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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996 Commission File Number 1-
11605
[LOGO OF THE WALT DISNEY COMPANY]
Incorporated in Delaware I.R.S. Employer
500 South Buena Vista Street, Burbank, California 91521 Identification No.
(818) 560-1000 95-4545390
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
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 No
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Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in 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
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As of November 30, 1996, the aggregate market value of registrant's common
stock held by non-affiliates (based on the closing price on such date as
reported on the New York Stock Exchange-Composite Transactions) was $49.1
billion. All executive officers and directors of registrant and all persons
filing a Schedule 13D with the Securities and Exchange Commission in respect
to registrant's common stock have been deemed, solely for the purpose of the
foregoing calculation, to be "affiliates" of the registrant.
There were 675,098,522 shares of common stock outstanding as of December 12,
1996.
Documents Incorporated by Reference
Certain information required for Part III of this report is incorporated
herein by reference to an amendment to this report on Form 10-K/A to be filed
within 120 days after the end of the fiscal year covered by this report.
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PART I
ITEM 1. BUSINESS
The Walt Disney Company, together with its subsidiaries, is a diversified
international entertainment company with operations in three business
segments: Creative Content, Broadcasting and Theme Parks and Resorts.
Information on revenues, operating income, identifiable assets and
supplemental revenue of the Company's business segments appears in Note 11 of
the Notes to Consolidated Financial Statements included in Item 8 hereof. The
Company employs approximately 100,000 people.
On February 9, 1996, the Company completed its acquisition of Capital
Cities/ABC, Inc. ("ABC"). Information on the acquisition appears in Note 2 of
the Notes to Consolidated Financial Statements included in Item 8 hereof. As a
result of the acquisition, a new parent company, with the name "The Walt
Disney Company," replaced the old parent company of the same name. For
convenience, the term "Company" is used in this report to refer to both the
old and the new parent company. Unless the context otherwise requires, the
term is also used to refer collectively to the parent company and the
subsidiaries through which its various businesses are actually conducted.
BUSINESS SYNERGY
The Company's three different operating segments market the Company's
trademarks, characters, products and services as part of a cohesive effort to
generate stockholder value through synergy.
The Creative Content segment produces live-action and animated motion
pictures, television programs and musical recordings, licenses the Company's
characters and other intellectual property for use in connection with
merchandise and publications, and publishes books and magazines. Within the
segment, films and characters are often promoted through the release of
audiocassettes and compact discs, children's books and magazines. In addition,
television programs have been created that contain characters originated in
animated films. Character merchandising and publications licensing promote the
Company's films and television programs, as well as the Company's other
operations. The Company also operates the Disney Stores, which are direct
retail distribution outlets for products based on the Company's characters and
films. The Company is also engaged directly in the home video and television
distribution of its film and television library.
The Company's other operations benefit substantially from the Creative
Content segment, and those operations in turn promote the Company's films,
television programs and merchandise. The products and services of the Creative
Content segment often contain elements highlighting the Company's theme parks
and resorts, and the theme parks and resorts will often promote recent
releases of motion pictures through parades, stage shows and other
attractions.
In keeping with its pursuit of business synergy, the Company recently moved
into the development of multimedia technologies, including interactive
software, interactive television and video ventures. The Company's interactive
software is primarily oriented toward children, and includes characters from
the Company's animated films and television programs. The Company is also
expanding into the cruise line business, with two ships scheduled to be
launched in 1998. The Company anticipates promoting the cruise line business
by incorporating the Company's characters, themes from live-action and
animated motion pictures, film and stage entertainment into the cruise
experience, and by packaging cruises with visits to the Walt Disney World
Resort.
In addition to the value generated through synergy, the Company believes its
operating segments benefit substantially from the Company's reputation in the
entertainment industry for commitment to excellent quality in all of its
products and services.
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CREATIVE CONTENT
The Company is an industry leader in producing and acquiring live-action and
animated motion pictures for distribution to the theatrical, television and
home video markets, and producing original television programming for the
network and first-run syndication markets. In addition, the Company also
produces music recordings and live stage plays. The Company licenses the name
"Walt Disney," as well as the Company's characters, visual and literary
properties and songs and music, to various consumer manufacturers, retailers,
show promoters and publishers throughout the world. Company subsidiaries also
engage in direct retail distribution through The Disney Stores; publish
domestic newspapers, technical and specialty publications; create books,
magazines and comics in the United States and Europe; and produce popular
music, children's audio products and computer software for all markets, as
well as film and video products for the educational marketplace.
THEATRICAL FILMS
Walt Disney Pictures and Television, a subsidiary of the Company, produces
and acquires live-action motion pictures that are distributed under the
banners Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures and
Caravan Pictures. Another subsidiary, Miramax Film Corp., acquires and
produces motion pictures that are primarily distributed under the Miramax
banner. The Company also produces and distributes animated motion pictures
under the banner Walt Disney Pictures. In addition, the Company distributes
films produced or acquired by certain independent production companies.
Recently, the Company announced a new direction for its film slate, which
will be phased-in over the next several years. The Company intends on
producing fewer total films, but increasing its per film expenditures.
Accordingly, total film expenditures are expected to approximate current
levels. During 1997, the Company will seek to distribute approximately 25
feature films under the Company's various banners and approximately 35
additional films under the Miramax banner, including several live-action
family feature films, one to two full-length animated films and between 45 and
55 films targeted to teenagers and adults. In addition, the Company
periodically reissues previously released animated films. As of September 30,
1996, the Company had released 427 full-length live-action features (primarily
color), 34 full-length animated color features and approximately 554 cartoon
shorts.
The Company distributes and markets its filmed products principally through
its own distribution and marketing companies in the United States and major
foreign markets.
HOME VIDEO
The Company directly distributes home video releases from each of its
banners in the domestic market. In the international market, the Company
distributes both directly and through foreign distribution companies. In
addition, the Company acquires and produces original programming for direct-
to-video release. As of September 30, 1996, approximately 834 produced and
acquired titles, including 437 feature films and 397 cartoon shorts and
animated features, were available to the domestic marketplace. Approximately
881 produced and acquired titles, including 462 feature films and 419 cartoon
shorts and animated features, were available to the international home
entertainment market.
TELEVISION PRODUCTION AND DISTRIBUTION
The Company develops, produces and distributes television programming for
broadcasters, cable and satellite operators, including the major television
networks, The Disney Channel, A&E Television Networks and Lifetime Television
under the Buena Vista Television, Touchstone Television and Walt Disney
Television labels. Program development is carried out in collaboration with a
number of independent writers, producers and creative teams under various
development arrangements. The Company focuses on the development, production
and distribution of half-hour comedies for network prime-time broadcast,
including such series as Home Improvement, Ellen and Boy Meets World. Fall
1996 releases included Dangerous Minds, Life's Work and Homeboys in Outer
Space.
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Walt Disney Television currently distributes two animated cartoon series for
Saturday morning: Aladdin and Timon and Pumbaa. The Company also offers a
variety of prime-time specials for exhibition on network television.
Additionally, the Company produces first-run animated and live-action
syndicated programming. The Disney Afternoon is a two-hour block of cartoons
airing five days per week, including Aladdin, Gargoyles, Darkwing Duck, Mighty
Ducks, Quack Pack and Timon and Pumbaa. Live-action programming includes Live!
with Regis and Kathie Lee, a daily talk show on ABC; Siskel & Ebert, a weekly
motion picture review program; Disney Presents Bill Nye the Science Guy and
Sing Me a Story With Belle, weekly educational programs for children.
The Company licenses the theatrical and television film library to the
domestic television syndication market. Television programs in off-network
syndication include Home Improvement, Blossom, Dinosaurs, The Golden Girls and
Empty Nest. Major packages of the Company's feature films and television
programming have been licensed for broadcast continuing over several years.
The Company licenses television series developed for United States networks
in a number of foreign markets, including Canada, France, Germany, Italy,
Spain and the United Kingdom. Certain of the Company's television programs are
also syndicated by the Company abroad, including The Disney Club, a weekly
series that the Company produces for foreign markets. The Company's television
programs are telecast regularly in many countries, including Australia,
Brazil, Canada, China, France, Germany, Italy, Japan, Mexico, Spain and the
United Kingdom.
The Company currently licenses its feature films for pay television on an
output basis in several geographic markets, including the United Kingdom and
Scandinavia, and has an arrangement with Showtime through 1997 for the United
States. In 1993, the Company entered into an agreement to license to the
Encore pay television service, over a multi-year period, exclusive domestic
pay television rights to Miramax films beginning in 1994 and Touchstone
Pictures and Hollywood Pictures films starting in 1997.
AUDIO PRODUCTS AND MUSIC PUBLISHING
The Company also produces and distributes compact discs, audiocassettes and
records, consisting primarily of soundtracks for animated films and read-along
products, directed at the children's market in the United States, France and
the United Kingdom, and licenses the creation of similar products throughout
the rest of the world. In addition, the Company commissions new music for its
motion pictures, television programs and records and exploits the song
copyrights created for the Company by licensing others to produce and
distribute printed music, records, audiovisual devices and public
performances.
Domestic retail sales of compact discs, audiocassettes and records are the
largest source of revenues, while direct marketing, which utilizes catalogs,
coupon packages and television, is a secondary means of distribution for the
Company.
The Company's Hollywood Records subsidiary develops, produces and markets
recordings from new talent across the spectrum of popular music, as well as
soundtracks from certain of the Company's live-action motion pictures.
WALT DISNEY THEATRICAL PRODUCTIONS
In 1994, the Company produced a Broadway-style stage musical based on the
animated feature film Beauty and the Beast. The stage adaptation is currently
playing in several cities in the United States and around the world. The
Company has also leased the New Amsterdam Theater in New York, and anticipates
producing additional live theatre including The Lion King, scheduled to open
in November 1997.
CHARACTER MERCHANDISE AND PUBLICATIONS LICENSING
The Company's worldwide licensing activities generate royalties which are
usually based on a fixed percentage of the wholesale or retail selling price
of the licensee's products. The Company
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licenses characters based upon both traditional and newly created film
properties. Character merchandise categories which have been licensed include
apparel, watches, toys, gifts, housewares, stationery, sporting goods and
domestic items such as sheets and towels. Publication categories which have
been licensed include continuity-series books, book sets, art and picture
books and magazines.
In addition to receiving licensing fees, the Company is actively involved in
the development and approval of licensed merchandise and in the
conceptualization, development, writing and illustration of licensed
publications. The Company continually seeks to create new characters to be
used in licensed products.
THE DISNEY STORES
The Company markets Disney-related products directly through its retail
facilities operated under "The Disney Store" name. These facilities are
generally located in leading shopping malls and similar retail complexes. The
stores carry a wide variety of Disney merchandise and promote other businesses
of the Company. During fiscal 1996, the Company opened 65 new stores in the
United States and Canada, 19 in Europe and 17 in the Asia-Pacific area,
bringing the total number to 530 as of September 30, 1996. The Company expects
to open additional stores in the future in selected markets throughout the
United States, as well as in Asia-Pacific, European and Latin American
countries.
NEWSPAPER, TECHNICAL AND SPECIALTY PUBLISHING
Publishing operations include production of seven daily newspapers (five of
which have Sunday editions); weekly community newspapers; shopping guides and
real estate magazines; specialized publications that involve news and ideas
for various industries; and consumer, special interest, trade and agricultural
publications. The publishing group also provides research and database
services.
BOOKS AND MAGAZINES
The Company also has book imprints in the United States offering books for
children and adults. The Company also produces several magazines for the
children and family markets as well as Discover, a general science magazine.
In addition, the Company is a partner in a joint venture which produces
children's books and magazines and computer software magazines in France.
DISNEY INTERACTIVE
Disney Interactive is a fully-integrated software business focused on the
product development and marketing of entertainment and educational computer
software and video game titles for home and school. The division's initiatives
also involve the development, publication and distribution of content for
narrow-band on-line services, the interactive software market, interactive
television platforms, Internet web sites and other emerging technology
ventures.
OTHER ACTIVITIES
The Company produces audiovisual materials for the educational market,
including videocassettes and film strips. It also licenses the manufacture and
sale of posters and other teaching aids. The Company markets and distributes,
through various channels, animation cel art and other animation-related
artwork and collectibles.
COMPETITIVE POSITION
The success of the Creative Content operations is heavily dependent upon
public taste, which is unpredictable and subject to change. In addition,
filmed entertainment operating results fluctuate due to the timing of
theatrical and home video releases. Release dates are determined by several
factors, including timing of vacation and holiday periods and competition in
the market. Operating results for the licensing and retail distribution
business are influenced by seasonal consumer purchasing behavior and by the
timing of animated theatrical releases.
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The Company's Creative Content businesses compete with all forms of
entertainment. A significant number of companies produce and/or distribute
theatrical and television films, exploit products in the home video market,
provide pay television programming service, sponsor live theater, and/or
produce interactive software. The Company also competes to obtain creative
talents, story properties, advertiser support, broadcast rights and market
share, which are essential to the success of all of the Company's Creative
Content businesses.
The Company competes in its character merchandising and other licensing,
publishing and retail activities with other licensers, publishers and
retailers of character, brand and celebrity names. Although public information
is limited, the Company believes it is the largest worldwide licenser of
character-based merchandise and producer/distributor of children's audio
products.
The Company's newspaper publishing operations compete in their various local
markets against other newspapers, and other media channels for audience and
advertising revenues. Technical and specialty publications usually cover small
markets, with limited competition.
BROADCASTING
TELEVISION AND RADIO NETWORKS
The Company operates the ABC Television Network, which as of September 30,
1996 had 223 primary affiliated stations operating under long-term agreements
reaching 99.9% of all U.S. television households. The ABC Television Network
broadcasts programs in "dayparts" and types as follows: Monday through Friday
Early Morning, Daytime and Late Night, Monday through Sunday Prime Time and
News, Children's and Sports. The Company also operates the ABC Radio Networks,
which serve more than 122 million people weekly over approximately 2,900
affiliates as of September 30, 1996 through seven different program services,
each with its own group of affiliated stations. The ABC Radio Networks also
produce and distribute a number of radio program series for radio stations
nationwide.
Generally, the networks pay the cost of producing their own programs or
acquiring broadcast rights from other producers for network programming and
pay varying amounts of compensation to affiliated stations for broadcasting
the programs and commercial announcements included therein. Substantially all
revenues from network operations are derived from the sale to advertisers of
time in network programs for commercial announcements. The ability to sell
time for commercial announcements and the rates received are dependent on many
factors, primarily the quantitative and qualitative audience that the network
can deliver to the advertiser, as well as overall advertiser demand for time
in the network marketplace.
TELEVISION AND RADIO STATIONS
The Company owns nine very high frequency (VHF) television stations, five of
which are located in the top ten markets in the United States; one ultra high
frequency (UHF) television station; eleven standard (AM) radio stations; and
ten frequency modulation (FM) radio stations. All of the television stations
are affiliated with the ABC Television Network, and 17 of the 21 radio
stations are affiliated with the ABC Radio Networks. The Company's television
stations penetrate 24% of the nation's television households, calculated using
the multiple ownership rules of the Federal Communications Commission (FCC).
The Company's radio stations reach more than 13 million people weekly in the
top twenty United States advertising markets.
During 1996, the Company also operated KCAL-TV, an independent station in
Los Angeles, California. In May 1996, the Company entered into an agreement to
sell KCAL to Young Broadcasting, Inc. The sale was consummated on November 22,
1996.
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CABLE AND INTERNATIONAL BROADCAST
The Company's Cable and International Broadcast operations are principally
involved in the production and distribution of cable television programming,
the licensing of programming to domestic and international markets and
investment in joint ventures in foreign-based television operations and
television production and distribution entities. The Company owns The Disney
Channel, 80% of ESPN Inc., 37.5% of the A&E Television Networks, 50% of
Lifetime Entertainment Services, and has various other investments in Europe.
The Disney Channel, which has approximately 25 million domestic and 7
million international subscribers, is a cable television service. New shows
developed for original use by The Disney Channel include dramatic, adventure,
comedy and educational series, as well as documentaries and first-run
television movies. In addition, entertainment specials include shows
originating from both the Walt Disney World Resort(R) and Disneyland Park(R).
The balance of the programming consists of products acquired from third
parties and products from the Company's theatrical film and television
programming library. The Disney Channel Taiwan premiered in March 1995,
followed by the launch of The Disney Channel U.K. in October 1995. The Company
began broadcasting The Disney Channel Australia in 1996, expects to launch The
Disney Channel in France and the Middle East in 1997, and is exploring the
development of The Disney Channel in other countries around the world.
ESPN Inc. operates ESPN, a cable sports programming service reaching 70
million subscribers domestically and 105 million subscribers in 160 countries
internationally, and ESPN2, which reaches 38 million domestic subscribers.
ESPN also owns 33% of Eurosport, a pan-European satellite-delivered cable and
direct-to-home sports programming service, and 20% of Japan Sports Network, a
sports cable channel. ESPNews, a 24-hour sports news cable channel, was
launched in fall 1996, and ESPN Asia and Star Sports have formed a joint
venture for delivery of sports programming throughout most of Asia.
The A&E Television Network is a cable programming service devoted to
cultural and entertainment programming reaching 68 million subscribers. The
History Channel, which is owned by A&E, reaches 22 million subscribers.
Lifetime Entertainment Services owns Lifetime Television, which reaches 66
million cable subscribers and is devoted to women's lifestyle programming.
The Company has affiliated European operations including (i) Tele-Munchen
Fernseh GmbH & Co., a 50%-owned television and theatrical
production/distribution company based in Munich, Germany, which also has
interests in cinemas, (ii) RTL 2 Fernseh GmbH & Co., a 23%-owned general
entertainment commercial broadcasting company, also based in Munich, reaching
28 million households, (iii) TM3 Fernseh GmbH & Co. KG, a 37.5%-owned women-
oriented commercial broadcasting company reaching 17 million households, also
based in Munich, (iv) RTL Disney Fernseh GmbH & Co. KG ("Super RTL"), a 50%-
owned German family entertainment commercial broadcasting company reaching 18
million households and (v) Scandinavian Broadcasting System SA, a 23%-owned
company based in Luxembourg with interests in television and radio stations,
satellite-delivered cable and direct-to-home programming services and
television production, serving various European countries and reaching 13
million households.
The Company's share of the financial results of the cable and international
broadcast services, other than The Disney Channel and ESPN Inc., are reported
under the heading "Corporate Activities and Other" in the Company's
consolidated statements of income.
COMPETITIVE POSITION
The ABC Television Network, The Disney Channel, ESPN and other broadcasting
affiliates compete for viewers with the other television networks, independent
television stations, other video media such as cable television, multipoint
distribution services ("MDS," which employ non-broadcast frequencies to
transmit subscription television services to individual homes and businesses),
direct
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broadcast services, satellite television program services and videocassettes.
In the sale of advertising time, the broadcasting operations compete with
other television networks, independent television stations, suppliers of cable
television programs and other advertising media such as newspapers, magazines
and billboards. Substantial competition also exists for exclusive broadcasting
rights for television programs. The ABC Radio Networks likewise compete with
other radio networks and radio programming services, independent radio
stations and other advertising media.
The Company's television and radio stations are in competition with other
television and radio stations, cable television systems, MDS, direct broadcast
services, satellite television program services, videocassettes and other
advertising media such as newspapers, magazines and billboards. Such
competition occurs primarily in individual market areas. Generally, a
television station in one market does not compete directly with other stations
in other market areas. Nor does a group of stations, such as those owned by
the Company, compete with any other group of stations as such. While the
pattern of competition in the radio station industry is basically the same, it
is not uncommon for radio stations outside of a market area to place a signal
of sufficient strength within that area (particularly during nighttime hours)
to gain a share of the audience. However, they generally do not realize
significantly increased advertising revenues as a result.
The Company's television and radio broadcasting operations are under the
jurisdiction of the FCC. Under the Communications Act of 1934, as amended (the
"Communications Act"), the FCC is empowered to issue, revoke or modify
broadcasting licenses, determine the location of stations, regulate the
equipment used by stations, adopt regulations to carry out the provisions of
the Communications Act and impose certain penalties for violation of its
regulations.
FCC regulations also restrict the ownership of stations and cable operations
in certain circumstances, and regulate the practices of network broadcasters,
cable providers and competing services. Such laws and regulations are subject
to change, and the Company generally cannot predict whether new legislation or
regulations, or a change in the extent of application or enforcement of
current laws and regulations, would have an adverse impact on the Company's
operations.
THEME PARKS AND RESORTS
The Company operates the Walt Disney World Resort in Florida and the
Disneyland Park and two hotels in California. The Company also earns royalties
on revenues generated by the Tokyo Disneyland(R) theme park and has an equity
interest in Disneyland Paris.
WALT DISNEY WORLD RESORT
The Walt Disney World Resort is located on approximately 30,500 acres of
land owned by Company subsidiaries 15 miles southwest of Orlando, Florida. The
resort includes three theme parks (the Magic Kingdom, Epcot and the Disney-MGM
Studios), hotels and villas, an entertainment complex, a shopping village,
conference centers, campgrounds, golf courses, water parks and other
recreational facilities designed to attract visitors for an extended stay. A
fourth theme park, Disney's Animal Kingdom featuring live animals in natural
habitats, is currently under construction and scheduled to open in spring
1998.
The Company markets the entire Walt Disney World Resort through a variety of
national, international and local advertising and promotional activities. The
Walt Disney World Resort began celebrating its 25th Anniversary in October
1996 with a series of promotional and special events. A number of attractions
in each of the theme parks are sponsored by corporate participants through
long-term participation agreements.
MAGIC KINGDOM - The Magic Kingdom, which opened in 1971, consists of seven
principal areas: Main Street U.S.A., Liberty Square, Frontierland, New
Tomorrowland, Fantasyland, Adventureland and Toontown Fair. These areas
feature themed rides and attractions, restaurants, refreshment stands and
merchandise shops.
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EPCOT - Epcot, which opened in 1982, consists of two major themed areas:
Future World and World Showcase. Future World dramatizes certain historical
developments and addresses the challenges facing the world today through major
pavilions devoted to high-tech products of the future ("Innoventions"),
communication and technological exhibitions ("Spaceship Earth"), and energy,
transportation, imagination, life and health, the land and seas. World
Showcase presents a community of nations focusing on the culture, traditions
and accomplishments of people around the world. World Showcase includes as a
central showpiece the American Adventure pavilion, which highlights the
history of the American people. Other nations represented are Canada, China,
France, Germany, Italy, Japan, Mexico, Morocco, Norway and the United Kingdom.
Both areas feature themed rides and attractions, restaurants and merchandise
shops.
DISNEY-MGM STUDIOS - The Disney-MGM Studios, which opened in 1989, consists
of a theme park, an animation studio and a film and television production
facility. The complex park centers around Hollywood as it was during the
1930's and 1940's and features Disney animators at work and a backstage tour
of the film and television production facilities in addition to themed food
service and merchandise facilities and other attractions. The production
facility consists of three sound stages, merchandise shops and a back lot area
and currently hosts both feature film and television productions.
RESORT FACILITIES - As of September 30, 1996, the Company owned and operated
12 resort hotels and a complex of villas and suites at the Walt Disney World
Resort, with a total of approximately 14,700 rooms. The Disney Institute, a
resort offering participatory programs and life-enriching experiences, opened
in 1996, as did Disney's BoardWalk Hotel with 378 luxury rooms. In addition,
Disney's Fort Wilderness camping and recreational area offers approximately
1,200 campsites and wilderness homes. Several of the resort hotels also
contain conference centers and related facilities.
Recreational activities available at the resort facilities include five
championship golf courses, miniature golf courses, an animal sanctuary,
tennis, sailing, water skiing, swimming, horseback riding and a number of
noncompetitive sports and leisure time activities. The Company also operates
three water parks: Blizzard Beach, River Country and Typhoon Lagoon.
The Company has also developed a shopping facility and entertainment complex
to be known as Downtown Disney, which consists of the Disney Village
Marketplace and Pleasure Island. The Disney Village Marketplace is home to the
50,000-square-foot World of Disney, which opened in October 1996 and is the
largest Disney retail store in the world. Pleasure Island, an entertainment
center adjacent to the Disney Village Marketplace, includes restaurants, night
clubs and shopping facilities. These shopping and entertainment facilities are
currently under significant expansion. The newly expanded property will be
situated on 66 acres on the west side of Pleasure Island and will include
multiple third party arrangements such as the House of Blues, a New Orleans-
style restaurant and live entertainment facility; Wolfgang Puck's Cafe, a
California cuisine restaurant; Virgin Records Megastore, a state-of-the-art
music, video and book showplace; Cirque du Soleil, a high energy acrobatics
and modern dance show; Bongos Cuban Cafe, a cafe/night club; and an AMC
theater complex, which will become the largest theater complex in Florida.
Currently under development are Celebration, a 4,900-acre town; Disney
Cruise Line, a cruise vacation line that will include two 85,000 ton ships;
Disney's Coronado Springs Resort, a facility designed to serve the moderately
priced hotel/convention market; and Disney's Wide World of Sports, a sports
complex featuring professional and amateur sporting events.
At the Disney Village Marketplace Hotel Plaza, seven independently operated
hotels are situated on property leased from the Company. These hotels have a
capacity of approximately 3,700 rooms. Additionally, two hotels--the Walt
Disney World Swan and the Walt Disney World Dolphin, with an aggregate
capacity of approximately 2,300 rooms--are independently operated on property
leased from the Company near Epcot. Another hotel, the 288-room Shades of
Green on Walt Disney World Resort, is leased from the Company and operated by
a non-profit organization as an armed forces recreation center.
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DISNEYLAND
The Company owns 330 acres and has under long-term lease an additional 39
acres of land in Anaheim, California. Disneyland, which opened in 1955,
consists of eight principal areas: Toontown, Fantasyland, Adventureland,
Frontierland, Tomorrowland, New Orleans Square, Main Street and Critter
Country. These areas feature themed rides and attractions, restaurants,
refreshment stands and merchandise shops. A number of the Disneyland
attractions are sponsored by corporate participants. The Company markets
Disneyland through national and local advertising and promotional activities.
The Company also owns and operates the 1,100-room Disneyland Hotel and the
500-room Disneyland Pacific Hotel.
The Company has received approval from the city of Anaheim to construct a
new theme park, Disney's California Adventure. The new theme park will be
constructed on the existing Disneyland parking lot and property adjacent to
the park. Disney's California Adventure will celebrate the many attributes of
the state of California and will feature Disneyland Center, a themed complex
of shopping, dining, and entertainment venues; the Grand Californian, a deluxe
750-room hotel located inside the park; and an assortment of "California"
themed areas with associated rides and attractions.
DISNEY VACATION CLUB
In 1995, the Company completed the 497-unit Disney Old Key West Resort at
the Walt Disney World Resort. In addition, 175 units in Vero Beach, Florida
opened in October 1995, and 102 units on Hilton Head Island, South Carolina,
and 383 villas located at Disney's BoardWalk Resort opened in 1996. Available
units at each facility are intended to be sold under a vacation ownership plan
and operated partially as rental property until the units are sold.
DISNEY REGIONAL ENTERTAINMENT
The Company is developing a variety of entertainment-based initiatives to
open in various parts of the United States and abroad. These businesses will
include sports concepts, interactive entertainment centers, children's play
centers and other operations that use Disney's creative entertainment talents
and the popularity of the Disney brand.
Beginning in February 1997, the Company will be opening Club Disney, the
first regional entertainment operation, in select suburban markets. Club
Disney is a play environment oriented toward children under 10 and their
parents. The first store in Thousand Oaks, California, will include a three-
story Jungle Climber, a game area, the Pooh N You Hundred Acre Wood-themed
play area, Curiosity Castle, the Starring You Studio and other attractions.
Entrance to the property will be priced comparably with the cost of admission
to a movie theater. The property will also have a cafe, a unique retail store
and party rooms with different themes for birthdays and other special
occasions.
TOKYO DISNEYLAND
The Company earns royalties on revenues generated by the Tokyo Disneyland
theme park, which is owned and operated by Oriental Land Co., Ltd. (OLC), an
unrelated Japanese corporation. The park, which opened in 1983, is similar in
size and concept to Disneyland and is located approximately six miles from
downtown Tokyo, Japan.
The Company and OLC have concluded a joint study of the basic design concept
for a theme park and associated hotel adjacent to Tokyo Disneyland. The
schematic design and design development stages for Tokyo DisneySea are
expected to continue until late 1997, at which time OLC will make a final
decision whether to commence construction.
In addition, the Company and OLC have reached agreement on the construction
of a 500 room Disney-branded hotel to be built near Tokyo Disneyland.
DISNEYLAND PARIS
Disneyland Paris is located on a 4,800-acre site at Marne-la-Valle,
approximately 20 miles east of Paris, France. The theme park, which opened in
April 1992, features 42 attractions in its five themed
-9-
<PAGE>
lands. Seven themed hotels, with a total of approximately 5,800 rooms, are part
of the resort complex, together with an entertainment center offering a variety
of retail, dining and show facilities. The project has been developed pursuant
to a 1987 master agreement with French governmental authorities by Euro Disney
S.C.A., a publicly held French company in which the Company holds a 39% equity
interest and which is managed by a subsidiary of the Company. The financial
results of the Company's investment in Euro Disney are reported under the
heading "Corporate Activities and Other" in the Company's consolidated
statements of income.
WALT DISNEY IMAGINEERING
Walt Disney Imagineering provides master planning, real estate development,
attraction and show design, engineering support, production support, project
management and other development services for the Company's operations.
ANAHEIM SPORTS, INC.
The Company owns and operates a National Hockey League franchise, the Mighty
Ducks of Anaheim. In addition, a subsidiary of the Company serves as general
partner of the Anaheim Angels (formerly the California Angels), a Major League
Baseball team.
COMPETITIVE POSITION
All of the theme parks and most of the associated resort facilities are
operated on a year-round basis. Historically, the theme parks and resorts
business experiences fluctuations in park attendance and resort occupancy
resulting from the nature of vacation travel. Peak attendance and resort
occupancy generally occur during the summer months when school vacations occur
and during early-winter and spring holiday periods.
The Company's theme parks and resorts compete with all other forms of
entertainment, lodging, tourism and recreational activities. The profitability
of the leisure-time industry is influenced by various factors which are not
directly controllable, such as economic conditions, amount of available leisure
time, oil and transportation prices and weather patterns.
ITEM 2. PROPERTIES
The Walt Disney World Resort, Disneyland Park and other properties of the
Company and its subsidiaries are described in Item 1 under the caption Theme
Parks and Resorts. Film library properties are described in Item 1 under the
caption Creative Content.
A subsidiary of the Company owns approximately 51 acres of land in Burbank,
California on which the Company's studios and executive offices are located.
The studio facilities are used for the production of both live-action and
animated motion pictures and television products. In addition, Company
subsidiaries lease office and warehouse space for certain studio and corporate
activities.
The Company's Broadcasting segment corporate offices are located in a
Company-owned building at 77 West 66th Street in New York City. The Company
also owns the ABC Television Center adjacent to the building and ABC Radio
Networks' studios at 125 West End Avenue in New York City.
Subsidiaries of the Company own the ABC Television Center and lease the ABC
Television Network offices in Los Angeles, the ABC News Bureau facility in
Washington, DC and a computer facility in Hackensack, New Jersey, under leases
expiring on various dates through 2034. The Company's broadcast operations and
engineering facility and local television studios and offices in New York City
are leased, but the Company has the right to acquire such properties for a
nominal sum in 1997. The Company's 80%-owned subsidiary ESPN owns ESPN Plaza in
Bristol, Connecticut, from which it conducts its technical operations. The
Company owns the majority of its other broadcast studios and offices and
broadcast transmitter sites elsewhere, and those which it does not own are
occupied under leases expiring on various dates through 2039.
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<PAGE>
A U.K. subsidiary of the Company owns buildings on a four-acre parcel under
long-term lease in London, England. The mixed-use development consists of
143,000 square feet of office space occupied by subsidiary operations, a
27,000 square foot building leased to a third party and 65,000 square feet of
retail space.
Various Company subsidiaries own and lease executive, editorial and other
offices and facilities used by the publishing operation in various cities. For
leased properties, the leases expire on various dates through 2006. All of the
significant premises occupied by the newspapers are owned by Company
subsidiaries.
The Company's Disney Store unit also leases retail space for the Disney
Stores in shopping malls and similar retail complexes worldwide.
It is the Company's practice to obtain United States and foreign legal
protection for its theatrical and television product and its other original
works, including the various names and designs of the animated characters and
the publications and music which have been created in connection with the
Company's filmed products. The Company owns all rights to the name, likeness
and portrait of Walt Disney.
ITEM 3. LEGAL PROCEEDINGS
The Company, together with, in some instances, certain of its directors and
officers, is a defendant or co-defendant in various legal actions involving
copyright, breach of contract and various other claims incident to the conduct
of its businesses. Management does not expect the Company to suffer any
material liability by reason of such actions.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected each year at the
organizational meeting of the Board of Directors which follows the annual
meeting of the stockholders and at other meetings as appropriate. Each of the
executive officers has been employed by the Company in the position or
positions indicated in the list and pertinent notes below. Messrs. Eisner,
Disney and Murphy have been employed by the Company as executive officers for
more than five years.
At September 30, 1996, the executive officers were as follows:
<TABLE>
<CAPTION>
Executive
Officer
Name Age Title Since
--------------------- --- -------------------------------- ---------
<C> <C> <S> <C>
Michael D. Eisner 54 Chairman of the Board and Chief 1984
Executive Officer
Michael S. Ovitz 49 President /1/ 1995
Roy E. Disney 66 Vice Chairman of the Board 1984
Sanford M. Litvack 60 Senior Executive Vice President 1991
and Chief of Corporate
Operations
Richard D. Nanula 36 Senior Executive Vice President 1996
and Chief Financial Officer /2/
John F. Cooke 54 Executive Vice President- 1995
Corporate Affairs /3/
Lawrence P. Murphy 44 Executive Vice President and 1985
Chief Strategic Officer and
Chairman of Disney Cruise Lines
</TABLE>
- --------
/1/ On October 2, 1995, Mr. Michael Ovitz joined the Company and assumed the
position of President. Mr. Ovitz co-founded and served as chairman of
Creative Artists Agency from 1975 until 1995. On December 12, 1996, the
Company announced that Mr. Ovitz will leave the Company effective January
31, 1997.
/2/ Mr. Nanula joined the Company's strategic planning operation in 1986 and was
named Vice President-Treasurer of the Company in January 1990. He was named
Senior Vice President and Chief Financial Officer in August 1991, Executive
Vice President in February 1994 and President of The Disney Stores, Inc. in
November 1994, where he served until assuming his present position in
February 1996.
/3/ Mr. Cooke served as President of the The Disney Channel from 1985 until
assuming his present position in February 1995.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Pacific stock
exchanges (NYSE symbol DIS). The following sets forth the high and low
composite sale prices for the fiscal periods indicated.
<TABLE>
<CAPTION>
Sales Price
---------------
High Low
------- -------
<S> <C> <C>
1996
4th Quarter.............................................. $63 5/8 $53 3/8
3rd Quarter.............................................. 65 5/8 58 1/4
2nd Quarter.............................................. 69 3/4 59 1/2
1st Quarter.............................................. 62 7/8 55 3/8
1995
4th Quarter.............................................. 62 3/4 50 1/2
3rd Quarter.............................................. 60 52 7/8
2nd Quarter.............................................. 56 1/4 45
1st Quarter.............................................. 46 7/8 37 3/4
</TABLE>
The Company declared a first quarter dividend of $.09 per share and three
subsequent quarterly dividends of $.11 per share in 1996, and in 1995,
declared a first quarter dividend of $.075 per share and three subsequent
quarterly dividends of $.09 per share.
As of September 30, 1996, the approximate number of record holders of the
Company's common stock was 564,000.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In millions, except per share data)
<TABLE>
<CAPTION>
1996 (1),(2) 1995 1994 1993(3) 1992
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Statements of Income
Revenues $ 18,739 $12,151 $10,090 $ 8,531 $ 7,504
Operating income 3,033 2,466 1,972 1,722 1,435
Income before cumulative
effect of accounting changes 1,214 1,380 1,110 671 817
Cumulative effect of
accounting changes -- -- -- (371) --
Net income 1,214 1,380 1,110 300 817
Per Share
Earnings before cumulative
effect of accounting changes $ 1.96 $ 2.60 $ 2.04 $ 1.23 $ 1.52
Cumulative effect of
accounting changes -- -- -- (.68) --
Earnings 1.96 2.60 2.04 .55 1.52
Dividends .42 .35 .29 .24 .20
Balance Sheets
Total assets $ 37,306 $14,606 $12,826 $11,751 $10,862
Borrowings 12,342 2,984 2,937 2,386 2,222
Stockholders' equity 16,086 6,651 5,508 5,031 4,705
Statements of Cash Flows
Cash flow from operations $ 4,625 $ 3,510 $ 2,808 $ 2,145 $ 1,838
Investing activities (13,464) (2,288) (2,887) (2,660) (1,924)
Financing activities 8,040 (332) (97) 113 (36)
</TABLE>
- --------
(1) These amounts reflect the impact of the acquisition of ABC. See Note 2 to
the Consolidated Financial Statements.
(2) 1996 results include a $300 million non-cash charge pertaining to the
implementation of SFAS 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and a $225 million
charge for costs related to the acquisition of ABC. The earnings per share
impacts of these charges were $.30 and $.22, respectively. See Notes 2 and
11 to the Consolidated Financial Statements.
(3) In 1993, the Company changed its accounting policy for project-related
pre-opening costs, adopted SFAS 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and adopted SFAS 109
"Accounting for Income Taxes." The cumulative effect of these accounting
changes on the 1993 results follows.
<TABLE>
<CAPTION>
Net Earnings
income per share
------ ---------
<S> <C> <C>
Expense pre-opening costs as incurred $(271) $(.50)
Adopt SFAS 106 (130) (.24)
Adopt SFAS 109 30 .06
----- -----
$(371) $(.68)
===== =====
</TABLE>
Operating and net income for 1993 also reflect a $350 million charge to fully
reserve the Company's outstanding receivables from Euro Disney and the
Company's commitment to help fund Euro Disney for a limited period. The
earnings per share impact of the charge, net of income tax benefit, was $.64.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On February 9, 1996, the Company acquired Capital Cities/ABC, Inc. ("ABC").
The Company's results of operations have incorporated ABC's activity since
that date. To enhance comparability, certain information below is presented on
a "pro forma" basis and reflects the acquisition of ABC as though it had
occurred at the beginning of the respective periods presented. The pro forma
results are not necessarily indicative of the combined results that would have
occurred had the acquisition actually occurred at the beginning of those
periods.
CONSOLIDATED RESULTS
(in millions, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
(unaudited) AS REPORTED
---------------- -------------------------
1996 1995 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Creative Content $10,505 $ 8,984 $10,095 $ 7,736 $ 6,232
Broadcasting 6,231 5,964 4,142 414 359
Theme Parks & Resorts 4,502 4,001 4,502 4,001 3,499
------- ------- ------- ------- -------
Total $21,238 $18,949 $18,739 $12,151 $10,090
======= ======= ======= ======= =======
Operating Income: (1)
Creative Content $ 1,612 $ 1,618 $ 1,596 $ 1,531 $ 1,205
Broadcasting 1,062 948 747 76 77
Theme Parks & Resorts 990 859 990 859 690
Accounting Change (300) -- (300) -- --
------- ------- ------- ------- -------
Total 3,364 3,425 3,033 2,466 1,972
Corporate Activities and Other (249) (255) (309) (239) (279)
Net Interest (Expense) Income (698) (775) (438) (110) 10
Acquisition-related Costs -- -- (225) -- --
------- ------- ------- ------- -------
Income Before Income Taxes 2,417 2,395 2,061 2,117 1,703
Income Taxes (1,067) (1,069) (847) (737) (593)
======= ======= ======= ======= =======
Net Income $ 1,350 $ 1,326 $ 1,214 $ 1,380 $ 1,110
======= ======= ======= ======= =======
Earnings Per Share $ 1.96 $ 1.94 $ 1.96 $ 2.60 $ 2.04
======= ======= ======= ======= =======
Net Income Excluding Non-
recurring Charges (2) $ 1,533 $ 1,326 $ 1,534 $ 1,380 $ 1,110
======= ======= ======= ======= =======
Earnings Per Share Excluding Non-
recurring Charges (2) $ 2.23 $ 1.94 $ 2.48 $ 2.60 $ 2.04
======= ======= ======= ======= =======
Amortization of Intangible Assets
Included in Operating Income $ 457 $ 457 $ 301 $ -- $ --
======= ======= ======= ======= =======
Average Number of Common and
Common Equivalent Shares
Outstanding 689 685 619 530 545
======= ======= ======= ======= =======
- --------
(1) Includes depreciation and amortization (excluding film cost) of:
Creative Content $ 198 $ 167 $ 186 $ 107 $ 80
Broadcasting 534 523 387 8 7
Theme Parks & Resorts 358 335 358 335 289
------- ------- ------- ------- -------
$1,090 $ 1,025 $ 931 $ 450 $ 376
======= ======= ======= ======= =======
</TABLE>
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<PAGE>
(2) During the second quarter of 1996, the Company recorded two non-recurring
charges. The Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of," which resulted in the Company recognizing
a $300 million non-cash charge. In addition, the Company recognized a $225
million charge for costs related to the acquisition of ABC. See Notes 2
and 11 to the Consolidated Financial Statements.
As a result of the acquisition, the Company has reconfigured its financial
reporting segments into Creative Content, Broadcasting, and Theme Parks and
Resorts. Consumer products operations, ABC's publishing operations and filmed
entertainment activities not related to broadcasting have been classified as
Creative Content. Operations previously reported as Filmed Entertainment that
pertain to broadcasting, as well as ABC's broadcasting operations, have been
classified as the Broadcasting segment. The Theme Parks and Resorts segment
contains the same operations as in prior years.
The following discussion of 1996 versus 1995 performance is primarily based
on pro forma results. The Company believes pro forma results represent the
best comparative standard for assessing net income, changes in net income and
earnings trends, as the pro forma presentation combines a full year of the
results of the Company and its acquired ABC operations. The discussion of
consolidated results also includes "as reported" comparisons to the extent
there have been material changes in reported amounts.
The discussion of Theme Parks and Resorts segment results is on an as
reported basis since the pro forma adjustments did not impact this segment.
CONSOLIDATED RESULTS
1996 VS. 1995 (PRO FORMA AND AS REPORTED)
Pro forma results for all periods and as reported results since the
acquisition date reflect the impact of the acquisition of ABC, including the
use of purchase accounting. Comparisons of as reported results reflect
significant increases in amortization of intangible assets, interest expense,
the effective income tax rate and shares outstanding arising from the
acquisition.
Pro forma revenues increased 12% to $21.2 billion, reflecting growth in all
business segments. Net income, excluding non-recurring charges, increased 16%
to $1.5 billion, and earnings per share increased 15% to $2.23. These results
were driven by increased operating income at the Theme Parks and Resorts and
Broadcasting segments.
Pro forma net interest expense decreased 10% to $698 million reflecting
lower interest rates and a reduction in net borrowings (the Company's
borrowings less cash and liquid investments).
As reported revenues increased 54% to $18.7 billion, reflecting increases in
all business segments and the impact of the acquisition of ABC. Net income,
excluding the non-recurring charges, increased 11% to $1.5 billion driven by
increased operating income for each business segment. Earnings per share,
excluding the non-recurring charges, decreased 5% to $2.48, reflecting the
impact of additional shares issued in connection with the acquisition.
As reported corporate activities and other increased 29% to $309 million,
reflecting higher corporate general and administrative costs and a $55 million
gain in the prior year related to the sale of a portion of the Company's
investment in Euro Disney.
1995 VS. 1994 (AS REPORTED)
Revenues increased 20% or $2.1 billion to $12.2 billion in 1995, reflecting
growth in Creative Content, Broadcasting and Theme Parks and Resorts revenues
of $1.5 billion, $55 million, and $502 million, respectively.
-16-
<PAGE>
Operating income rose 25% or $494 million to $2.5 billion in 1995, driven by
increases in Creative Content and Theme Parks and Resorts operating income of
$326 million and $169 million, respectively. Net income increased 24% to $1.4
billion and earnings per share increased 27% to $2.60 from $1.1 billion and
$2.04, respectively.
Corporate activities and other expenses decreased 14% or $40 million to $239
million. The results for 1995 included a gain of $55 million from the sale of
approximately 75 million shares, or 20% of the Company's investment in Euro
Disney, partially offset by higher corporate general and administrative
expenses.
Net interest income decreased $120 million to an expense of $110 million in
1995. The decrease reflected both a decline in interest income driven by lower
average investment balances and yields and an increase in interest expense
primarily reflecting the impact of higher borrowings. The higher borrowings
were due in part to prior-year common stock repurchases and Euro Disney
funding, which were initiated in the latter part of 1994.
BUSINESS SEGMENT RESULTS
CREATIVE CONTENT
1996 VS. 1995 (PRO FORMA)
Revenues increased 17% or $1.5 billion to $10.5 billion, driven by growth of
$500 million in home video, $274 million in theatrical, $197 million in the
Disney Stores and $151 million in character merchandise licensing. Home video
revenues reflect Pocahontas, Cinderella and The Aristocats animated titles and
The Santa Clause, While You Were Sleeping and Crimson Tide live-action titles
domestically, as well as The Lion King and 101 Dalmatians internationally.
Theatrical revenues reflect the worldwide box office performance of Toy Story,
The Rock and The Hunchback of Notre Dame, the international performance of
Pocahontas and the domestic performance of Phenomenon. Revenue growth at the
Disney Stores was driven by the opening of 101 new stores in 1996, bringing
the total number of stores to 530. Comparable store sales declined 2%,
primarily due to the strength of The Lion King merchandise in the prior year,
and new stores contributed $103 million of sales growth. Merchandise licensing
revenues increased due to the strength of standard characters worldwide and
the success of targeted marketing programs. Television revenues from program
distribution were comparable to the prior year, reflecting the success of
live-action titles in pay television, offset by the syndication sale of Home
Improvement in the prior year.
Operating income remained flat at $1.6 billion, reflecting improved results
in home video and worldwide merchandise licensing offset by lower theatrical
results. Costs and expenses increased 21% or $1.5 billion. The increase is
primarily due to higher theatrical distribution and home video selling costs,
higher production cost amortization, expansion of the Disney Stores and the
write-off of certain theatrical development projects.
1995 VS. 1994 (AS REPORTED)
Revenues increased 24% or $1.5 billion to $7.7 billion in 1995, driven by
growth of $605 million in worldwide home video revenues, $340 million in
television revenues, $237 million from the Disney Stores, $106 million in
worldwide theatrical revenues and $67 million from worldwide character
merchandise licensing. Home video revenues reflected the domestic and initial
international release of The Lion King and the worldwide release of Snow White
and the Seven Dwarfs. Television revenues grew primarily due to the release of
Home Improvement in syndication and increased availability and success of
titles in pay television. Growth at the Disney Stores was driven by the
opening of 105 new stores in 1995, bringing the total number of stores to 429.
Comparable store sales grew 4% and sales at new stores contributed $94 million
of sales growth. Theatrical revenues reflected the domestic rerelease and
expanded international release of The Lion King, the domestic release of
Pocahontas and the domestic release of the live-action titles The Santa
Clause, While You Were Sleeping and Pulp Fiction. Worldwide merchandise
licensing growth was generated by increased demand for traditional Disney
characters and recent animated film properties, principally The Lion King and
Pocahontas.
-17-
<PAGE>
Operating income increased 27% or $326 million to $1.5 billion in 1995,
primarily due to growth in worldwide home video, television, worldwide
character merchandise licensing and the Disney Stores. Costs and expenses
increased 23% or $1.2 billion, principally due to higher home video marketing
and distribution costs reflecting the worldwide release of Snow White and the
Seven Dwarfs and the domestic release of The Lion King, the ongoing expansion
and revenue growth of the Disney Stores, higher distribution costs related to
theatrical releases and costs associated with the syndication of Home
Improvement.
BROADCASTING
1996 VS. 1995 (PRO FORMA)
Revenues increased 4% or $267 million to $6.2 billion, reflecting a $309
million increase in revenues at ESPN and The Disney Channel, resulting from
higher advertising revenues and affiliate fees due primarily to expansion,
subscriber growth and improved advertising rates. Revenue increases were
partially offset by a $61 million decrease at the television network and
stations due to the impact of ratings deterioration and the absence of the
Super Bowl in the current period.
Operating income increased 12% or $114 million to $1.1 billion, reflecting
decreased costs and expenses at the television network, revenue increases at
ESPN and The Disney Channel and lower program write-offs at KCAL. Costs and
expenses increased 3% or $153 million, reflecting increased program rights and
production costs driven by growth at ESPN and The Disney Channel
internationally, partially offset by significantly decreased program
amortization at the television network, primarily attributable to the
acquisition, and lower program write-offs at KCAL.
1995 VS. 1994 (AS REPORTED)
The results reported in each year were not material, and reflected the
Company's broadcasting operations prior to the acquisition of ABC.
THEME PARKS AND RESORTS
1996 VS. 1995
Revenues increased 13% or $501 million to $4.5 billion, reflecting growth of
$191 million due to record theme park attendance, $148 million from greater
guest spending, and $52 million due to increased occupied rooms, primarily at
Florida resorts. Record theme park attendance at both the Walt Disney World
Resort and Disneyland Park in 1996 reflected growth in domestic and
international tourist visitation. Increased guest spending resulted from
higher admission prices, increased sales of food and beverages due to pricing
and expanded locations, and higher room rates at hotel and resort properties.
The increase in occupied rooms in Florida resulted from higher occupancy and a
complete year of operations at Disney's All-Star Music Resort, which opened in
phases during 1995. Occupied rooms also increased due to the opening of
Disney's BoardWalk Resort in June 1996.
Fiscal 1996 operating income increased 15% or $131 million to $990 million,
resulting primarily from higher theme park attendance, increased guest
spending and increased occupied rooms at Florida resorts. Costs and expenses,
which consist principally of labor, costs of merchandise, food and beverages
sold, depreciation, repairs and maintenance, entertainment and marketing and
sales expenses, increased 12% or $370 million, primarily due to increased
operating hours in response to higher attendance, expansion of theme park
attractions and resorts, increased marketing and sales expenses and increased
costs associated with higher guest spending and increased occupied rooms.
1995 VS. 1994
Revenues increased 14% or $502 million to $4.0 billion, driven by growth of
$288 million from higher theme park attendance in Florida and California and
$127 million from an increase in occupied rooms at Florida resorts. Higher
theme park attendance reflected increased domestic and international tourist
visitation. The increase in occupied rooms reflected the openings of Disney's
Wilderness Lodge
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<PAGE>
and Disney's All-Star Sports Resort in the third quarter of 1994 and the
phased opening of Disney's All-Star Music Resort during 1995.
Operating income increased 24% or $169 million to $859 million in 1995,
driven by higher theme park attendance and increased occupied rooms at Florida
resorts. Costs and expenses increased 12% or $333 million, primarily due to
increased attendance and occupied rooms, expansion of theme park attractions
and Florida resorts and increased marketing and sales expenses, partially
offset by the impact of ongoing cost reduction initiatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash from operations and has substantial
borrowing capacity to meet its operating and discretionary spending
requirements. Cash provided by operations increased 32% or $1.1 billion to
$4.6 billion in 1996, which includes the impact of the acquistion of ABC
discussed below.
Net borrowings increased $10.6 billion to $12.0 billion during fiscal 1996.
The increase was primarily due to an increase in debt in connection with the
acquisition of ABC.
In 1996, the Company invested $3.7 billion to develop, produce and acquire
rights to film and television properties and $1.7 billion to design and
develop new theme park attractions, resort properties, real estate
developments and other properties. 1995 investments totaled $1.9 billion and
$896 million, respectively.
The $1.8 billion increased investment in film and television properties was
primarily driven by ABC's television spending subsequent to the acquisition.
Television expenditures in 1997 will be higher as they will reflect a full
year of ABC's operations.
The $849 million increased investment in theme parks, resorts and other
properties resulted from initiatives including Disney's Animal Kingdom, Disney
Cruise Line, Disney's BoardWalk Resort, Disney's Coronado Springs Resort,
Disney's Wide World of Sports, and the town of Celebration. Continued spending
increases related to these projects and from development of additional
initiatives, including Disney's California Adventure and Downtown Disney, are
anticipated through 1997.
The Company repurchased 8 million shares of its common stock for
approximately $462 million in 1996. Under its share repurchase program, the
Company is authorized to purchase up to an additional 96 million shares. The
Company evaluates share repurchase decisions on an ongoing basis, taking into
account borrowing capacity, management's target capital structure, and other
investment opportunities. The Company also used $271 million to fund dividend
payments during the year.
During the second quarter of 1996, the Company completed its acquisition of
ABC. Aggregate consideration paid to ABC shareholders in March 1996 consisted
of $10.1 billion in cash and 155 million shares of Company common stock. The
Company initially funded the cash portion through the issuance of
approximately $8.8 billion of commercial paper and the use of existing cash
and investments. At acquisition, the Company assumed $627 million of ABC's
long-term debt.
Since the acquisition of ABC, the Company has replaced a portion of its
commercial paper with longer-term financing, and expects to continue this
process in the future. In the United States, the Company has issued $275
million of medium-term notes maturing in two to fifteen years, and in the
global bond market, the Company has issued $1.3 billion of five year notes and
$1.3 billion of ten year notes. In Europe, the Company has issued 300 billion
Italian lira (approximately $190 million) of four year notes, and borrowed
(Pounds)335 million (approximately $520 million) through a private offering.
In the Japanese market, the Company issued (Yen)150 billion (approximately
$1.4 billion) of three-year bonds through two public offerings. The Company
has swapped the interest payable on the foreign denominated borrowings into
United States dollar LIBOR.
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<PAGE>
The Company employs a variety of on-and off-balance-sheet financial
instruments to manage its exposure to changes in interest rates and
fluctuations in the value of foreign currencies. The Company does not expect
interest rate movements or fluctuations in the value of foreign currencies to
significantly affect its liquidity in the foreseeable future. For 1996 and
1995, a 1% increase or decrease in interest rates would not have had a
material impact on the Company's liquidity or operating results.
The Company currently maintains significant borrowing capacity to take
advantage of growth and investment opportunities. The Company focuses on net
borrowings, which take into account its cash and investment balances, when
monitoring borrowing capacity. The Company's borrowing capacity includes a $5
billion line of credit which is available for general corporate purposes and
to support commercial paper issuance. The Company has the capacity to issue up
to $2.1 billion in additional debt under a U.S. shelf registration filed in
March 1996, and $1.2 billion under a Euro Medium-Term Note Program established
in June 1996.
The Company sold its Los Angeles television station KCAL in November 1996
for $387 million in cash.
The Company's financial condition remains strong. The Company believes that
its cash, other liquid assets, operating cash flows and access to capital
markets taken together provide adequate resources to fund ongoing operating
requirements and future capital expenditures related to the expansion of
existing businesses and development of new projects.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Supplemental Data on page 27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-20-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
Information regarding directors appearing under the caption ELECTION OF
DIRECTORS in the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders (the "1997 Proxy Statement") is hereby incorporated by reference.
Information regarding executive officers is included in Part I of this Form
10-K as permitted by General Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the captions DIRECTORS' REMUNERATION; ATTENDANCE
and EXECUTIVE COMPENSATION in the 1997 Proxy Statement is hereby incorporated
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information setting forth the security ownership of certain beneficial
owners and management appearing under the caption STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS and STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS in
the 1997 Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain related transactions appearing under the
caption RELATED TRANSACTIONS in the 1997 Proxy Statement is hereby
incorporated by reference.
-21-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits and Financial Statements and Schedules
(1) Financial Statements and Schedules
See Index to Financial Statements and Supplemental Data at page 27.
(2) Exhibits
3(a) Restated Certificate of Incorporation of the Company, filed as
Exhibit 3(a) to the Form 8-B/A, dated January 23, 1996, is hereby
incorporated by reference.
3(b) Amended Bylaws of the Company, dated April 22, 1996, is filed
herewith.
4(a) Form of Registration Rights Agreement entered into or to be
entered into with certain stockholders of the Company, filed as
Exhibit B to Exhibit 2.1 to the Current Report on Form 8-K, dated
July 31, 1995, of Disney Enterprises, Inc., is hereby incorporated
by reference.
4(b) Rights Agreement dated as of November 8, 1995 between the Company
and The Bank of New York, as rights agent, filed as Exhibit 4.2 to
the Registration Statement on Form S-4, dated November 13, 1995,
(No. 33-64141), is hereby incorporated by reference.
4(c) 364-Day Credit Agreement, dated as of October 30, 1996, among the
Company, as Borrower, Citicorp USA, Inc., as Administrative Agent,
Credit Suisse and Bank of America National Trust and Savings
Association, as Co-Administrative Agents and the Financial
Institutions named therein, is filed herewith.
4(d) Five-Year Credit Agreement, dated October 30, 1996, among the
Company, as Borrower, Citicorp USA, Inc., as Administrative Agent,
Credit Suisse and Bank of America National Trust and Savings
Association, as Co-Administrative Agents and the Financial
Institutions named therein, is filed herewith.
4(e) Indenture, dated as of November 30, 1990, between Disney
Enterprises, Inc. and Bankers Trust Company, as Trustee, with
respect to certain senior debt securities of the Company, filed as
Exhibit 2 to the Company's Current Report on Form 8-K, dated
January 14, 1991, is hereby incorporated by reference.
4(f) Indenture, dated as of March 7, 1996, between the Company and
Citibank, N.A., as Trustee, with respect to certain senior debt
securities of the Company, filed as Exhibit 4.1(a) to the
Company's Current Report on Form 8-K, dated March 7, 1996, is
hereby incorporated by reference.
4(g) Other long-term borrowing instruments issued by the Company are
omitted pursuant to Item 601(b) (4) (iii) of Regulation S-K. The
Company undertakes to furnish copies of such instruments to the
Commission upon request.
10(a) (i) Agreement on the Creation and the Operation of Euro Disneyland
en France, dated March 25, 1987, and (ii) Letter relating thereto
of Michael D. Eisner, Chairman Disney Enterprises, Inc., dated
March 24, 1987, filed as Exhibits 10(b) and 10(a), respectively,
to Disney Enterprises, Inc.'s Current Report on Form 8-K dated
April 24, 1987, are hereby incorporated by reference.
10(b) Limited Recourse Financing Facility Agreement, dated as of April
27, 1988, among Disney Enterprises, Inc., Citibank Channel Island
Limited and Citicorp International, filed as Exhibit 10(a) to
Disney Enterprises, Inc.'s Current Report on Form 8-K dated April
29, 1988, is hereby incorporated by reference.
10(c) (i) Employment Agreement, dated as of January 10, 1989, between
Disney Enterprises, Inc. and Michael D. Eisner, filed as Exhibit
10(a) to Disney Enterprises, Inc.'s Quarterly Report on Form 10-Q
for the period ended March 31, 1989; (ii) Agreement, dated March
1, 1985, between Disney Enterprises, Inc. and Michael D. Eisner,
filed as
-22-
<PAGE>
Exhibit 2 to Disney Enterprises, Inc.'s Quarterly Report on Form
10-Q for the period ended June 30, 1985; and (iii) description of
action by the Compensation Committee taken on November 30, 1990,
filed as Exhibit 10(c) to Disney Enterprises, Inc.'s Annual Report
on Form 10-K for the year ended September 30, 1990, are hereby
incorporated by reference.
10(e) Employment Agreement, dated October 1, 1995, between Disney
Enterprises, Inc. and Michael S. Ovitz filed as Exhibit 10(e) to
Disney Enterprises, Inc.'s Annual Report on Form 10-K for the year
ended September 30, 1995, is hereby incorporated by reference.
10(f) (i) Contract, dated December 14, 1979, with E. Cardon Walker, to
purchase a 2% interest in certain motion pictures to be produced
by Disney Enterprises, Inc. and to acquire an additional 2% profit
participation; and (ii) Amendment thereto, dated August 8, 1980,
filed as Exhibits 1 and 3, respectively, to Disney Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended September 30,
1980, are hereby incorporated by reference.
10(g) Form of Indemnification Agreement entered into or to be entered
into by certain officers and directors of Disney Enterprises, Inc.
as determined from time to time by the Board of Directors,
included as Annex C to the Proxy Statement for Disney Enterprises,
Inc.'s 1988 Annual Meeting of Stockholders, is hereby incorporated
by reference.
10(h) 1995 Stock Option Plan for Non-Employee Directors, filed as
Exhibit A to the Proxy Statement for Disney Enterprises, Inc.'s
1995 Annual Meeting of Stockholders, is hereby incorporated by
reference.
10(i) (i) 1990 Stock Incentive Plan and Rules, filed as Exhibits 28(a)
and 28(b), respectively, to Disney Enterprises, Inc.'s
Registration Statement on Form S-8 (No. 33-39770), dated April 5,
1991, and (ii) Amended and Restated 1990 Stock Incentive Plan and
Rules, attached as Appendix B-2 to Disney Enterprises, Inc.'s
Joint Proxy Statement/ Prospectus included in the Registration
Statement on Form S-4, dated November 13, 1995 (No. 33-64141), is
hereby incorporated by reference.
10(j) 1995 Stock Incentive Plan and Rules, attached as Appendix B-1 to
Disney Enterprises, Inc.'s Joint Proxy Statement/Prospectus
included in the Registration Statement on Form S-4, dated November
13, 1995 (File No. 33-64141), is hereby incorporated by reference.
10(k) (i) 1987 Stock Incentive Plan and Rules, (ii) 1984 Stock Incentive
Plan and Rules, (iii) 1981 Incentive Plan and Rules and (iv) 1980
Stock Option Plan, all as set forth as Exhibits 1(a), 1(b), 2(a),
2(b), 3(a), 3(b) and 4, respectively, to the Prospectus contained
in Part I of Disney Enterprises, Inc.'s Registration Statement on
Form S-8 (No. 33-26106), dated December 20, 1988, are hereby
incorporated by reference.
10(l) Contingent Stock Award Rules under Disney Enterprises, Inc.'s 1984
Stock Incentive Plan, filed as Exhibit 10(t) to Disney
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1986, is hereby incorporated by reference.
10(m) 1996 Cash Bonus Performance Plan, filed as Exhibit 10(m) to Disney
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1995, is hereby incorporated by reference.
10(n) Disney Salaried Retirement Plan, as amended through March 1, 1994,
filed as Exhibit 10(l) to Disney Enterprises, Inc.'s Annual Report
on Form 10-K for the year ended September 30, 1994, is hereby
incorporated by reference.
10(o) The Walt Disney Company and Associated Companies Key Employees
Deferred Compensation and Retirement Plan, filed as Exhibit 10(u)
to Disney Enterprises, Inc.'s Annual Report on Form 10-K for the
year ended September 30, 1985, is hereby incorporated by
reference.
10(p) Group Term Life Insurance Plan (summary plan description), filed
as Exhibit 10(x) to Disney Enterprises, Inc.'s Annual Report on
Form 10-K for the year ended September 30, 1985, is hereby
incorporated by reference.
-23-
<PAGE>
10(q) Group Personal Excess Liability Insurance Plan (summary plan
description), filed as Exhibit 10(z) to Disney Enterprises, Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1986,
is hereby incorporated by reference.
10(r) Family Income Assurance Plan (summary plan description), filed as
Exhibit 10(aa) to the Annual Report on Form 10-K for the year
ended September 30, 1986, is hereby incorporated by reference.
10(s) Disney Salaried Savings and Investment Plan, as amended and
restated, filed as Exhibit 10(s) to Disney Enterprises, Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1995,
is hereby incorporated by reference.
10(t) Disney Salaried Savings and Investment Trust Agreement, dated June
30, 1992, filed as Exhibit 10 to Disney Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the period ended June 30, 1992,
is hereby incorporated by reference.
10(u) Master Trust Agreement for Employees Savings and Retirement Plans,
as amended and restated through June 1, 1990, between Disney
Enterprises, Inc. and Bankers Trust Company, as Trustee, filed as
Exhibit 28(b) to Disney Enterprises, Inc.'s Registration Statement
on Form S-8 (No. 33-35405), dated June 14, 1990, is hereby
incorporated by reference.
10(v) Employee Stock Option Plan of Capital Cities/ABC, Inc., as amended
through December 15, 1987, filed as Exhibit 10(f) to Capital
Cities/ABC, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1992, is hereby incorporated by reference.
10(w) Amended and Restated 1991 Stock Option Plan of Capital Cities/ABC,
Inc., filed as Exhibit 6(a)(i) to the Company's Quarterly Report
on Form 10-Q for the period ended March 31, 1996, is hereby
incorporated by reference.
10(x) Amended and Restated Agreement and Plan of Reorganization, dated
as of July 31, 1995, between Disney Enterprises, Inc. and Capital
Cities/ABC, Inc., filed as Exhibit 2.1 to Disney Enterprises,
Inc.'s Current Report on Form 8-K, dated October 6, 1995, is
hereby incorporated by reference.
10(y) First Amendment to the Disney Salaried Retirement Plan as amended
and restated effective January 1, 1988, filed as Exhibit (10) to
Disney Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
period ended December 31, 1995, is hereby incorporated by
reference.
21 Subsidiaries of the Company is filed herewith.
23 Consent of Price Waterhouse LLP, the Company's independent
accountants, is included herein at page 28.
27 Financial Data Schedule (filed electronically only).
28(a) Financial statements with respect to the Disney Salaried Savings
and Investment Plan for the year ended December 31, 1995, filed as
Exhibit 28 to Disney Enterprises, Inc.'s Annual Report on Form 10-
K for the year ended September 30, 1995, as amended by Amendment
No. 1 on Form 10-K/A dated June 30, 1996, are hereby incorporated
by reference.
(b) Reports on Form 8-K
-24-
<PAGE>
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.
THE WALT DISNEY COMPANY
-----------------------------------------------------
(Registrant)
Date: December 19, 1996 By: MICHAEL D. EISNER
-----------------------------------------------------
(Michael D. Eisner, Chairman of the Board and Chief
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive Officer
MICHAEL D. EISNER Chairman of the Board and December 19, 1996
- ----------------------------- Chief Executive Officer
(Michael D. Eisner)
Principal Financial and Accounting
Officers
RICHARD D. NANULA Senior Executive Vice December 19, 1996
- ----------------------------- President and Chief
(Richard D. Nanula) Financial Officer
JOHN J. GARAND Senior Vice President- December 19, 1996
- ----------------------------- Planning and Control
(John J. Garand)
Directors
REVETA F. BOWERS Director December 19, 1996
- -----------------------------
(Reveta F. Bowers)
ROY E. DISNEY Director December 19, 1996
- -----------------------------
(Roy E. Disney)
MICHAEL D. EISNER Director December 19, 1996
- -----------------------------
(Michael D. Eisner)
STANLEY P. GOLD Director December 19, 1996
- -----------------------------
(Stanley P. Gold)
SANFORD M. LITVACK Director December 19, 1996
- -----------------------------
(Sanford M. Litvack)
IGNACIO E. LOZANO, JR. Director December 19, 1996
- -----------------------------
(Ignacio E. Lozano, Jr.)
GEORGE J. MITCHELL Director December 19, 1996
- -----------------------------
(George J. Mitchell)
THOMAS S. MURPHY Director December 19, 1996
- -----------------------------
(Thomas S. Murphy)
RICHARD A. NUNIS Director December 19, 1996
- -----------------------------
(Richard A. Nunis)
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
MICHAEL S. OVITZ Director December 19, 1996
- ------------------------
(Michael S. Ovitz)
LEO J. O'DONOVAN, S.J. Director December 19, 1996
- ------------------------
(Leo J. O'Donovan, S.J.)
SIDNEY POITIER Director December 19, 1996
- ------------------------
(Sidney Poitier)
IRWIN E. RUSSELL Director December 19, 1996
- ------------------------
(Irwin E. Russell)
ROBERT A.M. STERN Director December 19, 1996
- ------------------------
(Robert A.M. Stern)
E. CARDON WALKER Director December 19, 1996
- ------------------------
(E. Cardon Walker)
RAYMOND L. WATSON Director December 19, 1996
- ------------------------
(Raymond L. Watson)
GARY L. WILSON Director December 19, 1996
- ------------------------
(Gary L. Wilson)
</TABLE>
-26-
<PAGE>
THE WALT DISNEY COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants and Consent of Independent Accountants.. 28
Consolidated Financial Statements of The Walt Disney Company and
Subsidiaries
Consolidated Statements of Income for the Years Ended September 30,
1996, 1995 and 1994.................................................... 29
Consolidated Balance Sheets as of September 30, 1996 and 1995........... 30
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994.................................................... 31
Notes to Consolidated Financial Statements.............................. 32
Quarterly Financial Summary............................................. 47
</TABLE>
Schedules other than those listed above are omitted for the reason that they
are not applicable or the required information is included in the financial
statements or related notes.
-27-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Walt Disney Company
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of The Walt Disney Company and its subsidiaries (the "Company") at
September 30, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standard Board's Statement
of Financial Accounting Standards 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," in fiscal 1996.
PRICE WATERHOUSE LLP
Los Angeles, California
November 25, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-26106,
33-35405 and 33-39770) and Form S-3 (Nos. 33-49891 and 33-62777) of The Walt
Disney Company of our report dated November 25, 1996 which appears above.
PRICE WATERHOUSE LLP
Los Angeles, California
December 19, 1996
-28-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
<TABLE>
<CAPTION>
Year ended September 30 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 18,739 $12,151 $10,090
COSTS AND EXPENSES (15,406) (9,685) (8,118)
ACCOUNTING CHANGE (300) -- --
-------- ------- -------
OPERATING INCOME 3,033 2,466 1,972
CORPORATE ACTIVITIES AND OTHER (309) (239) (279)
INTEREST EXPENSE (479) (178) (120)
INVESTMENT AND INTEREST INCOME 41 68 130
ACQUISITION-RELATED COSTS (225) -- --
-------- ------- -------
INCOME BEFORE INCOME TAXES 2,061 2,117 1,703
INCOME TAXES (847) (737) (593)
-------- ------- -------
NET INCOME $ 1,214 $ 1,380 $ 1,110
======== ======= =======
EARNINGS PER SHARE $ 1.96 $ 2.60 $ 2.04
======== ======= =======
Average number of common and common equivalent
shares outstanding 619 530 545
======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-29-
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In millions)
<TABLE>
<CAPTION>
September 30 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 278 $ 1,077
Investments 454 866
Receivables 3,343 1,793
Inventories 951 824
Film and television costs 3,912 2,099
Theme parks, resorts and other property, at cost
Attractions, buildings and equipment 11,019 8,340
Accumulated depreciation (4,448) (3,039)
------- -------
6,571 5,301
Projects in process 1,342 778
Land 118 111
------- -------
8,031 6,190
Intangible assets, net 17,978 --
Other assets 2,359 1,757
------- -------
$37,306 $14,606
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other accrued liabilities $ 6,374 $ 2,843
Income taxes payable 582 200
Borrowings 12,342 2,984
Unearned royalty and other advances 1,179 861
Deferred income taxes 743 1,067
Stockholders' equity
Preferred stock, $.01 par value; $.10 at September 30, 1995
Authorized--100 million shares
Issued--none
Common stock, $.01 par value; $.025 at September 30, 1995
Authorized--1.2 billion shares
Issued--682 million shares and 575 million shares 8,576 1,226
Retained earnings 7,933 6,990
Cumulative translation and other adjustments 39 38
------- -------
16,548 8,254
Less treasury stock, at cost, 8 million shares and 51
million shares (462) (1,603)
------- -------
16,086 6,651
------- -------
$37,306 $14,606
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-30-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Year ended September 30 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $ 1,214 $ 1,380 $ 1,110
CHARGES TO INCOME NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 2,966 1,383 1,199
Depreciation 677 470 410
Amortization of intangible assets 301 -- --
Accounting change 300 -- --
Other 22 133 231
CHANGES IN (including the impact of the ABC
acquisition)
Investments in trading securities 85 1 --
Receivables (426) (122) (280)
Inventories (95) (156) (59)
Other assets (160) (288) (81)
Accounts and taxes payable and accrued
liabilities (455) 415 136
Unearned royalty and other advances 274 161 (141)
Deferred income taxes (78) 133 283
--------- ------- -------
3,411 2,130 1,698
--------- ------- -------
CASH PROVIDED BY OPERATIONS 4,625 3,510 2,808
--------- ------- -------
INVESTING ACTIVITIES
Acquisition of ABC, net of cash acquired (8,432) -- --
Film and television costs (3,678) (1,886) (1,434)
Investments in theme parks, resorts and other
property (1,745) (896) (1,026)
Purchases of marketable securities (18) (1,033) (953)
Proceeds from sales of marketable securities 409 1,460 1,494
Other -- 67 (968)
--------- ------- -------
(13,464) (2,288) (2,887)
--------- ------- -------
FINANCING ACTIVITIES
Borrowings 13,560 786 1,866
Reduction of borrowings (4,872) (772) (1,315)
Repurchases of common stock (462) (349) (571)
Dividends (271) (180) (153)
Exercise of stock options and other 85 183 76
--------- ------- -------
8,040 (332) (97)
--------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents (799) 890 (176)
Cash and Cash Equivalents, Beginning of Period 1,077 187 363
--------- ------- -------
Cash and Cash Equivalents, End of Period $ 278 $ 1,077 $ 187
========= ======= =======
Supplemental disclosure of cash flow
information:
Interest paid $ 379 $ 123 $ 99
========= ======= =======
Income taxes paid $ 689 $ 557 $ 320
========= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
-31-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share amounts)
1 Description of the Business and Summary of Significant Accounting Policies
The Walt Disney Company, together with its subsidiaries (the "Company"), is
a diversified international entertainment organization. As discussed in Note
2, the Company acquired Capital Cities/ABC, Inc. ("ABC") on February 9, 1996.
As a result of the acquisition, the Company has reconfigured its financial
reporting segments into Creative Content, Broadcasting and Theme Parks and
Resorts. Consumer products operations, ABC's publishing operations and filmed
entertainment activities not related to broadcasting have been classified as
Creative Content. Operations previously reported as Filmed Entertainment that
pertain to broadcasting, as well as ABC's broadcasting operations, have been
classified as the Broadcasting segment. The Theme Parks and Resorts segment
contains the same operations as in prior years. The Company's business
segments are described below.
CREATIVE CONTENT
The Company produces and acquires live-action and animated motion pictures
for distribution to the theatrical, home video and television markets. The
Company also produces original television programming for the network and
first-run syndication markets. The Company distributes its filmed product
through its own distribution and marketing companies in the United States and
most foreign markets.
The Company licenses the name "Walt Disney," as well as the Company's
characters, visual and literary properties and songs and music, to various
consumer manufacturers, retailers, show promoters and publishers throughout
the world. The Company also engages in direct retail distribution principally
through the Disney Stores, and produces books and magazines for the general
public in the United States and Europe. In addition, the Company produces
audio products for all markets, as well as film, video and computer software
products for the educational marketplace.
The Company also publishes newspapers, technical and specialty publications
and provides research and database services, primarily for markets in the
United States.
BROADCASTING
The Company operates the ABC Television Network which has primary and
secondary affiliated stations providing coverage to U.S. television
households. The Company also owns television and radio stations affiliated
with the ABC Television Network and the ABC Radio Networks. The Company's
Cable and International Broadcast operations include domestic, European,
Taiwanese, Japanese and Australian operations, and are principally involved in
the production and distribution of cable television programming, the licensing
of programming to domestic and international markets and investing in joint
ventures in foreign-based television operations and television production and
distribution entities. The primary domestic cable programming services, which
operate through joint ventures, are ESPN, the A&E Television Networks and
Lifetime Television. The Company provides programming for and operates The
Disney Channel, a television programming service.
THEME PARKS AND RESORTS
The Company operates the Walt Disney World Resort(R) in Florida, and
Disneyland Park(R), the Disneyland Hotel and the Disneyland Pacific Hotel in
California. The Walt Disney World Resort includes the Magic Kingdom, Epcot and
the Disney-MGM Studios Theme Park, twelve resort hotels and a complex of
villas and suites, a nighttime entertainment complex, a shopping village,
conference centers, campgrounds, golf courses, water parks and other
recreational facilities. The Company earns royalties on revenues generated by
the Tokyo Disneyland(R) theme park near Tokyo, Japan, which is owned and
operated by an unrelated Japanese corporation. The Company also has an
investment in
-32-
<PAGE>
Euro Disney S.C.A. ("Euro Disney"), a publicly held French corporation that
operates Disneyland Paris. The Company's Walt Disney Imagineering unit designs
and develops new theme park concepts and attractions, as well as resort
properties. The Company also manages and markets vacation ownership interests
in the Disney Vacation Club. Included in Theme Parks and Resorts are the
Company's National Hockey League franchise, the Mighty Ducks of Anaheim, and
its ownership interest in the Anaheim Angels, a Major League Baseball team.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
The Walt Disney Company and its subsidiaries after elimination of intercompany
accounts and transactions. Investments in unconsolidated affiliated companies
are accounted for using the equity method, and are classified in the
consolidated balance sheets as "Other assets." The Company's share of earnings
or losses in its equity investments is shown under "Corporate activities and
other" in the consolidated statements of income.
Accounting Changes
During the second quarter of 1996, the Company adopted SFAS 121 Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ("SFAS 121") (see Note 11). Long-lived assets to be held and used
are recorded at cost. Management reviews long-lived assets and the related
intangible assets for impairment whenever events or changes in circumstances
indicate the carrying amount of such assets may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted net cash flows of the operation to which the assets relate, to
the carrying amount including associated intangible assets of such operation.
If the operation is determined to be unable to recover the carrying amount of
its assets, then intangible assets are written down first, followed by the
other long-lived assets of the operation, to fair value. Fair value is
determined based on discounted cash flows or appraised values, depending upon
the nature of the assets.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
footnotes thereto. Actual results could differ from those estimates.
Revenue Recognition
Revenues from the theatrical distribution of motion pictures are recognized
when motion pictures are exhibited. Revenues from video sales are recognized
on the date that video units are made widely available for sale by retailers.
Revenues from the licensing of feature films and television programming are
recorded when the material is available for telecasting by the licensee and
when certain other conditions are met.
Broadcast advertising revenues are recognized when commercials are aired.
Revenues from television subscription services related to the Company's
primary cable programming services are recognized as services are provided.
Revenues from participants and sponsors at the theme parks are generally
recorded over the period of the applicable agreements commencing with the
opening of the related attraction.
Cash, Cash Equivalents and Investments
Cash and cash equivalents consist of cash on hand and marketable securities
with original maturities of three months or less.
-33-
<PAGE>
Debt and equity securities are classified into one of three categories. Debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as "held-to-maturity" and reported at amortized cost.
Debt securities not classified as held-to-maturity and marketable equity
securities are classified as either "trading" or "available-for-sale," and are
recorded at fair value with unrealized gains and losses included in earnings
or stockholders' equity, respectively.
Inventories
Carrying amounts of merchandise, materials and supplies inventories are
generally determined on a moving average cost basis and are stated at the
lower of cost or market.
Film and Television Costs
Film and television production and participation costs are expensed based on
the ratio of the current period's gross revenues to estimated total gross
revenues from all sources on an individual production basis. Estimates of
total gross revenues can change significantly due to the level of market
acceptance of film and television products. Accordingly, revenue estimates are
reviewed periodically and amortization is adjusted. Such adjustments could
have a material effect on results of operations in future periods.
Television broadcast program licenses and rights and related liabilities are
recorded when the license period begins and the program is available for use.
Television network and station rights for theatrical movies and other long-
form programming are charged to expense primarily on accelerated bases related
to the usage of the program. Television network series costs and multi-year
sports rights are charged to expense based on the flow of anticipated revenue.
Theme Parks, Resorts and Other Property
Theme parks, resorts and other property are carried at cost. Depreciation is
computed on the straight-line method based upon estimated useful lives ranging
from three to fifty years.
Intangible/Other Assets
Rights to the name, likeness and portrait of Walt Disney and other
intangible assets are amortized over periods ranging from two to forty years.
The Company continually reviews the recoverability of the carrying value of
these assets using the methodology prescribed in SFAS 121.
Risk Management Contracts
In the normal course of business, the Company employs a variety of off-
balance-sheet financial instruments to manage its exposure to fluctuations in
interest and foreign currency exchange rates, including interest rate and
cross-currency swap agreements, forward and option contracts, and interest
rate exchange-traded futures. The Company designates interest rate and cross-
currency swaps as hedges of investments and debt, and accrues the differential
to be paid or received under the agreements as interest rates change over the
lives of the contracts. Differences paid or received on swap agreements are
recognized as adjustments to interest income or expense over the life of the
swaps, thereby adjusting the effective interest rate on the underlying
investment or obligation. Gains and losses on the termination of swap
agreements, prior to their original maturity, are deferred and amortized to
interest income or expense over the remaining term of the underlying hedged
transactions. Gains and losses arising from interest rate futures, forward and
option contracts, and foreign currency forward and option contracts are
recognized in income or expense as offsets of gains and losses resulting from
the underlying hedged transactions.
Cash flows from interest rate and foreign exchange risk management
activities are classified in the same category as the cash flows from the
related investment, borrowing or foreign exchange activity.
The Company classifies its derivative financial instruments as held or
issued for purposes other than trading.
-34-
<PAGE>
Earnings Per Share
Earnings per share amounts are based upon the weighted average number of
common and common equivalent shares outstanding during the year. Common
equivalent shares are excluded from the computation in periods in which they
have an anti-dilutive effect.
Reclassifications
Certain reclassifications have been made in the 1995 and 1994 financial
statements to conform to the 1996 presentation.
2 Acquisition
On February 9, 1996, the Company completed its acquisition of ABC. Pursuant
to the acquisition, aggregate consideration paid to ABC shareholders consisted
of $10.1 billion in cash and 155 million shares of Company common stock valued
at $8.8 billion based on the stock price as of the date the transaction was
announced.
The acquisition has been accounted for as a purchase and the acquisition
cost of $18.9 billion has been allocated to the assets acquired and
liabilities assumed based on estimates of their respective fair values. Assets
acquired totaled $4.8 billion (of which $1.5 billion was cash) and liabilities
assumed were $4.4 billion. A total of $18.3 billion, representing the excess
of acquisition cost over the fair value of ABC's net tangible assets, has been
allocated to intangible assets and is being amortized over forty years.
In connection with the acquisition, all common shares of the Company
outstanding immediately prior to the effective date of the acquisition were
canceled and replaced with new common shares and all treasury shares were
canceled and retired.
The Company's consolidated results of operations have incorporated ABC's
activity from the effective date of the acquisition. The unaudited pro forma
information below presents combined results of operations as if the
acquisition had occurred at the beginning of the respective periods presented.
The unaudited pro forma information is not necessarily indicative of the
results of operations of the combined company had the acquisition occurred at
the beginning of the periods presented, nor is it necessarily indicative of
future results.
<TABLE>
<CAPTION>
(in millions, except per share data)
Period Ended September 30,
-------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Revenues $ 21,238 $ 18,949
Net income (1) 1,350 1,326
Earnings per share (1) 1.96 1.94
</TABLE>
- --------
(1) The 1996 period includes the impact of a $300 million non-cash charge
related to the initial adoption of a new accounting standard (see Note
11). The charge reduced earnings per share by $0.27 for the period.
In addition, during the second quarter, the Company recognized a $225
million charge for costs related to the acquisition, which are not included in
the above pro forma amounts. Acquisition-related costs consist principally of
interest costs related to imputed interest for the period from the effective
date of the acquisition until March 14, 1996, the date that cash and stock
consideration was issued to ABC shareholders.
The Company entered into an agreement to sell its independent Los Angeles
television station as a result of the ABC acquisition. The sale of KCAL-TV for
$387 million was completed on November 22, 1996, resulting in a gain of
approximately $135 million which will be recognized in 1997's income
statement.
-35-
<PAGE>
3 Investment in Euro Disney
Euro Disney operates the Disneyland Paris theme park and resort complex on a
4,800-acre site near Paris, France. The Company accounts for its 39% ownership
interest in Euro Disney using the equity method of accounting. As of September
30, 1996, the Company's recorded investment in Euro Disney was $430 million.
The quoted market value of the Company's Euro Disney shares at September 30,
1996 was approximately $634 million.
During fiscal year 1994, the Company entered into restructuring agreements
with Euro Disney and the lenders participating in a financial restructuring
for Euro Disney (the "Lenders") to provide certain debt, equity and lease
financing to Euro Disney. In addition, the Company agreed to cancel certain
fully-reserved receivables and waive royalties and base management fees for a
period of five years and reduce such amounts for a specified period
thereafter.
As part of the overall restructuring, the Lenders served as underwriters for
51% of the Euro Disney rights offering, agreed to forgive certain interest
charges of Euro Disney, having a present value of approximately $300 million,
and deferred all principal payments until three years later than originally
scheduled. Pursuant to the terms of the restructuring, interest charges will
continue to progressively increase through fiscal year 2003, although
substantially all of the interest will have been reinstated by the end of
fiscal year 1998. Additionally, Euro Disney will begin paying royalties and
management fees commencing in fiscal year 1999.
Also as part of the restructuring, the Company agreed to arrange for the
provision of a 10-year unsecured standby credit facility of approximately $210
million, upon request, bearing interest at PIBOR. As of September 30, 1996,
Euro Disney had not requested the Company to establish this facility. The
Company also agreed, as long as any obligations to the Lenders are
outstanding, to maintain ownership of at least 34% of the outstanding common
stock of Euro Disney until June 1999, at least 25% for the subsequent five
years and at least 16.67% for an additional term thereafter.
In connection with the restructuring, Euro Disney Associes S.N.C. ("Disney
SNC"), a wholly-owned affiliate of the Company, entered into a lease
arrangement with a noncancelable term of 12 years (the "Lease") related to
substantially all of the Disneyland Paris theme park assets, and then entered
into a 12-year sublease agreement (the "Sublease") with Euro Disney. Remaining
lease rentals at September 30, 1996 of FF 9.8 billion ($1.9 billion)
receivable from Euro Disney under the Sublease approximate the amounts payable
by Disney SNC under the Lease. At the conclusion of the Sublease term, Euro
Disney will have the option to assume Disney SNC's rights and obligations
under the Lease. If Euro Disney does not exercise its option, Disney SNC may
purchase the assets, continue to lease the assets or elect to terminate the
Lease, in which case Disney SNC would make a termination payment to the lessor
equal to 75% of the lessor's then outstanding debt related to the theme park
assets, estimated to be $1.5 billion; Disney SNC could then sell or lease the
assets on behalf of the lessor to satisfy the remaining debt, with any excess
proceeds payable to Disney SNC.
Euro Disney's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in France ("French GAAP"). U.S.
generally accepted accounting principles ("U.S. GAAP") differ in certain
significant respects from French GAAP applied by Euro Disney, principally as
they relate to accounting for leases and the calculation of interest expense
relating to debt affected by Euro Disney's financial restructuring. The
Company records its pro rata equity share of Euro Disney's operating results
calculated in accordance with U.S. GAAP.
-36-
<PAGE>
4 Film and Television Costs
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------
<S> <C> <C>
Theatrical Film Costs
Released, less amortization $ 944 $ 632
In-process 1,947 970
------ ------
2,891 1,602
------ ------
Television Costs
Released, less amortization 303 274
In-process 168 120
------ ------
471 394
------ ------
Television Broadcast Rights 550 103
------ ------
$3,912 $2,099
====== ======
</TABLE>
Based on management's total gross revenue estimates as of September 30, 1996,
approximately 89% of unamortized film and television costs (except in-process)
are expected to be amortized during the next three years.
5 Borrowings
<TABLE>
<CAPTION>
Effective Fiscal
Interest Year
Rate Maturity 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial paper (a) 5.5% 1997 $ 4,185 $ --
U.S. dollar notes and debentures (b) 6.6 1998-2093 4,399 1,085
Dual currency and foreign notes (c) 5.4 1997-2000 1,987 363
Senior participating notes (d) 6.3 2000-2001 1,099 1,057
Other 5.6 1997-2013 672 479
------- ------
5.9% $12,342 $2,984
======= ======
</TABLE>
- --------
(a) In support of the issuance of commercial paper to fund the cash portion of
the ABC purchase price (see Note 2), the Company established bank
facilities in October 1995 totaling $12 billion. A portion of the
commercial paper issued was subsequently refinanced into longer-term
borrowings, and the bank facilities were refinanced to $7 billion. In
October 1996, these facilities were further refinanced to $5 billion and
expire in one to five years. Under the bank facilities, the Company has
the option to borrow at various interest rates.
(b) Includes approximately $600 million of borrowings previously issued by
ABC, Inc. and $300 million of borrowings due in 2093. The effective
interest rate reflects the effect of interest rate swaps entered into with
respect to certain of these borrowings.
(c) Denominated principally in U.S. dollars, Japanese yen, Australian dollars,
and Italian lira. The effective interest rate reflects the effect of
interest rate and cross-currency swaps entered into with respect to
certain of these borrowings.
(d) The average coupon rate is 2.7% on $1.3 billion face value of notes.
Additional interest may be paid based on the performance of designated
portfolios of films.
Borrowings, excluding commercial paper, have the following scheduled
maturities:
<TABLE>
<S> <C>
1997 $ 119
1998 752
1999 1,414
2000 918
2001 2,529
</TABLE>
-37-
<PAGE>
The Company capitalizes interest on assets constructed for its theme parks,
resorts and other property, and on theatrical and television productions in
process. In 1996, 1995 and 1994, respectively, total interest costs incurred
were $545, $236 and $172 million, of which $66, $58 and $52 million were
capitalized.
6 Income Taxes
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Income Before Income Taxes
Domestic (including U.S. exports) $1,822 $1,908 $1,514
Foreign subsidiaries 239 209 189
------ ------ ------
$2,061 $2,117 $1,703
====== ====== ======
Income Tax Provision
Current
Federal $ 389 $ 325 $ 117
State 101 68 30
Foreign (including withholding) 235 184 163
------ ------ ------
725 577 310
------ ------ ------
Deferred
Federal 106 170 260
State 16 (10) 23
------ ------ ------
122 160 283
------ ------ ------
$ 847 $ 737 $ 593
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Components of Deferred Tax Assets and Liabilities 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $(1,863) $ (440)
Investment in Euro Disney (74) (153)
Other--net (20) (13)
------- ------
Total deferred tax assets (1,957) (606)
------- ------
Deferred tax liabilities:
Depreciable, amortizable and other property 2,193 1,235
Licensing revenues 203 189
Leveraged leases 254 199
------- ------
Total deferred tax liabilities 2,650 1,623
------- ------
Net deferred tax liability before valuation allowance 693 1,017
Valuation allowance 50 50
------- ------
Net deferred tax liability $ 743 $1,067
======= ======
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of Effective Income Tax Rate 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
Nondeductible amortization of intangible assets 5.1 -- --
State taxes, net of Federal income tax benefit 3.7 1.9 2.1
Other--net (2.7) (2.1) (2.3)
---- ---- ----
41.1% 34.8% 34.8%
==== ==== ====
</TABLE>
In 1996 and 1995, income tax benefits of $44 and $90 million, respectively,
were allocated to stockholders' equity. Such benefits were attributable to
employee stock option transactions.
-38-
<PAGE>
7 Pension and Other Benefit Programs
The Company maintains pension plans and postretirement medical benefit plans
covering most of its domestic employees not covered by union or industry-wide
plans. Employees hired after January 1, 1994 are not eligible for the
postretirement medical benefit plans. Pension benefits are generally based on
years of service and/or compensation. The following summarizes the balance
sheet impact, as well as the benefit obligations, assets, funded status and
rate assumptions associated with the pension and postretirement medical
benefit plans.
<TABLE>
<CAPTION>
Postretirement
Pension plans benefit plans
-------------- ----------------
1996 1995 1996 1995
------- ----- ------- -------
<S> <C> <C> <C> <C>
Reconciliation of funded status of the
plans and the amounts included in the
Company's consolidated balance sheet:
Projected benefit obligations
Beginning obligations $ (604) $(476) $ (162) $ (182)
ABC's plans at acquisition (774) -- (99) --
Service cost (68) (38) (12) (11)
Interest cost (81) (38) (16) (13)
Amendments -- (5) -- 43
Gains or (losses) 88 (68) 10 (2)
Benefits paid 37 21 8 3
------- ----- ------- -------
Ending obligations (1,402) (604) (271) (162)
------- ----- ------- -------
Fair value of plans' assets
Beginning fair value 632 485 107 78
ABC's plans at acquisition 631 -- -- --
Actual return on plans' assets 149 102 20 16
Contributions 74 72 23 16
Benefits paid (44) (27) (12) (3)
------- ----- ------- -------
Ending fair value 1,442 632 138 107
------- ----- ------- -------
Funded status of the plans 40 28 (133) (55)
Unrecognized net (gain) loss (42) 98 (9) 15
Unrecognized prior service benefit (2) (2) (75) (111)
------- ----- ------- -------
Net balance sheet asset (liability) $ (4) $ 124 $ (217) $ (151)
======= ===== ======= =======
Rate assumptions
Discount rate 7.8% 7.5% 7.8% 7.5%
Rate of return on plans' assets 10.0% 9.5% 10.0% 9.5%
Salary increases 5.6% 5.8% N/A n/a
Annual increase in cost of benefits N/A n/a 7.0% 7.0%
</TABLE>
The annual increase in cost of postretirement benefits of 7% is assumed to
decrease .3ppts per year until stabilizing at 5.5%. An increase in the assumed
benefits cost trend of 1ppt for each year would increase the postretirement
benefit obligation at September 30, 1996 by $55 million.
The Company's accumulated pension benefit obligation at September 30, 1996
was $1.2 billion, of which 98% was vested. The projected benefit obligation
for the postretirement benefit plans at September 30, 1996 comprised 47%
retirees, 18% fully eligible active participants and 35% other active
participants.
The income statement cost of the pension plans for 1996, 1995 and 1994
totaled $58, $33 and $37 million, respectively. The income statement cost
(credit) for the postretirement benefit plans for the same years was $(16),
$(43) and $14 million, respectively. The discount rates and the salary
increase rate were 8.5% and 6.3%, respectively, in 1994.
-39-
<PAGE>
8 Stockholders' Equity
<TABLE>
<CAPTION>
Common Paid-in Retained
(Shares in millions) Shares Stock Capital Earnings
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1993 565 $14 $ 862 $4,833
Exercise of stock options, net 2 -- 69 --
Dividends ($.2875 per share) -- -- -- (153)
Net income -- -- -- 1,110
--- --- ------ ------
Balance at September 30, 1994 567 14 931 5,790
Exercise of stock options, net 8 -- 281 --
Dividends ($.345 per share) -- -- -- (180)
Net income -- -- -- 1,380
--- --- ------ ------
Balance at September 30, 1995 575 14 1,212 6,990
Acquisition impact (see Note 2) 104 (7) 7,213 --
Exercise of stock options, net 3 -- 144 --
Dividends ($.42 per share) -- -- -- (271)
Net income -- -- -- 1,214
--- --- ------ ------
Balance at September 30, 1996 682 $ 7 $8,569 $7,933
=== === ====== ======
</TABLE>
In November 1995, the Company adopted a stockholders' rights plan on
substantially the same terms originally adopted by the Company in 1989. The
plan becomes operative in certain events involving the acquisition of 25% or
more of the Company's common stock by any person or group in a transaction not
approved by the Company's Board of Directors. Upon the occurrence of such an
event, each right, unless redeemed by the Board, entitles its holder to
purchase for $350 an amount of common stock of the Company, or in certain
circumstances the acquirer, having a market value of twice the purchase price.
In connection with the rights plan, 7 million shares of preferred stock were
reserved. In connection with the acquisition of ABC, the Company's former
stockholders' rights plan was canceled.
At September 30, 1996 and 1995, the Company's cumulative foreign currency
translation adjustments and other amounts recorded directly to equity were $39
and $38 million, net of deferred taxes of $16 and $18 million, respectively.
The Company attempts to increase the long-term value of its shares by
periodically acquiring its stock when it perceives that the market value is
below an appropriate ratio of share price to historical earnings, projected
earnings, or other relevant measures. Treasury stock activity for the three
years ended September 30, 1996 was as follows:
<TABLE>
<CAPTION>
Treasury
(Shares in millions) Shares Stock
- ------------------------------------------------------------
<S> <C> <C>
Balance at September 30, 1993 29 $ 715
Common stock repurchased 14 571
--- -------
Balance at September 30, 1994 43 1,286
Common stock repurchased, net 8 317
--- -------
Balance at September 30, 1995 51 1,603
Cancellation of treasury stock (see Note 2) (51) (1,603)
Common stock repurchased 8 462
--- -------
Balance at September 30, 1996 8 $ 462
=== =======
</TABLE>
On April 22, 1996, the Company adopted a new share repurchase program. The
program will allow the Company to purchase up to 105 million shares of its
common stock from time to time in the open market or in privately negotiated
transactions. In December 1996, the Company established a fund pursuant to the
repurchase program to acquire shares of the Company for the purpose of funding
certain stock-based compensation. Any shares acquired by the fund that are not
utilized must be disposed of by December 31, 1999. Concurrent with the
acquisition of ABC, the Company canceled its former share repurchase program.
-40-
<PAGE>
9 Stock Incentive Plans
Under various plans, the Company may grant stock option and other awards to
key executive, management and creative personnel. Transactions under the
various stock option and incentive plans for the periods indicated were as
follows:
<TABLE>
<CAPTION>
(Shares in millions) 1996 1995 1994
- --------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 35 39 36
Awards canceled (2) (4) (1)
Awards granted 21 8 6
Awards exercised (3) (8) (2)
Awards transferred (ABC) 1 -- --
--- --- ---
Outstanding at September 30 52 35 39
=== === ===
Exercisable at September 30 17 15 17
=== === ===
</TABLE>
Stock option awards are granted at prices equal to at least market price on
the date of grant. Options outstanding at September 30, 1996 and 1995 ranged
in price from $13.28 to $65.75 and $5.56 to $57.44 per share, respectively.
Options exercised ranged in price from $5.56 to $57.44 per share in 1996, from
$3.61 to $57.44 per share in 1995, and from $3.23 to $41.00 per share in 1994.
Shares available for future option grants at September 30, 1996 were 60
million.
In October 1995, the Financial Accounting Standards Board issued SFAS 123,
Accounting for Stock-Based Compensation ("SFAS 123") which is effective for
the Company in fiscal 1997. As permitted under SFAS 123, the Company has
elected not to adopt the fair value based method of accounting for its stock-
based compensation plans, but will continue to account for such compensation
under the provisions of APB Opinion No. 25 and, accordingly, the impact of
SFAS 123 on the Company's financial statements is not expected to be material.
The Company will comply with the disclosure requirements of SFAS 123 in 1997.
10 Detail of Certain Balance Sheet Accounts
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Receivables
Trade, net of allowances $ 2,875 $1,593
Other 468 200
------- ------
$ 3,343 $1,793
======= ======
Accounts Payable and Other Accrued Liabilities
Accounts payable $ 5,515 $2,131
Payroll and employee benefits 757 647
Other 102 65
------- ------
$ 6,374 $2,843
======= ======
Intangible Assets
Cost in excess of ABC's net assets acquired $16,079 $ --
Trademark 1,100 --
FCC licenses 1,100 --
Accumulated amortization (301) --
------- ------
$17,978 $ --
======= ======
</TABLE>
-41-
<PAGE>
11 Segments
<TABLE>
<CAPTION>
Business Segments 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Creative Content $10,095 $ 7,736 $ 6,232
Broadcasting 4,142 414 359
Theme Parks and Resorts 4,502 4,001 3,499
------- ------- -------
$18,739 $12,151 $10,090
======= ======= =======
Operating Income
Creative Content $ 1,596 $ 1,531 $ 1,205
Broadcasting 747 76 77
Theme Parks and Resorts 990 859 690
Accounting change (300) -- --
------- ------- -------
$ 3,033 $ 2,466 $ 1,972
======= ======= =======
Capital Expenditures
Creative Content $ 359 $ 232 $ 149
Broadcasting 113 8 13
Theme Parks and Resorts 1,196 635 846
Corporate 77 21 18
------- ------- -------
$ 1,745 $ 896 $ 1,026
======= ======= =======
Depreciation Expense
Creative Content $ 163 $ 107 $ 80
Broadcasting 109 8 7
Theme Parks and Resorts 358 335 289
Corporate 47 20 34
------- ------- -------
$ 677 $ 470 $ 410
======= ======= =======
Identifiable Assets
Creative Content $ 8,837 $ 5,232 $ 4,066
Broadcasting 20,256 564 575
Theme Parks and Resorts 7,066 6,149 5,781
Corporate 1,147 2,661 2,404
------- ------- -------
$37,306 $14,606 $12,826
======= ======= =======
Supplemental Revenue Data
Creative Content
Theatrical product $ 5,306 $ 4,453 $ 3,734
Consumer products 2,597 2,120 1,798
Newspapers, technical and specialty publications 805 -- --
Broadcasting
Advertising 3,092 98 90
Theme Parks and Resorts
Admissions 1,493 1,346 1,180
Merchandise, food and beverage 1,555 1,424 1,238
</TABLE>
-42-
<PAGE>
<TABLE>
<CAPTION>
Geographic Segments 1996 1995 1994
- --------------------------------------------------
<S> <C> <C> <C>
Domestic Revenues
United States $14,422 $ 8,876 $ 7,544
United States export 746 608 480
International Revenues
Europe 2,086 1,677 1,345
Rest of World 1,485 990 721
------- ------- -------
$18,739 $12,151 $10,090
======= ======= =======
Operating Income
United States $ 2,113 $ 1,665 $ 1,345
Europe 953 486 405
Rest of World 178 402 280
Unallocated expenses (211) (87) (58)
------- ------- -------
$ 3,033 $ 2,466 $ 1,972
======= ======= =======
Identifiable Assets
United States $35,442 $13,438 $11,306
Europe 1,495 1,060 1,238
Rest of World 369 108 282
------- ------- -------
$37,306 $14,606 $12,826
======= ======= =======
</TABLE>
During the second quarter of the current year, the Company implemented SFAS
121. This new accounting standard changes the method that companies use to
evaluate the carrying value of such assets by, among other things, requiring
companies to evaluate assets at the lowest level at which identifiable cash
flows can be determined. The implementation of SFAS 121 resulted in the
Company recognizing a $300 million non-cash charge related principally to
certain assets included in the Theme Parks and Resorts segment.
12 Financial Instruments
Investments
As of September 30, 1996, the Company held $41 million of securities
classified as available-for-sale. As of September 30, 1995, the Company held
$96 million of securities classified as trading and $403 and $307 million of
securities and cash equivalents, respectively, classified as available-for-
sale. In 1996 and 1995, realized gains and losses on available-for-sale
securities, determined principally on an average cost basis, and unrealized
gains and losses on available-for-sale securities were not material. In 1995,
the change in the net unrealized gain on trading securities was not material.
Financial Risk Management
The Company is exposed to the impact of interest rate changes. The Company's
objective is to manage the impact of interest rate changes on earnings and
cash flows and on the market value of its investments and borrowings. The
Company maintains fixed rate debt as a percentage of its net debt between a
minimum and maximum percentage, which is set by policy.
The Company transacts business in virtually every part of the world and is
subject to risks associated with changing foreign exchange rates. The
Company's objective is to reduce earnings and cash flow volatility associated
with foreign exchange rate changes to allow management to focus its attention
on its core business issues and challenges. Accordingly, the Company enters
into various contracts which change in value as foreign exchange rates change
to protect the value of its existing foreign currency assets and liabilities,
commitments and anticipated foreign currency revenues. By
-43-
<PAGE>
policy, the Company maintains hedge coverage between minimum and maximum
percentages of its anticipated foreign exchange exposures for each of the next
five years. The gains and losses on these contracts offset changes in the
value of the related exposures.
It is the Company's policy to enter into foreign currency and interest rate
transactions only to the extent considered necessary to meet its objectives as
stated above. The Company does not enter into foreign currency or interest
rate transactions for speculative purposes.
Interest Rate Risk Management
The Company uses interest rate swaps and other instruments to manage net
exposure to interest rate changes related to its portfolio of borrowings and
investments and to lower its overall borrowing costs. Significant interest
rate risk management instruments held by the Company at September 30, 1996 and
1995 are described below.
Interest Rate Risk Management--Borrowings
At September 30, 1996, the Company had outstanding interest rate swaps on
its borrowings with notional amounts totaling $900 million, which effectively
converted floating rate commercial paper to fixed rate instruments. At
September 30, 1996 and 1995, the Company had outstanding interest rate swaps
on its borrowings with notional amounts totaling $1,520 and $685 million,
respectively, which effectively converted medium-term notes to commercial
paper or LIBOR-based variable rate instruments. These swap agreements expire
in two to 15 years.
Interest Rate Risk Management--Investment Transactions
At September 30, 1995, the Company had outstanding $154 million notional
amount of interest rate swaps designated as hedges of investments, and $225
million of options, futures and forward contracts. These swaps and contracts
were terminated during 1996 and the realized gains and losses are included in
earnings.
Interest Rate Risk Management--Summary of Transactions
The following table reflects incremental changes in the notional or
contractual amounts of the Company's interest rate contracts during 1996 and
1995. Activity representing renewal of existing positions is excluded.
<TABLE>
<CAPTION>
Balance at Balance at
September 30, Maturities/ September 30,
1995 Additions Expirations Terminations 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pay floating swaps $ 719 $1,195 $ (115) $ (279) $1,520
Pay fixed swaps 4,680 1,460 -- (5,240) 900
Forward contracts -- 93 (93) -- --
Futures contracts 123 6 -- (129) --
Option contracts 102 12 (40) (74) --
------ ------ ------- ------- ------
$5,624 $2,766 $ (248) $(5,722) $2,420
====== ====== ======= ======= ======
<CAPTION>
Balance at Balance at
September 30, Maturities/ September 30,
1994 Additions Expirations Terminations 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pay floating swaps $1,037 $ 984 $ (135) $(1,167) $ 719
Pay fixed swaps 214 4,606 -- (140) 4,680
Spreadlock contracts 250 -- (250) -- --
Forward contracts 101 294 (395) -- --
Futures contracts 266 289 (239) (193) 123
Option contracts 94 239 (190) (41) 102
------ ------ ------- ------- ------
$1,962 $6,412 $(1,209) $(1,541) $5,624
====== ====== ======= ======= ======
</TABLE>
-44-
<PAGE>
The impact of interest rate risk management activities on income in 1996 and
1995 and the amount of deferred gains and losses from interest rate risk
management transactions at September 30, 1996 and 1995 were not material.
Foreign Exchange Risk Management
The Company primarily uses option strategies which provide for the sale of
foreign currencies to hedge probable, but not firmly committed, revenues.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are offset by changes in the value of the underlying exposures
being hedged. The principal currencies hedged are the Japanese yen, French
franc, German mark, British pound, Canadian dollar, Italian lira and Spanish
peseta.
Foreign Exchange Risk Management Transactions
The Company uses option contracts to hedge anticipated foreign currency
revenues. The Company also uses forward contracts to hedge foreign currency
assets, liabilities and foreign currency payments the Company is committed to
make in connection with the construction of two cruise ships (see Note 13).
Cross-currency swaps are used to hedge foreign currency-denominated
borrowings.
At September 30, 1996 and 1995, the notional amounts of the Company's
foreign exchange risk management contracts, net of notional amounts of
contracts with counterparties against which the Company has a legal right of
offset, the related exposures hedged and the contract maturities are as
follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
NOTIONAL EXPOSURES FISCAL YEAR Notional Exposures Fiscal Year
AMOUNT HEDGED MATURITY Amount Hedged Maturity
-------- --------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Option contracts $5,563 $3,386 1997-1999 $5,070 $2,869 1996-1999
Forward contracts 1,981 1,174 1997-1999 1,940 1,196 1996-1999
Cross-currency swaps 2,308 2,536 1997-2001 350 350 1997-1998
------ ------ ------ ------
$9,852 $7,096 $7,360 $4,415
====== ====== ====== ======
</TABLE>
Gains and losses on contracts hedging anticipated foreign currency revenues
and foreign currency commitments are deferred until such revenues are
recognized or such commitments are met, and offset changes in the value of the
foreign currency revenues and commitments. At September 30, 1996 and 1995, the
Company had net deferred gains of $28 million and net deferred losses of $189
million, respectively, related to foreign currency hedge transactions, which
will be recognized in income over the next three years. Amounts recognizable
in any one year are not material and will be substantially offset by gains and
losses in the value of the related hedged transactions.
The impact of foreign exchange risk management activities on income in 1996
and 1995 was not material.
Fair Value of Financial Instruments
At September 30, 1996 and 1995, the Company's financial instruments included
cash, cash equivalents, investments, receivables, accounts payable, borrowings
and interest rate and foreign exchange risk management contracts.
-45-
<PAGE>
At September 30, 1996 and 1995, the fair values of cash and cash
equivalents, receivables, accounts payable, commercial paper and securities
sold under agreements to repurchase approximated carrying values because of
the short-term nature of these instruments. The estimated fair values of other
financial instruments subject to fair value disclosures, determined based on
broker quotes or quoted market prices or rates for the same or similar
instruments, and the related carrying amounts are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------- -----------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
--------- -------- -------- -------
<S> <C> <C> <C> <C>
Investments $ 41 $ 41 $ 499 $ 499
Borrowings (12,342) (12,270) (2,984) (3,151)
Risk management contracts 466 460 181 137
--------- -------- ------- -------
$(11,835) $(11,769) $(2,304) $(2,515)
========= ======== ======= =======
</TABLE>
Credit Concentrations
The Company continually monitors its positions with, and the credit quality
of, the financial institutions which are counterparties to its financial
instruments and does not anticipate nonperformance by the counterparties. The
Company would not realize a material loss as of September 30, 1996 in the
event of nonperformance by any one counterparty. The Company enters into
transactions only with financial institution counterparties which have a
credit rating of A- or better. The Company's current policy in agreements with
financial institution counterparties is generally to require collateral in the
event credit ratings fall below A- or in the event aggregate exposures exceed
limits as defined by contract. In addition, the Company limits the amount of
credit exposure with any one institution. At September 30, 1996, financial
institution counterparties posted collateral of $201 million to the Company,
and the Company was not required to collateralize its financial instrument
obligations.
The Company's trade receivables and investments do not represent significant
concentrations of credit risk at September 30, 1996, due to the wide variety
of customers and markets into which the Company's products are sold, their
dispersion across many geographic areas, and the diversification of the
Company's portfolio among instruments and issuers.
13 Commitments and Contingencies
The Company, together with, in some instances, certain of its directors and
officers, is a defendant or co-defendant in various legal actions involving
copyright, breach of contract and various other claims incident to the conduct
of its businesses. Management does not expect the Company to suffer any
material liability by reason of such actions, nor does it expect that such
actions will have a material effect on the Company's liquidity or operating
results.
During 1995, the Company entered into agreements with a shipyard to build
two cruise ships for its Disney Cruise Line. Under the agreements, the Company
is committed to make payments totaling approximately $700 million through
1999.
At September 30, 1996, the Company is committed to the purchase of broadcast
rights for various feature films, sports and other programming aggregating
approximately $4.5 billion. This amount is substantially payable over the next
five years.
-46-
<PAGE>
QUARTERLY FINANCIAL SUMMARY
(In millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
December 31 March 31 June 30 September 30
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 (/1/)
Revenues $3,837 $4,543 $5,087 $5,272
Operating income (/2/) 863 356 956 858
Net income (loss) (/2/) 497 (25) 406 336
Earnings (loss) per share (/2/) .93 (.04) .59 .49
1995
Revenues $3,303 $2,951 $2,773 $3,124
Operating income 787 608 574 497
Net income 482 315 318 265
Earnings per share .91 .60 .60 .50
</TABLE>
- --------
(1) Results after February 9, 1996 reflect the impact of the acquisition of
ABC. See Note 2 to the Consolidated Financial Statements.
(2) Reflects a $300 million non-cash charge in the second quarter pertaining
to the implementation of SFAS 121, and a $225 million charge for costs
related to the acquisition of ABC. The earnings per share impacts of these
charges were $.30 and $.22, respectively. See Notes 2 and 11 to the
Consolidated Financial Statements.
-47-
<PAGE>
[LOGO OF RECYCLED PAPER]
<PAGE>
EXHIBIT 3(b)
AMENDED AS OF
APRIL 22, 1996
AMENDED BYLAWS
OF
THE WALT DISNEY COMPANY
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
--------- -----------------
Corporation shall be in the City of Wilmington, County of New Castle, Delaware.
Section 2. Principal Place of Business. The principal place of
--------- ---------------------------
business of the Corporation is hereby fixed and located at 500 South Buena Vista
Street, Burbank, California 91521.
Section 3. Other Offices. The Corporation may also have offices at
--------- -------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
--------- -----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors (and in the case of a special
meeting, by the Board of Directors or the person calling the special meeting as
authorized by Section 3 of this Article II) and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders
--------- ---------------
shall be held on such date and at such time and place as may be fixed by the
Board of Directors and stated in the notice of the meeting, for the purpose of
electing directors and for the transaction of such other business as is properly
brought before the meeting in accordance with these Bylaws.
To be properly brought before the Annual Meeting, business must be
either (i) specified in the notice of Annual Meeting (or any supplement or
amendment thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the Annual Meeting by or at the direction of the Board
of Directors, or (iii) otherwise (a) properly be requested to be brought before
the Annual Meeting by a stockholder of record entitled to vote in the election
of directors generally, and (b) constitute a proper subject to be brought before
such meeting. In addition to any other applicable requirements, for business to
be properly brought before an Annual Meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at 500 South Buena Vista Street, Burbank, California 91521,
not less than 50 days nor more than 75 days prior to the meeting; provided,
however, that in the event that less than 65 days' notice or prior public
disclosure of the date of the Annual Meeting is given or made to stockholders,
notice by a stockholder to be timely must be so received not later than the
close of business on the 12th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the Annual Meeting
(i) a brief description of the business desired to be brought before the Annual
-1-
<PAGE>
Meeting and the reasons for conducting such business at the Annual Meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class, series and number of shares of the Corporation which are beneficially
owned by the stockholder, and (iv) any material interest of the stockholder in
such business. Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at the Annual Meeting except in accordance with the
procedures set forth in this Article II, Section 2. The person presiding at an
Annual Meeting shall, if the facts warrant, determine and declare to the Annual
Meeting that business was not properly brought before the Annual Meeting in
accordance with the provisions of this Article II, Section 2, and if he should
so determine, he shall so declare to the Annual Meeting and any such business
not properly brought before the meeting shall not be transacted. Written notice
of the Annual Meeting stating the place, date and hour of the Annual Meeting
shall be given to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for
--------- ----------------
any purpose or purposes, may be called by the Board of Directors, the Chairman
of the Board of Directors, or the President. Special meetings of stockholders
may not be called by any other person or persons. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than 10 nor
more than 60 days before the date of the meeting to each stockholder entitled to
vote at such meeting, and only such business as is stated in such notice shall
be acted upon thereat. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors, or (b) by a stockholder of the
Corporation who is entitled to vote at the meeting and who complies with the
notice provisions contained in Section 2 of this Article II.
Section 4. Quorum. Except as may be otherwise provided by law or by
--------- ------
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, a minority of the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
--------- ------
of Incorporation or these Bylaws, (i) at all meetings of stockholders for the
election of directors, a plurality of votes cast shall be sufficient to elect,
and (ii) any other question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereon. Unless otherwise provided in the Certificate of
Incorporation, each stockholder represented at a meeting of stockholders shall
be entitled to cast one vote for each share of the capital stock entitled to
vote thereat held by such stockholder. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in his discretion, may require that any votes cast at such meeting
shall be cast by written ballot.
Section 6. Organization. All meetings of the stockholders shall be
--------- ------------
presided over by the Chairman of the Board of Directors or, if he is not
present, by the Vice Chairman of the Board of Directors, and if he is not
present, by such officer or director as is designated by the Board of Directors.
The Secretary of the Corporation or, if he is not present, any Assistant
Secretary or other person designated by the presiding officer shall act as
secretary of the meeting.
-2-
<PAGE>
Section 7. List of Stockholders Entitled to Vote. The officer of the
--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least 10 days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
--------- ------------
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 9. Inspectors of Election. Before any meeting of
--------- ----------------------
stockholders, the Board of Directors shall appoint one or more inspectors to act
at the meeting and make a written report thereof. The Board of Directors may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
The inspectors shall:
(a) ascertain the number of shares outstanding and the voting
power of each,
(b) determine the shares represented at the meeting and the
validity of proxies and ballots,
(c) count all votes and ballots,
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination made by the inspectors,
and
(e) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots.
The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors. In
determining the validity and counting of proxies and ballots, the inspectors
shall act in accordance with applicable law.
-3-
<PAGE>
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. Subject to the rights,
--------- --------------------------------
if any, of holders of preferred stock of the Corporation to elect directors of
the Corporation, the Board of Directors shall consist of not less than nine nor
more than 21 members with the exact number of directors to be determined from
time to time solely by resolution duly adopted by the Board of Directors.
Directors shall be elected by a plurality of the votes cast at Annual Meetings
of stockholders, and each director so elected shall hold office as provided by
Article FIFTH of the Certificate of Incorporation. A director may be removed
from office only as provided by Article SIXTH of the Certificate of
Incorporation. Any director may resign at any time effective upon giving
written notice to the Corporation, unless the notice specifies a later time for
the effectiveness of such resignation. Directors need not be stockholders.
Section 2. Nomination of Directors. Only persons who are nominated
--------- -----------------------
in accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation at the Annual Meeting may be made at such meeting by or at the
direction of the Board of Directors, by any committee or persons appointed by
the Board of Directors or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 2. Such nominations by any
stockholder shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; provided, however,
that in the event that less than 65 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the person, and (d) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to the Rules and Regulations of the Securities and Exchange
Commission under Section 14 of the Securities Exchange Act of 1934, as amended;
and (ii) as to the stockholder giving the notice (a) the name and record address
of the stockholder and (b) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth herein. The officer of the
Corporation presiding at an Annual Meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors,
--------- ---------
howsoever resulting, may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
Section 4. Duties and Powers. The business of the Corporation shall
--------- -----------------
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
-4-
<PAGE>
Section 5. Meetings. The Board of Directors of the Corporation may
--------- --------
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the President, or by a majority of the
Board of Directors. Notice thereof, stating the place, date and hour of the
meeting, shall be given to each director either by mail not less than four days
before the date of the meeting, or personally or by telephone, telegram, telex
or similar means of communication on 12 hours notice, or on such shorter notice
as the person or persons calling such meeting may deem necessary or appropriate
in the circumstances.
Section 6. Quorum; Action of Board of Directors. Except as may be
--------- ------------------------------------
otherwise specifically provided by law, the Certificate of Incorporation or
these Bylaws, at all meetings of the Board of Directors, a majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 7. Action by Written Consent. Any action required or
--------- -------------------------
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Members of the
--------- -----------------------------------------
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
Section 9. Committees. The Board of Directors may, by resolution
--------- ----------
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. The Board of
Directors shall have the power to prescribe the manner in which proceedings of
any such committee shall be conducted. In the absence of any such prescription,
such committee shall have the power to prescribe the manner in which its
proceedings shall be conducted. Unless the Board of Directors or such committee
shall otherwise provide, regular and special meetings and other actions of any
such committee shall be governed by the provisions of this Article III
applicable to meetings and actions of the Board of Directors. Each committee
shall keep regular minutes and report to the Board of Directors when required.
Section 10. Fees and Compensation. Directors and members of committees
---------- ---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors.
-5-
<PAGE>
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be chosen
--------- -------
by the Board of Directors and shall be a Chairman of the Board of Directors (who
must be a director), a President, a Secretary and a Treasurer. The Board of
Directors, in its sole discretion, may also choose a Vice Chairman of the Board
of Directors (who must be a director), one or more Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these Bylaws.
Section 2. Election. The Board of Directors at its first meeting
--------- --------
held after each Annual Meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time solely
by the Board of Directors, which determination may be by resolution of the Board
of Directors or in any bylaw provision duly adopted or approved by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the Board of Directors with or without cause. Any vacancy occurring in
any office of the Corporation may be filled only by the Board of Directors.
Section 3. Chairman of the Board of Directors. The Chairman of the
--------- ----------------------------------
Board of Directors shall be the Chief Executive Officer of the Corporation,
shall preside at all meetings of the Board of Directors and of stockholders and
shall, subject to the provisions of the Bylaws and the control of the Board of
Directors, have general and active management, direction, and supervision over
the business of the Corporation and over its officers. He shall be a member ex
--
officio of all committees created by the Board of Directors, excluding the Audit
- -------
Review Committee and any committee to which he has been designated a regular
member by the Board of Directors. He shall perform all duties incident to the
office of chief executive and such other duties as from time to time may be
assigned to him by the Board of Directors. He shall have the right to delegate
any of his powers to any other officer or employee.
Section 4. President. The President shall report and be responsible
--------- ---------
to the Chairman of the Board. The President shall have such powers and perform
such duties as from time to time may be assigned or delegated to him by the
Board of Directors or are incident to the office or President.
During the absence, disability, or at the request of the Chairman of
the Board of Directors, the President shall perform the duties and exercise the
powers of the Chairman of the Board of Directors. In the absence or disability
of both the President and the Chairman of the Board of Directors, the person
designated by the Board of Directors shall perform the duties and exercise the
powers of the President, and unless otherwise determined by the Board, the
duties and powers of the Chairman.
Section 5. Executive Vice Presidents. The Executive Vice Presidents
--------- -------------------------
shall have such powers and perform such duties as from time to time may be
prescribed for them respectively by the Board of Directors or are incident to
the office of Executive Vice President.
Section 6. Senior Vice Presidents. The Senior Vice Presidents shall
--------- ----------------------
have such powers and perform such duties as from time to time may be prescribed
for them respectively by the Board of Directors or are incident to the office of
Senior Vice President.
Section 7. Vice Presidents. The Vice Presidents shall have such
--------- ---------------
powers and perform such duties as from time to time may be prescribed for them
respectively by the Board of Directors or are incident to the office of Vice
President.
-6-
<PAGE>
Section 8. Secretary. The Secretary shall keep or cause to be kept,
--------- ---------
at the principal executive office or such other place as the Board of Directors
may order, a book of minutes of all meetings of stockholders, the Board of
Directors and its committees, with the time and place of holding, whether
regular or special, and if special, how authorized, the notice thereof given,
the names of those present at Board of Directors and committee meetings, the
number of shares present or represented at stockholders' meetings, and the
proceedings thereof. The Secretary shall keep, or cause to be kept, a copy of
the Bylaws of the Corporation at the principal executive office or business
office of the Corporation.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a stock register, or a duplicate stock register,
showing the names of the stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors and any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors.
Section 9. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities of the Corporation and shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation, and shall send or cause
to be sent to the stockholders of the Corporation such financial statements and
reports as are by law or these Bylaws required to be sent to them.
The Treasurer shall deposit all moneys and valuables in the name and
to the credit of the Corporation with such depositaries as may be designated by
the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all
transactions and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors.
Section 10. Other Officers. Such other officers or assistant
---------- --------------
officers as the Board of Directors may choose shall perform such duties and have
such powers as from time to time may be assigned to them by the Board of
Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
Section 11. Execution of Contracts and Other Documents. Each officer
---------- ------------------------------------------
of the Corporation may execute, affix the corporate seal and/or deliver, in the
name and on behalf of the Corporation, deeds, mortgages, notes, bonds,
contracts, agreements, powers of attorney, guarantees, settlements, releases,
evidences of indebtedness, conveyances, or any other document or instrument
which is authorized by the Board of Directors or is required to be executed in
the ordinary course of business, except in cases where the execution, affixation
of the corporate seal and/or delivery thereof shall be expressly and exclusively
delegated by the Board of Directors to some other officer or agent of the
Corporation.
-7-
<PAGE>
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the
--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman or Vice Chairman of the Board of Directors, the
President or any Executive Vice President, Senior Vice President or Vice
President and (ii) by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
--------- ----------
transfer agent or (ii) a registrar, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
--------- -----------------
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Transfers of shares of capital stock of the
--------- ---------
Corporation shall be made only on the stock record of the Corporation by the
holder of record thereof or by his attorney thereunto authorized by the power of
attorney duly executed and filed with the Secretary of the Corporation or the
transfer agent thereof, and only on surrender of the certificate or certificates
representing such shares, properly endorsed or accompanied by a duly executed
stock transfer power. The Board of Directors may make such additional rules and
regulations as it may deem expedient concerning the issue and transfer of
certificates representing shares of the capital stock of the Corporation.
Section 5. Record Date. In order that the Corporation may determine
--------- -----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than 60 days nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
--------- -----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
-8-
<PAGE>
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
--------- -------
Certificate of Incorporation or these Bylaws, to be given to any director or
stockholder, such notice may be given by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex, cable or facsimile
transmission followed, if required by law, by deposit in the United States mail,
with postage prepaid.
Section 2. Waivers of Notice. Whenever any notice is required by
--------- -----------------
law, the Certificate of Incorporation or these Bylaws, to be given to any
director or stockholder, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Disbursements. All checks or demands for money and notes
--------- -------------
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
--------- -----------
fixed by resolution of the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
--------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board of Directors or
the President or any other officer or officers authorized by the Board of
Directors, the Chairman of the Board of Directors or the President, and any such
officer may, in the name of and on behalf of the Corporation, vote, represent
and exercise on behalf of the Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of the
Corporation and take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any corporation
in which the Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from time to time confer like powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. General. The Corporation shall indemnify to the full
--------- -------
extent authorized or permitted by law (as now or hereafter in effect) any person
made, or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
he, his testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this Section 1 shall apply to or have
any effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
-9-
<PAGE>
Section 2. Further Assurance. In furtherance and not in limitation
--------- -----------------
of the powers conferred by statute:
(a) the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of law; and
(b) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter into
contracts providing indemnification to the full extent authorized or permitted
by law and including as part thereof provisions with respect to any or all of
the foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
ARTICLE IX
AMENDMENTS
----------
Section 1. General. These Bylaws may be altered, amended or
--------- -------
repealed, in whole or in part, or new Bylaws may be adopted by either the
holders of 66-2/3% of the outstanding capital stock entitled to vote thereon or
by the Board of Directors.
ARTICLE X
EMERGENCY PROVISIONS
--------------------
Section 1. General. The provisions of this Article X shall be
--------- -------
operative only during a national emergency declared by the President of the
United States or the person performing the President's functions, or in the
event of a nuclear, atomic or other attack on the United States or a disaster
making it impossible or impracticable for the Corporation to conduct its
business without recourse to the provisions of this Article X. Said provisions
in such event shall override all other Bylaws of the Corporation in conflict
with any provisions of this Article X, and shall remain operative so long as it
remains impossible or impracticable to continue the business of the Corporation
otherwise, but thereafter shall be inoperative; provided that all actions taken
in good faith pursuant to such provisions shall thereafter remain in full force
and effect unless and until revoked by action taken pursuant to the provisions
of the Bylaws other than those contained in this Article X.
Section 2. Unavailable Directors. All directors of the Corporation
--------- ---------------------
who are not available to perform their duties as directors by reason of physical
or mental incapacity or for any other reason or who are unwilling to perform
their duties or whose whereabouts are unknown shall automatically cease to be
directors, with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
Section 3. Authorized Number of Directors. The authorized number of
--------- ------------------------------
directors shall be the number of directors remaining after eliminating those who
have ceased to be directors pursuant to Section 2 of this Article X, or the
minimum number required by law, whichever number is greater.
Section 4. Quorum. The number of directors necessary to constitute a
--------- ------
quorum shall be one-third of the authorized number of directors as specified in
Section 3 of this Article X, or such other minimum number as, pursuant to the
law or lawful decree then in force, it is possible for the Bylaws of a
Corporation to specify.
-10-
<PAGE>
Section 5. Creation of Emergency Committee. In the event the number
--------- -------------------------------
of directors remaining after eliminating those who have ceased to be directors
pursuant to Section 2 of this Article X is less than the minimum number of
authorized directors required by law, then until the appointment of additional
directors to make up such required minimum, all the powers and authorities which
the Board of Directors could by law delegate including all powers and
authorities which the Board of Directors could delegate to a committee, shall be
automatically vested in an emergency committee, and the emergency committee
shall thereafter manage the affairs of the Corporation pursuant to such powers
and authorities and shall have all other powers and authorities as may by law or
lawful decree be conferred on any person or body of persons during a period of
emergency.
Section 6. Constitution of Emergency Committee. The emergency
--------- -----------------------------------
committee shall consist of all the directors remaining after eliminating those
who have ceased to be directors pursuant to Section 2 of this Article X,
provided that such remaining directors are not less than three in number. In the
event such remaining directors are less than three in number, the emergency
committee shall consist of three persons, who shall be the remaining director or
directors and either one or two officers or employees of the Corporation, as the
remaining director or directors may in writing designate. If there is no
remaining director, the emergency committee shall consist of the three most
senior officers of the Corporation who are available to serve, and if and to the
extent that officers are not available, the most senior employees of the
Corporation. Seniority shall be determined in accordance with any designation of
seniority in the minutes of the proceedings of the Board, and in the absence of
such designation, shall be determined by rate of remuneration. In the event that
there are no remaining directors and no officers or employees of the Corporation
available, the emergency committee shall consist of three persons designated in
writing by the stockholder owning the largest number of shares of record as of
the date of the last record date.
Section 7. Powers of Emergency Committee. The emergency committee,
--------- -----------------------------
once appointed, shall govern its own procedures and shall have power to increase
the number of members thereof beyond the original number, and in the event of a
vacancy or vacancies therein, arising at any time, the remaining member or
members of the emergency committee shall have the power to fill such vacancy or
vacancies. In the event at any time after its appointment all members of the
emergency committee shall die or resign or become unavailable to act for any
reason whatsoever, a new emergency committee shall be appointed in accordance
with the foregoing provisions of this Article X.
Section 8. Directors Becoming Available. Any person who has ceased
--------- ----------------------------
to be a director pursuant to the provisions of Section 2 of this Article X and
who thereafter becomes available to serve as a director shall automatically
become a member of the emergency committee.
Section 9. Election of Board of Directors. The emergency committee
--------- ------------------------------
shall, as soon after its appointment as is practicable, take all requisite
action to secure the election of a board of directors, and upon such election
all the powers and authorities of the emergency committee shall cease.
Section 10. Termination of Emergency Committee. In the event, after
---------- ----------------------------------
the appointment of an emergency committee, a sufficient number of persons who
ceased to be directors pursuant to Section 2 of this Article X become available
to serve as directors, so that if they had not ceased to be directors as
aforesaid, there would be enough directors to constitute the minimum number of
directors required by law, then all such persons shall automatically be deemed
to be reappointed as directors and the powers and authorities of the emergency
committee shall be at an end.
-11-
<PAGE>
EXHIBIT 4(c)
COPY AS EXECUTED
----------------
================================================================================
364-DAY CREDIT AGREEMENT
Dated as of October 30, 1996
Among
THE WALT DISNEY COMPANY
as Borrower
-----------
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
----------
and
CITICORP USA, INC.
as Administrative Agent
-----------------------
and
CREDIT SUISSE
and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
as Co-Administrative Agents
---------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<CAPTION>
<C> <S> <C>
SECTION 1.01. Certain Defined Terms.................................. 1
SECTION 1.02. Computation of Time Periods............................ 10
SECTION 1.03. Accounting Terms....................................... 10
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances........................................... 11
SECTION 2.02. Making the Advances.................................... 11
SECTION 2.03. Facility Fee........................................... 12
SECTION 2.04. Reduction of the Commitments........................... 12
SECTION 2.05. Repayment of Advances.................................. 13
SECTION 2.06. Interest on Advances................................... 13
SECTION 2.07. Additional Interest on Eurodollar Rate Advances........ 14
SECTION 2.08. Interest Rate Determination............................ 14
SECTION 2.09. Optional Conversion of Advances........................ 15
SECTION 2.10. Prepayments of Advances................................ 16
SECTION 2.11. Increased Costs........................................ 16
SECTION 2.12. Illegality............................................. 17
SECTION 2.13. Payments and Computations.............................. 17
SECTION 2.14. Taxes.................................................. 18
SECTION 2.15. Sharing of Payments, Etc............................... 21
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation........... 21
SECTION 2.17. Evidence of Debt....................................... 22
SECTION 2.18. Use of Proceeds........................................ 22
SECTION 2.19. Extension of Termination Date.......................... 22
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Condition Precedent to Effectiveness of Section 2.01... 25
SECTION 3.02. Conditions Precedent to Each Borrowing................. 26
SECTION 3.03. Determinations Under Section 3.01...................... 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower......... 26
SECTION 4.02. Additional Representations and Warranties of the
Borrower as of Each Extension Date..................... 28
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
COVENANTS OF THE BORROWER
<C> <S> <C>
SECTION 5.01. Affirmative Covenants.................................. 28
SECTION 5.02. Negative Covenant...................................... 30
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default...................................... 31
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action............................... 32
SECTION 7.02. Administrative Agent's Reliance, Etc................... 33
SECTION 7.03. CUSA and Affiliates.................................... 33
SECTION 7.04. Lender Credit Decision................................. 33
SECTION 7.05. Indemnification........................................ 33
SECTION 7.06. Successor Administrative Agent......................... 34
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc........................................ 34
SECTION 8.02. Notices, Etc........................................... 35
SECTION 8.03. No Waiver; Remedies.................................... 36
SECTION 8.04. Costs and Expenses..................................... 36
SECTION 8.05. Right of Set-off....................................... 36
SECTION 8.06. Binding Effect......................................... 37
SECTION 8.07. Assignments and Participations......................... 37
SECTION 8.08. Indemnification........................................ 39
SECTION 8.09. Confidentiality........................................ 40
SECTION 8.10. Consent to Jurisdiction and Service of Process......... 40
SECTION 8.11. Governing Law.......................................... 41
SECTION 8.12. Execution in Counterparts.............................. 41
SCHEDULE
Schedule I - List of Applicable Lending Offices
EXHIBITS
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Opinion of Assistant General Counsel
of the Borrower
Exhibit D-1 - Form of Foreign Lender Certificate
Exhibit D-2 - Form of Foreign Lender Certificate
</TABLE>
(ii)
<PAGE>
364-DAY CREDIT AGREEMENT
Dated as of October 30, 1996
THE WALT DISNEY COMPANY, a Delaware corporation (the "Borrower"), the
banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof under the heading "The Initial
Lenders", CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrative
agent (together with any successor Administrative Agent appointed pursuant to
Article VII, the "Administrative Agent") for the Lenders (as hereinafter
defined) hereunder, and CREDIT SUISSE, a Swiss banking corporation ("Credit
Suisse") and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a national
banking corporation ("Bank of America"), as co-administrative agents (the "Co-
Administrative Agents") for the Lenders hereunder, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ABC" means ABC, Inc. (successor in interest to Capital Cities/ABC,
Inc.), a New York corporation and a wholly owned subsidiary of the
Borrower, or any successor thereto.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means such account of the
Administrative Agent maintained by the Administrative Agent at the office
of Citibank at 399 Park Avenue, New York, New York 10043, as the
Administrative Agent shall notify the Borrower and the Lenders from time to
time.
"Advance" means an advance by a Lender to the Borrower as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,
each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Agreement" means this 364-Day Credit Agreement, as it may be amended,
supplemented or otherwise modified from time to time in accordance with
Section 8.01.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
<PAGE>
2
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent and the Borrower, in substantially the form of
Exhibit B hereto.
"Assuming Lender" has the meaning specified in Section 2.19(c).
"Assumption Agreement" has the meaning specified in Section 2.19(c).
"Bank of America" has the meaning specified in the recital of parties
to this Agreement.
"Base Rate" means, for each day in any period, a fluctuating interest
rate per annum as shall be in effect from time to time, which rate per
annum shall at all times for such day during such period be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate in effect
for such day;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 0.50%, (ii) the rate obtained by dividing (A) the
latest three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average
(adjusted on the basis of a year of 365 or 366 days, as the case may
be) being determined weekly on each Monday (or, if any such day is not
a Business Day, on the next succeeding Business Day) for the three-
week period ending on the previous Friday by Citibank on the basis of
such rates reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York or, if such publication shall
be suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of
the Federal Reserve System (or any successor thereto) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among
other liabilities) three-month U.S. dollar nonpersonal time deposits
in the United States, and (iii) the average during such three-week
period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor thereto)
for insuring U.S. dollar deposits of Citibank in the United States;
and
(c) 0.50% per annum above the Federal Funds Rate for such day.
"Base Rate Advance" means an Advance which bears interest as provided
in Section 2.06(a)(i).
<PAGE>
3
"Borrowing" means a borrowing consisting of simultaneous Advances of
the same Type made by each of the Lenders pursuant to Section 2.01.
"Business Day" means a day of the year on which banks are not required
or authorized to close in Los Angeles, California, or New York City, New
York, or San Francisco, California, or, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on
in the London interbank market.
"Citibank" means Citibank, N.A., a national banking association.
"Co-Administrative Agents" has the meaning specified in the recital of
parties to this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Consenting Lender" has the meaning specified in Section 2.19(b).
"Convert", "Conversion" and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.08
or 2.09.
"Credit Suisse" has the meaning specified in the recital of parties to
this Agreement.
"CUSA" has the meaning specified in the recital of parties to this
Agreement.
"Debt" means, with respect to any Person: (a) indebtedness for
borrowed money, (b) obligations evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations to pay the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business), (d) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP, recorded as capital
leases and (e) obligations under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of any other Person of the kinds referred to in
clauses (a) through (d) above.
"Disney" means Disney Enterprises, Inc., a Delaware corporation and a
wholly owned subsidiary of the Borrower, or any successor thereto.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance, as the case may be, pursuant to which it became
a Lender, or such other office of such Lender as such Lender may from time
to time specify to the Borrower and the Administrative Agent for such
purpose.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) a Lender or any Affiliate of a Lender or
(b) any bank or other financial institution, or any other Person, which has
been approved in writing by the
<PAGE>
4
Borrower and the Administrative Agent as an Eligible Assignee for purposes
of this Agreement; provided, however, that neither the Borrower's approval
nor the Administrative Agent's approval shall be unreasonably withheld; and
provided further, however, that the Borrower may withhold its approval if
the Borrower reasonably believes that an assignment to such Eligible
Assignee pursuant to Section 8.07 will result in the incurrence of
increased costs payable by the Borrower pursuant to Section 2.11 or 2.14.
"Environmental Claim" means any administrative, regulatory or judicial
action, suit, demand, claim, lien, notice or proceeding relating to any
Environmental Law or any Environmental Permit.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code or duly promulgated policy or rule of
common law, now or hereafter in effect, and in each case as amended, and
any judicial or administrative interpretation thereof, including any order,
consent decree or judgment, relating to the environment, health, safety or
any Hazardous Material.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended.
"ERISA Event" means: (a) (i) the occurrence with respect to a Plan of
a reportable event, within the meaning of Section 4043 of ERISA, unless the
30-day notice requirement with respect thereto has been waived by the
Pension Benefit Guaranty Corporation or (ii) the provisions of paragraph
(1) of Section 4043(b) of ERISA (without regard to paragraph (2) of such
Section) are applicable with respect to a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA could
reasonably be expected to occur with respect to such Plan within the
following 30 days; (b) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (c) the cessation of operations by the
Borrower or any ERISA Affiliate at a facility in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by the Borrower
or any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (e) the failure by the Borrower or any ERISA Affiliate to make a
payment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) the
adoption of an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the
Pension Benefit Guaranty Corporation of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition
<PAGE>
5
which is reasonably likely to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance, as the case may be, pursuant to which it became
a Lender (or, if no such office is specified, its Domestic Lending Office),
or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent for such purpose.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Borrowing, an interest rate per
annum equal to the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rate
per annum at which deposits in U.S. dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period for a period equal to such
Interest Period and in an amount substantially equal to such Reference
Bank's (or, in the case of Citibank, CUSA's) Eurodollar Rate Advance
comprising part of such Borrowing. The Eurodollar Rate for any Interest
Period for each Eurodollar Rate Advance comprising part of the same
Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from
the Reference Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means an Advance which bears interest as
provided in Section 2.06(a)(ii).
"Eurodollar Rate Margin" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
====================================================
Public Debt Rating
S&P/Moody's Applicable Margin
====================================================
<S> <C>
Level 1
-------
AA-/Aa3 or above 0.120%
----------------------------------------------------
Level 2
-------
Lower than AA-/Aa3 but
at least A/A2 0.135%
----------------------------------------------------
Level 3
-------
Lower than A/A2 but
at least A-/A3 0.145%
----------------------------------------------------
Level 4
-------
Lower than A-/A3 or no
Public Debt Rating in effect 0.180%
====================================================
</TABLE>
<PAGE>
6
"Eurodollar Rate Reserve Percentage" means, with respect to any Lender
for any Interest Period for any Eurodollar Rate Advance, the reserve
percentage applicable during such Interest Period (or, if more than one
such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Credit Agreements" means, collectively, (a) the 364-Day
Credit Agreement dated as of October 31, 1995 among DC Holdco, Inc.
(predecessor in interest to The Walt Disney Company), the financial
institutions party thereto, CUSA, as the administrative agent thereunder,
and Credit Suisse, as the co-administrative agent thereunder, as amended,
supplemented or otherwise modified to (but not including) the Effective
Date, and (b) the Five-Year Credit Agreement dated as of October 31, 1995
among DC Holdco, Inc. (predecessor in interest to The Walt Disney Company),
the financial institutions party thereto, CUSA, as the administrative agent
thereunder, and Credit Suisse, as the co-administrative agent thereunder,
as amended, supplemented or otherwise modified to (but not including) the
Effective Date.
"Extension Date" has the meaning specified in Section 2.19(b).
"Facility Fee Percentage" means, as of any date, a percentage per
annum determined by reference to the Public Debt Rating in effect on such
date as set forth below:
<TABLE>
<CAPTION>
====================================================
Public Debt Rating
S&P/Moody's Percentage
====================================================
<S> <C>
Level 1
-------
AA-/Aa3 or above 0.030%
----------------------------------------------------
Level 2
-------
Lower than AA-/Aa3 but
at least A/A2 0.040%
----------------------------------------------------
Level 3
-------
Lower than A/A2 but
at least A-/A3 0.055%
----------------------------------------------------
Level 4
-------
Lower than A-/A3 or no
Public Debt Rating in effect 0.070%
====================================================
</TABLE>
<PAGE>
7
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by the Administrative Agent.
"Five-Year Credit Agreement" means the Five-Year Credit Agreement
being entered into on the date of this Agreement among the Borrower, the
banks, financial institutions and other institutional lenders party
thereto, CUSA, as the administrative agent thereunder, and Credit Suisse
and Bank of America, as the co-administrative agents thereunder, as such
agreement may be amended, supplemented or otherwise modified hereafter from
time to time.
"GAAP" means generally accepted accounting principles consistent with
those applied in the preparation of the audited financial statements
referred to in Section 4.01(c)(i) dated September 30, 1995.
"Hazardous Material" means (a) any petroleum or petroleum product,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, or radon gas, (b) any substance
defined as or included in the definition of "hazardous substances",
hazardous wastes", hazardous materials", "toxic substances", "contaminants"
or "pollutants", or words of similar import, under any applicable
Environmental Law or (c) any other substance to which exposure is regulated
by any governmental or regulatory authority.
"Indemnified Matters" has the meaning specified in Section 8.08.
"Indemnified Party" has the meaning specified in Section 8.08.
"Informed Parties" has the meaning specified in Section 8.09.
"Initial Lender" has the meaning specified in the recital of parties
to this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or on the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three, six or, if
generally available to all of the Lenders, twelve months as the Borrower
may, upon notice received by the Administrative Agent not later than 1:00
P.M. (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided, however, that:
<PAGE>
8
(i) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that if such extension would cause
the last day of such Interest Period to occur in the next succeeding
calendar month, the last day of such Interest Period shall occur on
the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any Interest
Period which ends after the scheduled Revolver Termination Date then
in effect or, if the Advances have been converted to a term loan
pursuant to Section 2.05 prior to the time of such selection, which
ends after the Maturity Date.
"IRS" has the meaning specified in Section 2.14(e).
"Lenders" means, collectively, each Initial Lender, each Assuming
Lender that shall become a party hereto pursuant to Section 2.19 and each
Eligible Assignee that shall become a party hereto pursuant to
Section 8.07; provided, however, that for purposes of any determination to
be made under Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, in
its capacity as a Lender, the term "Lenders" shall be deemed to include
Citibank.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement
which has the same effect as a lien or security interest.
"Majority Lenders" means, at any time, Lenders owed at least a
majority in interest of the aggregate unpaid principal amount of the
Advances owing to the Lenders at such time, or, if no such principal amount
is outstanding at such time, Lenders having at least a majority in interest
of the Commitments at such time; provided, however, that neither the
Borrower nor any of its Affiliates, if a Lender, shall be included in the
determination of the Majority Lenders at any time.
"Material Subsidiary" means, at any date of determination, a
subsidiary of the Borrower that, either individually or together with its
subsidiaries, taken as a whole, has total assets exceeding $100,000,000 on
such date.
"Maturity Date" means the earlier of (a) the second anniversary of the
Revolver Termination Date and (b) the date of termination in whole of the
aggregate Commitments pursuant to Section 2.04 or 6.01.
<PAGE>
9
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate
is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (ii) was so maintained and in respect
of which the Borrower or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Non-Consenting Lender" has the meaning specified in Section 2.19(b).
"Note" has the meaning specified in Section 2.17.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Other Taxes" has the meaning specified in Section 2.14(b).
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date of determination, the
higher rating that has been most recently announced by either S&P or
Moody's, as the case may be, for any class of non-credit enhanced long-term
senior unsecured public debt issued by the Borrower. For purposes of the
foregoing, (a) if only one of S&P and Moody's shall have in effect a Public
Debt Rating, the Eurodollar Rate Margin and the Facility Fee Percentage
shall be determined by reference to the available rating; (b) if neither
S&P nor Moody's shall have in effect a Public Debt Rating, the Eurodollar
Rate Margin and the Facility Fee Percentage will be set in accordance with
Level 4 under the definition of "Eurodollar Rate Margin" or "Facility Fee
Percentage", as the case may be; (c) if the ratings established by S&P and
Moody's shall fall within different levels, the Eurodollar Rate Margin and
the Facility Fee Percentage shall be based upon the higher rating; (d) if
any rating established by S&P or Moody's shall be changed, such change
shall be effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (e) if S&P or Moody's
shall change the basis on which ratings are established, each reference to
the Public Debt Rating announced by S&P or Moody's, as the case may be,
shall refer to the then equivalent rating by S&P or Moody's, as the case
may be.
"Reference Banks" means Citibank, Credit Suisse, Bank of America and
Barclays Bank PLC, or, in the event that less than two of such banks remain
Lenders hereunder at any time, any
<PAGE>
10
other commercial bank designated by the Borrower and approved by the
Majority Lenders as constituting a "Reference Bank" hereunder.
"Register" has the meaning specified in Section 8.07(c).
"Revolver Termination Date" means the earlier of (a) October 29, 1997,
subject to the extension thereof pursuant to Section 2.19, and (b) the date
of termination in whole of the aggregate Commitments pursuant to
Section 2.04 or 6.01; provided, however, that the Revolver Termination Date
of any Lender that is a Non-Consenting Lender to any requested extension
pursuant to Section 2.19 shall be the Revolver Termination Date in effect
immediately prior to the applicable Extension Date for all purposes of this
Agreement.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(d)(i).
"Significant Subsidiary" means any subsidiary of the Borrower or any
of its subsidiaries that constitutes a "significant subsidiary" under
Rule 405 promulgated by the SEC under the Securities Act of 1933, as
amended.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or an ERISA Affiliate and no Person other than the Borrower and
the ERISA Affiliates or (ii) was so maintained and in respect of which the
Borrower or an ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Taxes" has the meaning specified in Section 2.14(a).
"Term Loan Conversion Date" means the Revolver Termination Date on
which all Advances outstanding on such date are converted into a term loan
pursuant to Section 2.05.
"Term Loan Election" has the meaning specified in Section 2.05.
"Type" has the meaning specified in the definition of "Advance".
"United States" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with GAAP.
<PAGE>
11
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the
------------
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the Effective Date
until the Revolver Termination Date in an aggregate amount not to exceed at any
time outstanding the amount set forth opposite such Lender's name on the
signature pages hereof or, if such Lender has become a Lender hereunder pursuant
to an Assumption Agreement, the amount set forth as the Commitment of such
Lender in such Assumption Agreement or, if such Lender has entered into an
Assignment and Acceptance, the amount set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(c), as such
amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment").
Each Borrowing shall be in an aggregate amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof and shall consist of Advances of the
same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lender's Commitment, the
Borrower from time to time may borrow under this Section 2.01, prepay pursuant
to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made
-------------------
on notice, given not later than 11:00 A.M. (New York City time) on the same
Business Day as the date of a proposed Borrowing comprised of Base Rate Advances
and not later than 1:00 P.M. (New York City time) on the third Business Day
prior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telecopier or telex, or by telephone,
confirmed immediately by telecopier or telex, in substantially the form of
Exhibit A hereto, specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day), (ii) Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a
Borrowing comprised of Eurodollar Rate Advances, initial Interest Period for
each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on
the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower at the office where the
Administrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than $20,000,000 or
if the obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits
<PAGE>
12
or other funds acquired by such Lender to fund the Advance to be made by such
Lender as part of such Borrowing when such Advance, as a result of such failure,
is not made on such date.
(d) Unless the Administrative Agent shall have received notice from
a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that any Lender shall not have
so made such ratable portion available to the Administrative Agent, such Lender
agrees to pay to the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate; provided, however, that
(i) within two Business Days after any Lender shall fail to make such ratable
portion available to the Administrative Agent, the Administrative Agent shall
notify the Borrower of such failure and (ii) if such Lender shall not have paid
such corresponding amount to the Administrative Agent within two Business Days
after such demand is made of such Lender by the Administrative Agent, the
Borrower agrees to repay to the Administrative Agent forthwith, upon demand by
the Administrative Agent to the Borrower, such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative
Agent, at the interest rate applicable at the time to Advances comprising such
Borrowing. If and to the extent such corresponding amount shall be paid by such
Lender to the Administrative Agent in accordance with this Section 2.02(d), such
amount so paid shall constitute such Lender's Advance as part of such Borrowing
for all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to each
------------
Lender a facility fee on the average daily amount (whether used or unused) of
such Lender's Commitment from the Effective Date, in the case of each Initial
Lender, and from the later of (a) the Effective Date and (b) the effective date
specified in the Assumption Agreement or the Assignment and Acceptance pursuant
to which it became a Lender, in the case of each other Lender, until, in each
case, the Revolver Termination Date or, if the Borrower has made the Term Loan
Election pursuant to Section 2.05 on or prior to such date, the Maturity Date,
payable quarterly in arrears on the first Business Day of each January, April,
July and October during the term of such Lender's Commitment, commencing
January 2, 1997, and on the Revolver Termination Date or, if the Borrower has
made the Term Loan Election pursuant to Section 2.05 on or prior to such date,
the Maturity Date, at the rate per annum equal to the Facility Fee Percentage in
effect from time to time.
SECTION 2.04. Reduction of the Commitments. (a) Optional. The
---------------------------- --------
Borrower shall have the right, upon at least three Business Days' notice to the
Administrative Agent, to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Lenders, provided that each
partial reduction shall be in the aggregate amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof.
<PAGE>
13
(b) Mandatory. On the Revolver Termination Date, if the Borrower
---------
has made the Term Loan Election in accordance with Section 2.05 prior to such
date, and from time to time thereafter upon each prepayment of the Advances, the
aggregate Commitments of the Lenders under this Agreement shall be automatically
and permanently reduced on a pro rata basis by an amount equal to the amount by
which the aggregate Commitments of the Lenders under this Agreement immediately
prior to such reduction exceeds the aggregate unpaid principal amount of the
Advances outstanding at such time.
SECTION 2.05. Repayment of Advances. The Borrower shall, subject to
---------------------
the next succeeding sentence, repay to each Lender on the Revolver Termination
Date the aggregate principal amount of the Advances owing to such Lender on such
date. The Borrower may, upon not less than 15 days' notice to the Administrative
Agent, elect (the "Term Loan Election") to convert all of the Advances
outstanding on the Revolver Termination Date in effect at such time into a term
loan which the Borrower shall repay in full ratably to the Lenders on the
Maturity Date; provided that no Event of Default, or event that with the giving
of notice or passage of time or both would constitute an Event of Default, has
occurred and is continuing on the date of notice of the Term Loan Election or on
the Term Loan Conversion Date on which such election is to be effected.
SECTION 2.06. Interest on Advances. (a) Scheduled Interest. The
-------------------- ------------------
Borrower shall pay to each Lender interest on the unpaid principal amount of
each Advance owing to such Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
------------------
Base Rate Advance, a rate per annum equal at all times to the remainder of
(A) the Base Rate in effect from time to time minus (B) the Facility Fee
Percentage in effect from time to time, payable quarterly in arrears on the
first Business Day of each January, April, July, and October during such
periods and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance
------------------------
is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (A) the Eurodollar Rate
for such Interest Period for such Advance and (B) the Eurodollar Rate
Margin in effect from time to time, payable in arrears on the last day of
such Interest Period and, if such Interest Period has a duration of more
than three months, on the date which occurs three months and, if
applicable, six months, nine months and twelve months after the first day
of such Interest Period and on the date such Eurodollar Rate Advance shall
be Converted or paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid
----------------
principal amount of each Advance that is not paid when due and on the unpaid
amount of all interest, fees and other amounts payable hereunder that is not
paid when due, payable on demand, at a rate per annum equal at all times to
(i) in the case of any amount of principal, the greater of (x) 2% per annum
above the rate per annum required to be paid on such Advance immediately prior
to the date on which such amount became due and (y) 2% per annum above the Base
Rate in effect from time to time and (ii) to the fullest extent permitted by
law, in the case of all other amounts, 2% per annum above the Base Rate in
effect from time to time.
<PAGE>
14
SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The
-----------------------------------------------
Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the applicable Interest Period for such Advance from
(ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage of such Lender for such
Interest Period, payable on each date on which interest is payable on such
Advance. Such additional interest shall be determined by such Lender and
notified in reasonable detail to the Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
---------------------------
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the
Borrower and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.06(a)(i) or (a)(ii), and the
rate, if any, furnished by each Reference Bank for the purpose of determining
the applicable interest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information to
the Administrative Agent for purposes of determining the Eurodollar Rate for any
Eurodollar Rate Advances, (i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot be determined for
such Eurodollar Rate Advances, (ii) each such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance (or, if such Advance is then a Base Rate Advance, will continue as a
Base Rate Advance), and (iii) the obligation of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority
Lenders notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Majority Lenders (which cost each such Majority Lender reasonably determines in
good faith is material) of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Lenders, whereupon, unless the
Eurodollar Rate Margin shall be increased to reflect such costs as determined by
such Majority Lenders and as agreed by the Borrower, (i) each Eurodollar Rate
Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until the Majority Lenders shall notify the Administrative Agent, and
the Administrative Agent shall in turn notify the Borrower and the Lenders, that
the circumstances causing such suspension no longer exist. The Administrative
Agent shall use reasonable efforts to determine from time to time whether the
circumstances causing such suspension no longer exist and, promptly after the
<PAGE>
15
Administrative Agent knows that the circumstances causing such suspension no
longer exist, the Administrative Agent shall so notify the Borrower and the
Lenders.
(e) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $20,000,000, such Eurodollar Rate
Advances shall automatically Convert into Base Rate Advances and, on and after
such date, the right of the Borrower to Convert such Advances into Eurodollar
Rate Advances shall terminate; provided, however, that if and so long as each
such Eurodollar Rate Advance shall have the same Interest Period as Eurodollar
Rate Advances comprising another Borrowing or Borrowings, and the aggregate
unpaid principal amount of all such Eurodollar Rate Advances shall equal or
exceed $20,000,000, the Borrower shall have the right to continue all such
Eurodollar Rate Advances as, or to Convert all such Advances into, Eurodollar
Rate Advances having such Interest Period.
(g) Upon the occurrence and during the continuance of any Event of
Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The Borrower may on
-------------------------------
any Business Day, upon notice given to the Administrative Agent not later than
11:00 A.M. (New York City time) on the same Business Day as the date of the
proposed Conversion in the case of a Conversion of Eurodollar Rate Advances into
Base Rate Advances, and not later than 1:00 P.M. (New York City time) on the
third Business Day prior to the date of the proposed Conversion in the case of a
Conversion of Base Rate Advances into Eurodollar Rate Advances or of Eurodollar
Rate Advances of one Interest Period into Eurodollar Rate Advances of another
Interest Period, as the case may be, and subject to the provisions of Sections
2.08, 2.09 and 2.12, Convert all Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of any Eurodollar Rate Advances into Base Rate Advances or into
Eurodollar Rate Advances of another Interest Period shall be made on, and only
on, the last day of an Interest Period for such Eurodollar Rate Advances.
Promptly upon receipt from the Borrower of a notice of a proposed Conversion
hereunder, the Administrative Agent shall give notice of such proposed
Conversion to each Lender. Each such notice of a Conversion shall, within the
restrictions set forth above, specify (i) the date of such Conversion (which
shall be a Business Day), (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. The Borrower may Convert all Eurodollar
Rate Advances of any one Lender into Base Rate Advances of such Lender in
accordance with the provisions of Section 2.12 by complying with the procedures
set forth therein and in this Section 2.09 as though each reference in this
Section 2.09 to Advances of any Type was to such Advances of such Lender. Each
such notice of Conversion shall, subject to the provisions of Sections 2.08 and
2.12, be irrevocable and binding on the Borrower.
<PAGE>
16
SECTION 2.10. Prepayments of Advances. The Borrower may, upon not
-----------------------
less than the same Business Day's notice to the Administrative Agent received
not later than 11:00 A.M. (New York City time) in the case of Borrowings
consisting of Base Rate Advances and upon at least three Business Days' notice
to the Administrative Agent received not later than 1:00 P.M. (New York City
time) in the case of Borrowings consisting of Eurodollar Rate Advances, stating
the proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the Advances constituting part of the same Borrowings in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (a) each partial prepayment
shall be in an aggregate principal amount of $1,000,000 or an integral multiple
of $1,000,000 in excess thereof, and (b) in the case of any such prepayment of
Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(b).
SECTION 2.11. Increased Costs. (a) If after the date hereof, due to
---------------
either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or (ii)
the compliance with any hereafter promulgated guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost (excluding any allocation of
corporate overhead) to any Lender (which cost such Lender reasonably determines
in good faith is material) of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then such Lender shall so notify the Borrower promptly
after such Lender knows of such increased cost and determines that such cost is
material and the Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate of
such Lender as to the amount of such increased cost in reasonable detail and
stating the basis upon which such amount has been calculated and certifying that
such Lender's method of allocating such costs is fair and reasonable and that
such Lender's demand for payment of such costs hereunder is not inconsistent
with its treatment of other borrowers which, as a credit matter, are
substantially similar to the Borrower and which are subject to similar
provisions, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If, after the date hereof, either (i) the introduction of or
change in or in the interpretation of any law or regulation or (ii) the
compliance by any Lender with any hereafter promulgated guideline or request
from any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and
the amount of such capital is materially increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments of
this type, then such Lender shall so notify the Borrower promptly after such
Lender makes such determination and, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), the Borrower shall pay to such Lender
within five days from the date of such demand, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate of such Lender as
to such amount in reasonable detail and stating the basis upon which such amount
has been calculated and certifying that such Lender's method of allocating such
increase of capital is fair and reasonable and that such Lender's demand for
payment of such increase of
<PAGE>
17
capital hereunder is not inconsistent with its treatment of other borrowers
which, as a credit matter, are substantially similar to the Borrower and which
are subject to similar provisions, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under this
Section 2.11 any amounts which relate to costs or increases of capital incurred
prior to the 12 months immediately preceding the date of demand for payment of
such amounts, unless the applicable law, regulation, guideline or request
resulting in such costs or increases of capital is imposed retroactively. In the
case of any law, regulation, guideline or request which is imposed
retroactively, the Lender making demand for payment of any amount under this
Section 2.11 shall notify the Borrower not later than 12 months from the date
that such Lender should reasonably have known of such law, regulation, guideline
or request and the Borrower's obligation to compensate such Lender for such
amount is contingent upon such Lender's so notifying the Borrower; provided,
however, that any failure by such Lender to provide such notice shall not affect
the Borrower's obligations under this Section 2.11 with respect to amounts
resulting from costs or increases of capital incurred after the date which
occurs 12 months immediately preceding the date on which such Lender notified
the Borrower of such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other than
from the Borrower) for which such Lender has theretofore been compensated by the
Borrower under this Section 2.11, such Lender shall remit to the Borrower an
amount equal to the amount of such recoupment. Amounts required to be paid by
the Borrower pursuant to this Section 2.11 shall be paid in addition to, and
without duplication of, any amounts required to be paid pursuant to
Section 2.14.
SECTION 2.12. Illegality. Notwithstanding any other provision of
----------
this Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) the obligation of such Lender to make, or to Convert Base Rate
Advances into, Eurodollar Rate Advances shall be suspended until such Lender
shall notify the Administrative Agent, and the Administrative Agent shall notify
the Borrower and the other Lenders (which notice shall be given promptly after
the Administrative Agent knows that the circumstances causing such suspension no
longer exist), that the circumstances causing such suspension no longer exist
and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate
Advances of such Lender then outstanding, together with interest accrued
thereon, unless the Borrower, within five Business Days of notice from the
Administrative Agent or, if permitted by law, on and as of the last day of the
then existing Interest Period for such Eurodollar Rate Advances, Converts all
Eurodollar Rate Advances of such Lender then outstanding into Base Rate Advances
in accordance with Section 2.09.
SECTION 2.13. Payments and Computations. (a) The Borrower shall
-------------------------
make each payment hereunder and under the Notes, if any, not later than 11:00
A.M. (New York City time) on the day when due in U.S. dollars to the
Administrative Agent at the Administrative Agent's Account in same day funds.
The Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or facility fees ratably
(other than amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and
8.08) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Lender to
<PAGE>
18
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon any Assuming
Lender becoming a Lender hereunder as a result of an extension of the Revolver
Termination Date pursuant to Section 2.19, and upon the Administrative Agent's
receipt of such Lender's Assumption Agreement and recording of the information
contained therein in the Register, from and after the applicable Extension Date,
the Administrative Agent shall make all payments hereunder and under any Notes
issued in connection therewith in respect of the interest assumed thereby to the
Assuming Lender. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date specified in such Assignment
and Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes, if any, issued in connection therewith in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on clause (a) or (b) of the
definition of "Base Rate" shall be made by the Administrative Agent on the
basis of a year of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate or the Federal Funds Rate and of facility
fees shall be made by the Administrative Agent, and all computations of
additional interest pursuant to Section 2.07 shall be made by a Lender, on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or facility fees are payable. Each determination by the
Administrative Agent (or, in the case of Section 2.07, by a Lender) of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Whenever any payment hereunder or under the Notes, if any, shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or facility
fees, as the case may be; provided, however, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the immediately
preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes, if any, shall be made, in accordance with
Section 2.13, free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, and franchise taxes imposed
on it, by the jurisdiction under the laws of which
<PAGE>
19
such Lender or the Administrative Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof or by
any other jurisdiction in which such Lender or the Administrative Agent is doing
business that is unrelated to this Agreement (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.14) such
Lender or the Administrative Agent (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes,
if any, or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or the Notes, if any (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties to the extent not
imposed as a result of such Lender's or the Administrative Agent's (as the case
may be) gross negligence or willful misconduct, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Each Lender that is not created or organized under the laws of
the United States or a political subdivision thereof shall deliver to the
Borrower and the Administrative Agent on or prior to the date of its execution
and delivery of this Agreement, and each such Lender that is not a party hereto
on the date hereof shall deliver to the Borrower and the Administrative Agent on
or prior to the date on which such Lender becomes a Lender pursuant to Section
2.19 or 8.07 (as the case may be), a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender in substantially the form
set out in Exhibit D-1 or D-2 hereto, as applicable, to the effect that such
Lender is eligible under the provisions of an applicable tax treaty concluded by
the United States (in which case the certificate shall be accompanied by two
executed copies of Form 1001 (or any successor or substitute form or forms) of
the Internal Revenue Service (the "IRS") of the United States), or under Section
1441(c) or 1442 of the Internal Revenue Code (in which case the certificate
shall be accompanied by two copies of IRS Form 4224 (or any successor or
substitute form or forms) of the IRS), to receive, as of
<PAGE>
20
the date hereof or as of the date such party becomes a Lender hereto pursuant to
Section 2.19 or 8.07 (as the case may be), as appropriate, payments hereunder
without deduction or withholding of United States federal income tax. Each such
Lender further agrees to deliver to the Borrower and the Administrative Agent
from time to time, as reasonably requested by the Borrower or the Administrative
Agent, and in any case before or promptly upon the occurrence of any events
requiring a change in the most recent certificate previously delivered pursuant
to this Section 2.14(e), a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender in substantially the form set out in
Exhibit D-1 or D-2 hereto, as applicable. Further, each Lender that delivers a
certificate in the form set out in Exhibit D-1 hereto agrees, to the extent
permitted by law, to deliver to the Borrower and the Administrative Agent within
15 days prior to every third anniversary of the date of delivery of the initial
IRS Form 1001 by such Lender (or more often if required by law) on which this
Agreement is still in effect, two accurate and complete original signed copies
of IRS Form 1001 (or any successor or substitute form or forms required under
the Internal Revenue Code or the applicable regulations promulgated thereunder)
and a certificate in the form set out in such Exhibit D-1, and each Lender that
delivers a certificate in the form set out in Exhibit D-2 hereto agrees to
deliver to the Borrower and the Administrative Agent, to the extent permitted by
law, within 15 days prior to the beginning of each subsequent taxable year of
such Lender (or more often if required by law) during which this Agreement is
still in effect, two accurate and complete original signed copies of IRS Form
4224 (or any successor or substitute form or forms required under the Internal
Revenue Code or the applicable regulations promulgated thereunder) and a
certificate in the form of such Exhibit D-2. Each such certificate shall
certify as to one of the following:
(i) that such Lender is eligible to receive payments hereunder
without deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein but does not require additional payments therefor
pursuant to Section 2.14(a) or (c) because it is eligible and able to
recover the full amount of any such deduction or withholding from a source
other than the Borrower; or
(iii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein and that it is not eligible and able to recover the full
amount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by IRS Form 1001 or 4224,
that any Lender reasonably considers to be confidential, such Lender promptly
shall give notice thereof to the Borrower and the Administrative Agent and shall
not be obligated to include in such form or document such confidential
information; provided that such Lender certifies to the Borrower that the
failure to disclose such confidential information does not increase the
obligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of principal and interest on
all Advances and the termination of this Agreement until
<PAGE>
21
such date as all applicable statutes of limitations (including any extensions
thereof) have expired with respect to such agreements and obligations of the
Borrower contained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratable
share of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any Lender
--------------------------------------------
requests from the Borrower either payment of additional interest on Eurodollar
Rate Advances pursuant to Section 2.07, or reimbursement for increased costs
pursuant to Section 2.11, or payment of or reimbursement for Taxes pursuant to
Section 2.14, or if any Lender notifies the Administrative Agent that it is
unlawful for such Lender or its Eurodollar Lending Office to perform its
obligations hereunder pursuant to Section 2.12, (i) such Lender will, upon three
Business Days' notice by the Borrower to such Lender and the Administrative
Agent, to the extent not inconsistent with such Lender's internal policies and
applicable legal and regulatory restrictions, use reasonable efforts to make,
fund or maintain its Eurodollar Rate Advances through another Eurodollar Lending
Office of such Lender if (A) as a result thereof the additional amounts required
to be paid pursuant to Section 2.07, 2.11 or 2.14, as applicable, in respect of
such Eurodollar Rate Advances would be materially reduced or the provisions of
Section 2.12 would not apply to such Lender, as applicable, and (B) as
determined by such Lender in good faith but in its sole discretion, the making
or maintaining of such Eurodollar Rate Advances through such other Eurodollar
Lending Office would not otherwise materially and adversely affect such
Eurodollar Rate Advances or such Lender and (ii) unless such Lender has
theretofore taken steps to remove or cure, and has removed or cured, the
conditions creating such obligation to pay such additional amounts or the
circumstances described in Section 2.12, the Borrower may designate an Eligible
Assignee to purchase for cash (pursuant to an Assignment and Acceptance) all,
but not less than all, of the Advances then owing to such Lender and all, but
not less than all, of such Lender's rights and obligations hereunder, without
recourse to or warranty by, or expense to, such Lender, for a purchase price
equal to the outstanding principal amount of each such Advance then owing to
such Lender plus any accrued but unpaid interest thereon and any accrued but
unpaid facility fees owing thereto and, in addition, (A) all additional costs
reimbursements, expense reimbursements and indemnities, if any, owing in respect
of such Lender's Commitment hereunder, and all other accrued and unpaid amounts
owing to such Lender hereunder, at such time shall be paid to such Lender and
(B) if such Eligible Assignee is not otherwise a Lender at such time, the
applicable processing and recordation fee under Section 8.07(a) for such
assignment shall have been paid.
<PAGE>
22
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower
agrees that upon notice by any Lender to the Borrower (with a copy of such
notice to the Administrative Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Advances owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a promissory note or other evidence
of indebtedness, in form and substance reasonably satisfactory to the Borrower
and such Lender (each a "Note"), payable to the order of such Lender in a
principal amount equal to the Commitment of such Lender; provided, however, that
the execution and delivery of such promissory note or other evidence of
indebtedness shall not be a condition precedent to the making of any Advance
under this Agreement.
(b) The Register maintained by the Administrative Agent pursuant to Section
8.07(c) shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances comprising such
Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assumption Agreement and each Assignment and Acceptance delivered
to and accepted by it, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder,
and (iv) the amount of any sum received by the Administrative Agent from the
Borrower hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the Register
pursuant to subsection (b) above, and by each Lender in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount of
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent or such Lender
to make an entry, or any finding that an entry is incorrect, in the Register or
such account or accounts shall not limit or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) to support
the obligations of the Borrower in respect of commercial paper issued by the
Borrower and/or for other general corporate purposes of the Borrower and its
subsidiaries.
SECTION 2.19. Extension of Termination Date. (a) At least 45 days but
-----------------------------
not more than 60 days prior to the Revolver Termination Date in effect at any
time, the Borrower, by written notice to the Administrative Agent, may request
an extension of the Revolver Termination Date in effect at such time for a
period of 364 days from its then scheduled expiration; provided, however, that
the Borrower shall not have made the Term Loan Election for Advances outstanding
on such Revolver Termination Date prior to the then scheduled Revolver
Termination Date. The Administrative Agent shall promptly notify each Lender of
such request, and each Lender shall in turn, in its sole discretion, not earlier
than 30 days but at least 20 days prior to such Revolver Termination Date,
notify the Borrower and the Administrative Agent in writing as to whether such
Lender will consent to such extension. If any Lender
<PAGE>
24
shall fail to notify the Administrative Agent and the Borrower in writing of its
consent to any such request for extension of the Revolver Termination Date at
least 20 days prior to the scheduled occurrence thereof at such time, such
Lender shall be deemed to be a Non-Consenting Lender with respect to such
request. The Administrative Agent shall notify the Borrower not later than 15
days prior to the scheduled Revolver Termination Date in effect at such time of
the decision of the Lenders regarding the Borrower's request for an extension of
the Revolver Termination Date.
(b) If all of the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Revolver Termination
Date shall, effective as at the Revolver Termination Date otherwise in effect at
such time (the "Extension Date"), be extended for a period of 364 days from such
Extension Date; provided that on each Extension Date, no Event of Default, or
event that with the giving of notice or passage of time or both would constitute
an Event of Default, shall have occurred and be continuing, or shall occur as a
consequence thereof. If Lenders holding at least a majority in interest of the
aggregate Commitments at such time consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Revolver Termination
Date in effect at such time shall, effective as at the applicable Extension
Date, be extended as to those Lenders that so consented (each a "Consenting
Lender") but shall not be extended as to any other Lender (each a "Non-
Consenting Lender"). To the extent that the Revolver Termination Date is not
extended as to any Lender pursuant to this Section 2.19 and the Commitment of
such Lender is not assumed in accordance with subsection (c) of this Section
2.19 on or prior to the applicable Extension Date, the Commitment of such Non-
Consenting Lender shall automatically terminate in whole on such unextended
Revolver Termination Date without any further notice or other action by the
Borrower, such Lender or any other Person; provided that such Non-Consenting
Lender's rights under Sections 2.11, 2.14, 8.04 and 8.08, and its obligations
under Section 7.05, shall survive the Revolver Termination Date for such Lender
as to matters occurring prior to such date. It is understood and agreed that no
Lender shall have any obligation whatsoever to agree to any request made by the
Borrower for any requested extension of the Revolver Termination Date.
(c) If Lenders holding at least a majority in interest of the aggregate
Commitments at any time consent to any such request pursuant to subsection (a)
of this Section 2.19, the Borrower may arrange for one or more Consenting
Lenders or other Eligible Assignees (each such Eligible Assignee that accepts an
offer to assume a Non-Consenting Lender's Commitment as of the applicable
Extension Date being an "Assuming Lender") to assume, effective as of the
Extension Date, any Non-Consenting Lender's Commitment and all of the
obligations of such Non-Consenting Lender under this Agreement thereafter
arising, without recourse to or warranty by, or expense to, such Non-Consenting
Lender; provided, however, that the amount of the Commitment of any such
Assuming Lender as a result of such substitution shall in no event be less than
$25,000,000 unless the amount of the Commitment of such Non-Consenting Lender is
less than $25,000,000, in which case such Assuming Lender shall assume all of
such lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paid to
such Non-Consenting Lender (A) the aggregate principal amount of, and any
interest accrued and unpaid to the effective date of the assignment on, the
outstanding Advances, if any, of such Non-Consenting Lender plus (B) any
accrued but unpaid facility fees owing to such Non-Consenting Lender as of
the effective date of such assignment;
<PAGE>
24
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 8.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Administrative
Agent an assumption agreement, in form and substance satisfactory to the
Borrower and the Administrative Agent (an "Assumption Agreement"), duly executed
by such Assuming Lender, such Non-Consenting Lender, the Borrower and the
Administrative Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Administrative
Agent as to the increase in the amount of its Commitment and (C) each Non-
Consenting Lender being replaced pursuant to this Section 2.19 shall have
delivered to the Administrative Agent any Note or Notes held by such Non-
Consenting Lender. Upon the payment or prepayment of all amounts referred to in
clauses (i), (ii) and (iii) of the immediately preceding sentence, each such
Consenting Lender or Assuming Lender, as of the Extension Date, will be
substituted for such Non-Consenting Lender under this Agreement and shall be a
Lender for all purposes of this Agreement, without any further acknowledgment by
or the consent of the other Lenders, and the obligations of each such Non-
Consenting Lender hereunder shall, by the provisions hereof, be released and
discharged.
(d) If all of the Lenders (after giving effect to any assignments
pursuant to subsection (b) of this Section 2.19) consent in writing to a
requested extension (whether by execution or delivery of an Assumption Agreement
or otherwise) not later than one Business Day prior to such Extension Date, the
Administrative Agent shall so notify the Borrower, and, so long as no Event of
Default, or event that with the giving of notice or passage of time or both
would constitute an Event of Default, shall have occurred and be continuing as
of such Extension Date, or shall occur as a consequence thereof, the Revolver
Termination Date then in effect shall be extended for the 364-day period
described in subsection (a) of this Section 2.19, and all references in this
Agreement, and in the Notes, if any, to the " Revolver Termination Date" shall,
with respect to each Consenting Lender and each Assuming Lender for such
Extension Date, refer to the Revolver Termination Date as so extended. Promptly
following each Extension Date, the Administrative Agent shall notify the Lenders
(including, without limitation, each Assuming Lender) of the extension of the
scheduled Revolver Termination Date in effect immediately prior thereto and
shall thereupon record in the Register the relevant information with respect to
each such Consenting Lender and each such Assuming Lender.
<PAGE>
25
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.
-----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "Effective Date") on which all of the following conditions precedent
have been satisfied or waived in accordance with Section 8.01:
(a) the Administrative Agent shall have received on or before the
Effective Date the following, each dated the Effective Date, in form and
substance satisfactory to the Administrative Agent: (i) certified copies
of the resolutions of the Board of Directors of the Borrower or the
Executive Committee of such Board authorizing the execution and delivery of
this Agreement, and approving all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement; (ii) a certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the name and true signature of the officer of the
Borrower executing this Agreement on its behalf; (iii) an opinion of David
K. Thompson, Esq., Senior Vice President-Assistant General Counsel of the
Borrower, in substantially the form of Exhibit C hereto; and (iv) an
opinion of Shearman & Sterling, counsel for the Administrative Agent.
(b) all consents and approvals of any governmental or regulatory
authority and any other third party necessary in connection with this
Agreement or the consummation of the transactions contemplated hereby shall
have been obtained and shall remain in effect.
(c) there shall have occurred no material adverse change in the
business, financial condition or operations of (i) Disney and its
subsidiaries, taken as a whole, since September 30, 1995, except as
disclosed in periodic or other reports filed by Disney and its subsidiaries
during the period from September 30, 1995 to the date of this Agreement
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended,
copies of which have been furnished to the Initial Lenders prior to the
date of this Agreement, or (ii) the Borrower and its subsidiaries, taken as
a whole, since June 30, 1996, except as disclosed in reports filed by the
Borrower and its subsidiaries, if any, during the period from June 30, 1996
to the date of this Agreement pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, copies of which have been furnished to
the Initial Lenders prior to the date of this Agreement.
(d) the Borrower shall have paid or prepaid all amounts owing under
the Existing Credit Agreements, and all commitments of the lenders
thereunder shall have been terminated.
(e) the Borrower shall have notified each Lender and the
Administrative Agent in writing as to the proposed Effective Date at least
three Business Days prior to the occurrence thereof.
(f) all of the representations and warranties contained in Section
4.01 shall be correct in all material respects on and as of the Effective
Date, before and after giving effect to such date, as though made on and as
of the Effective Date (except to the extent that such representations and
warranties relate to an earlier date, in which case such representations
and warranties shall have been correct in all material respects on and as
of such earlier date).
<PAGE>
26
(g) no event shall have occurred and be continuing, or shall result
from the occurrence of the Effective Date, that constitutes an Event of
Default or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing (including
the initial Borrowing) shall be subject to the further conditions precedent that
the Effective Date shall have occurred and on the date of such Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of the date of such Borrowing,
before and after giving effect to such Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date (except to
the extent that such representations and warranties relate to an earlier
date, in which case such representations and warranties shall have been
correct in all material respects on and as of such earlier date); and
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or both.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
this Agreement shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent
shall promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to time
thereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Borrower and
each of the Significant Subsidiaries are duly qualified and in good
standing as foreign corporations authorized to do business in each
jurisdiction (other than the respective jurisdictions of their
incorporation) in which the nature of their respective activities or the
character of the properties they own or lease make such qualification
necessary and in which the failure so to qualify would have a material
<PAGE>
27
adverse effect on the financial condition or operations of the Borrower and
its subsidiaries, taken as a whole.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each of the Notes, if any, delivered hereunder are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or by-
laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any material contractual restriction
binding on or affecting the Borrower, Disney or ABC; no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by the Borrower of this Agreement or
the Notes, if any; and this Agreement is and each of the Notes, when
delivered hereunder, will be the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(c) (i) At any time prior to the date on which the Borrower first
delivers the audited financial statements of the Borrower and its
subsidiaries pursuant to Section 5.01(d)(ii), Disney's most recent annual
report on Form 10-K containing the consolidated balance sheet of Disney and
its subsidiaries, and the related consolidated statements of income and of
cash flows of Disney and its subsidiaries, copies of which have been
furnished to each Initial Lender prior to the date of this Agreement,
fairly present the consolidated financial condition of Disney and its
subsidiaries as at the date of such balance sheet and the consolidated
results of operations of Disney and its subsidiaries for the fiscal year
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and (ii) at any time thereafter, the
Borrower's most recent annual report on Form 10-K containing the
consolidated balance sheet of the Borrower and its subsidiaries, and the
related consolidated statements of income and of cash flows of the Borrower
and its subsidiaries, copies of which have been furnished to each Lender
pursuant to Section 5.01(d)(ii), fairly present the consolidated financial
condition of the Borrower and its subsidiaries as at the date of such
balance sheet and the consolidated results of operations of the Borrower
and its subsidiaries for the fiscal year ended on such date, all in
accordance with generally accepted accounting principles consistently
applied.
(d) There is no pending or, to the Borrower's knowledge, threatened
claim, action or proceeding affecting the Borrower or any of its
subsidiaries which could reasonably be expected to adversely affect the
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole, or which could reasonably be expected to affect the
legality, validity or enforceability of this Agreement; and to the
Borrower's knowledge, the Borrower and each of its subsidiaries have
complied, and are in compliance, with all applicable laws, rules,
regulations, permits, orders, consent decrees and judgments, except for any
such matters which have not had, and would not reasonably be expected to
have, a material adverse effect on the financial condition or operations of
the Borrower and its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and are
not reasonably expected to incur any material liability in connection with
their Single Employer Plans or Multiple Employer Plans, other than ordinary
liabilities for benefits; neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any material withdrawal
<PAGE>
28
liability (as defined in Part I of Subtitle E of Title IV of ERISA) to any
Multiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISA
Affiliate is reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the Borrower
---------------------------------------------------------
as of Each Extension Date. The Borrower represents and warrants on each
- -------------------------
Extension Date (and at no other time) that, as of each such date, the following
statements shall be true:
(a) there has been no material adverse change in the business,
financial condition or operations of the Borrower and its subsidiaries, taken
as a whole, since the date of the audited financial statements of the
Borrower and its subsidiaries most recently delivered to the Lenders pursuant
to Section 5.01(d)(ii) prior to the applicable Extension Date (except as
disclosed in periodic or other reports filed by the Borrower and its
subsidiaries pursuant to Section 13 of the Securities Exchange Act of 1934,
as amended, during the period from the date of the most recently delivered
audited financial statements of the Borrower and its subsidiaries pursuant to
Section 5.01(d)(ii) to the date of the request for an extension of the
Revolver Termination Date then in effect related to such Extension Date); and
(b) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of such date, as though made on
and as of such date (except to the extent that such representations and
warranties relate to an earlier date, in which case such representations and
warranties shall have been correct in all material respects on and as of such
earlier date).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
-------------------------
subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations, permits, orders, consent decrees and judgments binding on
the Borrower and its subsidiaries the failure with which to comply would have
a material adverse effect on the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,
if the failure to so pay and discharge would have a material adverse effect
on the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property, and (ii) all lawful
claims which, if unpaid, will by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its subsidiaries
shall be required to pay or discharge any such tax, assessment, charge, levy
or claim which is being contested in good faith and by proper proceedings and
as to which appropriate reserves are being maintained in accordance with
GAAP.
<PAGE>
29
(c) Preservation of Corporate Existence, Etc. Subject to Section
----------------------------------------
5.02(a), preserve and maintain, and cause each of Disney and ABC to preserve
and maintain, its corporate existence, rights (charter and statutory) and
franchises; provided, however, that none of the Borrower, Disney or ABC shall
be required to preserve any right or franchise if the loss thereof would not
have a material adverse effect on the business, financial condition or
operations of the Borrower and its subsidiaries, taken as a whole; and
provided further, however, that neither Disney nor ABC shall be required to
preserve its corporate existence if the loss thereof would not have a
material adverse effect on the business, financial condition or operations of
the Borrower and its subsidiaries, taken as a whole.
(d) Reporting Requirements. Furnish to the Administrative Agent, on
----------------------
behalf of the Lenders:
(i) as soon as available and in any event within 50 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, the Borrower's quarterly report to shareholders on Form 10-Q as
filed with the Securities and Exchange Commission (the "SEC"), in each
case containing a consolidated balance sheet of the Borrower and its
subsidiaries as of the end of such quarter and consolidated statements of
income and of cash flows of the Borrower and its subsidiaries for the
period commencing at the end of the previous fiscal year and ending with
the end of such quarter, and a certificate of any of the Borrower's
Chairman of the Board of Directors, President, Chief Financial Officer,
Treasurer, Assistant Treasurer or Controller stating that no Event of
Default, or event that with the giving of notice or passage of time or
both, would constitute an Event of Default, has occurred and is
continuing;
(ii) as soon as soon as available and in any event within 100
days after the end of each fiscal year of the Borrower, a copy of the
Borrower's annual report to shareholders on Form 10-K as filed with the
SEC, in each case containing consolidated financial statements of the
Borrower and its subsidiaries for such year and a certificate of any of
the Borrower's Chairman of the Board of Directors, President, Chief
Financial Officer, Treasurer, Assistant Treasurer or Controller stating
that no Event of Default, or event that with the giving of notice or
passage of time or both would constitute an Event of Default, has
occurred and is continuing;
(iii) promptly after the Borrower obtains actual knowledge of
the occurrence of each Event of Default, and each event that with the
giving of notice or passage of time or both would constitute an Event of
Default, a statement of any of the Borrower's Chairman of the Board of
Directors, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller setting forth details of such Event of Default or
event continuing on the date of such statement, and the action which the
Borrower has taken and proposes to take with respect thereto;
(iv) promptly after the commencement thereof, notice of any
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower or any of its subsidiaries of
the type described in Section 4.01(d);
<PAGE>
30
(v) promptly after the Borrower obtains actual knowledge
thereof, written notice of any pending or threatened Environmental Claim
against the Borrower or any of its subsidiaries or any of their
respective properties which could reasonably be expected to materially
and adversely affect the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole;
(vi) promptly after the Borrower obtains actual knowledge of the
occurrence of any ERISA Event which could reasonably be expected to
materially and adversely affect the financial condition or operations of
the Borrower and its subsidiaries, taken as a whole, a statement of any
of the Borrower's Chairman of the Board of Directors, President, Chief
Financial Officer, Treasurer, Assistant Treasurer or Controller
describing such ERISA Event and the action, if any, which the Borrower
has taken and proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice
received by the Borrower or any ERISA Affiliate concerning (A) the
imposition of withdrawal liability (as defined in Part I of Subtitle E of
Title IV of ERISA) by a Multiemployer Plan, which withdrawal liability
could reasonably be expected to materially and adversely affect the
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole, (B) the reorganization or termination, within the
meaning of Title IV of ERISA, of any Multiemployer Plan, which
reorganization or termination could reasonably be expected to materially
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole, or (C) the amount of liability
incurred, or which may be incurred, by the Borrower or any ERISA
Affiliate in connection with any event described in subclause (vii)(A) or
(vii)(B) above; and
(viii) such other material information reasonably related to
any Lender's credit analysis of the Borrower or any of its subsidiaries
as any Lender through the Administrative Agent may from time to time
reasonably request.
SECTION 5.02. Negative Covenant. So long as any Advance shall remain
-----------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey,
------------
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of the assets of the
Borrower and its subsidiaries, taken as a whole (whether now owned or
hereafter acquired), to, any Person, or permit any of its subsidiaries to do
so, unless (i) immediately after giving effect to such proposed transaction,
no Event of Default or event that with the giving of notice or lapse of time
or both would constitute an Event of Default, would exist and (ii) in the
case of any such merger to which the Borrower is a party, the Borrower is the
surviving corporation or the Person into which the Borrower shall be merged
or formed by any such consolidation shall be a corporation organized and
existing under the laws of the United States or any State thereof and shall
assume the Borrower's obligations hereunder and under the Notes, if any, in
an agreement or instrument reasonably satisfactory in form and substance to
the Majority Lenders.
<PAGE>
31
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events
-----------------
of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or any fee or other amount payable under this
Agreement, in each case within three Business Days after such interest, fee
or other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) delivered in writing and identified as
delivered in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenant
contained in Section 5.01(d)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed
or observed if the failure to perform or observe such other term, covenant or
agreement shall remain unremedied for 30 days after written notice thereof
shall have been given to the Borrower by the Administrative Agent or any
Lender; or
(e) The Borrower or any of its subsidiaries shall fail to pay any
principal of or premium or interest on any Debt which is outstanding in a
principal amount of at least $250,000,000 in the aggregate (but excluding
Debt arising hereunder) of the Borrower or such subsidiary (as the case may
be), when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure (i)
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt and (ii) shall not have been
cured or waived; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem, purchase or defease
such Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Borrower or any Material Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
<PAGE>
32
of a receiver, trustee, custodian or other similar official for it or for
substantially all of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Borrower or any Material Subsidiary shall
take any corporate action to authorize any of the actions set forth above in
this subsection (f); or
(g) Any money judgment, writ or warrant of attachment or similar
process against the Borrower, any Material Subsidiary or any of their
respective assets involving in any case an amount in excess of $100,000,000
is entered and shall remain undischarged, unvacated, unbonded or unstayed for
a period of 30 days or, in any case, within five days of any pending sale or
disposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. (a) Each Lender hereby
------------------------
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement of this Agreement or
collection of the Advances), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The Administrative Agent agrees
to give to each Lender prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
(b) The Co-Administrative Agents shall have no duties under this
Agreement other than those afforded to them in their capacities as Lenders, and
each Lender hereby acknowledges that the
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33
Co-Administrative Agents have no liability under this Agreement other than those
assumed by them in their capacities as Lenders.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable to any Lender for any action taken or omitted to be taken by it
or them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent: (i) may treat the Lender which made
any Advance as the holder of the Debt resulting therefrom until the
Administrative Agent receives and accepts an Assumption Agreement entered into
by an Assuming Lender as provided in Section 2.19, or an Assignment and
Acceptance entered into by such Lender, as assignor, and an Eligible Assignee,
as assignee, as provided in Section 8.07; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment and
-------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its respective Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from, and generally engage in any kind of business with, the
Borrower, any of its subsidiaries and any Person who may do business with or own
securities of the Borrower or any such subsidiary, all as if CUSA was not the
Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(c)(i) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of Advances then owing to each of
them (or, if no Advances are at the time outstanding or if any Advances are then
owing to Persons which are not Lenders, ratably according to the respective
<PAGE>
34
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal or
bankruptcy proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and such resignation shall be effective upon the appointment of a
successor Administrative Agent as provided herein. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days after
the retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent. Any successor Administrative Agent appointed hereunder
shall be a commercial bank organized or licensed under the laws of the United
States or of any State thereof, or an Affiliate of any such commercial bank,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Borrower or any of its Affiliates, if
a Lender, at the time of any such amendment, waiver or consent), do any of the
following: (a) waive any of the conditions specified in Section 3.01 or 3.02,
(b) increase the Commitments of the Lenders or subject the Lenders to any
additional obligations, (c) reduce the principal of, or interest on, the
Advances or the facility fees payable hereunder, (d) postpone any date fixed for
any payment of principal of, or interest on, the Advances (other than as
provided in
<PAGE>
35
Sections 2.05 and 2.19), (e) change the percentage of the Commitments or of the
aggregate unpaid principal amount of Advances, or the number of Lenders, which
shall be required for the Lenders or any of them to take any action hereunder or
(f) amend this Section 8.01; and provided, further, that no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications
------------
provided for hereunder shall be, except as otherwise expressly provided for
herein, in writing (including telecopier, telegraphic or telex communication)
and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower,
at its address at:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Assistant Treasurer
Telecopy Number: (818) 563-1682 and (818) 562-1811;
with a copy to:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Corporate Legal Department
Telecopy Number: (818) 563-4160;
if to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assumption Agreement or the Assignment and Acceptance
pursuant to which it became a Lender, as the case may be; and if to the
Administrative Agent, at its address at:
Citicorp USA, Inc.
One Court Square
Long Island City, New York 11120
Attention: Kim Coley
Telecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.
One Sansome Street
San Francisco, California 94104
Attention: Mark Wilson
Telecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telecopied, telegraphed or
<PAGE>
36
telexed, be effective when deposited in the mails, telecopied, delivered to the
telegraph company or confirmed by telex answerback, respectively, except that
notices and communications to the Administrative Agent pursuant to Article II or
VII shall not be effective until received by the Administrative Agent. Delivery
by telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or of any Exhibit hereto to be executed and
delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof.
(b) If any notice required under this Agreement is permitted to be
made, and is made, by telephone, actions taken or omitted to be taken in
reliance thereon by the Administrative Agent or any Lender shall be binding upon
the Borrower notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to the
Administrative Agent or such Lender; provided that any such action taken or
omitted to be taken by the Administrative Agent or such Lender shall have been
in good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
-------------------
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay,
------------------
within five Business Days of demand, all actual and reasonable costs and
expenses, if any (including, without limitation, actual and reasonable counsel
fees and expenses), of the Administrative Agent and each Lender in connection
with the enforcement (whether through legal proceedings or otherwise) of this
Agreement and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.08(f) or
2.10 or acceleration of the maturity of the Advances pursuant to Section 6.01 or
for any other reason (other than by reason of a payment pursuant to Section
2.12), the Borrower shall, within five Business Days of demand by any Lender
(with a copy of such demand to the Administrative Agent), pay to such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, but excluding trust accounts) at any time
held and other indebtedness at any time owing by such Lender (and, in the case
of CUSA, Citibank) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter existing under
this Agreement, whether or not such Lender shall have made any demand
<PAGE>
37
under this Agreement. Each Lender agrees promptly to notify the Borrower after
any such set-off and application made by such Lender (and, in the case of CUSA,
Citibank); provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender (and, in
the case of CUSA, Citibank) under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
--------------
(other than Section 2.01, which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower, the Administrative Agent and each Co-Administrative
Agent and when the Administrative Agent shall have been notified by each Initial
Lender that such Initial Lender has executed it and, thereafter, shall be
binding upon and inure to the benefit of the Borrower, the Administrative Agent,
each Co-Administrative Agent and each Lender and their respective successors and
permitted assigns, except that the Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,
------------------------------
if requested by the Borrower upon notice by the Borrower delivered to such
Lender and the Administrative Agent pursuant to clause (ii) of Section 2.16,
will, assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) the sum of (A) the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment and (B) the amount of the
commitment being contemporaneously assigned under the Five-Year Credit Agreement
by the Person that is such assigning Lender (in both cases determined as of the
date of the Assignment and Acceptance or similar agreement with respect to such
assignments) shall not be less than $50,000,000 in the aggregate (unless such
lesser amount is previously agreed among such assigning Lender, the
Administrative Agent and the Borrower), provided, however, that if the aggregate
amount of the Commitment of such assigning Lender hereunder and its commitment
under the Five-Year Credit Agreement is less than $50,000,000 on the date of
such proposed assignments, such assigning Lender may assign all, but not less
than all, of its remaining rights and obligations under this Agreement and the
Five-Year Credit Agreement (unless an assignment of a portion of such assigning
Lender's obligations hereunder and thereunder is otherwise previously agreed
among such assigning Lender, the Administrative Agent and the Borrower), (iii)
each such assignment shall be to an Eligible Assignee, and (iv) the parties to
each such assignment (other than the Borrower) shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,000. Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than any rights such Lender assignor may have under
Sections 2.11, 2.14 and 8.08) and be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
<PAGE>
38
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its subsidiaries or the performance or observance by the Borrower of any of its
obligations under this Agreement or any instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(c)(i) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance and each Assumption
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee
and, if applicable, the Borrower, together with any Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit B hereto, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and (iv) such Lender shall not agree in any
participation agreement with any participant
<PAGE>
39
or proposed participant to obtain the consent of such participant before
agreeing to the amendment, modification or waiver of any of the terms of this
Agreement or any Note, before consenting to any action or failure to act by the
Borrower or any other party hereunder or under any Note, or before exercising
any rights it may have in respect thereof, unless such amendment, modification,
waiver, consent or exercise would (A) increase the amount of such participant's
portion of such Lender's Commitment, (B) reduce the principal amount of or rate
of interest on the Advances or any fee or other amounts payable hereunder to
which such participant would be entitled to receive a share under such
participation agreement, or (C) postpone any date fixed for any payment of
principal of or interest on the Advances or any fee or other amounts payable
hereunder to which such participant would be entitled to receive a share under
such participation agreement.
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower in writing and directly related to the transactions contemplated
hereunder; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in violation
of the Securities Act of 1933, as amended from time to time, or any applicable
state securities laws, and each Lender hereby represents that it will make any
Advance for its own account in the ordinary course of its business and not with
a view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and any Note issued to it hereunder) in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System (or any successor regulation thereto) and the applicable operating
circular of such Federal Reserve Bank.
SECTION 8.08. Indemnification. The Borrower agrees to indemnify and
---------------
hold harmless the Administrative Agent, each Co-Administrative Agent and each
Lender and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding (whether or not an
Indemnified Party is a party thereto) arising out of, related to or in
connection with the Commitments hereunder or the Advances made pursuant hereto
or any transactions done in connection herewith, including, without limitation,
any transaction in which any proceeds of the Advances are, or are proposed, to
be applied (collectively, the "Indemnified Matters"); provided that the Borrower
shall have no obligation to any Indemnified Party under this Section 8.08 with
respect to (i) matters for which such Indemnified Party has been reimbursed by
or on behalf of the Borrower pursuant to any other provision of this Agreement,
but only to the extent of such reimbursement, or (ii) Indemnified Matters found
by a court of competent jurisdiction to have resulted from the willful
misconduct or gross negligence of such Indemnified Party. If any action is
brought against any Indemnified Party, such Indemnified Party shall promptly
notify the
<PAGE>
40
Borrower in writing of the institution of such action and the Borrower shall
thereupon have the right, at its option, to elect to assume the defense of such
action; provided, however, that the Borrower shall not, in assuming the defense
of any Indemnified Party in any Indemnified Matter, agree to any dismissal or
settlement of such Indemnified Matter without the prior written consent of such
Indemnified Party, which consent shall not be unreasonably withheld, if such
dismissal or settlement (A) would require any admission or acknowledgement of
culpability or wrongdoing by such Indemnified Party or (B) would provide for any
nonmonetary relief to any Person to be performed by such Indemnified Party. If
the Borrower so elects, it shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such Indemnified
Party) and payment of expenses. Such Indemnified Party shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (1) the
employment of such counsel shall have been authorized in writing by the Borrower
in connection with the defense of such action or (2) the Borrower shall not have
properly employed counsel reasonably satisfactory to such Indemnified Party to
have charge of the defense of such action, in which case such fees and expenses
shall be paid by the Borrower. If an Indemnified Party shall have reasonably
concluded (based upon the advice of counsel) that the representation by one
counsel of such Indemnified Party and the Borrower creates a conflict of
interest for such counsel, the reasonable fees and expenses of such counsel
shall be borne by the Borrower and the Borrower shall not have the right to
direct the defense of such action on behalf of such Indemnified Party (but shall
retain the right to direct the defense of such action on behalf of the
Borrower). Anything in this Section 8.08 to the contrary notwithstanding, the
Borrower shall not be liable for the fees and expenses of more than one counsel
for any Indemnified Party in any jurisdiction as to any Indemnified Matter or,
except as specified in the second sentence of this Section 8.08, for any
settlement of any Indemnified Matter effected without its written consent. All
obligations of the Borrower under this Section 8.08 shall survive the making and
repayment of the Advances and the termination of this Agreement.
SECTION 8.09. Confidentiality. Subject to the provisions of Section
---------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,
assigns, advisors, officers, employees, directors, agents, legal counsel and
other professional advisors (the "Informed Parties") to, hold all nonpublic
information obtained pursuant to this Agreement in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide transferee or participant in
connection with the contemplated transfer or participation or to another Lender
or an Informed Party agreeing to hold such nonpublic information as confidential
or as required or requested by law or to any governmental authority or
representative thereof or pursuant to legal process; provided that unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental authority or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
authority) for disclosure of any such nonpublic information prior to disclosure
of such information; and provided further that in no event shall any Lender be
obligated or required to return any materials furnished by the Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process. All
----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreement
or any instrument or other documents delivered hereunder may be brought in any
state or federal court in the Borough of Manhattan in the State of New York, and
by execution and delivery of this Agreement, the Borrower accepts, for itself
and in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid
<PAGE>
41
courts, and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with this Agreement or any instrument or other document
delivered hereunder from which no appeal has been taken or is available. The
Borrower agrees to receive service of process in any such proceeding in any such
court at its office at 114 Fifth Avenue, New York, New York 10011, Attention:
Kenneth E. Newman (or at such other address in the Borough of Manhattan in the
State of New York as the Borrower shall notify the Administrative Agent from
time to time) and, if the Borrower ever ceases to maintain such office in the
Borough of Manhattan, irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, New York 10019, or any other address in the State of
New York communicated by CT Corporation System to the Administrative Agent, as
its agent to receive on its behalf service of all process in any such proceeding
in any such court, such service being hereby acknowledged by the Borrower to be
effective and binding service in every respect.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement. A full set of executed counterparts of this Agreement shall be
lodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER
------------
THE WALT DISNEY COMPANY
By: [SIGNATURE APPEARS HERE]
---------------------------
Title: Vice President and Assistant Treasurer
------------------------
THE ADMINISTRATIVE AGENT
------------------------
CITICORP USA, INC.,
as Administrative Agent
By: /s/ Steven R. Victorin
---------------------------
Title: Attorney-in-Fact
------------------------
<PAGE>
42
THE CO-ADMINISTRATIVE AGENTS
----------------------------
CREDIT SUISSE,
as Co-Administrative Agent
By: /s/ Stephen M. Flynn
--------------------------
Title: Member of Senior Management
-----------------------
By: /s/ David J. Worthington
--------------------------
Title: Member of Senior Management
-----------------------
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Co-Administrative Agent
By: /s/ Matthew J. Koe
--------------------------
Title: Vice President
-----------------------
THE INITIAL LENDERS
-------------------
Commitment
- ----------
$57,500,000.00 CITICORP USA, INC.
By: /s/ Steven R. Victorin
--------------------------
Title: Attorney-in-Fact
-----------------------
$55,500,000.00 CREDIT SUISSE
By: /s/ Stephen M. Flynn
--------------------------
Title: Member of Senior Management
-----------------------
By: /s/ Marilou Palenzuela
--------------------------
Title: Member of Senior Management
-----------------------
$55,500,000.00 BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ Matthew J. Koe
--------------------------
Title: Vice President
-----------------------
<PAGE>
43
$55,500,000.00 ABN AMRO BANK N.V.,
LOS ANGELES INTERNATIONAL BRANCH
BY: ABN AMRO NORTH AMERICA, INC.,
AS AGENT
By: /s/ Paul K. Stimpfl
--------------------------
Title: Vice President/Director
-----------------------
By: /s/ Kenneth T. Bowman
--------------------------
Title: Vice President/Director
-----------------------
$55,500,000.00 BANCA COMMERCIALE ITALIANA,
LOS ANGELES FOREIGN BRANCH
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 BANKERS TRUST COMPANY
By: /s/ Gina S. Thompson
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
--------------------------
Title: Director
-----------------------
$55,500,000.00 THE BANK OF NEW YORK
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 THE BANK OF NOVA SCOTIA
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Regional Manager
-----------------------
<PAGE>
44
$55,500,000.00 BANQUE NATIONALE DE PARIS
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: SVP & Manager
-----------------------
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 BANQUE PARIBAS
By: /s/ Jean-Yves Fillion /s/ Harry Collyns
--------------------------
Title: Vice President Vice President
-----------------------
$55,500,000.00 BARCLAYS BANK PLC
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Associate Director
-----------------------
$55,500,000.00 THE CHASE MANHATTAN BANK
By: /s/ John J. Huber
--------------------------
Title: Managing Director
-----------------------
$55,500,000.00 THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
By: /s/ Masatsugu Morishita
--------------------------
Title: Sr. Vice President &
Joint General Manager
-----------------------
$55,500,000.00 DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By: /s/ J. Scott Jessup
--------------------------
Title: Vice President
-----------------------
By: /s/ Ross A. Howard
--------------------------
Title: Director
-----------------------
<PAGE>
45
$55,500,000.00 THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ L. Gene Berile
--------------------------
Title: Senior Vice President
-----------------------
$55,500,000.00 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Jane W. Workman
--------------------------
Title: Senior Vice President
-----------------------
$55,500,000.00 THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
By: /s/ Nobuhiro Umemura
--------------------------
Title: Joint General Manager
-----------------------
$55,500,000.00 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By: /s/ Vicente Timiraos
--------------------------
Title: SVP
-----------------------
$55,500,000.00 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Deputy General Manager
-----------------------
$55,500,000.00 THE MITSUI TRUST & BANKING CO., LTD.
By: /s/ Margaret Holloway
--------------------------
Title: Vice President & Manager
-----------------------
$55,500,000.00 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
--------------------------
Title: Vice President
-----------------------
<PAGE>
46
$55,500,000.00 NATIONSBANK OF TEXAS, N.A.
By: /s/ Chas A. McDonell
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 ROYAL BANK OF CANADA
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Senior Manager
-----------------------
$55,500,000.00 THE SAKURA BANK, LIMITED
By: /s/ Fernando Buesa
--------------------------
Title: Vice President
-----------------------
By: /s/ Ofusa Sato
--------------------------
Title: Senior Vice President &
Assistant General Manager
-----------------------
$55,500,000.00 THE SANWA BANK, LIMITED
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 THE SUMITOMO BANK, LIMITED
By: [SIGNATURE APPEARS HERE]
--------------------------
Title:
-----------------------
$55,500,000.00 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: /s/ Eleanor Chan
--------------------------
Title: Manager & Vice President
-----------------------
$55,500,000.00 SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: First Vice President
-----------------------
<PAGE>
47
$55,500,000.00 SWISS BANK CORPORATION,
SAN FRANCISCO BRANCH
By: Hans-Ueli Surber
--------------------------
Title: Executive Director
Merchant Banking
-----------------------
By: /s/ Nang S. Peechaphand
--------------------------
Title: Associate Director Accounting
-----------------------
$55,500,000.00 TORONTO DOMINION (TEXAS), INC.
By: /s/ Frederic B. Hawley
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 UNION BANK OF CALIFORNIA, N.A.
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President-Manager
-----------------------
$55,500,000.00 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Laurent J. Chaix
--------------------------
Title: Vice President
-----------------------
By: /s/ Stephen A. Cayer
--------------------------
Title: Assistant Treasurer
-----------------------
$55,500,000.00 WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Joel K. Wood
--------------------------
Title: Vice President
-----------------------
$55,500,000.00 WELLS FARGO BANK, N.A.
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Senior Vice President
-----------------------
By: [SIGNATURE APPEARS HERE]
--------------------------
Title: Vice President
-----------------------
<PAGE>
48
$55,500,000.00 THE YASUDA TRUST
& BANKING CO., LTD.
By: /s/ Makota Lagawa
--------------------------
Title: Deputy General Manager
-----------------------
$2,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
EXHIBIT 4(d)
EXECUTION COPY
--------------
================================================================================
FIVE-YEAR CREDIT AGREEMENT
Dated as of October 30, 1996
Among
THE WALT DISNEY COMPANY
as Borrower
-----------
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
----------
and
CITICORP USA, INC.
as Administrative Agent
-----------------------
and
CREDIT SUISSE
and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
as Co-Administrative Agents
---------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.............................. 1
SECTION 1.02. Computation of Time Periods........................ 11
SECTION 1.03. Accounting Terms................................... 11
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances....................................... 11
SECTION 2.02. Making the Advances................................ 12
SECTION 2.03. Facility Fee....................................... 13
SECTION 2.04. Reduction of the Commitments....................... 13
SECTION 2.05. Repayment of Advances.............................. 13
SECTION 2.06. Interest on Advances............................... 13
SECTION 2.07. Additional Interest on Eurodollar Rate Advances.... 14
SECTION 2.08. Interest Rate Determination........................ 14
SECTION 2.09. Optional Conversion of Advances.................... 15
SECTION 2.10. Prepayments of Advances............................ 16
SECTION 2.11. Increased Costs.................................... 16
SECTION 2.12. Illegality......................................... 17
SECTION 2.13. Payments and Computations.......................... 18
SECTION 2.14. Taxes.............................................. 19
SECTION 2.15. Sharing of Payments, Etc........................... 21
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation....... 21
SECTION 2.17. Evidence of Debt................................... 22
SECTION 2.18. Use of Proceeds.................................... 23
SECTION 2.19. Increase in the Aggregate Commitments.............. 23
SECTION 2.20. Extension of Termination Date...................... 24
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Section 2.01....................................... 26
SECTION 3.02. Conditions Precedent to Each Borrowing............. 27
SECTION 3.03. Determinations Under Section 3.01.................. 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower..... 28
SECTION 4.02. Additional Representations and Warranties of the
Borrower as of Each Increase Date and Each
Extension Date.................................... 29
(i)
<PAGE>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants.............................. 30
SECTION 5.02. Negative Covenant.................................. 32
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default.................................. 33
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action........................... 34
SECTION 7.02. Administrative Agent's Reliance, Etc............... 35
SECTION 7.03. CUSA and Affiliates................................ 35
SECTION 7.04. Lender Credit Decision............................. 35
SECTION 7.05. Indemnification.................................... 35
SECTION 7.06. Successor Administrative Agent..................... 36
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.................................... 36
SECTION 8.02. Notices, Etc. ..................................... 37
SECTION 8.03. No Waiver; Remedies................................ 38
SECTION 8.04. Costs and Expenses................................. 38
SECTION 8.05. Right of Set-off................................... 38
SECTION 8.06. Binding Effect..................................... 39
SECTION 8.07. Assignments and Participations..................... 39
SECTION 8.08. Indemnification.................................... 41
SECTION 8.09. Confidentiality.................................... 42
SECTION 8.10. Consent to Jurisdiction and Service of Process..... 42
SECTION 8.11. Governing Law...................................... 43
SECTION 8.12. Execution in Counterparts.......................... 43
SCHEDULE
Schedule I - List of Applicable Lending Offices
EXHIBITS
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Opinion of Assistant General Counsel of the Borrower
Exhibit D-1 - Form of Foreign Lender Certificate
Exhibit D-2 - Form of Foreign Lender Certificate
(ii)
<PAGE>
FIVE-YEAR CREDIT AGREEMENT
Dated as of October 30, 1996
THE WALT DISNEY COMPANY, a Delaware corporation (the "Borrower"), the
banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof under the heading "The Initial
Lenders", CITICORP USA, INC., a Delaware corporation ("CUSA"), as administrative
agent (together with any successor Administrative Agent appointed pursuant to
Article VII, the "Administrative Agent") for the Lenders (as hereinafter
defined) hereunder, and CREDIT SUISSE, a Swiss banking corporation ("Credit
Suisse"), and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a national
banking corporation ("Bank of America"), as co-administrative agents (the "Co-
Administrative Agents") for the Lenders hereunder, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ABC" means ABC, Inc. (successor in interest to Capital Cities/ABC,
Inc.), a New York corporation and a wholly owned subsidiary of the
Borrower, or any successor thereto.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means such account of the
Administrative Agent maintained by the Administrative Agent at the office
of Citibank at 399 Park Avenue, New York, New York 10043, as the
Administrative Agent shall notify the Borrower and the Lenders from time to
time.
"Advance" means an advance by a Lender to the Borrower as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance,
each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Agreement" means this Five-Year Credit Agreement, as it may be
amended, supplemented or otherwise modified from time to time in accordance
with Section 8.01.
"Anniversary Date" means February 15, 1998 and February 15 in each
succeeding calendar year occurring during the term of this Agreement.
<PAGE>
2
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent and the Borrower, in substantially the form of Exhibit
B hereto.
"Assuming Lender" has the meaning specified in Section 2.19(d).
"Assumption Agreement" has the meaning specified in Section
2.19(d)(ii).
"Bank of America" has the meaning specified in the recital of parties
to this Agreement.
"Base Rate" means, for each day in any period, a fluctuating interest
rate per annum as shall be in effect from time to time, which rate per
annum shall at all times for such day during such period be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate in effect
for such day;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 0.50%, (ii) the rate obtained by dividing (A) the
latest three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average
(adjusted on the basis of a year of 365 or 366 days, as the case may
be) being determined weekly on each Monday (or, if any such day is not
a Business Day, on the next succeeding Business Day) for the three-
week period ending on the previous Friday by Citibank on the basis of
such rates reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York or, if such publication shall
be suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of
the Federal Reserve System (or any successor thereto) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among
other liabilities) three-month U.S. dollar nonpersonal time deposits
in the United States, and (iii) the average during such three-week
period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor thereto)
for insuring U.S. dollar deposits of Citibank in the United States;
and
(c) 0.50% per annum above the Federal Funds Rate for such day.
<PAGE>
3
"Base Rate Advance" means an Advance which bears interest as provided
in Section 2.06(a)(i).
"Borrowing" means a borrowing consisting of simultaneous Advances of
the same Type made by each of the Lenders pursuant to Section 2.01.
"Business Day" means a day of the year on which banks are not required
or authorized to close in Los Angeles, California, or New York City, New
York, or San Francisco, California, or, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on
in the London interbank market.
"Citibank" means Citibank, N.A., a national banking association.
"Co-Administrative Agents" has the meaning specified in the recital of
parties to this Agreement.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Date" has the meaning specified in Section 2.19(b).
"Commitment Increase" has the meaning specified in Section 2.19(a).
"Consenting Lender" has the meaning specified in Section 2.20(b).
"Consolidated EBITDA" means, for any period, (a) net income or net
loss, as the case may be, of the Borrower and its subsidiaries on a
consolidated basis for such period, as determined in accordance with GAAP
for such period, plus (b) the sum of all amounts which, in the
determination of such consolidated net income or net loss, as the case may
be, for such period, have been deducted for (i) Consolidated Interest
Expense, (ii) consolidated income tax expense, (iii) consolidated
depreciation expense, and (iv) consolidated amortization expense, in each
case determined in accordance with GAAP for such period.
"Consolidated Interest Expense" means, for any period, total interest
expense of the Borrower and its subsidiaries with respect to all
outstanding Debt of the Borrower and its subsidiaries during such period,
all as determined on a consolidated basis for such period and in accordance
with GAAP for such period.
"Convert", "Conversion" and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.08
or 2.09.
"Credit Suisse" has the meaning specified in the recital of parties to
this Agreement.
"CUSA" has the meaning specified in the recital of parties to this
Agreement.
"Debt" means, with respect to any Person: (a) indebtedness for
borrowed money, (b) obligations evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations
<PAGE>
4
to pay the deferred purchase price of property or services (other than
trade payables incurred in the ordinary course of business), (d)
obligations as lessee under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases and (e) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of any
other Person of the kinds referred to in clauses (a) through (d) above.
"Disney" means Disney Enterprises, Inc., a Delaware corporation and a
wholly owned subsidiary of the Borrower, or any successor thereto.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance, as the case may be, pursuant to which it became
a Lender, or such other office of such Lender as such Lender may from time
to time specify to the Borrower and the Administrative Agent for such
purpose.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) a Lender or any Affiliate of a Lender or
(b) any bank or other financial institution, or any other Person, which has
been approved in writing by the Borrower and the Administrative Agent as an
Eligible Assignee for purposes of this Agreement; provided, however, that
neither the Borrower's approval nor the Administrative Agent's approval
shall be unreasonably withheld; and provided further, however, that the
Borrower may withhold its approval if the Borrower reasonably believes that
an assignment to such Eligible Assignee pursuant to Section 8.07 will
result in the incurrence of increased costs payable by the Borrower
pursuant to Section 2.11 or 2.14.
"Environmental Claim" means any administrative, regulatory or judicial
action, suit, demand, claim, lien, notice or proceeding relating to any
Environmental Law or any Environmental Permit.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code or duly promulgated policy or rule of
common law, now or hereafter in effect, and in each case as amended, and
any judicial or administrative interpretation thereof, including any order,
consent decree or judgment, relating to the environment, health, safety or
any Hazardous Material.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended.
<PAGE>
5
"ERISA Event" means: (a) (i) the occurrence with respect to a Plan of
a reportable event, within the meaning of Section 4043 of ERISA, unless the
30-day notice requirement with respect thereto has been waived by the
Pension Benefit Guaranty Corporation or (ii) the provisions of paragraph
(1) of Section 4043(b) of ERISA (without regard to paragraph (2) of such
Section) are applicable with respect to a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA could
reasonably be expected to occur with respect to such Plan within the
following 30 days; (b) the provision by the administrator of any Plan of a
notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (c) the cessation of operations by the
Borrower or any ERISA Affiliate at a facility in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by the Borrower
or any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (e) the failure by the Borrower or any ERISA Affiliate to make a
payment to a Plan described in Section 302(f)(1)(A) of ERISA; (f) the
adoption of an amendment to a Plan requiring the provision of security to
such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the
Pension Benefit Guaranty Corporation of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition which is reasonably likely to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance, as the case may be, pursuant to which it became
a Lender (or, if no such office is specified, its Domestic Lending Office),
or such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent for such purpose.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Borrowing, an interest rate per
annum equal to the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rate
per annum at which deposits in U.S. dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period for a period equal to such
Interest Period and in an amount substantially equal to such Reference
Bank's (or, in the case of Citibank, CUSA's) Eurodollar Rate Advance
comprising part of such Borrowing. The Eurodollar Rate for any Interest
Period for each Eurodollar Rate Advance comprising part of the same
Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from
the Reference Banks two Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section 2.08.
<PAGE>
6
"Eurodollar Rate Advance" means an Advance which bears interest as
provided in Section 2.06(a)(ii).
"Eurodollar Rate Margin" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
============================================================
Public Debt Rating
S&P/Moody's Applicable Margiin
============================================================
<S> <C>
Level 1
-------
AA-/Aa3 or above 0.100%
------------------------------------------------------------
Level 2
-------
Lower than AA-/Aa3 but
at least A/A2 0.115%
------------------------------------------------------------
Level 3
-------
Lower than A/A2 but
at least A-/A3 0.130%
------------------------------------------------------------
Level 4
-------
Lower than A-/A3 or no
Public Debt Rating in effect 0.160%
============================================================
</TABLE>
"Eurodollar Rate Reserve Percentage" means, with respect to any Lender
for any Interest Period for any Eurodollar Rate Advance, the reserve
percentage applicable during such Interest Period (or, if more than one
such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Credit Agreements" means, collectively, (a) the 364-Day
Credit Agreement dated as of October 31, 1995 among DC Holdco, Inc.
(predecessor in interest to The Walt Disney Company), the financial
institutions party thereto, CUSA, as the administrative agent thereunder,
and Credit Suisse, as the co-administrative agent thereunder, as amended,
supplemented or otherwise modified to (but not including) the Effective
Date, and (b) the Five-Year Credit Agreement dated as of October 31, 1995
among DC Holdco, Inc. (predecessor in interest to The Walt Disney Company),
the financial institutions party thereto, CUSA, as the administrative agent
thereunder, and Credit Suisse, as the co-administrative agent thereunder,
as amended, supplemented or otherwise modified to (but not including) the
Effective Date.
"Extension Date" has the meaning specified in Section 2.20(b).
<PAGE>
7
"Facility Fee Percentage" means, as of any date, a percentage per
annum determined by reference to the Public Debt Rating in effect on such
date as set forth below:
<TABLE>
<CAPTION>
============================================================
Public Debt Rating
S&P/Moody's Percentage
============================================================
<S> <C>
Level 1
-------
AA-/Aa3 or above 0.050%
------------------------------------------------------------
Level 2
-------
Lower than AA-/Aa3 but 0.060%
at least A/A2
------------------------------------------------------------
Level 3
-------
Lower than A/A2 but 0.070%
at least A-/A3
------------------------------------------------------------
Level 4
-------
Lower than A-/A3 or no 0.090%
Public Debt Rating in effect
============================================================
</TABLE>
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by the Administrative Agent.
"GAAP" means generally accepted accounting principles consistent with
those applied in the preparation of the audited financial statements
referred to in Section 4.01(c)(i) dated September 30, 1995, subject,
however, to the provisions of Section 1.03.
"Hazardous Material" means (a) any petroleum or petroleum product,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, or radon gas, (b) any substance
defined as or included in the definition of "hazardous substances",
hazardous wastes", hazardous materials", "toxic substances", "contaminants"
or "pollutants", or words of similar import, under any applicable
Environmental Law or (c) any other substance to which exposure is regulated
by any governmental or regulatory authority.
"Increase Date" has the meaning specified in Section 2.19(a).
"Increasing Lender" has the meaning specified in Section 2.19(b).
"Indemnified Matters" has the meaning specified in Section 8.08.
<PAGE>
8
"Indemnified Party" has the meaning specified in Section 8.08.
"Informed Parties" has the meaning specified in Section 8.09.
"Initial Lender" has the meaning specified in the recital of parties
to this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or on the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three, six or, if
generally available to all of the Lenders, twelve months as the Borrower
may, upon notice received by the Administrative Agent not later than 1:00
P.M. (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided, however, that:
(i) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that if such extension would cause
the last day of such Interest Period to occur in the next succeeding
calendar month, the last day of such Interest Period shall occur on
the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(iv) the Borrower may not select for any Advance any Interest
Period which ends after the scheduled Termination Date then in effect.
"IRS" has the meaning specified in Section 2.14(e).
"Lenders" means, collectively, each Initial Lender, each Assuming
Lender that shall become a party hereto pursuant to Section 2.19 or 2.20
and each Eligible Assignee that shall become a party hereto pursuant to
Section 8.07; provided, however, that for purposes of any determination to
be made under Section 2.07, 2.11, 2.12 or 8.04(b) with respect to CUSA, in
its capacity as a Lender, the term "Lenders" shall be deemed to include
Citibank.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement
which has the same effect as a lien or security interest.
<PAGE>
9
"Majority Lenders" means, at any time, Lenders owed at least a
majority in interest of the aggregate unpaid principal amount of the
Advances owing to the Lenders at such time, or, if no such principal amount
is outstanding at such time, Lenders having at least a majority in interest
of the Commitments at such time; provided, however, that neither the
Borrower nor any of its Affiliates, if a Lender, shall be included in the
determination of the Majority Lenders at any time.
"Material Subsidiary" means, at any date of determination, a
subsidiary of the Borrower that, either individually or together with its
subsidiaries, taken as a whole, has total assets exceeding $100,000,000 on
such date.
"Measurement Period" means, at any date of determination, the most
recently completed four consecutive fiscal quarters of the Borrower on or
immediately prior to such date.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (ii) was so maintained and in respect
of which the Borrower or an ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Non-Consenting Lender" has the meaning specified in Section 2.20(b).
"Note" has the meaning specified in Section 2.17.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Other Taxes" has the meaning specified in Section 2.14(b).
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date of determination, the
higher rating that has been most recently announced by either S&P or
Moody's, as the case may be, for any class of non-credit enhanced long-term
senior unsecured public debt issued by the Borrower. For purposes of the
foregoing, (a) if only one of S&P and Moody's shall have in effect a Public
Debt Rating, the Eurodollar Rate Margin and the Facility Fee Percentage
shall be determined by
<PAGE>
10
reference to the available rating; (b) if neither S&P nor Moody's shall
have in effect a Public Debt Rating, the Eurodollar Rate Margin and the
Facility Fee Percentage will be set in accordance with Level 4 under the
definition of "Eurodollar Rate Margin" or "Facility Fee Percentage", as the
case may be; (c) if the ratings established by S&P and Moody's shall fall
within different levels, the Eurodollar Rate Margin and the Facility Fee
Percentage shall be based upon the higher rating; (d) if any rating
established by S&P or Moody's shall be changed, such change shall be
effective as of the date on which such change is first announced publicly
by the rating agency making such change; and (e) if S&P or Moody's shall
change the basis on which ratings are established, each reference to the
Public Debt Rating announced by S&P or Moody's, as the case may be, shall
refer to the then equivalent rating by S&P or Moody's, as the case may be.
"Reference Banks" means Citibank, Credit Suisse, Bank of America and
Barclays Bank PLC, or, in the event that less than two of such banks remain
Lenders hereunder at any time, any other commercial bank designated by the
Borrower and approved by the Majority Lenders as constituting a "Reference
Bank" hereunder.
"Register" has the meaning specified in Section 8.07(c).
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SEC" has the meaning specified in Section 5.01(e)(i).
"Significant Subsidiary" means any subsidiary of the Borrower or any
of its subsidiaries that constitutes a "significant subsidiary" under Rule
405 promulgated by the SEC under the Securities Act of 1933, as amended.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower or an ERISA Affiliate and no Person other than the Borrower and
the ERISA Affiliates or (ii) was so maintained and in respect of which the
Borrower or an ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Taxes" has the meaning specified in Section 2.14(a).
"Termination Date" means the earlier of (a) February 15, 2002, subject
to the extension thereof pursuant to Section 2.20, and (b) the date of
termination in whole of the aggregate Commitments pursuant to Section 2.04
or 6.01; provided, however, that the Termination Date of any Lender that is
a Non-Consenting Lender to any requested extension pursuant to Section 2.20
shall be the Termination Date in effect immediately prior to the applicable
Extension Date for all purposes of this Agreement.
"364-Day Credit Agreement" means the 364-Day Credit Agreement being
entered into on the date of this Agreement among the Borrower, the banks,
financial institutions and other institutional lenders party thereto, CUSA,
as the administrative agent thereunder, and Credit
<PAGE>
11
Suisse and Bank of America, as the co-administrative agents thereunder, as
such agreement may be amended, supplemented or otherwise modified hereafter
from time to time.
"Type" has the meaning specified in the definition of "Advance".
"United States" and "U.S." each means the United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with GAAP; provided, however,
that if any changes in accounting principles from those used in the preparation
of the financial statements referred to in Section 4.01(c)(i) dated September
30, 1995 hereafter occur by reason of the promulgation of rules, regulations,
pronouncements, opinions or other requirements of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and result in a change in
the method of calculation of financial covenants or the terms related thereto
contained in this Agreement, the Borrower shall, at its option, (i) furnish to
the Administrative Agent, together with each delivery of the consolidated
financial statements of the Borrower and its subsidiaries required to be
delivered pursuant to Section 5.01(e), a written reconciliation setting forth
the differences that would have resulted if such financial statements had been
prepared utilizing accounting principles and policies in conformity with those
used to prepare the financial statements referred to in Section 4.01(c)(i) dated
September 30, 1995 or (ii) enter into negotiations with the Administrative Agent
and the Lenders to amend such financial covenants or terms equitably to reflect
such changes so that the criteria for evaluating the financial condition of the
Borrower and its subsidiaries shall be the same after such changes as if such
changes had not been made; provided, however, that at all times in the case of
clause (i) above, and in the case of clause (ii) above until the amendment
referred to in such clause (ii) becomes effective, all covenants and related
calculations under this Agreement shall be performed, observed and determined as
though no such changes in accounting principles had been made.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the
------------
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof or, if such Lender has become a Lender hereunder pursuant to an
Assumption Agreement, the amount set forth as the Commitment of such Lender in
such Assumption Agreement or, if such Lender has entered into an Assignment and
Acceptance, the amount set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 8.07(c), as such amount may be
reduced pursuant to Section 2.04 or increased pursuant to Section 2.19 (such
Lender's "Commitment"). Each Borrowing shall be in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably
<PAGE>
12
according to their respective Commitments. Within the limits of each Lender's
Commitment, the Borrower from time to time may borrow under this Section 2.01,
prepay pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made
-------------------
on notice, given not later than 11:00 A.M. (New York City time) on the same
Business Day as the date of a proposed Borrowing comprised of Base Rate Advances
and not later than 1:00 P.M. (New York City time) on the third Business Day
prior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telecopier or telex, or by telephone,
confirmed immediately by telecopier or telex, in substantially the form of
Exhibit A hereto, specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day), (ii) Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a
Borrowing comprised of Eurodollar Rate Advances, initial Interest Period for
each such Advance. Each Lender shall, before 1:00 P.M. (New York City time) on
the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower at the office where the
Administrative Agent's Account is maintained.
(b) Anything in subsection (a) above or Section 2.01 to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Borrowing if the aggregate amount of such Borrowing is less than $20,000,000 or
if the obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended at such time pursuant to Section 2.08.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that any Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender agrees to pay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid
to the Administrative Agent, at the Federal Funds Rate; provided, however, that
(i) within two Business Days after any Lender shall fail to make such ratable
portion available to the Administrative Agent, the Administrative Agent shall
notify the Borrower of such failure
<PAGE>
13
and (ii) if such Lender shall not have paid such corresponding amount to the
Administrative Agent within two Business Days after such demand is made of such
Lender by the Administrative Agent, the Borrower agrees to repay to the
Administrative Agent forthwith, upon demand by the Administrative Agent to the
Borrower, such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at the interest rate applicable at
the time to Advances comprising such Borrowing. If and to the extent such
corresponding amount shall be paid by such Lender to the Administrative Agent in
accordance with this Section 2.02(d), such amount so paid shall constitute such
Lender's Advance as part of such Borrowing for all purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Facility Fee. The Borrower agrees to pay to each Lender
------------
a facility fee on the average daily amount (whether used or unused) of such
Lender's Commitment from the Effective Date, in the case of each Initial Lender,
and from the later of (a) the Effective Date and (b) the effective date
specified in the Assumption Agreement or the Assignment and Acceptance pursuant
to which it became a Lender, in the case of each other Lender, until, in each
case, the Termination Date, payable quarterly in arrears on the first Business
Day of each January, April, July and October during the term of such Lender's
Commitment, commencing January 2, 1997, and on the Termination Date, at the rate
per annum equal to the Facility Fee Percentage in effect from time to time.
SECTION 2.04. Reduction of the Commitments. The Borrower shall have
----------------------------
the right, upon at least three Business Days' notice to the Administrative
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders, provided that each partial reduction
shall be in the aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof.
SECTION 2.05. Repayment of Advances. The Borrower shall repay to each
---------------------
Lender on the Termination Date the aggregate principal amount of the Advances
owing to such Lender on such date.
SECTION 2.06. Interest on Advances. (a) Scheduled Interest. The
-------------------- ------------------
Borrower shall pay to each Lender interest on the unpaid principal amount of
each Advance owing to such Lender from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base
------------------
Rate Advance, a rate per annum equal at all times to the remainder of (A)
the Base Rate in effect from time to time minus (B) the Facility Fee
Percentage in effect from time to time, payable quarterly in arrears on the
first Business Day of each January, April, July and October and during such
periods and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is
------------------------
a Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance and (B) the
<PAGE>
14
Eurodollar Rate Margin in effect from time to time, payable in arrears on
the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on the date which occurs three months
and, if applicable, six months, nine months and twelve months after the
first day of such Interest Period and on the date such Eurodollar Rate
Advance shall be Converted or paid in full.
(b) Default Interest. The Borrower shall pay interest on the unpaid
----------------
principal amount of each Advance that is not paid when due and on the unpaid
amount of all interest, fees and other amounts payable hereunder that is not
paid when due, payable on demand, at a rate per annum equal at all times to (i)
in the case of any amount of principal, the greater of (x) 2% per annum above
the rate per annum required to be paid on such Advance immediately prior to the
date on which such amount became due and (y) 2% per annum above the Base Rate in
effect from time to time and (ii) to the fullest extent permitted by law, in the
case of all other amounts, 2% per annum above the Base Rate in effect from time
to time.
SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The
-----------------------------------------------
Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the applicable Interest Period for such Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified in
reasonable detail to the Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
---------------------------
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.06(a)(i) or (a)(ii), and the rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under Section 2.06(a)(ii).
(c) If fewer than two Reference Banks furnish timely information to
the Administrative Agent for purposes of determining the Eurodollar Rate for any
Eurodollar Rate Advances, (i) the Administrative Agent shall forthwith notify
the Borrower and the Lenders that the interest rate cannot be determined for
such Eurodollar Rate Advances, (ii) each such Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance (or, if such Advance is then a Base Rate Advance, will continue as a
Base Rate Advance), and (iii) the obligation of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until
<PAGE>
15
the Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the Majority
Lenders notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Majority Lenders (which cost each such Majority Lender reasonably determines in
good faith is material) of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Lenders, whereupon, unless the
Eurodollar Rate Margin shall be increased to reflect such costs as determined by
such Majority Lenders and as agreed by the Borrower, (i) each Eurodollar Rate
Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until the Majority Lenders shall notify the Administrative Agent, and
the Administrative Agent shall in turn notify the Borrower and the Lenders, that
the circumstances causing such suspension no longer exist. The Administrative
Agent shall use reasonable efforts to determine from time to time whether the
circumstances causing such suspension no longer exist and, promptly after the
Administrative Agent knows that the circumstances causing such suspension no
longer exist, the Administrative Agent shall so notify the Borrower and the
Lenders.
(e) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $20,000,000, such Eurodollar Rate
Advances shall automatically Convert into Base Rate Advances and, on and after
such date, the right of the Borrower to Convert such Advances into Eurodollar
Rate Advances shall terminate; provided, however, that if and so long as each
such Eurodollar Rate Advance shall have the same Interest Period as Eurodollar
Rate Advances comprising another Borrowing or Borrowings, and the aggregate
unpaid principal amount of all such Eurodollar Rate Advances shall equal or
exceed $20,000,000, the Borrower shall have the right to continue all such
Eurodollar Rate Advances as, or to Convert all such Advances into, Eurodollar
Rate Advances having such Interest Period.
(g) Upon the occurrence and during the continuance of any Event of
Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The Borrower may on
-------------------------------
any Business Day, upon notice given to the Administrative Agent not later than
11:00 A.M. (New York City time) on the same Business Day as the date of the
proposed Conversion in the case of a Conversion of Eurodollar Rate Advances into
Base Rate Advances, and not later than 1:00 P.M. (New York City time) on the
third Business Day prior to the date of the proposed Conversion in the case of a
Conversion of Base Rate Advances into Eurodollar Rate Advances or of Eurodollar
Rate Advances of one Interest Period into Eurodollar Rate Advances of another
Interest Period, as the case may be, and subject to the provisions
<PAGE>
16
of Sections 2.08, 2.09 and 2.12, Convert all Advances of one Type comprising the
same Borrowing into Advances of the other Type; provided, however, that any
Conversion of any Eurodollar Rate Advances into Base Rate Advances or into
Eurodollar Rate Advances of another Interest Period shall be made on, and only
on, the last day of an Interest Period for such Eurodollar Rate Advances.
Promptly upon receipt from the Borrower of a notice of a proposed Conversion
hereunder, the Administrative Agent shall give notice of such proposed
Conversion to each Lender. Each such notice of a Conversion shall, within the
restrictions set forth above, specify (i) the date of such Conversion (which
shall be a Business Day), (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. The Borrower may Convert all Eurodollar
Rate Advances of any one Lender into Base Rate Advances of such Lender in
accordance with the provisions of Section 2.12 by complying with the procedures
set forth therein and in this Section 2.09 as though each reference in this
Section 2.09 to Advances of any Type was to such Advances of such Lender. Each
such notice of Conversion shall, subject to the provisions of Sections 2.08 and
2.12, be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Advances. The Borrower may, upon not
-----------------------
less than the same Business Day's notice to the Administrative Agent received
not later than 11:00 A.M. (New York City time) in the case of Borrowings
consisting of Base Rate Advances and upon at least three Business Days' notice
to the Administrative Agent received not later than 1:00 P.M. (New York City
time) in the case of Borrowings consisting of Eurodollar Rate Advances, stating
the proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the Advances constituting part of the same Borrowings in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (a) each partial prepayment
shall be in an aggregate principal amount of $1,000,000 or an integral multiple
of $1,000,000 in excess thereof, and (b) in the case of any such prepayment of
Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(b).
SECTION 2.11. Increased Costs. (a) If after the date hereof, due to
---------------
either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or (ii)
the compliance with any hereafter promulgated guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost (excluding any allocation of
corporate overhead) to any Lender (which cost such Lender reasonably determines
in good faith is material) of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then such Lender shall so notify the Borrower promptly
after such Lender knows of such increased cost and determines that such cost is
material and the Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate of
such Lender as to the amount of such increased cost in reasonable detail and
stating the basis upon which such amount has been calculated and certifying that
such Lender's method of allocating such costs is fair and reasonable and that
such Lender's demand for payment of such costs hereunder is not inconsistent
with its treatment of other borrowers which, as a credit matter, are
substantially similar to the Borrower and which are subject to similar
provisions, submitted to the Borrower and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
<PAGE>
17
(b) If, after the date hereof, either (i) the introduction of or
change in or in the interpretation of any law or regulation or (ii) the
compliance by any Lender with any hereafter promulgated guideline or request
from any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and
the amount of such capital is materially increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments of
this type, then such Lender shall so notify the Borrower promptly after such
Lender makes such determination and, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), the Borrower shall pay to such Lender
within five days from the date of such demand, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate of such Lender as
to such amount in reasonable detail and stating the basis upon which such amount
has been calculated and certifying that such Lender's method of allocating such
increase of capital is fair and reasonable and that such Lender's demand for
payment of such increase of capital hereunder is not inconsistent with its
treatment of other borrowers which, as a credit matter, are substantially
similar to the Borrower and which are subject to similar provisions, submitted
to the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(c) The Borrower shall not be obligated to pay under this Section
2.11 any amounts which relate to costs or increases of capital incurred prior to
the 12 months immediately preceding the date of demand for payment of such
amounts, unless the applicable law, regulation, guideline or request resulting
in such costs or increases of capital is imposed retroactively. In the case of
any law, regulation, guideline or request which is imposed retroactively, the
Lender making demand for payment of any amount under this Section 2.11 shall
notify the Borrower not later than 12 months from the date that such Lender
should reasonably have known of such law, regulation, guideline or request and
the Borrower's obligation to compensate such Lender for such amount is
contingent upon such Lender's so notifying the Borrower; provided, however, that
any failure by such Lender to provide such notice shall not affect the
Borrower's obligations under this Section 2.11 with respect to amounts resulting
from costs or increases of capital incurred after the date which occurs 12
months immediately preceding the date on which such Lender notified the Borrower
of such law, regulation, guideline or request.
(d) If any Lender shall subsequently recoup any costs (other than
from the Borrower) for which such Lender has theretofore been compensated by the
Borrower under this Section 2.11, such Lender shall remit to the Borrower an
amount equal to the amount of such recoupment. Amounts required to be paid by
the Borrower pursuant to this Section 2.11 shall be paid in addition to, and
without duplication of, any amounts required to be paid pursuant to Section
2.14.
SECTION 2.12. Illegality. Notwithstanding any other provision of this
----------
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) the obligation of such Lender to make, or to Convert Base Rate
Advances into, Eurodollar Rate Advances shall be suspended until such Lender
shall notify the Administrative Agent, and the Administrative Agent shall notify
the Borrower and the other Lenders (which notice shall
<PAGE>
18
be given promptly after the Administrative Agent knows that the circumstances
causing such suspension no longer exist), that the circumstances causing such
suspension no longer exist and (ii) the Borrower shall forthwith prepay in full
all Eurodollar Rate Advances of such Lender then outstanding, together with
interest accrued thereon, unless the Borrower, within five Business Days of
notice from the Administrative Agent or, if permitted by law, on and as of the
last day of the then existing Interest Period for such Eurodollar Rate Advances,
Converts all Eurodollar Rate Advances of such Lender then outstanding into Base
Rate Advances in accordance with Section 2.09.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
-------------------------
each payment hereunder and under the Notes, if any, not later than 11:00 A.M.
(New York City time) on the day when due in U.S. dollars to the Administrative
Agent at the Administrative Agent's Account in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or facility fees ratably (other
than amounts payable pursuant to Sections 2.07, 2.11, 2.14, 8.04 and 8.08) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon any Assuming Lender
becoming a Lender hereunder as a result of a Commitment Increase pursuant to
Section 2.19 or an extension of the Termination Date pursuant to Section 2.20,
and upon the Administrative Agent's receipt of such Lender's Assumption
Agreement and recording of the information contained therein in the Register,
from and after the applicable Increase Date or Extension Date, as the case may
be, the Administrative Agent shall make all payments hereunder and under any
Notes issued in connection therewith in respect of the interest assumed thereby
to the Assuming Lender. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date specified in such Assignment
and Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes, if any, issued in connection therewith in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on clause (a) or (b) of the
definition of "Base Rate" shall be made by the Administrative Agent on the basis
of a year of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate or the Federal Funds Rate and of facility
fees shall be made by the Administrative Agent, and all computations of
additional interest pursuant to Section 2.07 shall be made by a Lender, on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or facility fees are payable. Each determination by the
Administrative Agent (or, in the case of Section 2.07, by a Lender) of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Whenever any payment hereunder or under the Notes, if any, shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or facility
fees, as the case may be; provided, however, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the immediately
preceding Business Day.
<PAGE>
19
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes, if any, shall be made, in accordance with Section
2.13, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, and franchise taxes imposed
on it, by the jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof or by any other
jurisdiction in which such Lender or the Administrative Agent is doing business
that is unrelated to this Agreement (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to any Lender or the
Administrative Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.14) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes,
if any, or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or the Notes, if any (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties to the extent not
imposed as a result of such Lender's or the Administrative Agent's (as the case
may be) gross negligence or willful misconduct, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor.
<PAGE>
20
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Each Lender that is not created or organized under the laws of
the United States or a political subdivision thereof shall deliver to the
Borrower and the Administrative Agent on or prior to the date of its execution
and delivery of this Agreement, and each such Lender that is not a party hereto
on the date hereof shall deliver to the Borrower and the Administrative Agent on
or prior to the date on which such Lender becomes a Lender pursuant to Section
2.19, 2.20 or 8.07 (as the case may be), a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender in
substantially the form set out in Exhibit D-1 or D-2 hereto, as applicable, to
the effect that such Lender is eligible under the provisions of an applicable
tax treaty concluded by the United States (in which case the certificate shall
be accompanied by two executed copies of Form 1001 (or any successor or
substitute form or forms) of the Internal Revenue Service (the "IRS") of the
United States), or under Section 1441(c) or 1442 of the Internal Revenue Code
(in which case the certificate shall be accompanied by two copies of IRS Form
4224 (or any successor or substitute form or forms) of the IRS), to receive, as
of the date hereof or as of the date such party becomes a Lender hereto pursuant
to Section 2.19, 2.20 or 8.07 (as the case may be), as appropriate, payments
hereunder without deduction or withholding of United States federal income tax.
Each such Lender further agrees to deliver to the Borrower and the
Administrative Agent from time to time, as reasonably requested by the Borrower
or the Administrative Agent, and in any case before or promptly upon the
occurrence of any events requiring a change in the most recent certificate
previously delivered pursuant to this Section 2.14(e), a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender in
substantially the form set out in Exhibit D-1 or D-2 hereto, as applicable.
Further, each Lender that delivers a certificate in the form set out in Exhibit
D-1 hereto agrees, to the extent permitted by law, to deliver to the Borrower
and the Administrative Agent within 15 days prior to every third anniversary of
the date of delivery of the initial IRS Form 1001 by such Lender (or more often
if required by law) on which this Agreement is still in effect, two accurate and
complete original signed copies of IRS Form 1001 (or any successor or substitute
form or forms required under the Internal Revenue Code or the applicable
regulations promulgated thereunder) and a certificate in the form set out in
such Exhibit D-1, and each Lender that delivers a certificate in the form set
out in Exhibit D-2 hereto agrees to deliver to the Borrower and the
Administrative Agent, to the extent permitted by law, within 15 days prior to
the beginning of each subsequent taxable year of such Lender (or more often if
required by law) during which this Agreement is still in effect, two accurate
and complete original signed copies of IRS Form 4224 (or any successor or
substitute form or forms required under the Internal Revenue Code or the
applicable regulations promulgated thereunder) and a certificate in the form of
such Exhibit D-2. Each such certificate shall certify as to one of the
following:
(i) that such Lender is eligible to receive payments hereunder
without deduction or withholding of United States federal income tax;
(ii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein but does not require additional payments therefor
pursuant to Section 2.14(a) or (c) because it is eligible and able to
recover the full amount of any such deduction or withholding from a source
other than the Borrower; or
<PAGE>
21
(iii) that such Lender is not eligible to receive payments hereunder
without deduction or withholding of United States federal income tax as
specified therein and that it is not eligible and able to recover the full
amount of the same from a source other than the Borrower.
If any form or document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to compute the tax
payable and information required on the date hereof by IRS Form 1001 or 4224,
that any Lender reasonably considers to be confidential, such Lender promptly
shall give notice thereof to the Borrower and the Administrative Agent and shall
not be obligated to include in such form or document such confidential
information; provided that such Lender certifies to the Borrower that the
failure to disclose such confidential information does not increase the
obligations of the Borrower under this Section 2.14.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of principal and interest on
all Advances and the termination of this Agreement until such date as all
applicable statutes of limitations (including any extensions thereof) have
expired with respect to such agreements and obligations of the Borrower
contained in this Section 2.14.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.07, 2.11, 2.14, 8.04 or 8.08) in excess of its ratable
share of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.16. Mandatory Assignment by a Lender; Mitigation. If any
--------------------------------------------
Lender requests from the Borrower either payment of additional interest on
Eurodollar Rate Advances pursuant to Section 2.07, or reimbursement for
increased costs pursuant to Section 2.11, or payment of or reimbursement for
Taxes pursuant to Section 2.14, or if any Lender notifies the Administrative
Agent that it is unlawful for such Lender or its Eurodollar Lending Office to
perform its obligations hereunder pursuant to Section 2.12, (i) such Lender
will, upon three Business Days' notice by the Borrower to such Lender and the
Administrative Agent, to the extent not inconsistent with such Lender's internal
policies and applicable legal and regulatory restrictions, use reasonable
efforts to make, fund or maintain its Eurodollar Rate Advances through another
Eurodollar Lending Office of such Lender if (A) as a result thereof the
additional amounts required to be paid pursuant to Section 2.07, 2.11 or 2.14,
as applicable, in respect of such Eurodollar Rate Advances would be materially
reduced or the provisions of Section 2.12 would not apply to such Lender, as
applicable, and (B) as determined by such Lender in good faith
<PAGE>
22
but in its sole discretion, the making or maintaining of such Eurodollar Rate
Advances through such other Eurodollar Lending Office would not otherwise
materially and adversely affect such Eurodollar Rate Advances or such Lender and
(ii) unless such Lender has theretofore taken steps to remove or cure, and has
removed or cured, the conditions creating such obligation to pay such additional
amounts or the circumstances described in Section 2.12, the Borrower may
designate an Eligible Assignee to purchase for cash (pursuant to an Assignment
and Acceptance) all, but not less than all, of the Advances then owing to such
Lender and all, but not less than all, of such Lender's rights and obligations
hereunder, without recourse to or warranty by, or expense to, such Lender, for a
purchase price equal to the outstanding principal amount of each such Advance
then owing to such Lender plus any accrued but unpaid interest thereon and any
accrued but unpaid facility fees owing thereto and, in addition, (A) all
additional costs reimbursements, expense reimbursements and indemnities, if any,
owing in respect of such Lender's Commitment hereunder, and all other accrued
and unpaid amounts owing to such Lender hereunder, at such time shall be paid to
such Lender and (B) if such Eligible Assignee is not otherwise a Lender at such
time, the applicable processing and recordation fee under Section 8.07(a) for
such assignment shall have been paid.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower
agrees that upon notice by any Lender to the Borrower (with a copy of such
notice to the Administrative Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in order for such
Lender to evidence (whether for purposes of pledge, enforcement or otherwise)
the Advances owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a promissory note or other evidence
of indebtedness, in form and substance reasonably satisfactory to the Borrower
and such Lender (each a "Note"), payable to the order of such Lender in a
principal amount equal to the Commitment of such Lender; provided, however, that
the execution and delivery of such promissory note or other evidence of
indebtedness shall not be a condition precedent to the making of any Advance
under this Agreement.
(b) The Register maintained by the Administrative Agent pursuant to
Section 8.07(c) shall include a control account, and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the Type of Advances comprising
such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii)
the terms of each Assumption Agreement and each Assignment and Acceptance
delivered to and accepted by it, (iii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder, and (iv) the amount of any sum received by the Administrative Agent
from the Borrower hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the
Register pursuant to subsection (b) above, and by each Lender in its account or
accounts pursuant to subsection (a) above, shall be prima facie evidence of the
amount of principal and interest due and payable or to become due and payable
from the Borrower to, in the case of the Register, each Lender and, in the case
of such account or accounts, such Lender, under this Agreement, absent manifest
error; provided, however, that the failure of the Administrative Agent or such
Lender to make an entry, or any finding that an entry is
<PAGE>
23
incorrect, in the Register or such account or accounts shall not limit or
otherwise affect the obligations of the Borrower under this Agreement.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) to support
the obligations of the Borrower in respect of commercial paper issued by the
Borrower and/or for other general corporate purposes of the Borrower and its
subsidiaries.
SECTION 2.19. Increase in the Aggregate Commitments. (a) The Borrower
-------------------------------------
may, at any time but in any event not more than once in any calendar year prior
to the Termination Date, by notice to the Administrative Agent, request that the
aggregate amount of the Commitments be increased by an amount of $100,000,000 or
an integral multiple of $5,000,000 in excess thereof (each a "Commitment
Increase") to be effective as of a date that is at least 90 days prior to the
scheduled Termination Date then in effect (the "Increase Date") as specified in
the related notice to the Administrative Agent; provided, however, that (i) in
no event shall the aggregate amount of the Commitments at any time exceed
$5,000,000,000, (ii) on the date of any request by the Borrower for a Commitment
Increase and at all times thereafter to and including the related Increase Date,
the Public Debt Rating shall be at least A- by S&P and at least A3 by Moody's
and (iii) no Event of Default, or event that with the giving of notice or
passage of time or both would constitute an Event of Default, shall have
occurred and be continuing as of the date of such request or as of the
applicable Increase Date, or shall occur as a result thereof.
(b) The Administrative Agent shall promptly notify the Lenders of a
request by the Borrower for a Commitment Increase, which notice shall include
(i) the proposed amount of such requested Commitment Increase, (ii) the proposed
Increase Date and (iii) the date by which Lenders wishing to participate in the
Commitment Increase must commit to an increase in the amount of their respective
Commitments (the "Commitment Date"). Each Lender that is willing to participate
in such requested Commitment Increase (each an "Increasing Lender") shall give
written notice to the Administrative Agent on or prior to the Commitment Date of
the amount by which it is willing to increase its Commitment. If the Lenders
notify the Administrative Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate therein in such amounts as
are agreed between the Borrower and the Administrative Agent.
(c) Promptly following each Commitment Date, the Administrative Agent
shall notify the Borrower as to the amount, if any, by which the Lenders are
willing to participate in the requested Commitment Increase. If the aggregate
amount by which the Lenders are willing to participate in any requested
Commitment Increase on any such Commitment Date is less than the requested
Commitment Increase, then the Borrower may extend offers to one or more Eligible
Assignees to participate in any portion of the requested Commitment Increase
that has not been committed to by the Lenders as of the applicable Commitment
Date; provided, however, that the Commitment of each such Eligible Assignee
shall be in an amount of $25,000,000 or an integral multiple of $1,000,000 in
excess thereof.
(d) On each Increase Date, each Eligible Assignee that accepts an
offer to participate in a requested Commitment Increase in accordance with
Section 2.19(c) (each such Eligible Assignee and
<PAGE>
24
each Eligible Assignee that agrees to an extension of the Termination Date in
accordance with Section 2.20(c), an "Assuming Lender") shall become a Lender
party to this Agreement as of such Increase Date and the Commitment of each
Increasing Lender for such requested Commitment Increase shall be so increased
by such amount (or by the amount allocated to such Lender pursuant to the last
sentence of Section 2.19(b)) as of such Increase Date; provided, however, that
the Administrative Agent shall have received on or before such Increase Date the
following, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directors
of the Borrower or the Executive Committee of such Board approving the
Commitment Increase and the corresponding modifications to this Agreement
and (B) an opinion of counsel for the Borrower (which may be in-house
counsel), in substantially the form of Exhibit C hereto;
(ii) an assumption agreement from each Assuming Lender, if any, in
form and substance satisfactory to the Borrower and the Administrative
Agent (each an "Assumption Agreement"), duly executed by such Eligible
Assignee, the Administrative Agent and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase in
the amount of its Commitment in a writing satisfactory to the Borrower and
the Administrative Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.19(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier or
telex, of the occurrence of the Commitment Increase to be effected on such
Increase Date and shall record in the Register the relevant information with
respect to each Increasing Lender and each Assuming Lender on such date.
SECTION 2.20. Extension of Termination Date. (a) At least 45 days but
-----------------------------
not more than 75 days prior to the next Anniversary Date, the Borrower, by
written notice to the Administrative Agent, may request an extension of the
Termination Date in effect at such time by one calendar year from its then
scheduled expiration; provided, however, that, if the Borrower does not request
an extension of the Termination Date in a timely manner prior to any Anniversary
Date it may, but shall not be obligated to, request that the Termination Date be
extended for two consecutive calendar years from its then scheduled expiration
by making a request therefor in a timely manner prior to the next succeeding
Anniversary Date. The Administrative Agent shall promptly notify each Lender of
such request, and each Lender shall in turn, in its sole discretion, not later
than 30 days prior to such next Anniversary Date, notify the Borrower and the
Administrative Agent in writing as to whether such Lender will consent to such
extension. If any Lender shall fail to notify the Administrative Agent and the
Borrower in writing of its consent to any such request for extension of the
Termination Date at least 30 days prior to the next Anniversary Date, such
Lender shall be deemed to be a Non-Consenting Lender with respect to such
request. The Administrative Agent shall notify the Borrower not later than 25
days prior to such next Anniversary Date of the decision of the Lenders
regarding the Borrower's request for an extension of the Termination Date.
(b) If all of the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.20, the Termination Date in
effect at such time shall, effective as at such
<PAGE>
25
next Anniversary Date (the "Extension Date"), be extended for one calendar year
or two calendar years, as properly requested; provided that on each Extension
Date, no Event of Default, or event that with the giving of notice or passage of
time or both would constitute an Event of Default, shall have occurred and be
continuing, or shall occur as a consequence thereof. If less than all of the
Lenders consent in writing to any such request in accordance with subsection (a)
of this Section 2.20, the Termination Date in effect at such time shall,
effective as at the applicable Extension Date, be extended as to those Lenders
that so consented (each a "Consenting Lender") but shall not be extended as to
any other Lender (each a "Non-Consenting Lender"). To the extent that the
Termination Date is not extended as to any Lender pursuant to this Section 2.20
and the Commitment of such Lender is not assumed in accordance with subsection
(c) of this Section 2.20 on or prior to the applicable Extension Date, the
Commitment of such Non-Consenting Lender shall automatically terminate in whole
on such unextended Termination Date without any further notice or other action
by the Borrower, such Lender or any other Person; provided that such Non-
Consenting Lender's rights under Sections 2.11, 2.14, 8.04 and 8.08, and its
obligations under Section 7.05, shall survive the Termination Date for such
Lender as to matters occurring prior to such date. It is understood and agreed
that no Lender shall have any obligation whatsoever to agree to any request made
by the Borrower for any requested extension of the Termination Date.
(c) If less than all of the Lenders consent to any such request
pursuant to subsection (a) of this Section 2.20, the Borrower may arrange for
one or more Consenting Lenders or other Eligible Assignees as Assuming Lenders
to assume, effective as of the Extension Date, any Non-Consenting Lender's
Commitment and all of the obligations of such Non-Consenting Lender under this
Agreement thereafter arising, without recourse to or warranty by, or expense to,
such Non-Consenting Lender; provided, however, that the amount of the Commitment
of any such Assuming Lender as a result of such substitution shall in no event
be less than $25,000,000 unless the amount of the Commitment of such Non-
Consenting Lender is less than $25,000,000, in which case such Assuming Lender
shall assume all of such lesser amount; and provided further that:
(i) any such Consenting Lender or Assuming Lender shall have paid
to such Non-Consenting Lender (A) the aggregate principal amount of, and
any interest accrued and unpaid to the effective date of the assignment on,
the outstanding Advances, if any, of such Non-Consenting Lender plus (B)
any accrued but unpaid facility fees owing to such Non-Consenting Lender as
of the effective date of such assignment;
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 8.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14, 8.04 and 8.08, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Administrative
Agent an Assumption Agreement, duly executed by such Assuming Lender, such Non-
Consenting Lender, the Borrower and
<PAGE>
26
the Administrative Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Administrative
Agent as to the increase in the amount of its Commitment and (C) each Non-
Consenting Lender being replaced pursuant to this Section 2.20 shall have
delivered to the Administrative Agent any Note or Notes held by such Non-
Consenting Lender. Upon the payment or prepayment of all amounts referred to in
clauses (i), (ii) and (iii) of the immediately preceding sentence, each such
Consenting Lender or Assuming Lender, as of the Extension Date, will be
substituted for such Non-Consenting Lender under this Agreement and shall be a
Lender for all purposes of this Agreement, without any further acknowledgment by
or the consent of the other Lenders, and the obligations of each such Non-
Consenting Lender hereunder shall, by the provisions hereof, be released and
discharged.
(d) If all of the Lenders (after giving effect to any assignments
pursuant to subsection (b) of this Section 2.20) consent in writing to a
requested extension (whether by execution or delivery of an Assumption Agreement
or otherwise) not later than one Business Day prior to such Extension Date, the
Administrative Agent shall so notify the Borrower, and, so long as no Event of
Default, or event that with the giving of notice or passage of time or both
would constitute an Event of Default, shall have occurred and be continuing as
of such Extension Date, or shall occur as a consequence thereof, the Termination
Date then in effect shall be extended for the additional one-year period or two-
year period, as the case may be, as described in subsection (a) of this Section
2.20, and all references in this Agreement, and in the Notes, if any, to the
"Termination Date" shall, with respect to each Consenting Lender and each
Assuming Lender for such Extension Date, refer to the Termination Date as so
extended. Promptly following each Extension Date, the Administrative Agent shall
notify the Lenders (including, without limitation, each Assuming Lender) of the
extension of the scheduled Termination Date in effect immediately prior thereto
and shall thereupon record in the Register the relevant information with respect
to each such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.
-----------------------------------------------------
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "Effective Date") on which all of the following conditions precedent
have been satisfied or waived in accordance with Section 8.01:
(a) the Administrative Agent shall have received on or before the
Effective Date the following, each dated the Effective Date, in form and
substance satisfactory to the Administrative Agent: (i) certified copies
of the resolutions of the Board of Directors of the Borrower or the
Executive Committee of such Board authorizing the execution and delivery of
this Agreement, and approving all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement; (ii) a certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the name and true signature of the officer of the
Borrower executing this Agreement on its behalf; (iii) an opinion of David
K. Thompson, Esq., Senior Vice President-Assistant General Counsel of the
Borrower, in substantially the form of Exhibit C hereto; and (iv) an
opinion of Shearman & Sterling, counsel for the Administrative Agent.
<PAGE>
27
(b) all consents and approvals of any governmental or regulatory
authority and any other third party necessary in connection with this
Agreement or the consummation of the transactions contemplated hereby shall
have been obtained and shall remain in effect.
(c) there shall have occurred no material adverse change in the
business, financial condition or operations of (i) Disney and its
subsidiaries, taken as a whole, since September 30, 1995, except as
disclosed in periodic or other reports filed by Disney and its subsidiaries
during the period from September 30, 1995 to the date of this Agreement
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended,
copies of which have been furnished to the Initial Lenders prior to the
date of this Agreement, or (ii) the Borrower and its subsidiaries, taken as
a whole, since June 30, 1996, except as disclosed in reports filed by the
Borrower and its subsidiaries, if any, during the period from June 30, 1996
to the date of this Agreement pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, copies of which have been furnished to
the Initial Lenders prior to the date of this Agreement.
(d) the Borrower shall have paid or prepaid all amounts owing under
the Existing Credit Agreements, and all commitments of the lenders
thereunder shall have been terminated.
(e) the Borrower shall have notified each Lender and the
Administrative Agent in writing as to the proposed Effective Date at least
three Business Days prior to the occurrence thereof.
(f) all of the representations and warranties contained in Section
4.01 shall be correct in all material respects on and as of the Effective
Date, before and after giving effect to such date, as though made on and as
of the Effective Date (except to the extent that such representations and
warranties relate to an earlier date, in which case such representations
and warranties shall have been correct in all material respects on and as
of such earlier date).
(g) no event shall have occurred and be continuing, or shall result
from the occurrence of the Effective Date, that constitutes an Event of
Default or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing (including
the initial Borrowing) shall be subject to the further conditions precedent that
the Effective Date shall have occurred and on the date of such Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of the date of such Borrowing,
before and after giving effect to such Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date (except to
the extent that such representations and warranties relate to an earlier
date, in which case such representations and warranties shall have been
correct in all material respects on and as of such earlier date); and
<PAGE>
28
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or both.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
this Agreement shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent
shall promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as of the Effective Date and from time to time
thereafter as required under this Agreement as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Borrower and
each of the Significant Subsidiaries are duly qualified and in good
standing as foreign corporations authorized to do business in each
jurisdiction (other than the respective jurisdictions of their
incorporation) in which the nature of their respective activities or the
character of the properties they own or lease make such qualification
necessary and in which the failure so to qualify would have a material
adverse effect on the financial condition or operations of the Borrower and
its subsidiaries, taken as a whole.
(b) The execution, delivery and performance by the Borrower of this
Agreement and each of the Notes, if any, delivered hereunder are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or by-
laws or (ii) any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any material contractual restriction
binding on or affecting the Borrower, Disney or ABC; no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by the Borrower of this Agreement or
the Notes, if any; and this Agreement is and each of the Notes, when
delivered hereunder, will be the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(c) (i) At any time prior to the date on which the Borrower first
delivers the audited financial statements of the Borrower and its
subsidiaries pursuant to Section 5.01(e)(ii), Disney's most recent annual
report on Form 10-K containing the consolidated balance sheet of Disney and
its subsidiaries, and the related consolidated statements of income and of
cash flows of Disney
<PAGE>
29
and its subsidiaries, copies of which have been furnished to each Initial
Lender prior to the date of this Agreement, fairly present the consolidated
financial condition of Disney and its subsidiaries as at the date of such
balance sheet and the consolidated results of operations of Disney and its
subsidiaries for the fiscal year ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and (ii) at
any time thereafter, the Borrower's most recent annual report on Form 10-K
containing the consolidated balance sheet of the Borrower and its
subsidiaries, and the related consolidated statements of income and of cash
flows of the Borrower and its subsidiaries, copies of which have been
furnished to each Lender pursuant to Section 5.01(e)(ii), fairly present
the consolidated financial condition of the Borrower and its subsidiaries
as at the date of such balance sheet and the consolidated results of
operations of the Borrower and its subsidiaries for the fiscal year ended
on such date, all in accordance with generally accepted accounting
principles consistently applied.
(d) There is no pending or, to the Borrower's knowledge, threatened
claim, action or proceeding affecting the Borrower or any of its
subsidiaries which could reasonably be expected to adversely affect the
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole, or which could reasonably be expected to affect the
legality, validity or enforceability of this Agreement; and to the
Borrower's knowledge, the Borrower and each of its subsidiaries have
complied, and are in compliance, with all applicable laws, rules,
regulations, permits, orders, consent decrees and judgments, except for any
such matters which have not had, and would not reasonably be expected to
have, a material adverse effect on the financial condition or operations of
the Borrower and its subsidiaries, taken as a whole.
(e) The Borrower and the ERISA Affiliates have not incurred and are
not reasonably expected to incur any material liability in connection with
their Single Employer Plans or Multiple Employer Plans, other than ordinary
liabilities for benefits; neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any material withdrawal
liability (as defined in Part I of Subtitle E of Title IV of ERISA) to any
Multiemployer Plan; and no Multiemployer Plan of the Borrower or any ERISA
Affiliate is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
SECTION 4.02. Additional Representations and Warranties of the
------------------------------------------------
Borrower as of Each Increase Date and Each Extension Date. The Borrower
- ---------------------------------------------------------
represents and warrants on each Increase Date and each Extension Date (and at no
other time) that, as of each such date, the following statements shall be true:
(a) there has been no material adverse change in the business,
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole, since the date of the audited financial statements of the
Borrower and its subsidiaries most recently delivered to the Lenders
pursuant to Section 5.01(e)(ii) prior to the applicable Increase Date or
Extension Date, as the case may be (except as disclosed in periodic or
other reports filed by the Borrower and its subsidiaries pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, during the
period from the date of the most recently delivered audited financial
statements of the Borrower and its subsidiaries pursuant to Section
5.01(e)(ii) to the date of the request for an increase in the aggregate
Commitments related to such Increase Date or for an extension of the
Termination Date then in effect related to such Extension Date, as the case
may be); and
<PAGE>
30
(b) the representations and warranties contained in Section 4.01 are
correct in all material respects on and as of such date, as though made on
and as of such date (except to the extent that such representations and
warranties relate to an earlier date, in which case such representations
and warranties shall have been correct in all material respects on and as
of such earlier date).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
-------------------------
subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations, permits, orders, consent decrees and judgments binding
on the Borrower and its subsidiaries the failure with which to comply would
have a material adverse effect on the financial condition or operations of
the Borrower and its subsidiaries, taken as a whole.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
subsidiaries to pay and discharge, before the same shall become delinquent,
if the failure to so pay and discharge would have a material adverse effect
on the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property, and (ii) all lawful
claims which, if unpaid, will by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its subsidiaries
shall be required to pay or discharge any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained in
accordance with GAAP.
(c) Preservation of Corporate Existence, Etc. Subject to Section
----------------------------------------
5.02(a), preserve and maintain, and cause each of Disney and ABC to
preserve and maintain, its corporate existence, rights (charter and
statutory) and franchises; provided, however, that none of the Borrower,
Disney or ABC shall be required to preserve any right or franchise if the
loss thereof would not have a material adverse effect on the business,
financial condition or operations of the Borrower and its subsidiaries,
taken as a whole; and provided further, however, that neither Disney nor
ABC shall be required to preserve its corporate existence if the loss
thereof would not have a material adverse effect on the business, financial
condition or operations of the Borrower and its subsidiaries, taken as a
whole.
(d) Maintenance of Interest Coverage Ratio. Maintain as of the last
--------------------------------------
day of each fiscal quarter of the Borrower, commencing with the first
fiscal quarter of the Borrower following the Effective Date, a ratio of (i)
Consolidated EBITDA for the Measurement Period ending on such day to (ii)
Consolidated Interest Expense for the Measurement Period ending on such
day, of not less than 3 to 1.
<PAGE>
31
(e) Reporting Requirements. Furnish to the Administrative Agent, on
----------------------
behalf of the Lenders:
(i) as soon as available and in any event within 50 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, the Borrower's quarterly report to shareholders on Form 10-Q
as filed with the Securities and Exchange Commission (the "SEC"), in
each case containing a consolidated balance sheet of the Borrower and
its subsidiaries as of the end of such quarter and consolidated
statements of income and of cash flows of the Borrower and its
subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, and a certificate
of any of the Borrower's Chairman of the Board of Directors,
President, Chief Financial Officer, Treasurer, Assistant Treasurer or
Controller (A) stating that no Event of Default, or event that with
the giving of notice or passage of time or both would constitute an
Event of Default, has occurred and is continuing and (B) containing a
schedule which shall set forth the computations used by the Borrower
in determining compliance with the covenant contained in Section
5.01(d);
(ii) as soon as soon as available and in any event within 100
days after the end of each fiscal year of the Borrower, a copy of the
Borrower's annual report to shareholders on Form 10-K as filed with
the SEC, in each case containing consolidated financial statements of
the Borrower and its subsidiaries for such year and a certificate of
any of the Borrower's Chairman of the Board of Directors, President,
Chief Financial Officer, Treasurer, Assistant Treasurer or Controller
(A) stating that no Event of Default, or event that with the giving of
notice or passage of time or both would constitute an Event of
Default, has occurred and is continuing and (B) containing a schedule
which shall set forth the computations used by the Borrower in
determining compliance with the covenant contained in Section 5.01(d);
(iii) promptly after the Borrower obtains actual knowledge of
the occurrence of each Event of Default, and each event that with the
giving of notice or passage of time or both would constitute an Event
of Default, a statement of any of the Borrower's Chairman of the Board
of Directors, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller setting forth details of such Event of Default
or event continuing on the date of such statement, and the action
which the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the commencement thereof, notice of any
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower or any of its subsidiaries
of the type described in Section 4.01(d);
(v) promptly after the Borrower obtains actual knowledge
thereof, written notice of any pending or threatened Environmental
Claim against the Borrower or any of its subsidiaries or any of their
respective properties which could reasonably be expected to materially
and adversely affect the financial condition or operations of the
Borrower and its subsidiaries, taken as a whole;
<PAGE>
32
(vi) promptly after the Borrower obtains actual knowledge of the
occurrence of any ERISA Event which could reasonably be expected to
materially and adversely affect the financial condition or operations
of the Borrower and its subsidiaries, taken as a whole, a statement of
any of the Borrower's Chairman of the Board of Directors, President,
Chief Financial Officer, Treasurer, Assistant Treasurer or Controller
describing such ERISA Event and the action, if any, which the Borrower
has taken and proposes to take with respect thereto;
(vii) promptly after receipt thereof by the Borrower or any
ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of
each notice received by the Borrower or any ERISA Affiliate concerning
(A) the imposition of withdrawal liability (as defined in Part I of
Subtitle E of Title IV of ERISA) by a Multiemployer Plan, which
withdrawal liability could reasonably be expected to materially and
adversely affect the financial condition or operations of the Borrower
and its subsidiaries, taken as a whole, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan, which reorganization or termination could
reasonably be expected to materially adversely affect the financial
condition or operations of the Borrower and its subsidiaries, taken as
a whole, or (C) the amount of liability incurred, or which may be
incurred, by the Borrower or any ERISA Affiliate in connection with
any event described in subclause (vii)(A) or (vii)(B) above; and
(viii) such other material information reasonably related to
any Lender's credit analysis of the Borrower or any of its
subsidiaries as any Lender through the Administrative Agent may from
time to time reasonably request.
SECTION 5.02. Negative Covenant. So long as any Advance shall remain
-----------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Majority Lenders:
(a) Mergers, Etc. Merge or consolidate with or into, or convey,
------------
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of the assets of the
Borrower and its subsidiaries, taken as a whole (whether now owned or
hereafter acquired), to, any Person, or permit any of its subsidiaries to
do so, unless (i) immediately after giving effect to such proposed
transaction, no Event of Default or event which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default would exist
and (ii) in the case of any such merger to which the Borrower is a party,
the Borrower is the surviving corporation or the Person into which the
Borrower shall be merged or formed by any such consolidation shall be a
corporation organized and existing under the laws of the United States or
any State thereof and shall assume the Borrower's obligations hereunder and
under the Notes, if any, in an agreement or instrument reasonably
satisfactory in form and substance to the Majority Lenders.
<PAGE>
33
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or any fee or other amount payable under this
Agreement, in each case within three Business Days after such interest, fee
or other amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) delivered in writing and identified
as delivered in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any covenant
contained in Section 5.01(d), Section 5.01(e)(iii) or Section 5.02; or
(d) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement shall remain unremedied for 30 days after written
notice thereof shall have been given to the Borrower by the Administrative
Agent or any Lender; or
(e) The Borrower or any of its subsidiaries shall fail to pay any
principal of or premium or interest on any Debt which is outstanding in a
principal amount of at least $250,000,000 in the aggregate (but excluding
Debt arising hereunder) of the Borrower or such subsidiary (as the case may
be), when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure
(i) shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt and (ii) shall not have
been cured or waived; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) The Borrower or any Material Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Borrower or any Material Subsidiary seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for
it or for substantially all of its
<PAGE>
34
property and, in the case of any such proceeding instituted against it (but
not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property) shall
occur; or the Borrower or any Material Subsidiary shall take any corporate
action to authorize any of the actions set forth above in this subsection
(f); or
(g) Any money judgment, writ or warrant of attachment or similar
process against the Borrower, any Material Subsidiary or any of their
respective assets involving in any case an amount in excess of $100,000,000
is entered and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 30 days or, in any case, within five days of any pending
sale or disposition of any asset pursuant to any such process;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. (a) Each Lender hereby
------------------------
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement of this Agreement or
collection of the Advances), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The Administrative Agent agrees
to give to each Lender prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
(b) The Co-Administrative Agents shall have no duties under this
Agreement other than those afforded to them in their capacities as Lenders, and
each Lender hereby acknowledges that the
<PAGE>
35
Co-Administrative Agents have no liability under this Agreement other than those
assumed by them in their capacities as Lenders.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable to any Lender for any action taken or omitted to be taken by it
or them under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent: (i) may treat the Lender which made
any Advance as the holder of the Debt resulting therefrom until the
Administrative Agent receives and accepts an Assumption Agreement entered into
by an Assuming Lender as provided in Section 2.19 or 2.20, as the case may be,
or an Assignment and Acceptance entered into by such Lender, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment and
-------------------
the Advances made by it and any Note or Notes issued to it, CUSA shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its respective Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from, and generally engage in any kind of business with, the
Borrower, any of its subsidiaries and any Person who may do business with or own
securities of the Borrower or any such subsidiary, all as if CUSA was not the
Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(c)(i) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of Advances then owing to each of
them (or, if no Advances are at the time outstanding or if any Advances are then
owing to Persons which are not Lenders, ratably according to the respective
<PAGE>
36
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal or
bankruptcy proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and such resignation shall be effective upon the appointment of a
successor Administrative Agent as provided herein. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Majority Lenders, and shall have accepted such appointment, within 30 days after
the retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent. Any successor Administrative Agent appointed hereunder
shall be a commercial bank organized or licensed under the laws of the United
States or of any State thereof, or an Affiliate of any such commercial bank,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Borrower or any of its Affiliates, if
a Lender, at the time of any such amendment, waiver or consent), do any of the
following: (a) waive any of the conditions specified in Section 3.01 or 3.02,
(b) increase the Commitments of the Lenders (other than as provided in Section
2.19) or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Advances or the facility fees payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest
<PAGE>
37
on, the Advances (other than as provided in Section 2.20), (e) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
Advances, or the number of Lenders, which shall be required for the Lenders or
any of them to take any action hereunder or (f) amend this Section 8.01; and
provided further that no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Lenders required above
to take such action, affect the rights or duties of the Administrative Agent
under this Agreement or any Note.
SECTION 8.02. Notices, Etc. (a) All notices and other communications
------------
provided for hereunder shall, except as otherwise expressly provided for herein,
be in writing (including telecopier, telegraphic or telex communication) and
mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, at
its address at:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Assistant Treasurer
Telecopy Number: (818) 563-1682 and (818) 562-1811
with a copy to:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Corporate Legal Department
Telecopy Number: (818) 563-4160
if to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assumption Agreement or the Assignment and Acceptance
pursuant to which it became a Lender, as the case may be; and if to the
Administrative Agent, at its address at:
Citicorp USA, Inc.
One Court Square
Long Island City, New York 11120
Attention: Kim Coley
Telecopy Number: (718) 248-4844
with a copy to:
Citicorp Securities, Inc.
One Sansome Street
San Francisco, California 94104
Attention: Mark Wilson
Telecopy Number: (415) 627-6355;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telecopied, telegraphed or
<PAGE>
38
telexed, be effective when deposited in the mails, telecopied, delivered to the
telegraph company or confirmed by telex answerback, respectively, except that
notices and communications to the Administrative Agent pursuant to Article II or
VII shall not be effective until received by the Administrative Agent. Delivery
by telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or of any Exhibit hereto to be executed and
delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof.
(b) If any notice required under this Agreement is permitted to be
made, and is made, by telephone, actions taken or omitted to be taken in
reliance thereon by the Administrative Agent or any Lender shall be binding upon
the Borrower notwithstanding any inconsistency between the notice provided by
telephone and any subsequent writing in confirmation thereof provided to the
Administrative Agent or such Lender; provided that any such action taken or
omitted to be taken by the Administrative Agent or such Lender shall have been
in good faith and in accordance with the terms of this Agreement.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay,
------------------
within five Business Days of demand, all actual and reasonable costs and
expenses, if any (including, without limitation, actual and reasonable counsel
fees and expenses), of the Administrative Agent and each Lender in connection
with the enforcement (whether through legal proceedings or otherwise) of this
Agreement and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.08(f) or
2.10 or acceleration of the maturity of the Advances pursuant to Section 6.01 or
for any other reason (other than by reason of a payment pursuant to Section
2.12), the Borrower shall, within five Business Days of demand by any Lender
(with a copy of such demand to the Administrative Agent), pay to such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Advance.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender (and, in the case of CUSA, Citibank) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, but excluding trust accounts) at any time
held and other indebtedness at any time owing by such Lender (and, in the case
of CUSA, Citibank) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter existing under
this Agreement, whether or not such Lender shall have made any demand
<PAGE>
39
under this Agreement. Each Lender agrees promptly to notify the Borrower after
any such set-off and application made by such Lender (and, in the case of CUSA,
Citibank); provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender (and, in
the case of CUSA, Citibank) under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
--------------
(other than Section 2.01, which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower, the Administrative Agent and each Co-Administrative
Agent and when the Administrative Agent shall have been notified by each Initial
Lender that such Initial Lender has executed it and, thereafter, shall be
binding upon and inure to the benefit of the Borrower, the Administrative Agent,
each Co-Administrative Agent and each Lender and their respective successors and
permitted assigns, except that the Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,
------------------------------
if requested by the Borrower upon notice by the Borrower delivered to such
Lender and the Administrative Agent pursuant to clause (ii) of Section 2.16,
will, assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) the sum of (A) the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment and (B) the amount of the
commitment being contemporaneously assigned under the 364-Day Credit Agreement
by the Person that is such assigning Lender (in both cases determined as of the
date of the Assignment and Acceptance or similar agreement with respect to such
assignments) shall not be less than $50,000,000 in the aggregate (unless such
lesser amount is previously agreed among such assigning Lender, the
Administrative Agent and the Borrower), provided, however, that if the aggregate
amount of the Commitment of such assigning Lender hereunder and its commitment
under the 364-Day Credit Agreement is less than $50,000,000 on the date of such
proposed assignments, such assigning Lender may assign all, but not less than
all, of its remaining rights and obligations under this Agreement and the 364-
Day Credit Agreement (unless an assignment of a portion of such assigning
Lender's obligations hereunder and thereunder is otherwise previously agreed
among such assigning Lender, the Administrative Agent and the Borrower), (iii)
each such assignment shall be to an Eligible Assignee, and (iv) the parties to
each such assignment (other than the Borrower) shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,000. Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than any rights such Lender assignor may have under
Sections 2.11, 2.14 and 8.08) and be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
<PAGE>
40
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any instrument or document furnished pursuant hereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its subsidiaries or the performance or observance by the Borrower of any of its
obligations under this Agreement or any instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(c)(i) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance and each Assumption
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee
and, if applicable, the Borrower, together with any Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit B hereto, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and (iv) such Lender shall not agree in any
participation agreement with any participant
<PAGE>
41
or proposed participant to obtain the consent of such participant before
agreeing to the amendment, modification or waiver of any of the terms of this
Agreement or any Note, before consenting to any action or failure to act by the
Borrower or any other party hereunder or under any Note, or before exercising
any rights it may have in respect thereof, unless such amendment, modification,
waiver, consent or exercise would (A) increase the amount of such participant's
portion of such Lender's Commitment, (B) reduce the principal amount of or rate
of interest on the Advances or any fee or other amounts payable hereunder to
which such participant would be entitled to receive a share under such
participation agreement, or (C) postpone any date fixed for any payment of
principal of or interest on the Advances or any fee or other amounts payable
hereunder to which such participant would be entitled to receive a share under
such participation agreement.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 8.07, disclose to
the assignee or participant or proposed assignee or participant any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower in writing and directly related to the transactions contemplated
hereunder; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender in accordance with the terms of Section 8.09.
(g) No participation or assignment hereunder shall be made in violation of
the Securities Act of 1933, as amended from time to time, or any applicable
state securities laws, and each Lender hereby represents that it will make any
Advance for its own account in the ordinary course of its business and not with
a view to the public distribution or sale thereof.
(h) Anything in this Agreement to the contrary notwithstanding, any Lender
may at any time create a security interest in all or any portion of its rights
under this Agreement (including, without limitation, the Advances owing to it
and any Note issued to it hereunder) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System (or any successor regulation thereto) and the applicable operating
circular of such Federal Reserve Bank.
SECTION 8.08. Indemnification. The Borrower agrees to indemnify and hold
---------------
harmless the Administrative Agent, each Co-Administrative Agent and each Lender
and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding (whether or not an
Indemnified Party is a party thereto) arising out of, related to or in
connection with the Commitments hereunder or the Advances made pursuant hereto
or any transactions done in connection herewith, including, without limitation,
any transaction in which any proceeds of the Advances are, or are proposed, to
be applied (collectively, the "Indemnified Matters"); provided that the Borrower
shall have no obligation to any Indemnified Party under this Section 8.08 with
respect to (i) matters for which such Indemnified Party has been reimbursed by
or on behalf of the Borrower pursuant to any other provision of this Agreement,
but only to the extent of such reimbursement, or (ii) Indemnified Matters found
by a court of competent jurisdiction to have resulted from the willful
misconduct or gross negligence of such Indemnified Party. If any action is
brought against any Indemnified Party, such Indemnified Party shall promptly
notify the
<PAGE>
42
Borrower in writing of the institution of such action and the Borrower shall
thereupon have the right, at its option, to elect to assume the defense of such
action; provided, however, that the Borrower shall not, in assuming the defense
of any Indemnified Party in any Indemnified Matter, agree to any dismissal or
settlement of such Indemnified Matter without the prior written consent of such
Indemnified Party, which consent shall not be unreasonably withheld, if such
dismissal or settlement (A) would require any admission or acknowledgement of
culpability or wrongdoing by such Indemnified Party or (B) would provide for any
nonmonetary relief to any Person to be performed by such Indemnified Party. If
the Borrower so elects, it shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such Indemnified
Party) and payment of expenses. Such Indemnified Party shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (1) the
employment of such counsel shall have been authorized in writing by the Borrower
in connection with the defense of such action or (2) the Borrower shall not have
properly employed counsel reasonably satisfactory to such Indemnified Party to
have charge of the defense of such action, in which case such fees and expenses
shall be paid by the Borrower. If an Indemnified Party shall have reasonably
concluded (based upon the advice of counsel) that the representation by one
counsel of such Indemnified Party and the Borrower creates a conflict of
interest for such counsel, the reasonable fees and expenses of such counsel
shall be borne by the Borrower and the Borrower shall not have the right to
direct the defense of such action on behalf of such Indemnified Party (but shall
retain the right to direct the defense of such action on behalf of the
Borrower). Anything in this Section 8.08 to the contrary notwithstanding, the
Borrower shall not be liable for the fees and expenses of more than one counsel
for any Indemnified Party in any jurisdiction as to any Indemnified Matter or,
except as specified in the second sentence of this Section 8.08, for any
settlement of any Indemnified Matter effected without its written consent. All
obligations of the Borrower under this Section 8.08 shall survive the making and
repayment of the Advances and the termination of this Agreement.
SECTION 8.09. Confidentiality. Subject to the provisions of Section
---------------
8.07(f), each Lender shall, and shall instruct its Affiliates, successors,
assigns, advisors, officers, employees, directors, agents, legal counsel and
other professional advisors (the "Informed Parties") to, hold all nonpublic
information obtained pursuant to this Agreement in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide transferee or participant in
connection with the contemplated transfer or participation or to another Lender
or an Informed Party agreeing to hold such nonpublic information as confidential
or as required or requested by law or to any governmental authority or
representative thereof or pursuant to legal process; provided that unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental authority or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
authority) for disclosure of any such nonpublic information prior to disclosure
of such information; and provided further that in no event shall any Lender be
obligated or required to return any materials furnished by the Borrower.
SECTION 8.10. Consent to Jurisdiction and Service of Process. All
----------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreement
or any instrument or other documents delivered hereunder may be brought in any
state or federal court in the Borough of Manhattan in the State of New York, and
by execution and delivery of this Agreement, the Borrower accepts, for itself
and in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid
<PAGE>
43
courts, and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with this Agreement or any instrument or other document
delivered hereunder from which no appeal has been taken or is available. The
Borrower agrees to receive service of process in any such proceeding in any such
court at its office at 114 Fifth Avenue, New York, New York 10011, Attention:
Kenneth E. Newman (or at such other address in the Borough of Manhattan in the
State of New York as the Borrower shall notify the Administrative Agent from
time to time) and, if the Borrower ever ceases to maintain such office in the
Borough of Manhattan, irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, New York 10019, or any other address in the State of
New York communicated by CT Corporation System to the Administrative Agent, as
its agent to receive on its behalf service of all process in any such proceeding
in any such court, such service being hereby acknowledged by the Borrower to be
effective and binding service in every respect.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement. A full set of executed counterparts of this Agreement shall be
lodged with the Administrative Agent and the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER
------------
THE WALT DISNEY COMPANY
By: [SIGNATURE APPEARS HERE]
-----------------------------------------
Title: Vice President and Assistant Treasuer
--------------------------------------
THE ADMINISTRATIVE AGENT
------------------------
CITICORP USA, INC.,
as Administrative Agent
By: /s/ Steven R. Victorin
-----------------------------------------
Title: Attorney-in-Fact
-----------------------------------------
<PAGE>
44
THE CO-ADMINISTRATIVE AGENTS
----------------------------
CREDIT SUISSE,
as Co-Administrative Agent
By: /s/ Stephen M. Flynn
----------------------------------------
Title: Member of Senior Management
-------------------------------------
By: /s/ David J. Worthington
----------------------------------------
Title: Member of Senior Management
-------------------------------------
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Co-Administrative Agent
By: /s/ Matthew J. Koenig
----------------------------------------
Title: Vice President
-------------------------------------
THE INITIAL LENDERS
-------------------
Commitment
- ----------
$86,250,000.00 CITICORP USA, INC.
By: /s/ Steven R. Victorin
----------------------------------------
Title: Attorney-in-Fact
-------------------------------------
$83,250,000.00 CREDIT SUISSE
By: /s/ Stephen M. Flynn
----------------------------------------
Title: Member of Senior Management
-------------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Member of Senior Management
-------------------------------------
$83,250,000.00 BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ Matthew J. Koenig
----------------------------------------
Title: Vice President
-------------------------------------
<PAGE>
45
$83,250,000.00 ABN AMRO BANK N.V.,
LOS ANGELES INTERNATIONAL BRANCH
BY: ABN AMRO NORTH AMERICA, INC.,
AS AGENT
By: /s/ Paul K. Stimpfl
----------------------------------------
Title: Vice President/Director
-------------------------------------
By: /s/ Kenneth H. Bowman
----------------------------------------
Title: Vice President/Director
-------------------------------------
$83,250,000.00 BANCA COMMERCIALE ITALIANA,
LOS ANGELES FOREIGN BRANCH
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 BANKERS TRUST COMPANY
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
----------------------------------------
Title: Director
-------------------------------------
$83,250,000.00 THE BANK OF NEW YORK
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 THE BANK OF NOVA SCOTIA
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: [TITLE APPEARS HERE]
-------------------------------------
<PAGE>
46
$83,250,000.00 BANQUE NATIONALE DE PARIS
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Senior Vice President & Manager
-------------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 BANQUE PARIBAS
By: /s/ Jean-Yves Fillion /s/ Harry Collyns
----------------------------------------
Title: Vice President Vice President
-------------------------------------
$83,250,000.00 BARCLAYS BANK PLC
By: /s/ James K. Downey
----------------------------------------
Title: Associate Director
-------------------------------------
$83,250,000.00 THE CHASE MANHATTAN BANK
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Managing Director
-------------------------------------
$83,250,000.00 THE DAI-ICHI KANGYO BANK, LTD.,
LOS ANGELES AGENCY
By: /s/ Masatsugii Morishita
----------------------------------------
Title: Sr. Vice President & Joint General
Manager
-------------------------------------
$83,250,000.00 DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND BRANCHES
By: /s/ J. Scott Jessup
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ Ross A. Howard
----------------------------------------
Title: Director
-------------------------------------
<PAGE>
47
$83,250,000.00 THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Senior Vice President
-------------------------------------
$83,250,000.00 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Jane W. Workman
----------------------------------------
Title: Senior Vice President
-------------------------------------
$83,250,000.00 THE FUJI BANK, LTD.,
LOS ANGELES AGENCY
By: /s/ Nobuhiro Umemura
----------------------------------------
Title: Joint General Manager
-------------------------------------
$83,250,000.00 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By: /s/ Vincente Timiraos
----------------------------------------
Title: Senior Vice President
-------------------------------------
$83,250,000.00 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., LOS ANGELES AGENCY
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Deputy General Manager
-------------------------------------
$83,250,000.00 THE MITSUI TRUST & BANKING CO.,
LTD.
By: /s/ Margaret Holloway
----------------------------------------
Title: Vice President & Manager
-------------------------------------
<PAGE>
$83,250,000.00 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 NATIONSBANK OF TEXAS, N.A.
By: /s/ Chas A. McDonell
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 ROYAL BANK OF CANADA
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Senior Manager
-------------------------------------
$83,250,000.00 THE SAKURA BANK, LIMITED
By: /s/ Fernando Buesa
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Senior Vice President
------------------------------------
Assistant General Manager
-------------------------------------
$83,250,000.00 THE SANWA BANK, LIMITED
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 THE SUMITOMO BANK, LIMITED
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title:
-------------------------------------
$83,250,000.00 THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: /s/ Eleanor Chan
----------------------------------------
Title: Manager & Vice President
-------------------------------------
<PAGE>
49
$83,250,000.00 SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: First Vice President
-------------------------------------
$83,250,000.00 SWISS BANK CORPORATION,
SAN FRANCISCO BRANCH
By: /s/ Hans-Ueli Surber
----------------------------------------
Title: Executive Director Merchant Banking
-------------------------------------
By: /s/ Nang S. Peecnaphand
----------------------------------------
Title: Associate Director Accounting
-------------------------------------
$83,250,000.00 TORONTO DOMINION (TEXAS), INC.
By: /s/ Frederic Hawley
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 UNION BANK OF CALIFORNIA, N.A.
By: /s/ Anna Bagdasarian
----------------------------------------
Title: Vice President/Manager
-------------------------------------
$83,250,000.00 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Laurent J. Chaix
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ Stephen A. Caver
----------------------------------------
Title: Assistant Treasurer
-------------------------------------
$83,250,000.00 WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Joel K. Wood
----------------------------------------
Title: Vice President
-------------------------------------
<PAGE>
50
$83,250,000.00 WELLS FARGO BANK, N.A.
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Senior Vice President
-------------------------------------
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------------
Title: Vice President
-------------------------------------
$83,250,000.00 THE YASUDA TRUST
& BANKING CO., LTD.
By: /s/ Makoto Tagawa
----------------------------------------
Title: Deputy General Manager
-------------------------------------
$3,000,000,000 TOTAL OF COMMITMENTS
<PAGE>
EXHIBIT 21
THE WALT DISNEY COMPANY AND SUBSIDIARIES
Name of subsidiary State of Incorporation
- ------------------ ----------------------
ABC, Inc. New York
ABC Holding Company Inc. Delaware
American Broadcasting Companies, Inc. Delaware
Buena Vista Home Video, Inc. California
Buena Vista International, Inc. California
Buena Vista Television California
Disney Enterprises, Inc. Delaware
Lake Buena Vista Communities, Inc. Delaware
Miramax Film Corp. New York
The Disney Channel California
The Disney Store, Inc. California
Walt Disney Pictures and Television California
Walt Disney World Co. Delaware
WCO Parent Corporation Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF INCOME FOUND
ON THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 278
<SECURITIES> 454
<RECEIVABLES> 3,343
<ALLOWANCES> 0
<INVENTORY> 951
<CURRENT-ASSETS> 0
<PP&E> 12,479
<DEPRECIATION> 4,448
<TOTAL-ASSETS> 37,306
<CURRENT-LIABILITIES> 0
<BONDS> 12,342
0
0
<COMMON> 8,576
<OTHER-SE> 7,972
<TOTAL-LIABILITY-AND-EQUITY> 37,306
<SALES> 18,739
<TOTAL-REVENUES> 18,739
<CGS> 0
<TOTAL-COSTS> 15,706
<OTHER-EXPENSES> 534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 479
<INCOME-PRETAX> 2,061
<INCOME-TAX> 847
<INCOME-CONTINUING> 1,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,214
<EPS-PRIMARY> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
