<PAGE>
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, 1995 Commission File Number 1-4083
[LOGO OF THE WALT DISNEY COMPANY]
Incorporated in Delaware I.R.S. Employer Identification No.
500 South Buena Vista Street, 95-0684440
Burbank, California 91521
(818) 560-1000
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- - ------------------- ---------------------
Common Stock, $.025 par value New York Stock Exchange
Pacific Stock Exchange
Swiss Stock Exchange
Tokyo 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
--- ---
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. ____
As of November 30, 1995, 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 $31.6
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 524,843,804 shares of common stock outstanding as of December 15,
1995.
<PAGE>
PART I
ITEM 1. BUSINESS
The Walt Disney Company, together with its subsidiaries (the "Company"), is
a diversified international entertainment company with operations in three
business segments: Filmed Entertainment, Theme Parks and Resorts and Consumer
Products. Information on revenues, operating income, identifiable assets and
supplemental revenue data of the Company's business segments appears in the
Consolidated Statement of Income and in Note 13 of Notes to Consolidated
Financial Statements included in Item 8 hereof. The Company employs
approximately 71,000 people.
In July 1995, the Company and Capital Cities/ABC, Inc. ("Cap Cities")
entered into a reorganization agreement, pursuant to which the Company expects
to acquire Cap Cities in a transaction that is expected to be completed in
1996. Information on the business activities of Cap Cities appears in Note 2
of Notes to Consolidated Financial Statements included in Item 8 hereof.
FILMED ENTERTAINMENT
The Company produces and acquires live-action and animated motion pictures
for distribution to the theatrical, television and home video markets and
produces original television programming for the network and first-run
syndication markets. In addition, the Company provides programming for and
operates The Disney Channel, a pay television programming service and KCAL-TV,
a Los Angeles, California television station. The Company also produces music
recordings and live stage plays.
The success of all the Company's theatrical motion pictures and television
programming is heavily dependent upon public taste, which is unpredictable and
subject to change without warning. 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.
THEATRICAL FILMS
Walt Disney Pictures and Television, a wholly-owned 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. The Company's Miramax Film Corp.
subsidiary distributes films under its own banner. In addition, the Company
distributes films produced or acquired by the independent production companies
Cinergi Pictures Entertainment, Interscope Communications and Merchant-Ivory
Productions. The Company also produces animated motion pictures under the
banner Walt Disney Pictures.
The Company generally seeks to distribute approximately 20 to 30 feature
films each year under the Company's various banners, including several live-
action family feature films, one to two full-length animated films under the
Walt Disney Pictures banner, and between 15 and 25 teenage and adult films
under the other motion picture banners. In addition, the Company periodically
reissues previously released animated films. As of September 30, 1995, the
Company had released 311 full-length live-action features (primarily color),
33 full-length animated color features and approximately 536 cartoon shorts.
The Company also expects that Miramax will independently acquire and produce
approximately 30 films per year.
The Company distributes and markets its filmed products through its own
distribution and marketing companies in the United States and certain 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
-1-
<PAGE>
direct-to-video release. As of September 30, 1995, approximately 657 titles,
including 203 feature films and 193 cartoon shorts and animated features were
available to the domestic marketplace. Approximately 589 titles, including 293
feature films and 296 cartoon shorts and animated features were available to
the international home entertainment market.
NETWORK TELEVISION
The Company's network television operation develops, produces and
distributes television programming to network and other broadcasters, 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 exclusive development
arrangements. Since 1991, the Company has focused on the development,
production and distribution of half-hour comedies for network prime-time
broadcast, including such series as Home Improvement, Ellen, If Not For You,
Boy Meets World and Misery Loves Company. The Company seeks to syndicate in
the domestic market those series that produce enough programs to permit
syndicated "strip" broadcasting on a five-days-per-week basis.
The Company licenses television series developed for United States networks
in a number of foreign markets, including Germany, Italy, the United Kingdom,
France, Spain and Canada.
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.
The Company believes that its television programs complement the marketing
and distribution of its theatrical motion pictures, the Walt Disney World
destination resort, Disneyland and other businesses.
PAY TELEVISION AND TELEVISION SYNDICATION
The Company licenses a number of feature films to pay television services,
including its wholly-owned subsidiary, The Disney Channel.
The Company's Buena Vista Television subsidiary licenses the theatrical and
television film library to the domestic television syndication market. Major
packages of the Company's feature films and television programming have been
licensed for broadcast and basic cable continuing over several years.
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 1996 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.
The Company also 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, Goof Troop and
Bonkers. Tale Spin, Duck Tales and Chip'n Dale are also syndicated nationally.
Live action programming includes: Live with Regis and Kathie Lee and Danny!,
daily talk shows; 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; and Land's End, a weekly action
program. Home Improvement, Blossom and Dinosaurs entered syndication in
September 1995, joining The Golden Girls and Empty Nest in off-network
syndication.
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,
-2-
<PAGE>
Canada, China, France, Germany, Italy, Japan, Mexico, Spain and the United
Kingdom. The Company teamed with Compagnie Luxembourgeoise de Telediffusion S.
A. to launch Super RTL, a new family-oriented channel in Germany in June 1995.
THE DISNEY CHANNEL
The Disney Channel, which has approximately 14.5 million subscribers, is the
Company's nationwide premium 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 destination resort and Disneyland. 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 premiered in Taiwan in March 1995, with the launch of The Disney
Channel (Taiwan), and in Europe in October 1995, with the launch of The Disney
Channel UK. The Company is scheduled to begin broadcasting The Disney Channel
in Australia in late 1996 and is exploring the development of The Disney
Channel in other countries around the world.
KCAL-TV
The Company operates KCAL-TV, an independent commercial station on VHF
channel 9 in the Los Angeles area. Its revenues are derived from the sale of
advertising time to local, regional and national advertisers.
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 three cities in the United States and overseas, and is scheduled to
open in additional cities around the world beginning in 1996.
HOLLYWOOD RECORDS
Hollywood Records seeks to develop and market recordings from new talent
across the spectrum of popular music, as well as soundtracks from the
Company's live-action motion pictures.
COMPETITIVE POSITION
The Company's filmed entertainment businesses (including theatrical films,
product distributed through the network, syndication and pay television and
home video markets and The Disney Channel) compete with all forms of
entertainment. 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 filmed entertainment
businesses.
A significant number of companies produce and/or distribute theatrical and
television films, exploit products in the home video market and provide pay
television programming service. The Company produces and distributes films
designed for family audiences and believes that it is a significant source of
such films.
THEME PARKS AND RESORTS
The Company operates the Walt Disney World(R) destination resort in Florida
and the Disneyland Park(R) and the Disneyland Hotel in California. The Company
earns royalties on revenues generated by the Tokyo Disneyland theme park.
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.
-3-
<PAGE>
WALT DISNEY WORLD DESTINATION RESORT
The Walt Disney World destination resort is located on approximately 29,900
acres of land owned by the Company 15 miles southwest of Orlando, Florida. The
resort includes three theme parks (the Magic Kingdom, Epcot and the Disney-MGM
Studios Theme Park), 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. The
Company markets the entire Walt Disney World destination resort through a
variety of national, international and local advertising and promotional
activities. 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, Liberty Square, Frontierland, Tomorrowland,
Fantasyland, Adventureland and Mickey's Starland. These areas feature themed
rides and attractions, restaurants, refreshment stands and merchandise shops.
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, Mexico,
Japan, China, France, the United Kingdom, Germany, Italy, Morocco and Norway.
Both areas feature themed rides and attractions, restaurants, refreshment
stands and merchandise shops.
DISNEY-MGM STUDIOS THEME PARK - The Disney-MGM Studios Theme Park, which
opened in 1989, consists of a theme park, an animation studio and a production
facility. The theme 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
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, 1995, the Company owned and operated
12 resort hotels and a complex of villas and suites at the Walt Disney World
destination resort, with a total of approximately 14,300 rooms. Disney's
Boardwalk Resort, a mixed-use resort built around a turn-of-the-century
Atlantic boardwalk theme, offering approximately 380 hotel rooms and
additional Disney Vacation Club villas, and The Disney Institute, a resort
community offering participatory programs and enriching experiences, are
expected to open in 1996. 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, 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 known as the Disney
Village Marketplace. Pleasure Island, an entertainment center adjacent to
Disney Village Marketplace, includes restaurants, night clubs and shopping
facilities. Currently under development are Celebration, a 5,000-acre town;
Disney Cruise Lines, a cruise vacation line that will include two ships;
Disney's Animal Kingdom, a themed wild animal adventure park incorporating
live animals in natural habitats; Disney's Coronado Springs Resort, designed
to serve the moderately priced hotel/convention market; a sports complex
featuring amateur sporting events; and a motor speedway which will host
Indianapolis style racing.
-4-
<PAGE>
The downtown area of Celebration is scheduled to open during 1996, when
limited residential lot sales are also expected to begin.
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 290-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.
DISNEY VACATION CLUB
In 1995, Disney Vacation Development, Inc., a wholly-owned subsidiary of the
Company, completed its 497-unit Disney Vacation Club at the Walt Disney World
Resort. In addition, 175 units of the Disney Vacation Club in Vero Beach,
Florida opened in October 1995, and a 102-unit Disney Vacation Club on Hilton
Head Island, South Carolina, and 377 Disney Vacation Club villas located at
Disney's Boardwalk Resort are expected to open in 1996. Each facility is
intended to be sold under a vacation ownership plan and operated partially as
rental property until the units are completely sold. The Company has also
acquired property for a planned resort in Newport Beach, California.
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 near
Disneyland.
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., 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.
DISNEY DESIGN AND DEVELOPMENT
Disney Design and Development, encompassing the Company's two major design
and development organizations, Walt Disney Imagineering and Disney Development
Company, 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.
COMPETITIVE POSITION
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. The Company
believes its theme parks and resorts benefit substantially from the Company's
reputation in the entertainment industry for excellent quality and from
synergy with activities in other business segments of the Company.
-5-
<PAGE>
CONSUMER PRODUCTS
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 through The
Disney Stores and consumer catalogs, and is a publisher of books, magazines
and comics in the United States and Europe. In addition, the Company produces
audio products for all markets, as well as film and video products for the
educational marketplace. Operating results for the consumer products business
are influenced by seasonal consumer purchasing behavior and by the timing of
animated theatrical releases.
CHARACTER MERCHANDISE AND PUBLICATIONS LICENSING
The Company's domestic and foreign 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 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, magazines and
newspaper comic strips.
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.
PUBLISHING
The Company has book imprints in the United States offering trade books for
children (Mouse Works, Disney Press and Hyperion Books for Children) and
adults (Hyperion Press). In addition, the Company is a joint venture partner
in Disney Hachette Editions, which produces children's books, and Disney
Hachette Presse, which produces children's magazines and computer software
magazines in France. In Italy and France, the Company publishes comic
magazines for children. The Company also publishes the children's magazine
Disney Adventures, the general science magazine Discover and the family
entertainment and informational magazines FamilyFun and FamilyPC.
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 1995, the Company opened 64 new Disney Stores in
the United States and Canada, 26 in Europe and 15 in the Asia-Pacific area,
bringing the total number to 429 as of September 30, 1995. The Company expects
to open additional stores in the future in selected markets throughout the
country, as well as in Asia-Pacific, European and Latin American countries.
AUDIO PRODUCTS AND MUSIC PUBLISHING
The Company produces and distributes compact discs, audiocassettes and
records primarily directed at the children's market in the United States and
France, consisting primarily of soundtracks for animated films and read-along
products, 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, records and related
materials 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.
-6-
<PAGE>
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.
COMPETITIVE POSITION
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. In the record and music
publishing business the Company competes with several other companies.
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.
OTHER OPERATIONS
DISNEY INTERACTIVE
Disney Interactive, organized during 1995, is a fully integrated software
venture focused on product development and marketing of entertainment and
educational computer software and video game titles for home and school.
DISNEY SPORTS ENTERPRISES
Disney Sports Enterprises provides management and development services for
the Company's National Hockey League franchise, the Mighty Ducks of Anaheim.
DISNEYLAND PARIS
Disneyland Paris is located on a 4,800-acre site at Marne-la-Vallee,
approximately 20 miles east of Paris, France. 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. In
addition, the Company has licensed various intellectual property rights to
Euro Disney for use in connection with the project.
The Disneyland Paris theme park, which opened in April 1992, draws on a
number of European traditions in its five themed lands. Six themed hotels,
with a total of approximately 5,200 rooms, are part of the resort complex,
together with an entertainment center offering a variety of retail, dining and
show facilities and a 595-space camping area. The complex is served by direct
rail transport to Paris and by high-speed TGV train service.
In 1994, the Company, Euro Disney, Euro Disney's principal creditors and
Euro Disney's shareholders approved a financial restructuring that included an
offering of new shares, to which the Company subscribed 49%, and various other
contributions and concessions by and from the Company and Euro Disney's
creditors. In connection with the restructuring, the Company agreed to waive
its royalties and base management fees through September 30, 1998. (See Note 3
of Notes to Consolidated Financial Statements and Management's Discussion and
Analysis on page 12 for further information.)
ITEM 2. PROPERTIES
The Walt Disney World destination resort, Disneyland Park and other
California and Florida properties are described in Item 1 under the caption
Theme Parks and Resorts. Film library properties are described in Item 1 under
the caption Filmed Entertainment.
-7-
<PAGE>
The Company owns approximately 51 acres of land in Burbank, California on
which are located its studios and executive offices. The studio facilities are
used for the production of both live-action and animated motion pictures and
television products. In addition, the Company leases office and warehouse
space for certain of its studio and corporate activities. The Company's KCAL-
TV facilities are located in Hollywood, California.
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.
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.
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, Pacific, Swiss and
Tokyo 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>
1995
1st Quarter.............................................. $46 7/8 $37 3/4
2nd Quarter.............................................. 56 1/4 45
3rd Quarter.............................................. 60 52 7/8
4th Quarter.............................................. 62 3/4 50 1/2
1994
1st Quarter.............................................. $45 3/8 $37 1/8
2nd Quarter.............................................. 48 5/8 40 7/8
3rd Quarter.............................................. 45 1/8 39 5/8
4th Quarter.............................................. 44 1/4 38 3/4
</TABLE>
The Company declared one quarterly dividend of $.075 per share and three
quarterly dividends of $.09 per share in 1995, and in 1994, declared one
quarterly dividend of $.0625 per share and three quarterly dividends of $.075.
As of September 30, 1995, the approximate number of record holders of the
Company's common stock was 507,960.
-8-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In millions, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993* 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Income
Revenues $12,112.1 $10,055.1 $ 8,529.2 $ 7,504.0 $ 6,112.0
Operating income 2,445.7 1,965.7 1,724.5 1,435.3 1,094.5
Income before cumulative
effect of accounting
changes 1,380.1 1,110.4 671.3 816.7 636.6
Cumulative effect of
accounting changes (371.5)
Net income 1,380.1 1,110.4 299.8 816.7 636.6
Per Share
Earnings before
cumulative effect of
accounting changes $ 2.60 $ 2.04 $ 1.23 $ 1.52 $ 1.20
Cumulative effect of
accounting changes (.68)
Earnings 2.60 2.04 .55 1.52 1.20
Cash dividends .35 .29 .24 .20 .17
Balance Sheet
Total assets $14,605.8 $12,826.3 $11,751.1 $10,861.7 $ 9,428.5
Borrowings 2,984.3 2,936.9 2,385.8 2,222.4 2,213.8
Stockholders' equity 6,650.8 5,508.3 5,030.5 4,704.6 3,871.3
Statement of Cash Flows
Cash flow from
operations $ 3,510.1 $ 2,807.3 $ 2,145.2 $ 1,838.1 $ 1,496.7
Investing activities (2,288.4) (2,886.7) (2,659.7) (1,923.7) (1,726.3)
Financing activities (332.1) (96.7) 112.7 (35.7) 295.9
</TABLE>
* See Notes 1, 7, 8, and 12 of Notes to Consolidated Financial Statements for
description of accounting changes effective October 1, 1992.
-9-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 VS. 1994
Revenues increased 20% or $2.06 billion to a record $12.11 billion in 1995,
reflecting growth in Filmed Entertainment, Theme Parks and Resorts and
Consumer Products revenues of $1.21 billion, $496.2 million, and $352.6
million, respectively. Revenues of $2.80 billion from foreign operations in
all business segments increased 19% or $443.6 million in 1995 and represented
23% of total revenues.
Operating income rose 24% or $480.0 million to a record $2.45 billion in
1995, driven by increases in Filmed Entertainment, Theme Parks and Resorts and
Consumer Products operating income of $218.3 million, $176.7 million and $85.0
million, respectively. Net income increased 24% to a record $1.38 billion and
earnings per share increased 27% to a record $2.60 from $1.11 billion and
$2.04, respectively.
1994 VS. 1993
Revenues increased 18% or $1.53 billion to a record $10.06 billion in 1994,
driven by growth in Filmed Entertainment and Consumer Products revenues of
$1.12 billion and $383.1 million, respectively. Revenues of $2.36 billion from
foreign operations in all business segments increased 30% or $539.1 million in
1994 and represented 23% of total revenues, an increase of two percentage
points over 1993.
Operating income rose 14% or $241.2 million to a record $1.97 billion in
1994, driven by increases in Filmed Entertainment and Consumer Products
operating income of $233.9 million and $70.1 million, respectively, partially
offset by Theme Parks and Resorts results, which declined $62.8 million. Net
income increased 65% to a record $1.11 billion and earnings per share
increased 66% to a record $2.04 from $671.3 million and $1.23, respectively,
before the cumulative effect of accounting changes in 1993. Excluding Euro
Disney reserves, which negatively impacted 1993 results, net income and
earnings per share grew 25%.
FILMED ENTERTAINMENT
1995 VS. 1994
Revenues increased 25% or $1.21 billion to $6.00 billion in 1995, driven by
growth of $605 million in worldwide home video revenues, $340 million in
television revenues and $106 million in worldwide theatrical revenues. Home
video revenues increased primarily due to the domestic and initial
international release of The Lion King and the worldwide release of Snow White
and the Seven Dwarfs, compared to the worldwide release of Aladdin, the
domestic release of The Fox and the Hound and the international release of The
Jungle Book in the prior year. Television revenues grew primarily due to the
release of Home Improvement in syndication and increased availability and
success of titles in pay television. Theatrical revenues increased primarily
due to 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.
Operating income increased 25% or $218.3 million to $1.07 billion in 1995,
primarily due to growth in worldwide home video and television. Costs and
expenses increased 25% or $989.9 million, 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, higher
distribution costs related to theatrical releases and costs associated with
the syndication of Home Improvement.
1994 VS. 1993
Revenues increased 30% or $1.12 billion to $4.79 billion in 1994, driven by
growth of $731 million in worldwide home video revenues, $224 million in
worldwide theatrical revenues and $99 million in television revenues. Domestic
home video revenues were driven by Aladdin, The Fox and the Hound and
-10-
<PAGE>
The Return of Jafar compared to Beauty and the Beast and Pinocchio in 1993,
while international home video revenues were driven by The Jungle Book,
Aladdin and Bambi compared to Beauty and the Beast and Cinderella in the prior
year. Theatrical revenues increased due to the worldwide release of The Lion
King, except for Europe, Aladdin in Europe and continued expansion of
theatrical productions, including full-year operations of Miramax, which was
acquired in June 1993. Television revenues grew due to increased title
availabilities worldwide.
Operating income increased 38% or $233.9 million to $856.1 million in 1994,
driven by growth in worldwide home video activity and television, partially
offset by lower worldwide theatrical operating income, reflecting lower
results per film in 1994. Theatrical results in 1993 were driven by the
worldwide release of Aladdin except for Europe, and international releases of
Beauty and the Beast, Sister Act and The Jungle Book, compared to the 1994
release of The Lion King, the European release of Aladdin, and the
international release of Cool Runnings. Costs and expenses increased 29% or
$886.0 million, principally due to higher film cost amortization and increased
distribution and selling costs, resulting from increased home video and
theatrical activities.
THEME PARKS AND RESORTS
1995 VS. 1994
Revenues increased 14% or $496.2 million to $3.96 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 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 26% or $176.7 million to $860.8 million in 1995,
driven by higher theme park attendance 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 11% or $319.5
million, primarily due to expansion of theme park attractions and Florida
resorts and increased marketing and sales expenses, partially offset by the
impact of ongoing cost reduction initiatives.
1994 VS. 1993
Revenues of $3.46 billion in 1994 were substantially unchanged from the
prior year, as growth of $86 million reflecting higher guest spending at
Florida theme parks and resorts and $47 million from an increase in occupied
rooms at Florida resorts offset the $114 million impact of lower attendance at
Florida and California theme parks. Guest spending rose, primarily due to
expanded product offerings and certain price increases, while the increase in
occupied rooms reflected the third quarter openings of Disney's Wilderness
Lodge and Disney's All-Star Sports Resort and expansion at the Disney Vacation
Club. Lower attendance was driven by reduced international tourism.
Operating income decreased 8% or $62.8 million to $684.1 million in 1994,
reflecting the impact of reduced revenues from lower theme park attendance.
Costs and expenses increased 3% or $85.7 million, primarily due to expansion
of theme park attractions and resorts in Florida and a charge recorded in the
fourth quarter to write off certain development costs associated with Disney's
America, as a result of the Company's decision to seek a new site for the
theme park.
CONSUMER PRODUCTS
1995 VS. 1994
Revenues increased 20% or $352.6 million to $2.15 billion in 1995, driven by
growth of $237 million from the Disney Stores and $67 million from worldwide
character merchandise licensing. In 1995, 105 new Disney Stores opened,
bringing the total number of stores to 429. Comparable store sales grew 4% and
sales at new stores contributed $94 million of sales growth. Worldwide
merchandise licensing growth was generated by increased demand for traditional
Disney characters and recent animated film properties, principally The Lion
King and Pocahontas.
-11-
<PAGE>
Operating income increased 20% or $85.0 million to $510.5 million in 1995,
primarily due to growth in worldwide character merchandise licensing and the
Disney Stores. Costs and expenses, which consist principally of costs of goods
sold, labor and publicity and promotion, increased 19% or $267.6 million,
primarily due to ongoing expansion and revenue growth of the Disney Stores.
1994 VS. 1993
Revenues increased 27% or $383.1 million to $1.80 billion in 1994, driven by
growth of $166 million from the Disney Stores, $109 million from worldwide
character merchandise licensing and $87 million from publications, catalogs
and records and audio entertainment. In 1994, 85 new Disney Stores opened,
bringing the total number of stores to 324. Comparable store sales grew 7% and
sales at new stores contributed $70 million of sales growth. Worldwide
merchandise licensing growth was generated by increased demand for traditional
Disney characters and new animated film properties, including Aladdin and The
Lion King.
Operating income increased 20% or $70.1 million to $425.5 million in 1994,
primarily due to the worldwide success of character merchandise licensing and
expansion of the Disney Stores, partially offset by higher costs and expenses.
Costs and expenses increased 30% or $313.0 million, primarily reflecting
expansion and revenue growth of the Disney Stores and higher expenses in
catalog businesses.
CORPORATE ACTIVITIES
GENERAL AND ADMINISTRATIVE EXPENSES
1995 VS. 1994
General and administrative expenses increased 13% or $21.4 million to $183.6
million in 1995, reflecting higher corporate general and administrative
expenses and losses from Disney Sports Enterprises (The Mighty Ducks of
Anaheim) due to the shortened NHL season.
1994 VS. 1993
General and administrative expenses decreased 1% or $2.0 million to $162.2
million in 1994, reflecting operating income from Disney Sports Enterprises
and lower losses incurred by Hollywood Records, partially offset by higher
corporate general and administrative expenses incurred to support growth in
the Company's operations and performance-related incentive programs.
INVESTMENT AND INTEREST INCOME AND INTEREST EXPENSE
1995 VS. 1994
Total investment and interest income decreased 48% or $61.9 million to $68.0
million in 1995. The decrease reflected both lower average investment balances
and yields.
Interest expense increased 49% or $58.4 million to $178.3 million in 1995,
primarily reflecting the impact of higher borrowings, due in part to calendar
1994 common stock repurchases and prior-year Euro Disney funding.
1994 VS. 1993
Total investment and interest income decreased 30% or $56.2 million to
$129.9 million in 1994. The decrease reflected both lower average investment
balances and yields.
Interest expense decreased 24% or $37.8 million to $119.9 million in 1994,
primarily due to the 1993 write-off of unamortized issuance costs related to
subordinated notes redeemed by the Company and increased capitalized interest,
resulting from higher capital expenditures in the current year.
INVESTMENT IN EURO DISNEY
1995 VS. 1994
The Company's investment in Euro Disney resulted in a loss of $35.1 million
in 1995, compared to a loss of $110.4 million in 1994. Results for 1995
include a gain of $55 million from the sale of
-12-
<PAGE>
approximately 75 million shares, or 20% of the Company's investment in Euro
Disney, to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud in the first
quarter. The Company currently holds an ownership interest in Euro Disney of
approximately 39% and has agreed, under certain conditions, 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. The prior-year loss consisted of a $52.8
million third-quarter charge reflecting the Company's participation in the
Euro Disney financial restructuring, and the Company's equity share of Euro
Disney's post-restructuring operating results.
1994 VS. 1993
The Company's investment in Euro Disney resulted in a loss of $110.4 million
in 1994. The loss consisted of a $52.8 million charge recognized in the third
quarter as a result of the Company's participation in the Euro Disney
financial restructuring and the Company's equity share of fourth quarter
operating results. The prior year loss reflected the Company's equity share of
Euro Disney's operating results and a $350.0 million charge to fully reserve
receivables from and a funding commitment to Euro Disney, partially offset by
royalties and gain amortization related to the investment.
During the third quarter of 1994, the Company entered into agreements with
Euro Disney and lenders participating in the restructuring (the "Lenders"), to
provide certain debt, equity and lease financing to Euro Disney.
Under the restructuring agreements, which specified amounts denominated in
French francs, the Company increased its equity investment in Euro Disney by
subscribing for 49% of a $1.1 billion rights offering of new shares; provided
long-term lease financing at a 1% interest rate for approximately $255 million
of theme park assets; and subscribed for securities reimbursable in shares
with a face value of approximately $180 million and a 1% coupon. In addition,
the Company canceled fully-reserved receivables from Euro Disney of
approximately $210 million, waived royalties and base management fees for a
period of five years and reduced such amounts for specified periods
thereafter, and modified the method by which management incentive fees will be
calculated.
Additionally, 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, 1995, Euro Disney had not
requested the Company to establish this facility.
As part of the overall restructuring, the Lenders served as underwriters for
51% of the Euro Disney rights offering, forgave certain interest charges for
the period from April 1, 1994 to September 30, 2003, having a present value of
approximately $300 million, and deferred all principal payments until three
years later than originally scheduled.
In connection with the restructuring, Euro Disney Associes S.N.C. ("Disney
SNC"), an indirect 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, 1995 of approximately FF 10 billion ($2
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.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash from operations and has substantial
borrowing capacity to meet its operating and discretionary cash requirements.
Cash provided by operations increased 25% or $702.8 million to $3.51 billion
in 1995, primarily due to increased operating income in each business segment.
Net borrowings (the Company's borrowings less cash and liquid investments)
decreased $327 million to $1.4 billion. The decrease was primarily due to
payments of existing debt and an increase in cash and liquid investments,
partially offset by the issuance of $400 million of senior participating notes
in the second quarter and $300 million of senior, unsecured debt obligations
in the first quarter.
In 1995, the Company invested $1.89 billion to develop and produce film and
television properties and $896.5 million to design and develop new theme park
attractions and resort properties, including Disney's Animal Kingdom, Disney
Cruise Lines, the Blizzard Beach water park, Disney's BoardWalk and the town
of Celebration.
Pursuant to agreements executed in connection with the 1994 Euro Disney
financial restructuring, the Company sold approximately 75 million, or 20%, of
its Euro Disney shares to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud for
approximately $145 million in 1995.
The Company repurchased 8.9 million shares of its common stock for
approximately $349 million in 1995. Under its share repurchase program, the
Company is authorized to purchase up to an additional 104 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 $180 million to fund dividend
payments during the year.
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
credit facilities which are available for general corporate purposes and to
support commercial paper issuance.
The Company's financial condition remains strong. The Company believes that
its cash, other liquid assets, operating cash flows, access to equity capital
markets and borrowing capacity 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.
Expansion of existing businesses includes continued film and television
production, design and development of theme park attractions and resort
properties and expansion of the Disney Stores worldwide. Theme park and resort
projects currently under development include Disney's Animal Kingdom, the town
of Celebration, Disney Cruise Lines, the Coronado Springs Resort and Disney's
BoardWalk. In addition, the Company continually evaluates discretionary
investments in new projects which complement its existing businesses.
In July 1995, the Company and Capital Cities/ABC, Inc. ("Cap Cities")
entered into a reorganization agreement, pursuant to which the Company expects
to acquire Cap Cities in a transaction that will be accounted for as a
purchase. (See Note 2 of Notes to Consolidated Financial Statements.) The
transaction has been approved by the Board of Directors of each company, and
is subject to regulatory review and approval by each company's stockholders.
Pursuant to the reorganization agreement, stockholders of Cap Cities will have
the right to receive a combination of common stock and cash. The relative
proportions of common stock and cash consideration payable to Cap Cities
stockholders are dependent upon certain elections to be made by Cap Cities
stockholders and other conditions as defined in the reorganization agreement.
The acquisition cost is estimated to be $19 billion as of the date the
transaction was announced. The transaction is expected to be completed by
early 1996.
In October 1995, the Company established bank facilities totaling $12
billion to support the issuance of commercial paper. The Company intends to
initially fund the cash portion of the Cap Cities purchase consideration
through the issuance of commercial paper and the use of existing cash and
investments. The Company may subsequently replace the commercial paper with
longer-term financing. In accordance with this objective, the Company has
filed a shelf registration statement permitting the issuance from time to time
of up to $5 billion of debt and preferred equity securities.
-14-
<PAGE>
Upon consummation of the Cap Cities acquisition, the Company's debt and
equity capitalization will change significantly from the issuance of new
borrowings and Company common stock. The Company continues to believe that it
will have adequate resources to fund ongoing operating requirements and future
capital expenditures related to the expansion of existing businesses and
development of new projects.
RISK MANAGEMENT STRATEGIES
The Company employs a variety of on- and off-balance-sheet financial
instruments to manage its business and financial market risks.
During 1995 and 1994, the Company raised $400 million and $475 million,
respectively, from the issuance of senior participating notes. The notes, due
2000 with a minimum yield of 2.0% and due 2001 with a minimum yield of 4.2%,
respectively, provide that a portion of the interest paid is contingent upon
the performance of a portfolio of live-action films released under the
Company's various film labels. In the future, the Company will continue to
seek partners that will share the risks and rewards of its live-action film
business.
The Company's foreign currency revenues continue to grow and management
believes it is prudent to reduce the risk associated with fluctuations in the
value of the U.S. dollar in the foreign exchange markets. The Company uses
foreign currency forward and option contracts to reduce the impact of changes
in the value of its existing foreign currency assets and liabilities,
commitments and anticipated foreign currency revenues denominated in Japanese
yen, French francs, German marks, British pounds, and other currencies. The
primary focus of the Company's foreign exchange risk management program is to
reduce earnings volatility. By policy, the Company maintains hedge coverages
between minimum and maximum percentages of its anticipated foreign exchange
exposures for each of the next five years.
The Company is exposed to interest rate risk related to its investments and
borrowings. The Company monitors the net interest rate sensitivity of its
portfolio of investments and borrowings and uses interest rate and cross-
currency swaps, exchange-traded futures and forward and option contracts to
manage the net interest exposure and to lower overall borrowing costs. In
addition, in anticipation of additional borrowings to finance its proposed
acquisition of Cap Cities, the Company has entered into forward-starting
interest rate swaps to manage the interest rate risk associated with such
borrowings. The Company's objective is to manage the impact of interest rate
changes on earnings and on the market value of its investments and borrowings.
The Company does not expect interest rate movements to significantly affect
its liquidity in the foreseeable future. For 1995 and 1994, 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 continually monitors its positions with, and the credit quality
of, the financial institutions which are counterparties to its off-balance-
sheet financial instruments, and does not anticipate failure to perform by
such institutions. The Company enters into off-balance-sheet transactions only
with financial institution counterparties which have a credit rating of single
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 single A-. With respect to certain contracts, the
Company has the right to offset amounts payable to the counterparties to the
extent of amounts receivable, further reducing the risk associated with
counterparty nonperformance.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Supplemental Data on page 31.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-15-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves three years, with the
terms of office of the respective classes expiring in successive years. The
following table sets forth information as to the persons who served as
directors of the Company during the 1995 fiscal year.
<TABLE>
<CAPTION>
Name and Year First Became
A Director of Disney Age Business Experience
-------------------------- --- -------------------
<C> <C> <S>
CLASS I DIRECTORS (ELECTED 1994)
Stephen F. Bollenbach 53 Senior Executive Vice President and
(1995) Chief Financial Officer of Disney
since May 1, 1995. Mr. Bollenbach
served as Chief Executive Officer and
President of Host Marriott
Corporation from October 1993 until
he joined Disney. From March 1992
until October 1993, he served as the
Chief Financial Officer of Marriott
Corporation. During the two years
prior to joining Marriott
Corporation, Mr. Bollenbach was the
Chief Financial Officer of The Trump
Group. He served as Senior Vice
President and Chief Financial
Officer, as well as a member of the
Board of Directors, of Holiday
Corporation/Promus Companies prior
thereto. In addition, Mr. Bollenbach
is a member of the Board of Directors
of America West Airlines, Inc.
Michael D. Eisner 53 Chairman of the Board and Chief
(1984) Executive Officer of Disney. Prior to
joining Disney in September 1984,
Mr. Eisner was President and Chief
Operating Officer of Paramount
Pictures Corp., which was then a
wholly owned subsidiary of
Gulf+Western Industries, Inc. Prior
to joining Paramount in 1976, Mr.
Eisner was Senior Vice President,
Prime Time Programming, for ABC
Entertainment, a division of the
American Broadcasting Company, Inc.,
with responsibility for the
development and supervision of all
prime-time series programming,
limited series movies made for
television and the acquisition of
talent.
Stanley P. Gold 53 For more than the past five years,
(1987) (also June 1984- Mr. Gold has served as President and
September 1984) Chief Executive Officer of Shamrock
Holdings, Inc. which, through its
subsidiaries, is engaged in real
estate development and the making of
investments. Since January 1, 1990,
Mr. Gold has been President of
Trefoil Investors, Inc., the general
partner of Trefoil Capital Investors,
L.P., an investment partnership, as
well as President of Shamrock Capital
Advisors, Inc., which acts as manager
of the partnership. Mr. Gold is also
Chairman of the Board of Directors of
L.A. Gear, Inc., a manufacturer and
distributor of athletic and casual
footwear.
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Name and Year First Became
A Director of Disney Age Business Experience
-------------------------- --- -------------------
<C> <C> <S>
Irwin E. Russell 69 Attorney engaged in private practice
(1987) specializing in the entertainment
industry. From 1989 to 1992 he served
of counsel to the law firm of Rudin,
Appel & Rosenfeld. From 1980 through
September 1986, he was senior partner
in the law firm of Russell &
Glickman. From 1971 to 1976, Mr.
Russell was Executive Vice President,
Treasurer and Director of The Wolper
Organization, Inc., a film production
company. Mr. Russell serves as an ad
hoc arbitrator for the Federal
Mediation and Conciliation Service
and the American Arbitration
Association.
Raymond L. Watson 68 Chairman of the Executive Committee
(1974) of Disney's Board of Directors since
September 1984 and served as Chairman
of the Board of Disney from May 1983
to September 1984. Since September
1986, Mr. Watson has been Vice
Chairman of the Board of The Irvine
Company, a land development company.
From 1985 to 1986, he was Regents
Professor in the Graduate School of
Management at the University of
California, Irvine. Mr. Watson is also
a member of the Boards of Directors of
Pacific Mutual Life Insurance Company;
Mitchell Energy & Development Co., a
company engaged in oil and gas
exploration, production, distribution
and land development; and Tejon Ranch
Company.
CLASS II DIRECTORS (ELECTED 1995)
Sanford M. Litvack 59 Senior Executive Vice President and
(1995) Chief of Corporate Operations of
Disney since August 1994. From April
1991 through November 1991,
Mr. Litvack served as Senior Vice
President-General Counsel of Disney.
From June 1992 through August 1994,
he served as Executive Vice
President-Law and Human Resources of
Disney. Mr. Litvack was previously a
member of the executive committee and
chairman of the litigation department
of the law firm of Dewey Ballantine,
of which he was a partner from
January 1987 until April 1991.
Richard A. Nunis 63 Chairman of Walt Disney Attractions,
(1981) a principal business of Disney
encompassing Disney's theme parks and
resorts, and a senior executive of
Disney or a subsidiary thereof for
more than the past five years. He is
also a member of the Boards of
Directors of Sun Banks, N.A. and
Florida Progress Corporation, a
diversified holding company whose
interests include an electric
utility. Mr. Nunis is a member of the
Travel and Tourism Advisory Board of
the U.S. Department of Commerce and a
director or trustee of several
educational, civic and charitable
organizations, including the
University of Central Florida.
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Name and Year First Became
A Director of Disney Age Business Experience
-------------------------- --- -------------------
<C> <C> <S>
Sidney Poitier 68 Actor, director, writer and the Chief
(1994) Executive Officer of Verdon-Cedric
Productions, a film production
company, and a member of the Boards
of Directors of SpectraVision, Inc.,
a designer and operator of closed-
circuit television movie viewing
systems, and Sarah Lawrence College.
Mr. Poitier has won many awards,
including the Academy Award for Best
Actor and the American Film
Institute's Lifetime Achievement
Award. He belongs to numerous civic
organizations, including the
Children's Defense Fund, the NAACP
League Defense and Education Fund and
the Natural Resources Defense
Council.
Robert A.M. Stern 56 Practicing architect, teacher and
(1992) writer. He is Senior Partner of
Robert A.M. Stern Architects of New
York, which he founded, and a Fellow
of the American Institute of
Architects. Mr. Stern is also a
professor at the Graduate School of
Architecture, Planning and
Preservation at Columbia University
in New York, where he is Director of
the Historic Preservation Program.
Mr. Stern was the architect of the
Yacht and Beach Club hotels and the
Casting Center at the Walt Disney
World Resort and the Newport Bay Club
and the Cheyenne Hotel at Disneyland
Paris. He is also the architect of
Disney's Boardwalk Hotel at the Walt
Disney World Resort and the Feature
Animation Building at Disney's
headquarters in Burbank, California.
E. Cardon Walker 78 Senior executive of Disney for more
(1960) than 25 years until 1984, serving as
President from 1971 to 1977 and
Chairman of the Board and Chief
Executive Officer from 1980 to 1983.
From 1984 through 1989, he provided
consulting and other services to
Disney.
CLASS III DIRECTORS (ELECTED 1993)
Reveta F. Bowers 47 Head of School for the Center for
(1993) Early Education, an independent
school for pre-school through sixth
grade located in Los Angeles, since
1976, Mrs. Bowers is a member of the
Board of Directors of several non-
profit educational organizations,
including the National Association of
Independent Schools and Educational
Records Bureau, Inc. She is also a
trustee of Harvard-Westlake School, an
independent high school located in Los
Angeles.
Roy E. Disney 65 Vice Chairman of the Board of
(June 1984) Directors of Disney since 1984, and
(1967-March 1984) since November 1985 head of Disney's
animation department. In addition,
Mr. Disney is Chairman of the Board
of Shamrock Holdings, Inc. Mr. Disney
is a nephew of the late Walt Disney.
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Name and Year First Became
A Director of Disney Age Business Experience
-------------------------- --- -------------------
<C> <C> <S>
Ignacio E. Lozano, Jr. 68 Chairman and Editor-in Chief of
(1981) Lozano Enterprises, which publishes
La Opinion, the largest Spanish-
language newspaper in the Los Angeles
metropolitan area. Mr. Lozano was
Publisher and Editor of La Opinion
from 1953 to 1986, except for the
period from 1976 through 1977 when he
was the United States Ambassador to
El Salvador. Mr. Lozano is a member of
the Boards of Directors of Bank
America Corporation, a bank holding
company; Bank of America N.T. & S.A.;
Pacific Enterprises, a holding company
with interests in a natural gas public
utility; Pacific Mutual Life Insurance
Company; and a number of public
service and charitable organizations.
George J. Mitchell 62 Special Counsel to the law firm of
(1995) Verner, Liipfert, Bernhard, McPherson
and Hand in Washington, D.C. Mr.
Mitchell served as a United States
Senator for fifteen years commencing
in 1980, the last six years of which
he was the Senate Majority Leader.
Mr. Mitchell is a member of the
Boards of Directors of UNUM
Corporation, Federal Express Corp.
and Xerox Corporation. He also serves
as a special advisor to the President
and the Secretary of State on United
States investment and trade
opportunities in Ireland.
Gary L. Wilson 55 Co-Chairman of the Board of Northwest
(1985) Airlines Corporation. From July 1985
through December 1989, he was
Executive Vice President and Chief
Financial Officer of Disney. Prior to
joining Disney, Mr. Wilson was
Executive Vice President and Chief
Financial Officer of Marriott
Corporation, a diversified company
involved in lodging, food service and
related businesses.
</TABLE>
-19-
<PAGE>
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 such 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, 1995, the executive officers were as follows:
<TABLE>
<CAPTION>
Executive
Officer
Name Age Title Since
- - --------------------- --- ---------------------------------------------------- ---------
<S> <C> <C> <C>
Michael D. Eisner 53 Chairman of the Board, Chief Executive Officer 1984
and President /1/
Roy E. Disney 65 Vice Chairman of the Board 1984
Stephen F. Bollenbach 53 Senior Executive Vice President and Chief 1995
Financial Officer
Sanford M. Litvack 59 Senior Executive Vice President and Chief of 1991
Corporate Operations
John F. Cooke 53 Executive Vice President-Corporate Affairs /2/ 1995
Lawrence P. Murphy 43 Executive Vice President and Chief Strategic Officer 1985
and Chairman of Disney Cruise Lines
John J. Garand 48 Senior Vice President-Planning and Control /3/ 1992
</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.
/2/ Mr. Cooke served as President of The Disney Channel from 1985 until
assuming his present position in February 1995.
/3/ Mr. Garand joined the Company as Vice President-Planning and Control in
1992 and was named Senior Vice President-Planning and Control in September
1995. Mr. Garand was previously Senior Vice President and Chief Financial
Officer for Morse Shoe, Inc. from April 1990 until March 1992. Prior to
that, Mr. Garand served in various positions at the corporate and
subsidiary offices of PepsiCo, Inc. from 1981 until March 1990.
ITEM 11. EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
Mr. Eisner serves the Company pursuant to an employment agreement dated as
of January 11, 1989, which provides for his employment as Chairman and Chief
Executive Officer of the Company through September 30, 1998. Mr. Eisner's base
salary is $750,000 per year through the entire term of the agreement. In
addition, his agreement provides for a nondiscretionary annual bonus equal to
2% of the amount (the "Bonus Base") by which the Company's net income for the
fiscal year exceeds the amount representing a return on stockholder's equity
of 11% (9% for 1989 and 1990). Mr. Eisner's bonuses for the first two years of
the agreement were payable in cash; thereafter, bonuses, to the extent earned,
are payable in cash to the extent the return on stockholders' equity is equal
to or less than 17.5%, and in restricted stock, as defined in the employment
agreement, to the extent of any amount over 17.5%. Mr. Eisner's employment
agreement provided for a single stock option grant (made on January 11, 1989)
with respect to 8,000,000 shares of Common Stock. Of the options granted, 25%
were granted at a exercise price $10 above the then-current fair market value
of the Common Stock, with the remaining 75% granted at a price equal to fair
market value. In the event of death or disability, Mr. Eisner's employment
agreement provides for continued payment of base salary for the remaining term
of the agreement and continued payment of annual bonuses for 24 months. Mr.
Eisner is entitled to termination payments under certain circumstances and is
indemnified up to stated limits in respect of potential tax liabilities for
certain of such payments.
-20-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Lozano, Poitier, Russell and Watson comprise the Company's
Compensation Committee. Messrs. Lozano, Poitier and Russell are nonemployee
directors. Mr. Watson was Chairman of the Board of Directors of the Company
from May 1983 to September 1984, but he has not served as a Company employee
since that time.
At its September 1995 meeting, the Board of Directors approved the payment
of $250,000 as special compensation to Mr. Russell for extraordinary services
rendered over an extended period of time in connection with his position as
Chairman of the Compensation Committee. These services related to
circumstances arising after the death of Frank G. Wells, the Company's former
President and Chief Operating Officer, in April 1994 and concluded with Mr.
Russell's key role in securing for the Company the services of Michael S.
Ovitz as President.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four most highly
compensated executive officers of the Company who served in such capacities on
September 30, 1995 (the "named executive officers") for services rendered to
the Company during each of the last three fiscal years.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------- ------------------------
Number of Restricted
Name and Principal Fiscal Stock Options Stock All Other
Positions Year Salary Bonus /3/ Granted Awards /4/ Compensation /5/
------------------ ------ -------- ---------- ------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Eisner....... 1995 $750,000 $8,024,707 -- 5,996,522 $ 6,877
Chief Executive Officer 1994 750,000 7,268,807 -- 2,638,394 9,730
and Chairman of the 1993 750,000 -- -- -- 9,667
Board
Sanford M. Litvack /1/.. 1995 $647,115 $1,600,000 -- -- $ 6,820
Senior Executive Vice 1994 500,000 1,600,000 200,000 -- 9,731
President and Chief of 1993 500,000 375,000 -- -- 9,992
Corporate Operations
John F. Cooke /2/....... 1995 $569,616 $ 550,000 335,000 -- $ 6,840
Executive Vice 1994 523,751 575,000 -- -- 7,859
President-Corporate 1993 505,770 500,000 -- -- 10,842
Affairs
Lawrence P. Murphy...... 1995 $475,769 $ 550,000 150,000 -- $ 6,828
Executive Vice 1994 436,846 800,000 -- -- 9,701
President and Chief 1993 408,558 375,000 -- -- 10,151
Strategic Officer
Roy E. Disney........... 1995 $350,000 $ 550,000 200,000 -- $ 3,820
Vice Chairman of the 1994 350,000 500,000 -- -- 6,670
Board 1993 350,000 450,000 -- -- 5,532
</TABLE>
- - --------
/1/ Mr. Litvack assumed this position in August 1994; prior to that he was
Executive Vice President- Law and Human Resources.
/2/ Mr. Cooke assumed this position in February 1995; prior to that he was
President of The Disney Channel.
/3/ Mr. Eisner's bonus was calculated pursuant to the bonus formula set forth
in his employment agreement (see "Employment Agreements" above). For Fiscal
1995, Mr. Eisner received a cash bonus of $8,024,707 and 97,445 shares of
restricted stock (valued at $5,996,522) pursuant to the formula set forth
in his employment agreement (the "Bonus Formula"). For Fiscal 1994, Mr.
Eisner received a cash bonus of $7,268,807 and 60,618 shares of restricted
stock (valued at $2,638,394) pursuant to the Bonus Formula. In accordance
with the S.E.C.'s rules, the cash and restricted stock portions of Mr.
Eisner's bonus are reported separately in, respectively, the "Bonus" and
"Restricted Stock" columns above. For Fiscal 1993, the Company did not meet
the bonus threshold set forth in Mr. Eisner's employment agreement and he
accordingly did not receive a bonus for that fiscal year.
-21-
<PAGE>
/4/ Mr. Eisner received 97,445 shares of restricted stock for part of his Fiscal
1995 bonus and 60,618 shares of restricted stock for part of his Fiscal 1994
bonus pursuant to the Bonus Formula (see "Employment Agreements" above).
Pursuant to Mr. Eisner's employment agreement, the restricted stock value is
based upon the average closing price for the Company's Common Stock between:
(i) December 1 and December 14, 1995 ($61.538 per share) for the restricted
stock awarded as part of Mr. Eisner's Fiscal 1995 bonus and (ii) November 28
and December 9, 1994 ($43.525 per share) for the restricted stock awarded as
part of Mr. Eisner's Fiscal 1994 bonus. Mr. Eisner is entitled to receive
dividends on the restricted stock, and all restrictions will lapse on the
third anniversary following the date of grant, or earlier in the event of
death or certain corporate transactions that eliminate or materially impair
the market for the Company's Common Stock.
/5/ The Company provides the named executive officers with certain group life,
health, medical and other non-cash benefits generally available to all
salaried employees and not included in this column pursuant to the S.E.C.'s
rules. The amounts shown in this column include the following:
(a) The Disney Salaried Savings and Investment Plan (the "Savings Plan")
currently permits salaried employees of the Company to elect to make
tax-deferred contributions of a portion of their base compensation.
Amounts deferred through payroll deductions are contributed by the
Company on behalf of a participant as tax-deferred contributions
pursuant to Section 401(k) of the Internal Revenue Code. Under the
Savings Plan, the Company currently matches a participant's first 4% of
tax-deferred contributions by an amount equal to 50% of such
contribution for each year, subject to a maximum of 2% of the
participant's compensation for that year. Participants may allocate
their contributions among six investment funds, including a fund
investing in the Company's Common Stock. All Company matching
contributions are invested in Common Stock of the Company. During
Fiscal 1995, the Company's matching contributions were $3,057 for Mr.
Eisner, $3,000 for Mr. Litvack, $3,020 for Mr. Cooke, $3,008 for Mr.
Murphy and $0 for Mr. Disney, who did not participate in the Plan. The
Company's matching contributions were $3,014 during Fiscal 1994 and
$4,497 during Fiscal 1993 for Mr. Cooke.
(b) The Company provides certain key employees with personal liability
insurance coverage up to $5,000,000. Benefits under the plan supplement
each employee's personal homeowner's and automobile liability insurance
coverage. During Fiscal 1995, the Company paid $520 in premiums on
behalf of each of the named executive officers. The Company paid
premiums of $195 during each of Fiscal 1994 and Fiscal 1993 for Mr.
Cooke.
(c) The Supplemental Medical Plan is a fully insured hospital and medical
expense reimbursement plan covering certain key management employees
and their dependents. The plan provides coverage for 100% of medical
expenses incurred (with certain limited exceptions) up to 20% of the
employee's annual salary in any one year, provided that the expenses
are not covered by the Company's Major Medical Plan, which is available
to all salaried employees of the Company. The Company pays the full
cost of premiums for the Supplemental Medical Plan, as well as premiums
for additional voluntary insurance under the Company's group life
insurance plan. During Fiscal 1995, premiums of $3,300 were paid on
behalf of each of the named executive officers. The Company paid
premiums of $4,650 during Fiscal 1994 and $6,150 during Fiscal 1993 for
Mr. Cooke.
-22-
<PAGE>
OPTION GRANTS FOR FISCAL 1995 AND POTENTIAL REALIZABLE VALUES
The following table sets forth as to each of the named executive officers
information with respect to option grants during Fiscal 1995 and the potential
realizable value of such option grants: (i) the number of shares of Common
Stock underlying options granted during Fiscal 1995, (ii) the percentage that
such options represent of all options granted to employees during Fiscal 1995,
(iii) the exercise price, (iv) the expiration date and (v) the potential
realizable value, assuming a 5% and 10% annual rate of appreciation in the
Common Stock during the option terms. The table also sets forth a hypothetical
potential realizable value during a corresponding 10-year term, assuming a 5%
and 10% annual rate of appreciation, for all stockholders. The 5% and 10%
assumed rates of growth are for illustrative purposes only. They are not
intended to predict future stock prices, which will depend on market
conditions and other factors such as the Company's performance.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
Stock Price Appreciation
Individual Grants for Option Term /3/
--------------------------------------------- -------------------------------
% of Total
Options
Number of Granted to Exercise
Options Employees in Price Expiration
Name Granted /2/ Fiscal Year ($/Share) Date 5% 10%
---- ----------- ------------ --------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Eisner....... -- -- -- -- -- --
Sanford M. Litvack...... -- -- -- -- -- --
John F. Cooke........... 335,000 3.55% $52.75 2/21/2005 $ 11,113,354 $ 28,163,421
Lawrence P. Murphy...... 150,000 1.59% 55.25 4/24/2005 5,211,964 13,208,141
Roy E. Disney........... 200,000 2.12% 46.56 1/23/2005 5,856,518 14,841,567
All Stockholders /1/ N/A N/A N/A N/A 18,964,874,599 48,060,710,689
</TABLE>
- - --------
/1/ The potential realizable gain to stockholders (based on 524,450,134 shares
outstanding and a fair market value of $57.50 per share on September 29,
1995 and 5% and 10% assumed annual rates over a term of ten years,
commencing on October 1, 1995), is provided as a comparison to the
potential gain realized by the named executive officers at the same assumed
annual rates of stock appreciation.
/2/ Mr. Cooke's options become exercisable in 9% installments on the first and
second anniversary following the date of grant, 21% installments on the
third through fifth anniversaries, and a 19% installment on the sixth
anniversary of grant. Mr. Disney's options become exercisable in five
installments of 20% on each of the first through fifth anniversaries
following the date of grant. Mr. Murphy's options become exercisable in 50%
installments on each of the fourth and fifth anniversaries following the
date of grant.
/3/ Amounts for the named executive officers shown under the "Potential
Realizable Value" columns above have been calculated by multiplying the
exercise price by the annual appreciation rate shown (compounded for the
term of the options), subtracting the exercise price per share and
multiplying the gain per share by the number of shares covered by the
options.
OPTION EXERCISES AND VALUES FOR FISCAL 1995
The following table sets forth as to each of the named executive officers
information with respect to option exercises during Fiscal 1995 and the status
of their options on September 30, 1995: (i) the number of shares of Common
Stock underlying options exercised during Fiscal 1995, (ii) the aggregate
dollar value realized upon the exercise of such options, (iii) the total
number of exercisable and unexercisable stock options held on September 30,
1995 and (iv) the aggregate dollar value of in-the-money exercisable and
unexercisable options on September 30, 1995.
-23-
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Number of Value of Unexercised
Acquired Unexercised Options In-the-Money Options
Upon 9/30/95 9/30/95 /1/
Exercise of Value Upon ------------------------- --------------------------
Name Option Exercise Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Eisner....... -- -- 6,000,000 2,000,000 $238,410,000 $79,470,000
Sanford M. Litvack...... -- -- 345,000 355,000 9,660,785 8,270,715
John F. Cooke........... 40,000 $1,480,005 -- 415,000 -- 4,795,010
Lawrence P. Murphy -- -- 272,000 330,000 9,189,824 5,925,960
Roy E. Disney........... -- -- 160,000 200,000 5,490,080 2,187,600
</TABLE>
- - --------
/1/ In accordance with the S.E.C.'s rules, values are calculated by subtracting
the exercise price from the fair market value of the underlying Common
Stock. For purposes of this table, fair market value is deemed to be
$57.50, the average of the high and low Common Stock price reported for the
New York Stock Exchange Composite Transactions on September 29, 1995.
RETIREMENT PLANS
The Company maintains a tax-qualified, noncontributory retirement plan for
salaried employees called the Disney Salaried Retirement Plan (the "Retirement
Plan"). Certain provisions of the Retirement Plan become effective if there is
a change in control of the Company (as defined in the Retirement Plan
document). These provisions prevent any assets of the Retirement Plan from
reverting to the Company and any transfers of assets or liabilities to or from
the Retirement Plan, and prevent any amendments to the Retirement Plan. In
addition, the Company maintains a nonqualified, unfunded plan, the Amended and
Restated Key Plan (the "Restated Key Plan"), which provides retirement
benefits for key salaried employees.
The table set forth below illustrates the total combined estimated annual
benefits payable under the Retirement Plan and the Restated Key Plan to
eligible salaried employees for years of service assuming normal retirement at
age 65.
<TABLE>
<CAPTION>
Average
Annual Base
Compensation Years of Service
for Highest Five --------------------------------------------
Consecutive Years 15 20 25 30 35
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 45,444 $ 60,621 $ 75,906 $ 91,050 $104,925
300,000 88,757 118,371 148,094 177,675 205,988
450,000 132,069 176,121 220,281 264,300 307,050
600,000 175,382 233,871 292,469 350,925 408,113
750,000 218,694 291,621 364,656 437,550 509,175
1,000,000 290,882 387,871 484,969 581,925 677,613
</TABLE>
The Retirement Plan covers salaried employees who have completed one year of
service. Benefits under the Retirement Plan are based primarily on the
participant's credited years of service and average base compensation (base
compensation excludes other compensation such as bonuses) for the highest five
consecutive years of compensation during the ten-year period prior to
termination or retirement, whichever is earlier. In addition, a portion of
each participant's retirement benefit is comprised of a flat dollar amount
based solely on years and hours of credited service. Benefits are non-
forfeitable after five years of vesting service, and actuarially reduced
benefits are available for participants who retire on or after age 55 after
five years of vesting service. The Restated Key Plan provides retirement
benefits for key salaried employees in excess of maximum benefit accruals for
qualified plans permitted under Code procedures. In calendar year 1995, the
maximum annual benefit accruable under a tax-qualified plan was $120,000. The
benefits provided under the Restated Key Plan are provided by the Company on a
noncontributory basis.
-24-
<PAGE>
As of December 1, 1995, the estimated annual payments for services under the
Retirement Plan and the Restated Key Plan would be based upon an average
compensation of $750,000 for Mr. Eisner, $540,599 for Mr. Litvack, $496,281
for Mr. Cooke, $417,081 for Mr. Murphy and $350,000 for Mr. Disney. Messrs.
Eisner, Cooke and Disney each have eleven years, Mr. Litvack has five years
and Mr. Murphy has ten years of credited service for the plans. The table set
forth above illustrates estimated benefits payable determined on a straight-
life annuity basis. There is no offset in benefits under either plan for
Social Security benefits.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
each person known to the Company to own more than 5% of the outstanding Common
Stock as of December 1, 1995.
<TABLE>
<CAPTION>
Shares Percent
Name and Address Beneficially of
of Beneficial Owner Owned Class
------------------- ------------ -------
<S> <C> <C>
Bass Management Trust /1/............................ 31,125,578 5.93%
2700 First City Bank Tower
201 Main Street
Fort Worth, Texas 76102
</TABLE>
- - --------
/1/ According to a Schedule 13D, amended through January 28, 1992, filed on
behalf of the Bass Management Trust (the "Trust"), Mr. Perry R. Bass may
also be deemed a beneficial owner of the shares held by the Trust by virtue
of his authority as Trustee and a trustor of the Trust, and Nancy L. Bass
may also be deemed a beneficial owner of such shares as a trustor of the
Trust.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of December 1, 1995 by each director of the Company,
each of the executive officers named in the Summary Compensation Table
included elsewhere herein and the current directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
Sole Shared Voting
Voting and and/or Acquirable
Investment Investment Within 60 Percent of
Name Power /1/ Power /2/ Days /3/ Common Stock /4/
---- ---------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Reveta F. Bowers.......... -- -- -- --
John F. Cooke............. -- 1,430 -- *
Roy E. Disney /5/......... 5,674,600 2,179,444 200,000 1.53
Michael D. Eisner......... 2,852,640 99,219 6,000,000 1.71
Stanley P. Gold........... 1,000 1,936 -- *
Sanford M. Litvack........ -- 607 345,000 *
Ignacio E. Lozano, Jr. ... 5,148 440 -- *
George J. Mitchell........ 500 -- -- *
Lawrence P. Murphy........ 20,272 1,070 272,000 *
Richard A. Nunis.......... 70,122 35,160 420,000 *
Sidney Poitier............ -- -- -- --
Irwin E. Russell.......... 4,000 -- -- *
Robert A.M. Stern......... 140 -- -- *
E. Cardon Walker.......... -- 162,943 -- *
Raymond L. Watson......... -- 17,040 -- *
Gary L. Wilson............ -- -- -- --
All current directors and
executive officers as a
group (19 persons,
including the foregoing). 8,781,162 2,700,305 7,256,000 3.57
</TABLE>
- - --------
* Represents less than 1% of the Company's outstanding Common Stock.
-25-
<PAGE>
/1/ Certain of the directors and executive officers included in the table
disclaim beneficial ownership of some of these shares as follows: Mr.
Eisner--53,600 shares held by Mr. Eisner's wife directly and as custodian
for their children, 36,000 shares held in trust for the benefit of their
children and 1,600 shares held in a family trust; Mr. Disney--2,179,444
shares (see footnote (5) below); Mr. Gold--1,520 shares held by Mr. Gold's
wife and children and 416 shares held by Shamrock Holdings, Inc., of which
he is an officer and director; Mr. Lozano--440 shares that he holds as
custodian for the benefit of his child; Mr. Nunis--3,547 shares held by a
trust of which Mr. Nunis is trustee for the benefit of his son; and all
current directors and executive officers as a group--2,276,151 shares.
/2/ Includes interests in shares held for the benefit of the following
individuals and for all current directors and executive officers as a group
in the Disney Salaried Savings and Investment Plan as of December 1, 1995,
with respect to which such persons have sole voting power but no investment
rights: Mr. Eisner--8,019 shares; Mr. Litvack--607 shares; Mr. Murphy--
1,070 shares; Mr. Cooke--1,430 shares; Mr. Nunis--9,555 shares; and all
current directors and executive officers as a group--20,877 shares.
/3/ Reflects the number of shares that could be purchased by exercise of
options available as of December 1, 1995 or within 60 days thereafter under
the Company's stock option or stock incentive plans.
/4/ Based on the number of shares outstanding at, or acquirable within 60 days
of, December 1, 1995.
/5/ The shares listed in the table for Mr. Disney include 2,179,444 shares as to
which Mr. Disney disclaims beneficial ownership, consisting of 1,507,520
shares owned by Mr. Disney's wife; 256,320 shares held in trusts for the
benefit of his four children, of which Mr. Disney is the trustee; 33,332
shares held in trust for the benefit of one of his children, of which Mr.
Disney is the trustee; and 416 shares owned by a subsidiary of Shamrock
Holdings, Inc., of which both Mr. Disney and his wife are officers and
directors and the shares of which are held by Mr. Disney, his wife, certain
of his children, trusts for the benefit of his children and custodial
accounts for the benefit of certain of his children and grandchildren.
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
executive officers and directors to file initial reports of ownership and
reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of all Section 16(a) forms that
they file. Based upon a review of these filings and written representations
from certain of the Company's directors and executive officers that no other
reports were required, the Company notes that Robert A.M. Stern inadvertently
failed to report the gift of 10 shares on December 17, 1994; Gary L. Wilson
inadvertently failed to report the sale of 1,072 shares held in a retirement
account on July 5, 1995; and John F. Cooke, an executive officer of the
Company, inadvertently filed a late initial report of ownership. Messrs. Stern
and Wilson subsequently reported each transaction.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During Fiscal 1995, E. Cardon Walker received payments totaling $565,359
with respect to films in which he had invested between 1963 and 1979 under a
former investment participation incentive program of the Company, but as to
which he had not yet recovered the amount of such investment, and $17,066 as
his net profit participation in prior years' programs.
During Fiscal 1995, a subsidiary of the Company retained the firm of Robert
A.M. Stern Architects, of which Mr. Stern is Senior Partner, for architectural
services relating to resort and office developments in California and Florida.
Payments to Mr. Stern's firm for these services aggregated approximately
$201,363 during Fiscal 1995.
During Fiscal 1995, a subsidiary of the Company retained Impact Design,
Inc., of which Barbera Hale Thornhill is principal, to perform interior design
services for the Disney Vacation Club at Newport Coast development. Ms.
Thornhill is the wife of Gary L. Wilson. Payments to Impact Design, Inc.
totaled approximately $121,122 during Fiscal 1995.
-26-
<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 31.
(2)Exhibits
3(a) Restated Certificate of Incorporation of the Company, filed as
Exhibit 3(a) to the Company's Annual Report on Form 10-K for the
year ended September 30, 1992, is hereby incorporated by
reference.
3(b) Bylaws of the Company, as amended, filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the year ended September
30, 1994, are hereby incorporated by reference.
4(a) Rights Agreement, dated as of June 21, 1989, between the Company
and Security Pacific National Bank, as Rights Agent (including
the form of Certificate of Designation of the Series R Preferred
Stock attached as Exhibit A thereto and the form of Rights
Certificate attached as Exhibit B thereto), filed as Exhibit 1 to
the Company's Current Report on Form 8-K, dated June 21, 1989, is
hereby incorporated by reference.
4(b) Indenture, dated as of November 30, 1990, between the Company 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(c) Second Amended and Restated Credit Agreement, dated as of April
12, 1995, among the Company, Citicorp USA, Inc., as Agent, and
certain financial institutions, filed as Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995, is hereby incorporated by reference.
4(d) 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 of the Company,
dated March 24, 1987, filed as Exhibits 10(b) and 10(a),
respectively, to the Company's Current Report on Form 8-K filed
April 24, 1987, are hereby incorporated by reference.
10(b) Limited Recourse Financing Facility Agreement, dated as of April
27, 1988, among the Company, Citibank Channel Island Limited and
Citicorp International, filed as Exhibit (10a) to the Company's
Current Report on Form 8-K filed April 29, 1988, is hereby
incorporated by reference.
10(c) (i) Employment Agreement, dated as of January 10, 1989, between
the Company and Michael D. Eisner, filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1989; (ii) Agreement, dated March 1, 1985, between the
Company and Michael D. Eisner, filed as Exhibit 2 to the
Company'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
the Company's Annual Report on Form 10-K for the year ended
September 30, 1990, are hereby incorporated by reference.
10(d) Restricted Stock Agreement, dated May 5, 1995, between the
Corporation and Stephen F. Bollenbach is filed herewith.
10(e) Employment Agreement, dated October 1, 1995, between the Company
andMichael S. Ovitz is filed herewith.
-27-
<PAGE>
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 the Company and to acquire an additional 2% profit
participation; and (ii) Amendment thereto, dated August 8, 1980,
filed as Exhibits 1 and 3, respectively, to the Company'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 the Company as
determined from time to time by the Board of Directors, included
as Annex C to the Proxy Statement for the Company'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 Company's Proxy Statement, dated December 29,
1994, with respect to its 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 the Company'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, filed as
Appendix B-2 to the Company's Joint Proxy Statement and
Prospectus, dated November 13, 1995, are hereby incorporated by
reference.
10(j) 1995 Stock Incentive Plan and Rules, filed as Appendix B-1 to the
Company's Joint Proxy Statement and Prospectus, dated November
13, 1995, 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 the Company'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 the Company's 1984 Stock
Incentive Plan, filed as Exhibit 10(t) to the Company's Annual
Report on Form 10-K for the year ended September 30, 1986, are
hereby incorporated by reference.
10(m) 1996 Cash Bonus Performance Plan is filed herewith.
10(n) Disney Salaried Retirement Plan, as amended through March 1,
1994, filed as Exhibit 10(l) to the Company's Annual Report on
Form 10-K for the year endedSeptember 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 the Company'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 the Company's Annual Report on Form 10-K for
the year ended September 30, 1985, is hereby incorporated by
reference.
10(q) Group Personal Excess Liability Insurance Plan (summary plan
description), filed as Exhibit 10(z) to the Company'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, is filed herewith.
10(t) Disney Salaried Savings and Investment Plan Trust Agreement,
dated June 30, 1992, filed as Exhibit 10 to the Company'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 the
Company and Bankers Trust Company, as Trustee, filed as Exhibit
28(b) to the Company's Registration Statement on Form S-8 (No.
33-35405), filed June 14, 1990, is hereby incorporated by
reference.
-28-
<PAGE>
10(v) Amended and Restated Agreement and Plan of Reorganization, dated
as of July 31, 1995, between the Company and Capital Cities/ABC,
Inc., filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K, dated October 6, 1995, is hereby incorporated by
reference.
18 Letter from the Company's independent accountants, dated August
9, 1993, regarding preferability of the change in accounting
method for project-related pre-opening costs, filed as Exhibit 1
to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1993, is hereby incorporated by reference.
21 Subsidiaries of The Walt Disney Company is filed herewith.
23 Consent of Price Waterhouse LLP, the Company's independent
accountants, is included herein at page 32.
27 Financial Data Schedule (filed electronically only).
28 Financial statements with respect to the Disney Salaried Savings
and Investment Plan for the year ended December 31, 1994, filed
as Exhibit 28 to the Annual Report on Form 10-K for the year
ended September 30, 1994, as amended by Amendment No. 1 on Form
10-K/A dated June 30, 1995, are hereby incorporated by reference.
(b) Reports on Form 8-K
(1) The Company filed a Current Report on Form 8-K, dated July 31, 1995,
with respect to the execution of an Agreement and Plan of
Reorganization, and certain other related agreements, by the Company
and Capital Cities/ABC, Inc.
(2) The Company filed a Current Report on Form 8-K, dated October 6, 1995,
with respect to the execution of an Amended and Restated Agreement and
Plan of Reorganization between the Company and Capital Cities/ABC, Inc.
-29-
<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, 1995 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
- - ----------------------------- Chief Executive Officer December 19, 1995
(Michael D. Eisner)
Principal Financial and
Accounting Officers
STEPHEN F. BOLLENBACH Senior Executive Vice
- - ----------------------------- President and Chief
(Stephen F. Bollenbach) Financial Officer December 19, 1995
JOHN J. GARAND Senior Vice President -
- - ----------------------------- Planning and Control December 19, 1995
(John J. Garand)
Directors
STEPHEN F. BOLLENBACH Director December 19, 1995
- - -----------------------------
(Stephen F. Bollenbach)
REVETA F. BOWERS Director December 19, 1995
- - -----------------------------
(Reveta F. Bowers)
ROY E. DISNEY Director December 19, 1995
- - -----------------------------
(Roy E. Disney)
MICHAEL D. EISNER Director December 19, 1995
- - -----------------------------
(Michael D. Eisner)
STANLEY P. GOLD Director December 19, 1995
- - -----------------------------
(Stanley P. Gold)
SANFORD M. LITVACK Director December 19, 1995
- - -----------------------------
(Sanford M. Litvack)
IGNACIO E. LOZANO, JR. Director December 19, 1995
- - -----------------------------
(Ignacio E. Lozano, Jr.)
GEORGE J. MITCHELL Director December 19, 1995
- - -----------------------------
(George J. Mitchell)
RICHARD A. NUNIS Director December 19, 1995
- - -----------------------------
(Richard A. Nunis)
SIDNEY POITIER Director December 19, 1995
- - -----------------------------
(Sidney Poitier)
IRWIN E. RUSSELL Director December 19, 1995
- - -----------------------------
(Irwin E. Russell)
ROBERT A.M. STERN Director December 19, 1995
- - -----------------------------
(Robert A.M. Stern)
E. CARDON WALKER Director December 19, 1995
- - -----------------------------
(E. Cardon Walker)
RAYMOND L. WATSON Director December 19, 1995
- - -----------------------------
(Raymond L. Watson)
GARY L. WILSON Director December 19, 1995
- - -----------------------------
(Gary L. Wilson)
</TABLE>
-30-
<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.. 32
Consolidated Financial Statements of The Walt Disney Company and
Subsidiaries
Consolidated Statement of Income for the Years Ended September 30, 1995,
1994 and 1993.......................................................... 33
Consolidated Balance Sheet as of September 30, 1995 and 1994............ 34
Consolidated Statement of Cash Flows for the Years Ended September 30,
1995, 1994 and 1993.................................................... 35
Notes to Consolidated Financial Statements.............................. 36
Quarterly Financial Summary............................................. 52
</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.
-31-
<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, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1995,
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 Notes 1, 7, 8, and 12 to the consolidated financial
statements, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and SFAS No. 109, "Accounting for Income Taxes," and changed its method of
accounting for pre-opening costs in fiscal 1993.
PRICE WATERHOUSE LLP
Los Angeles, California
November 27, 1995
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 27, 1995 which appears above.
PRICE WATERHOUSE LLP
Los Angeles, California
December 19, 1995
-32-
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
<TABLE>
<CAPTION>
Year ended September 30 1995 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Filmed entertainment $ 6,001.5 $ 4,793.3 $3,673.4
Theme parks and resorts 3,959.8 3,463.6 3,440.7
Consumer products 2,150.8 1,798.2 1,415.1
--------- --------- --------
12,112.1 10,055.1 8,529.2
--------- --------- --------
Costs and Expenses
Filmed entertainment 4,927.1 3,937.2 3,051.2
Theme parks and resorts 3,099.0 2,779.5 2,693.8
Consumer products 1,640.3 1,372.7 1,059.7
--------- --------- --------
9,666.4 8,089.4 6,804.7
--------- --------- --------
Operating Income
Filmed entertainment 1,074.4 856.1 622.2
Theme parks and resorts 860.8 684.1 746.9
Consumer products 510.5 425.5 355.4
--------- --------- --------
2,445.7 1,965.7 1,724.5
--------- --------- --------
Corporate Activities
General and administrative expenses 183.6 162.2 164.2
Interest expense 178.3 119.9 157.7
Investment and interest income (68.0) (129.9) (186.1)
--------- --------- --------
293.9 152.2 135.8
--------- --------- --------
Loss from Investment in Euro Disney (35.1) (110.4) (514.7)
--------- --------- --------
Income Before Income Taxes and Cumulative
Effect of Accounting Changes 2,116.7 1,703.1 1,074.0
Income taxes 736.6 592.7 402.7
--------- --------- --------
Income Before Cumulative Effect of Accounting
Changes 1,380.1 1,110.4 671.3
Cumulative Effect of Accounting Changes
Pre-opening costs -- -- (271.2)
Postretirement benefits -- -- (130.3)
Income taxes -- -- 30.0
--------- --------- --------
Net Income $ 1,380.1 $ 1,110.4 $ 299.8
========= ========= ========
Amounts Per Common Share
Earnings Before Cumulative Effect of Account-
ing Changes $ 2.60 $ 2.04 $ 1.23
Cumulative Effect of Accounting Changes
Pre-opening costs -- -- (.50)
Postretirement benefits -- -- (.24)
Income taxes -- -- .06
--------- --------- --------
Earnings Per Share $ 2.60 $ 2.04 $ .55
========= ========= ========
Average Number of Common and Common Equivalent
Shares Outstanding 530.4 545.2 544.5
========= ========= ========
Pro Forma Amounts Assuming the New Accounting
Method for Pre-opening Costs is Applied
Retroactively
Net Income $ 571.0
========
Earnings Per Share $ 1.05
========
</TABLE>
See Notes to Consolidated Financial Statements
-33-
<PAGE>
CONSOLIDATED BALANCE SHEET
(In millions)
<TABLE>
<CAPTION>
September 30 1995 1994
- - ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,076.5 $ 186.9
Investments 866.3 1,323.2
Receivables 1,792.8 1,670.5
Merchandise inventories 824.0 668.3
Film and television costs 2,099.4 1,596.2
Theme parks, resorts and other property, at cost
Attractions, buildings and equipment 8,339.9 7,450.4
Accumulated depreciation (3,038.5) (2,627.1)
--------- ---------
5,301.4 4,823.3
Projects in progress 778.4 879.1
Land 110.5 112.1
--------- ---------
6,190.3 5,814.5
Investment in Euro Disney 532.9 629.9
Other assets 1,223.6 936.8
--------- ---------
$14,605.8 $12,826.3
========= =========
Liabilities and Stockholders' Equity
Accounts payable and other accrued liabilities $ 2,842.5 $ 2,474.8
Income taxes payable 200.2 267.4
Borrowings 2,984.3 2,936.9
Unearned royalty and other advances 860.7 699.9
Deferred income taxes 1,067.3 939.0
Stockholders' equity
Preferred stock, $.10 par value
Authorized--100.0 million shares
Issued--none
Common stock, $.025 par value
Authorized--1.2 billion shares
Issued--575.4 million shares and 567.0 million shares 1,226.3 945.3
Retained earnings 6,990.4 5,790.3
Cumulative translation and other adjustments 37.3 59.1
--------- ---------
8,254.0 6,794.7
Less treasury stock, at cost--51.0 million shares and
42.9 million shares 1,603.2 1,286.4
--------- ---------
6,650.8 5,508.3
--------- ---------
$14,605.8 $12,826.3
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-34-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Year ended September 30 1995 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided by Operations Before Income
Taxes $ 4,067.5 $ 3,127.7 $ 2,453.9
Income taxes paid (557.4) (320.4) (308.7)
--------- --------- ---------
3,510.1 2,807.3 2,145.2
--------- --------- ---------
Investing Activities
Film and television costs (1,886.0) (1,433.9) (1,264.6)
Investments in theme parks, resorts and other
property (896.5) (1,026.1) (813.9)
Euro Disney investment 144.8 (971.1) (140.1)
Purchases of investments (1,033.2) (952.7) (1,313.5)
Proceeds from sales of investments 1,460.3 1,494.1 841.0
Other (77.8) 3.0 31.4
--------- --------- ---------
(2,288.4) (2,886.7) (2,659.7)
--------- --------- ---------
Financing Activities
Borrowings 786.1 1,866.4 1,256.0
Reduction of borrowings (771.9) (1,315.3) (1,119.2)
Repurchases of common stock (348.7) (570.7) (31.6)
Dividends (180.0) (153.2) (128.6)
Other 182.4 76.1 136.1
--------- --------- ---------
(332.1) (96.7) 112.7
--------- --------- ---------
Increase (Decrease) in Cash and Cash
Equivalents 889.6 (176.1) (401.8)
Cash and Cash Equivalents, Beginning of Year 186.9 363.0 764.8
--------- --------- ---------
Cash and Cash Equivalents, End of Year $ 1,076.5 $ 186.9 $ 363.0
========= ========= =========
The difference between Income Before Income Taxes and Cumulative Effect of
Accounting Changes as shown on the Consolidated Statement of Income and Cash
Provided By Operations Before Income Taxes is detailed as follows.
Income Before Income Taxes and Cumulative
Effect of Accounting Changes $ 2,116.7 $ 1,703.1 $ 1,074.0
--------- --------- ---------
Cumulative Effect of Accounting Changes -- -- (514.2)
Charges to Income Not Requiring Cash Outlays
Depreciation 470.2 409.7 364.2
Amortization of film and television costs 1,382.8 1,198.6 664.2
Euro Disney 35.1 110.4 350.0
Other 98.1 121.1 163.5
Changes in
Investments in trading securities 1.2 -- --
Receivables (122.3) (280.2) (211.0)
Merchandise inventories (155.7) (59.4) (146.1)
Other assets (287.7) (81.5) 197.0
Accounts payable and other accrued
liabilities 368.3 146.7 544.4
Unearned royalty and other advances 160.8 (140.8) (32.1)
--------- --------- ---------
1,950.8 1,424.6 1,379.9
--------- --------- ---------
Cash Provided by Operations Before Income
Taxes $ 4,067.5 $ 3,127.7 $ 2,453.9
========= ========= =========
Supplemental Cash Flow Information:
Interest paid $ 122.8 $ 99.3 $ 77.3
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-35-
<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 company with operations or
investments in the following businesses.
FILMED ENTERTAINMENT
The Company produces and acquires live-action and animated motion pictures
for distribution to the theatrical, television and home video 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 provides programming for and operates The
Disney Channel, a pay television programming service, and a Los Angeles,
California television station.
THEME PARKS AND RESORTS
The Company operates the Walt Disney World(R) destination resort in Florida
and the Disneyland Park(R) and the Disneyland Hotel in California. The Walt
Disney World destination 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 theme park near Tokyo, Japan, which is owned and operated by an
unrelated Japanese corporation. The Company's Disney Design and Development
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.
CONSUMER PRODUCTS
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 through the
Disney Stores and consumer catalogs, and is a publisher of books, magazines
and comics in the United States and Europe. In addition, the Company produces
audio products for all markets, as well as film and video products for the
educational marketplace.
INVESTMENT IN EURO DISNEY
The Company is an equity investor in Euro Disney S.C.A. ("Euro Disney"), the
operator of the Disneyland Paris Resort (see Note 3).
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 affiliated companies are accounted
for using the equity method.
Accounting Changes
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 115 Accounting for Certain Investments in Debt
and Equity Securities (see Note 14), the impact of which was not material.
Effective October 1, 1992, the Company adopted SFAS 106 Employers' Accounting
for Postretirement Benefits Other Than Pensions (see Note 8) and SFAS 109
Accounting for Income Taxes (see Note 7) and changed its method of accounting
for pre-opening costs (see Note 12). These changes had no cash impact.
The pro forma amounts presented in the consolidated statement of income
reflect the effect of retroactive application of expensing pre-opening costs.
-36-
<PAGE>
Revenue Recognition
Revenues from the theatrical distribution of motion pictures are recognized
when motion pictures are exhibited. Television licensing revenues are recorded
when the program material is available for telecasting by the licensee and
when certain other conditions are met. Revenues from video sales are
recognized on the date that video units are made widely available for sale by
retailers.
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.
SFAS 115, adopted in 1995, requires that certain investments in debt and
equity securities be 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. Prior to 1995, debt securities were
carried at cost, adjusted for unamortized premium or discount. Marketable
equity securities were carried at the lower of aggregate cost or market.
Realized gains and losses were determined on an average cost basis.
Merchandise 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 are reviewed periodically and amortization is adjusted
accordingly.
Television broadcast rights are amortized principally on an accelerated
basis over the estimated useful lives of the programs.
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.
Other Assets
Rights to the name, likeness and portrait of Walt Disney, goodwill and other
intangible assets are amortized over periods ranging from two to forty years.
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 original term of the swaps. Gains and
losses arising from interest rate futures, forwards 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.
-37-
<PAGE>
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.
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 1994 and 1993 financial
statements to conform to the 1995 presentation.
2 Proposed Acquisition
In July 1995, the Company and Capital Cities/ABC, Inc. ("Cap Cities")
entered into a reorganization agreement, pursuant to which the Company expects
to acquire Cap Cities in a transaction that will be accounted for as a
purchase. The transaction has been approved by the Board of Directors of each
company, and is subject to regulatory review and approval by each company's
stockholders. Pursuant to the reorganization agreement, stockholders of Cap
Cities will have the right to receive one share of common stock and $65 in
cash, or the equivalent value in common stock or in cash, subject to certain
limitations, for each of their shares. The acquisition cost is estimated to be
$19 billion based upon the Company's common stock price as of the date the
transaction was announced. The transaction is expected to be completed in
early 1996.
Cap Cities, directly or through its subsidiaries, operates the ABC
Television Network, ten television stations, the ABC Radio Networks and 21
radio stations, and provides programming for cable television. Through joint
ventures, Cap Cities is also engaged in international broadcast/cable services
and television production and distribution. Cap Cities also publishes daily
and weekly newspapers, shopping guides, various specialized and business
periodicals and books, provides research services, and distributes information
from databases.
The Company's consolidated results of operations will incorporate Cap Cities
activity commencing upon the acquisition date. The unaudited pro forma
combined information below presents combined results of operations as if the
acquisition had occurred October 1, 1994 and balance sheet information as if
the acquisition had occurred as of September 30, 1995. The unaudited pro forma
combined information, based upon the historical consolidated financial
statements of the Company and Cap Cities, assumes an acquisition cost of
approximately $19 billion, and further assumes that an estimated $16 billion
excess of acquisition cost over the net tangible book value of Cap Cities'
assets is allocated to intangible assets with a useful life of 40 years. In
addition, since the exact amounts of cash and/or shares of common stock
issuable to Cap Cities stockholders are dependent upon certain elections to be
made by Cap Cities stockholders and other conditions as defined in the
reorganization agreement, two alternative scenarios of unaudited pro forma
combined financial information are presented, which give effect to the range
of possible amounts of common stock and/or cash to be received by Cap Cities
stockholders upon consummation of the acquisition. Scenario 1 assumes that all
Cap Cities stockholders receive one share of common stock and $65 in cash for
each outstanding share of Cap Cities common stock, reflecting the maximum
number of shares of common stock which could be issued in connection with the
acquisition. Scenario 2 assumes that all Cap Cities stockholders receive
solely cash for each outstanding share of Cap Cities common stock.
-38-
<PAGE>
The unaudited pro forma combined information is not necessarily indicative
of the results of operations of the combined company had the acquisition
occurred October 1, 1994, or financial position had the acquisition occurred
on September 30, 1995, nor is it necessarily indicative of future results or
financial position.
<TABLE>
<CAPTION>
SCENARIO 1 Scenario 2
Statement of Income YEAR ENDED Year ended
Data SEPT. 30, 1995 Sept. 30, 1995
--------------------------------------------------------
<S> <C> <C>
Revenues $18,908.4 $18,908.4
Net income 1,368.5 987.7
Earnings per share (1) 2.00 1.86
<CAPTION>
Balance Sheet Data SEPT. 30, 1995 Sept. 30, 1995
--------------------------------------------------------
<S> <C> <C>
Total assets $33,538.6 $33,538.6
Borrowings 11,588.4 21,192.1
Stockholders' equity 15,478.1 5,874.5
</TABLE>
--------
(1) Earnings per share excluding amortization of intangible
assets would be $2.60 and $2.64 under scenarios 1 and 2,
respectively.
3 Investment in Euro Disney
Euro Disney, a publicly traded French company, operates the Disneyland Paris
theme park and resort complex on a 4,800-acre site near Paris, France. The
Company accounts for its ownership interest in Euro Disney using the equity
method of accounting.
In October 1994, the Company sold approximately 75 million Euro Disney
shares for $145 million to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud,
Chairman of United Saudi Commercial Bank, and recognized a gain of $55
million. The sale reduced the Company's equity ownership in Euro Disney from
49% at September 30, 1994 to approximately 39%. The quoted market value of the
Company's Euro Disney shares at September 30, 1995 was approximately $966
million.
During the third quarter of 1994, the Company entered into restructuring
agreements with Euro Disney and the lenders participating in a financial
restructuring for Euro Disney (the "Lenders") and recorded a charge of $52.8
million to reflect its participation in the restructuring. In the fourth
quarter of 1994, the Company recorded a loss of $57.6 million to reflect its
equity share of Euro Disney's operating results for that period.
Under the restructuring agreements, which specified amounts denominated in
French francs, the Company increased its equity investment in Euro Disney by
subscribing for 49% of a $1.1 billion rights offering of new shares; provided
long-term lease financing at a 1% interest rate for approximately $255 million
of Disneyland Paris theme park assets; and subscribed for securities
reimbursable in shares with a face value of approximately $180 million and a
1% coupon. In addition, the Company canceled fully-reserved receivables from
Euro Disney of approximately $210 million, waived royalties and base
management fees for a period of five years and reduced such amounts for
specified periods thereafter, and modified the method by which management
incentive fees will be calculated.
Additionally, 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, 1995, 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"), an indirect 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
-39-
<PAGE>
rentals at September 30, 1995 of FF 10 billion ($2 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.
As part of the overall restructuring, the Lenders served as underwriters for
51% of the Euro Disney rights offering, forgave certain interest charges for
the period from April 1, 1994 to September 30, 2003, having a present value of
approximately $300 million, and deferred all principal payments until three
years later than originally scheduled.
In 1993, the Company's loss from its investment in Euro Disney included a
$350 million charge to fully reserve its outstanding receivables and its
commitment to help fund Euro Disney for a limited period, to afford Euro
Disney time to attempt the financial restructuring. Previously deferred base
management fees for 1993 were permanently waived as part of Euro Disney's
financial restructuring.
Euro Disney's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in France ("French GAAP"). Under
French GAAP, Euro Disney recognized net income of FF 114 million in 1995, a
net loss of FF 1.8 billion in 1994, and a net loss of FF 5.3 billion in 1993
(FF 2.1 billion before the cumulative effect of an accounting change). During
1993, Euro Disney changed its method of accounting for project-related pre-
opening costs. Under the new method, such costs are expensed as incurred. The
cumulative effect of the change in method on prior years was a charge against
income of FF 3.2 billion. The effect of the change in 1993 was to decrease the
loss before the cumulative effect of accounting change by FF 338 million.
-40-
<PAGE>
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 the debt affected by Euro Disney's financial
restructuring. In addition, the U.S. GAAP treatment of receivables due from
Euro Disney and canceled by the Company in connection with Euro Disney's
financial restructuring in 1994 differed significantly from French GAAP
applied by Euro Disney. The summarized consolidated financial statements for
Euro Disney set forth below are stated in U.S. dollars in accordance with U.S.
GAAP.
<TABLE>
<CAPTION>
Balance Sheet 1995 1994
-----------------------------------------------------------
<S> <C> <C>
Cash and investments $ 291 $ 289
Receivables 207 227
Fixed assets, net 3,855 3,791
Other assets 173 137
------ ------
Total Assets $4,526 $4,444
====== ======
Accounts payable and other liabilities $ 642 $ 560
Borrowings 3,213 3,051
Stockholders' equity 671 833
------ ------
Total Liabilities and Stockholders' Equity $4,526 $4,444
====== ======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations 1995 1994 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 912 $ 751 $ 873
Costs and expenses 967 1,198 1,114
Net interest expense 161 280 287
----- ------ -------
Loss before income taxes and cumulative effect
of accounting change (216) (727) (528)
Income taxes -- -- --
----- ------ -------
Loss before cumulative effect of accounting
change (216) (727) (528)
Cumulative effect of change in accounting for
pre-opening costs -- -- (578)
----- ------ -------
Net Loss $(216) $ (727) $(1,106)
===== ====== =======
Pro forma net loss assuming the change in
accounting method is applied retroactively $ (528)
=======
</TABLE>
4 Film and Television Costs
<TABLE>
<CAPTION>
1995 1994
- - -----------------------------------------------
<S> <C> <C>
Theatrical Film Costs
Released, less amortization $ 632.0 $ 436.7
In process 969.8 627.1
-------- --------
1,601.8 1,063.8
-------- --------
Television Costs
Released, less amortization 274.1 281.9
In process 119.9 124.7
-------- --------
394.0 406.6
-------- --------
Television Broadcast Rights 103.6 125.8
-------- --------
$2,099.4 $1,596.2
======== ========
</TABLE>
Based on management's total gross revenue estimates as of September 30,
1995, approximately 87% of unamortized production costs applicable to released
theatrical and television productions are expected to be amortized during the
next three years.
-41-
<PAGE>
5 Borrowings
<TABLE>
<CAPTION>
Effective Fiscal
Interest Year
Rate Maturity 1995 1994
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior participating notes (a) 6.3% 2000-2001 $1,056.8 $ 722.8
Medium-term notes (b) 7.3 1996-2093 863.0 948.0
Eurobonds 8.2 1998 300.0 --
Japanese yen bonds (c) 5.6 1998 285.4 285.4
Securities sold under agreements to
repurchase (d) 0.5 1996 180.0 57.5
Commercial paper (e) -- -- -- 609.1
Other (c) 8.6 1996-2013 299.1 314.1
-------- --------
6.6% $2,984.3 $2,936.9
======== ========
</TABLE>
- - --------
(a) The average coupon rate is 2.7% on $1.3 billion face value amount of
notes. Additional interest may be paid based on the performance of
designated portfolios of films.
(b) The effective interest rate reflects the effect of interest rate swaps
entered into with respect to certain of these borrowings.
(c) The effective interest rate reflects the effect of cross-currency swaps
entered into with respect to certain of these borrowings.
(d) Securities sold under agreements to repurchase are collateralized by
certain marketable securities.
(e) The Company has available through 2000 an unsecured revolving line of bank
credit of up to $1 billion for general corporate purposes, including the
support of commercial paper borrowings. In addition, in October 1995, the
Company established bank facilities totaling $12 billion to support the
issuance of commercial paper to fund the cash portion of the Cap Cities
purchase price (see Note 2). The facilities expire in one to six years.
Under the revolving line of bank credit and the new bank facilities, the
Company has the option to borrow at various interest rates.
Borrowings, excluding commercial paper and securities sold under agreements
to repurchase, have the following scheduled maturities.
<TABLE>
<S> <C>
1996 $128.7
1997 108.0
1998 711.1
1999 33.3
2000 850.3
</TABLE>
The Company capitalizes interest on assets constructed for its theme parks,
resorts and other property, and on theatrical and television productions in
process. In 1995, 1994 and 1993, respectively, total interest costs incurred
were $236.4, $171.9 and $183.7 million, of which $58.1, $52.0 and $26.0
million were capitalized.
6 Unearned Royalty and Other Advances
<TABLE>
<CAPTION>
1995 1994
- - ------------------------------------------------
<S> <C> <C>
Tokyo Disneyland royalty advances $452.1 $466.6
Other 408.6 233.3
------ ------
$860.7 $699.9
====== ======
</TABLE>
-42-
<PAGE>
In 1988, the Company monetized a substantial portion of its royalties
through 2008 from certain Tokyo Disneyland operations. The Company has certain
ongoing obligations under its contract with the owner and operator of Tokyo
Disneyland, and accordingly, royalty advances are being amortized through
2008. The maximum amount the Company may be required to fund under certain
recourse provisions of the monetization agreement is $145 million. The Company
does not anticipate funding any significant amount under this agreement.
7 Income Taxes
<TABLE>
<CAPTION>
1995 1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Income Taxes and Cumulative Effect
of Accounting Changes
Domestic (including U.S. exports) $1,908.3 $1,514.5 $ 931.4
Foreign subsidiaries 208.4 188.6 142.6
-------- -------- --------
$2,116.7 $1,703.1 $1,074.0
======== ======== ========
Income Tax Provision
Current
Federal $ 325.6 $ 117.3 $ 217.3
State 67.6 29.9 47.1
Foreign subsidiaries 78.7 84.1 63.3
Other foreign 104.6 78.7 65.1
-------- -------- --------
576.5 310.0 392.8
-------- -------- --------
Deferred
Federal 170.1 259.6 17.0
State (10.0) 23.1 (7.1)
-------- -------- --------
160.1 282.7 9.9
-------- -------- --------
$ 736.6 $ 592.7 $ 402.7
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Components of Deferred Tax Assets and Liabilities 1995 1994
- - --------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $ (351.0) $(221.3)
Investment in Euro Disney (153.2) (133.3)
State income/franchise taxes (88.7) (72.9)
Pension and other benefit programs -- (26.2)
-------- -------
Total deferred tax assets (592.9) (453.7)
-------- -------
Deferred tax liabilities:
Theme parks, resorts and other property 1,133.0 954.8
Licensing revenues 91.3 66.1
Interest and property taxes 87.5 73.8
Purchase accounting 48.3 49.6
Leveraged leases 198.7 175.1
Other--net 51.6 23.5
-------- -------
Total deferred tax liabilities 1,610.4 1,342.9
-------- -------
Net deferred tax liability before evaluation allowance 1,017.5 889.2
Valuation allowance 49.8 49.8
-------- -------
Net deferred tax liability $1,067.3 $ 939.0
======== =======
</TABLE>
-43-
<PAGE>
<TABLE>
<CAPTION>
Reconciliation of Effective Income Tax Rate 1995 1994 1993
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 34.8%
State taxes, net of Federal income tax benefit 1.9 2.1 2.2
Effect of increase in statutory tax rate on deferred taxes -- -- 1.6
Other (2.1) (2.3) (1.1)
---- ---- ----
34.8% 34.8% 37.5%
==== ==== ====
</TABLE>
As discussed in Note 1, the Company adopted SFAS 109 in 1993, effective
October 1, 1992. The adoption of SFAS 109 changed the Company's method of
accounting for income taxes from the deferred method to the asset and
liability method. SFAS 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Differences between financial reporting
and tax bases arise most frequently from differences in timing of income and
expense recognition and as a result of business acquisitions.
As a result of adoption, the Company recognized a benefit in 1993 of $30.0
million, or $.06 per share, representing the cumulative effect of the change
on results for years prior to October 1, 1992. The cumulative effect
represented the adjustment of previously recorded deferred tax assets and
liabilities to reflect the lower prevailing tax rates and the establishment of
previously unrecorded deferred tax liabilities. The adoption had no effect on
pre-tax income in 1993.
In 1995 and 1994, income tax benefits of $90.0 and $12.6 million,
respectively, were allocated to stockholders' equity. Such benefits were
attributable to employee stock option transactions.
8 Pension and Other Benefit Programs
The Company contributes to various pension plans under union and industry-
wide agreements. In 1995, 1994 and 1993, the costs recognized under these
plans were $14.3, $13.1 and $16.1 million, respectively. The Company's share
of the unfunded liability, if any, related to these multi-employer plans is
not material.
The Company also maintains pension plans covering most of its domestic
salaried and hourly employees not covered by union or industry-wide pension
plans and a non-qualified, unfunded retirement plan for key employees. With
respect to its qualified defined benefit pension plans, the Company's policy
is to fund, at a minimum, the amount necessary on an actuarial basis to
provide for benefits in accordance with the requirements of ERISA. Benefits
are generally based on years of service and/or compensation.
The funded status of the plans and the amounts included in the Company's
consolidated balance sheet are as follows.
<TABLE>
<CAPTION>
1995 1994
- - ----------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value, primarily publicly traded stocks
and bonds $631.6 $484.8
Actuarial present value of projected benefit obligations
Accumulated benefit obligations
Vested (498.9) (383.2)
Non-vested (18.1) (20.3)
Provision for future salary increases (86.6) (72.2)
------ ------
Excess of plan assets over projected benefit obligations 28.0 9.1
Unrecognized net loss 98.2 82.3
Unrecognized prior service benefit (5.2) (10.6)
Unrecognized net obligation 3.4 3.7
------ ------
Prepaid pension cost $124.4 $ 84.5
====== ======
</TABLE>
-44-
<PAGE>
Net pension cost in 1995, 1994 and 1993 amounted to $33.1, $36.5 and $32.0
million, respectively. The weighted average discount rate was 7.5% for 1995
and 8.5% for 1994 and 1993, and the expected long-term rate of return on plan
assets was 9.5% for 1995, 1994 and 1993. The assumed rate of increase in
compensation for the salaried plans was 5.8% for 1995, 6.3% for 1994, and 6.8%
for 1993. The mortality table used is the 1983 Group Annuity Mortality Table
for Males and Females.
The Company sponsors a plan to provide postretirement medical benefits to
most of its domestic salaried and hourly employees, and contributes to multi-
employer welfare plans to provide similar benefits to certain employees under
collective bargaining agreements. Employees hired after January 1, 1994 are
not eligible for postretirement medical benefits. The Company funds its
postretirement health benefit liability on a discretionary basis.
As discussed in Note 1, the Company adopted SFAS 106 in 1993, effective
October 1, 1992. SFAS 106 requires accrual of postretirement benefit costs to
actuarially allocate such costs to the years during which employees render
qualifying service. Previously, such costs were expensed as actual claims were
paid. SFAS 106 also requires recognition of the unfunded and previously
unrecognized accumulated postretirement benefit obligation (transition
obligation) for all participants in the Company-sponsored plan. The Company
elected to immediately recognize the transition obligation, which resulted in
a charge against income of $130.3 million, or $.24 per share, after related
income tax benefit of $71.7 million, which represented the cumulative effect
of the change in accounting on results prior to October 1, 1992. Under the
provisions of SFAS 106, postretirement benefit expense in 1993 exceeded the
amount under the previous accounting method by $17.0 million after-tax, or
$.03 per share.
The funded status of the plan and the amounts included in the Company
consolidated balance sheet are as follows.
<TABLE>
<CAPTION>
1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation
Retirees $ 53.9 $ 46.9
Fully eligible active plan participants 32.4 57.8
Other active plan participants 75.5 77.7
------- ------
161.8 182.4
Plan assets at fair value, primarily publicly traded stocks
and bonds (107.3) (78.1)
Unrecognized net gain (14.9) (23.1)
Unrecognized prior service cost 111.5 129.0
------- ------
Accrued postretirement benefit cost $ 151.1 $210.2
======= ======
</TABLE>
Net postretirement benefit (gain) cost in 1995, 1994 and 1993 amounted to
$(42.7), $13.9 and $29.8 million, respectively.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% for 1995 and 8.5% for 1994 and
1993. The expected long-term rate of return on plan assets was 9.5% for 1995,
1994 and 1993.
The annual rate of increase in the per capita cost of covered health care
benefits was assumed to be 7% in 1995, 1994 and 1993. An increase in the
assumed health care cost trend rate of 1% for each year would increase the
postretirement benefit obligation as of September 30, 1995 and 1994 by $34.8
and $39.2 million, respectively, and the net service and interest cost
components of net postretirement benefit cost for 1995, 1994 and 1993 by $5.5,
$7.1 and $8.1 million, respectively.
-45-
<PAGE>
9 Stockholders' Equity
<TABLE>
<CAPTION>
Common Paid-in Retained
(Shares in millions) Shares Stock Capital Earnings
- - ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1992 552.2 $13.8 $ 606.1 $4,661.9
Exercise of stock options, net 12.4 0.3 256.2 --
Dividends ($.24 per share) -- -- -- (128.6)
Net income -- -- -- 299.8
----- ----- -------- --------
Balance at September 30, 1993 564.6 14.1 862.3 4,833.1
Exercise of stock options, net 2.4 0.1 68.8 --
Dividends ($.2875 per share) -- -- -- (153.2)
Net income -- -- -- 1,110.4
----- ----- -------- --------
Balance at September 30, 1994 567.0 14.2 931.1 5,790.3
Exercise of stock options, net 8.4 0.2 280.8 --
Dividends ($.345 per share) -- -- -- (180.0)
Net income -- -- -- 1,380.1
----- ----- -------- --------
Balance at September 30, 1995 575.4 $14.4 $1,211.9 $6,990.4
===== ===== ======== ========
</TABLE>
In June 1989, the Company adopted a stockholders rights plan. 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, 7.2 million shares of preferred stock were
reserved.
At September 30, 1995 and 1994, the Company's cumulative foreign currency
translation adjustments were $37.3 and $59.1 million, net of deferred taxes of
$17.6 and $27.5 million, respectively.
Treasury stock activity for the three years ended September 30, 1995 was as
follows.
<TABLE>
<CAPTION>
Treasury
(Shares in millions) Shares Stock
- - ------------------------------------------------------------
<S> <C> <C>
Balance at September 30, 1992 27.8 $ 664.1
Common stock repurchased 0.9 31.6
Common stock trade-ins on exercised options 0.4 20.0
---- --------
Balance at September 30, 1993 29.1 715.7
Common stock repurchased 13.8 570.7
---- --------
Balance at September 30, 1994 42.9 1,286.4
Common stock repurchased, net 8.1 316.8
---- --------
Balance at September 30, 1995 51.0 $1,603.2
==== ========
</TABLE>
On November 21, 1994, the authorized share repurchase amount under the
Company's share repurchase program was increased from 90 million to 180
million shares. Since the program's inception, a total of 75.5 million shares
have been repurchased at prevailing market prices.
-46-
<PAGE>
10 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) 1995 1994 1993
- - -------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 38.8 36.4 44.3
Awards canceled (3.3) (1.6) (1.1)
Awards granted 7.8 6.5 5.6
Awards exercised (8.2) (2.5) (12.4)
---- ---- -----
Outstanding at September 30 35.1 38.8 36.4
==== ==== =====
Exercisable at September 30 14.6 17.5 13.4
==== ==== =====
</TABLE>
Stock option awards are granted at prices equal to at least market price on
the date of grant. Options outstanding at September 30, 1995 and 1994 ranged
in price from $5.56 to $57.44 and $3.61 to $47.31 per share, respectively.
Options exercised ranged in price from $3.61 to $57.44 per share in 1995, from
$3.23 to $41.00 per share in 1994, and from $3.23 to $33.35 per share in 1993.
Shares available for future option grants at September 30, 1995 were 14.4
million.
11 Detail of Certain Balance Sheet Accounts
<TABLE>
<CAPTION>
1995 1994
- - ------------------------------------------------
<S> <C> <C>
Receivables
Trade, net of allowances $1,593.1 $1,328.4
Other 199.7 342.1
-------- --------
$1,792.8 $1,670.5
======== ========
Other Assets
Intangibles $ 318.3 $ 311.0
Other 905.3 625.8
-------- --------
$1,223.6 $ 936.8
======== ========
Accounts Payable and Other
Accrued Liabilities
Accounts payable $2,130.7 $1,771.8
Payroll and employee benefits 646.7 638.6
Other 65.1 64.4
-------- --------
$2,842.5 $2,474.8
======== ========
</TABLE>
12 Pre-Opening Costs
As discussed in Note 1, during 1993 the Company changed its method of
accounting for pre-opening costs. In years prior to 1993, project-related pre-
opening costs were capitalized and amortized on a straight-line basis over
periods of up to five years. Under the new method, project-related pre-opening
costs are expensed as incurred. The cumulative effect of the change in method
on prior years was a charge against income of $271.2 million, or $.50 per
share, after related income tax benefit of $71.0 million, of which $233.0
million related to the impact of the accounting change on the Company's
investment in Euro Disney. The effect of the change was to increase income in
1993 by $40.2 million after-tax, or $.07 per share.
-47-
<PAGE>
13 Segments
<TABLE>
<CAPTION>
Business Segments 1995 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Capital Expenditures
Filmed entertainment $ 125.0 $ 100.7 $ 130.2
Theme parks and resorts 635.5 846.4 593.4
Consumer products 115.4 61.1 36.3
Corporate 20.6 17.9 54.0
--------- --------- ---------
$ 896.5 $ 1,026.1 $ 813.9
========= ========= =========
Depreciation Expense
Filmed entertainment $ 61.6 $ 49.1 $ 38.5
Theme parks and resorts 319.5 289.2 269.2
Consumer products 52.2 38.3 26.2
Corporate 36.9 33.1 30.3
--------- --------- ---------
$ 470.2 $ 409.7 $ 364.2
========= ========= =========
Identifiable Assets
Filmed entertainment $ 4,834.2 $ 3,791.5 $ 3,417.5
Theme parks and resorts 6,073.9 5,706.9 5,216.0
Consumer products 962.0 845.3 707.5
Corporate 2,202.8 1,852.7 2,410.1
Investment in Euro Disney 532.9 629.9 --
--------- --------- ---------
$14,605.8 $12,826.3 $11,751.1
========= ========= =========
Supplemental Revenue Data
Filmed entertainment
Theatrical product $ 4,452.5 $ 3,734.2 $ 2,764.4
Theme parks and resorts
Admissions 1,346.0 1,179.6 1,215.6
Merchandise, food and beverage 1,423.6 1,238.1 1,232.7
<CAPTION>
Geographic Segments
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Domestic Revenues
United States $ 9,311.0 $ 7,697.6 $ 6,710.8
United States export 547.8 458.0 399.8
International Revenues
Europe 1,552.1 1,344.8 984.6
Rest of world 701.2 554.7 434.0
--------- --------- ---------
$12,112.1 $10,055.1 $ 8,529.2
========= ========= =========
Operating Income
United States $ 1,745.8 $ 1,392.7 $ 1,591.7
Europe 464.1 405.0 121.8
Rest of world 323.2 226.0 82.5
Unallocated expenses (87.4) (58.0) (71.5)
--------- --------- ---------
$ 2,445.7 $ 1,965.7 $ 1,724.5
========= ========= =========
Identifiable Assets
United States $13,437.5 $11,306.1 $11,084.5
Europe 1,060.2 1,237.8 519.7
Rest of world 108.1 282.4 146.9
--------- --------- ---------
$14,605.8 $12,826.3 $11,751.1
========= ========= =========
</TABLE>
-48-
<PAGE>
14 Financial Instruments
As discussed in Note 1, the Company adopted the method of accounting
prescribed by SFAS 115 Accounting for Certain Investments in Debt and Equity
Securities in 1995. As of September 30, 1995, the Company held $95.8 million
of securities classified as trading and $403.0 and $307.3 million of
securities and cash equivalents, respectively, classified as available-for-
sale. In 1995, realized gains and losses on available-for-sale securities,
determined principally on an average cost basis, unrealized gains and losses
on available-for-sale securities and the change in the net unrealized gain on
trading securities were 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 transacts business in virtually every part of the world and,
accordingly, 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 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 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 investments and
borrowings and to lower its overall borrowing costs. Significant interest rate
risk management instruments held by the Company at September 30, 1995 and 1994
are described below.
Interest Rate Risk Management-Investment Transactions
At September 30, 1995 and 1994, the Company had outstanding interest rate
swaps designated as hedges of investments with notional amounts totaling
$153.9 and $131.3 million, respectively, which expire in six to seven years,
and $225.2 and $461.5 million, respectively, of options, futures and forward
contracts which expire in one to three years.
At September 30, 1994, the Company had outstanding spreadlock contracts with
notional amounts totaling $250.0 million. These contracts matured during 1995,
and the realized gains and losses are included in investment and interest
income.
Interest Rate Risk Management-Borrowings
At September 30, 1995 and 1994, the Company had outstanding interest rate
swaps on its borrowings with notional amounts totaling $685.0 and $590.0
million, respectively, which effectively converted medium-term notes to
commercial paper or LIBOR-based variable rate instruments, and $395.0 million
at September 30, 1994, which effectively converted senior participating notes
to LIBOR-based variable rate instruments. These swap agreements expire in one
to 14 years. In anticipation of the acquisition of Cap Cities (see Note 2),
the Company has entered into forward-starting interest rate swaps designated
as hedges of anticipated borrowings with notional amounts totaling $4.4
billion. These swaps will become effective in 1996 and will effectively
convert acquisition-related floating-rate borrowings into fixed-rate
instruments. These swaps expire in three to ten years.
-49-
<PAGE>
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 1995 and
1994. Activity representing renewal of existing positions is excluded.
<TABLE>
<CAPTION>
Balance at Balance at
September 30, Maturities/ September 30,
1994 Additions Expirations Terminations 1995
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pay floating swaps $1,037.4 $ 983.9 $ (135.0) $(1,167.4) $ 718.9
Pay fixed swaps 213.1 4,606.5 -- (139.6) 4,680.0
Spreadlock contracts 250.0 -- (250.0) -- --
Forward contracts 100.7 294.1 (394.8) -- --
Futures contracts 266.4 288.9 (238.6) (193.2) 123.5
Option contracts 94.4 238.8 (190.4) (41.1) 101.7
-------- -------- --------- --------- --------
$1,962.0 $6,412.2 $(1,208.8) $(1,541.3) $5,624.1
======== ======== ========= ========= ========
<CAPTION>
Balance at Balance at
September 30, Maturities/ September 30,
1993 Additions Expirations Terminations 1994
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pay floating swaps $1,431.7 $1,047.4 $ (590.7) $ (851.0) $1,037.4
Pay fixed swaps 717.6 141.8 -- (646.3) 213.1
Spreadlock contracts 50.0 300.0 -- (100.0) 250.0
Forward contracts 212.1 96.5 -- (207.9) 100.7
Futures contracts 18.7 824.3 (5.3) (571.3) 266.4
Option contracts 65.8 727.6 (147.6) (551.4) 94.4
-------- -------- --------- --------- --------
$2,495.9 $3,137.6 $ (743.6) $(2,927.9) $1,962.0
======== ======== ========= ========= ========
</TABLE>
The impact of interest rate risk management activities on income in 1995 and
1994 and the amount of deferred gains and losses from interest rate risk
management transactions at September 30, 1995 and 1994 were not material.
Foreign Exchange Risk Management
Most foreign exchange hedging contracts are option strategies providing for
the sale of foreign currencies which 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, Italian lira, British pound, Canadian dollar, and
Spanish peseta.
Foreign Exchange Risk Management Transactions
The Company uses option contracts to hedge anticipated foreign currency
revenues and forward contracts to hedge foreign currency assets and foreign
currency payments the Company is committed to make in connection with the
construction of two cruise ships (see Note 15). Cross-currency swaps are used
to hedge foreign currency-denominated borrowings.
At September 30, 1995 and 1994, 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 contract maturities are as follows.
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
NOTIONAL EXPOSURES FISCAL YEAR Notional Exposures Fiscal Year
AMOUNT HEDGED MATURITY Amount Hedged Maturity
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Option contracts $5,070.5 $2,869.3 1996-1999 $6,160.8 $2,337.4 1995-1998
Forward contracts 1,939.7 1,195.6 1996-1999 1,274.8 918.5 1995-1996
Cross-currency swaps 350.1 350.1 1997-1998 365.2 372.0 1995-1998
-------- -------- -------- --------
$7,360.3 $4,415.0 $7,800.8 $3,627.9
======== ======== ======== ========
</TABLE>
-50-
<PAGE>
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, 1995, the Company
had net deferred losses of $188.9 million related to foreign currency hedge
transactions, which will be recognized in income over the next four years.
Amounts recognizable in any one year are not material and will be offset by
gains in the value of the related hedged transactions. Deferred gains and
losses from foreign exchange risk management transactions at September 30,
1994 were not material. The impact of foreign exchange risk management
activities on income in 1995 and 1994 was not material.
Fair Value of Financial Instruments
At September 30, 1995 and 1994, the Company's financial instruments included
cash, cash equivalents, investments, borrowings and interest rate and foreign
exchange risk management contracts.
At September 30, 1995, the fair values of cash and cash equivalents,
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 at September 30, 1995 are as follows.
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------------------------------------------------
<S> <C> <C>
Investments $ 498.8 $ 498.8
Borrowings (2,984.3) (3,151.3)
Risk management contracts 180.7 137.1
--------- ---------
$(2,304.8) $(2,515.4)
========= =========
</TABLE>
At September 30, 1994, the estimated fair values of each class of the
Company's financial instruments either approximated carrying values, or were
not material.
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, 1995 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-. In addition, the Company limits the amount
of credit exposure with any one institution. At September 30, 1995, neither
the Company nor its counterparties were required to collateralize their
respective financial instrument obligations.
The Company's trade receivables and investments do not represent significant
concentrations of credit risk at September 30, 1995, 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. (See Note 3 for a
discussion of the Company's investment in Euro Disney).
15 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 Lines. Under the agreements, the
Company is committed to make payments totaling approximately $700 million
through 1999.
-51-
<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>
1995
Revenues $3,301.7 $2,922.8 $2,764.0 $3,123.6
Operating income 790.8 606.6 562.3 486.0
Net income 482.4 315.5 318.2 264.0
Earnings per share .91 .60 .60 .50
1994
Revenues $2,727.3 $2,275.8 $2,353.6 $2,698.4
Operating income 624.4 410.0 492.6 438.7
Net income 368.6 248.4 267.5 225.9
Earnings per share .68 .45 .49 .42
</TABLE>
-52-
<PAGE>
[LETTERHEAD OF THE WALT DISNEY COMPANY]
EXHIBIT 10(d)
As of May 5, 1995
Mr. Stephen F. Bollenbach
10400 Fernwood Drive
Washington, D.C.
Amended and Restated Award of Restricted Stock
----------------------------------------------
Dear Mr. Bollenbach:
We are pleased to confirm to you that, subject to the restrictions described
below, you have been awarded 150,000 shares of the Common Stock of The Walt
Disney Company (the "Company"), par value $0.025 per share (the "Restricted
Shares"). This letter will confirm the following agreement between you and the
Company with respect to this award of Restricted Shares.
1. Payment. Concurrently with your countersignature and return of
-------
this letter, you will deliver to the Company a payment of $3,750 in
consideration of the grant of the Restricted Shares, representing the aggregate
par value of the Restricted Shares.
2. Restriction on Transfer; Risk of Forfeiture.
-------------------------------------------
(a) No Transfer. Except as provided in Section 7, none of the
-----------
Restricted Shares may be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered unless and until such shares become unrestricted.
(b) Performance-Based Restricted Shares. One-third or 50,000 shares
-----------------------------------
of the Restricted Stock (hereinafter referred to as the "Performance Based
Restricted Shares") shall vest and become unrestricted in and, except as
provided in Section 4, only if (i) the required certification is made under the
1996 Cash Bonus Plan for Eligible Executive Officers of DC Holdco, Inc. (the
"1996 Bonus Plan") that the Performance Target (as defined in the 1996 Bonus
Plan) established with respect to you under the 1996 Bonus Plan has been met, or
(ii) the required certification is made under any subsequently adopted annual
cash
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
Mr. Stephen F. Bollenbach
As of May 5, 1995
Page 2
bonus plan that meets the requirements for performance-based compensation
under Section 162(m) of the Internal Revenue Code (a "Successor Bonus Plan")
that the performance target(s) established with respect to you, if any, under
any such Successor Bonus Plan have been met for the 1997 or 1998 fiscal year.
(c) Other Restricted Shares. Subject to the provisions of Section 3,
-----------------------
the remaining 100,000 Restricted Shares shall vest and become unrestricted as
determined pursuant to the following schedule or at such earlier date as such
restrictions shall otherwise lapse under the provisions of Section 4:
Date Shares Become Unrestricted Number of Shares
------------------------------- ----------------
October 29, 1997 50,000
October 29, 1998 50,000
For purposes of this letter, the period during which the Restricted Shares
remain subject to the restrictions set forth in this Section 2 shall be called
the "Restricted Period."
(d) All certificates representing Restricted Shares shall be issued in
your name and delivered to you and returned by you to remain in the physical
custody of the Company during the Restricted Period or until such time as any
transfer restrictions hereunder otherwise terminate as provided herein. Each
such certificate shall bear a legend in substantially the following form:
"The transfer of these securities is subject to restrictions set
forth in a certain Amended and Restated Restricted Stock Award Agreement, dated
as of May 5, 1995, a copy of which is available for inspection at the office of
the Secretary of the Corporation."
Any purported transfer of any Restricted Shares in contravention of the terms,
conditions and restrictions set forth in this letter, irrespective of whether
the certificate representing such Shares contains the legend set forth above,
shall be ineffective, and any disposition of such Restricted Shares purported to
be effected thereby shall be void.
3.(a) Forfeiture of Restricted Shares upon Voluntary Termination or
-------------------------------------------------------------
Termination for Cause. Except as provided in paragraph 4 below, if (i) you
- - ---------------------
voluntarily terminate your employment with the Company, or (ii) your employ-
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
Mr. Stephen F. Bollenbach
As of May 5, 1995
Page 3
ment is terminated by the Company for Cause (as hereinafter defined) prior to
the end of the Restricted Period, the Restricted Shares then still subject to
the restrictions set forth in Section 2 shall be forfeited and revert back to
the Company without any payment to you. For purposes of this letter, "Cause"
means (i) your conviction of a felony or a crime involving moral turpitude; (ii)
your willful or repeated failure to perform substantially the duties and
responsibilities of your position, after receipt of written notice from the
Company of such failure; or (iii) your engaging in willful, intentional or
reckless misconduct or gross negligence that is seriously detrimental to the
business or reputation of the Company.
(b) Forfeiture of Performance-Based Restricted Shares upon Failure to
-----------------------------------------------------------------
Meet Performance Target(s). Except as provided in Section 4 below, the 50,000
- - --------------------------
Performance-Based Restricted Shares shall be forfeited and revert back to the
Company without any payment to you on December 31, 1996 unless either (i) the
applicable Performance Target under the 1996 Bonus Plan has been met and duly
certified as provided therein, or (ii) a Successor Bonus Plan for fiscal years
beginning on or after October 1, 1996 has been adopted by the Company or DC
Holdco, Inc. If the Performance-Based Restricted Shares remain unvested after
December 31, 1996, they shall be forfeited and revert back to the Company
without payment to you (i) upon the failure of the shareholders to approve the
Successor Bonus Plan at the shareholder's meeting at which such plan is first
considered or (ii) on December 31, 1998, unless the Performance-Based Restricted
Shares have earlier become unrestricted pursuant to Section 2.
4. Vesting Upon Death, Disability, Termination by the Company Without
------------------------------------------------------------------
Cause or Voluntary Termination for Good Reason. If your employment with the
- - ----------------------------------------------
Company terminates due to (i) your death, (ii) your illness or disability which
has incapacitated you from performing your duties for six consecutive months as
determined in good faith by the Company's Chief Executive Officer, (iii) a
termination by the Company other than for Cause or (iv) a Voluntary Termination
for Good Reason (as defined below), the Restricted Period shall immediately and
automatically lapse, without further action by the Company, on the date of such
termination as to any Restricted Shares then still subject to the restrictions
set forth in Section 2; provided that if the termination occurs prior to the
--------
certification required under Section 2 for a reason specified in clause (iii) or
(iv) above, the vesting of the 50,000 Performance-Based Restricted Shares shall
not occur unless and until the certification required under Section 2 is made
for the fiscal year in which such termination of employment occurs. If such
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
Mr. Stephen F. Bollenbach
As of May 5, 1995
Page 4
certification is not made by the December 31st first following the end of the
fiscal year in which such termination of employment occurs, the Performance-
Based Restricted Shares shall then be forfeited and revert back to the Company
without payment to you.
For purposes of this letter, a "Voluntary Termination for Good Reason"
-------------------------------------
means any voluntary resignation by you within 120 days following the occurrence
of any of the following events without your prior written consent: (i) you do
not serve as Chief Financial Officer of the Company; (ii) you do not report to
the Company's Chief Executive Officer; or (iii) your principal place of
employment is relocated to a location other than the Company's corporate
headquarters complex or a nearby complex housing other senior executives of the
Company or its affiliates.
5. Change in Control. Notwithstanding any other provision of this
-----------------
letter to the contrary, the Restricted Period shall lapse in the event the
Company enters into an agreement pursuant to which either the Company or all or
substantially all of its assets are to be sold or combined with another entity
(regardless of whether or not such sale or combination is subject to the
satisfaction of conditions precedent or subsequent) and, as a consequence
thereof, the market for public trading of the Company's Common Stock would, or
could reasonably be expected to be, eliminated or materially impaired.
6. Rights as a Stockholder. Subject to the provisions of Sections 2
-----------------------
and 3 hereof, you shall have all the rights of a stockholder with respect to
your Restricted Shares, including the right to vote the shares and to receive
dividends.
7. Conversions and Property Distributions. In the event your
--------------------------------------
Restricted Shares are exchanged for or converted into securities other than
Common Stock or in the event that any distribution is made with respect to such
Restricted Shares either in Common Stock or in other property (other than cash),
the securities or other property (other than cash) that you receive shall be
subject to the same restrictions as apply to your Restricted Shares.
8. Withholding. As a condition to receiving any share certificate
-----------
without the legend and the vesting of any shares, you shall be required to pay
or to provide (to the Company's satisfaction), in accordance with the terms of
the Company's 1987 Stock Incentive Plan, as amended (the "Stock Plan"), for any
and all applicable Federal, state or local withholding taxes.
<PAGE>
[LOGO OF THE WALT DISNEY COMPANY]
Mr. Stephen F. Bollenbach
As of May 5, 1995
Page 5
9. No Right to Continued Employment. This letter is not an employment
--------------------------------
contract, and nothing in this letter shall be deemed to confer on you any right
to continue in the employ of the Company or any of its subsidiaries, or to
interfere with or limit in any way the right of the Company or any of its
subsidiaries to terminate such employment at any time.
10. Governing Law. This letter shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California.
11. Waiver and Amendment. This letter may not be modified or amended,
--------------------
and any provision hereof may not be waived, except pursuant to a written
agreement signed by the Company and you. Any such modification, amendment or
waiver signed by, or binding upon, you shall be valid and binding upon any and
all persons or entities who may, at any time, have or claim any rights under or
pursuant to this letter in respect of the Restricted Shares. No waiver of any
breach or default hereunder shall be deemed a waiver of any subsequent breach or
default of the same or similar nature. This letter supersedes in its entirety
the letter agreement between us captioned "Award of Restricted Stock," dated May
5, 1995.
Please sign one of the two copies of this letter where indicated below and
return it to me at your earliest convenience. Please retain the other copy of
this letter for your records.
THE WALT DISNEY COMPANY
By: /s/ SANFORD M. LITVACK
----------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
/s/ STEPHEN F. BOLLENBACH
- - --------------------------------
Stephen F. Bollenbach
<PAGE>
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT
DATED AS OF OCTOBER 1, 1995
BETWEEN
THE WALT DISNEY COMPANY
AND
MICHAEL S. OVITZ
MICHAEL S. OVITZ ("EXECUTIVE") and THE WALT DISNEY COMPANY, a Delaware
corporation ("COMPANY"), hereby agree as follows:
1. TERM
The term of Executive's employment by Company under this Agreement shall
commence on and as of October 1, 1995 and shall expire on September 30, 2000
(the "TERM"), unless earlier terminated as hereinafter provided.
2. TITLE AND DUTIES
During the Term, Executive shall be employed by Company as its President.
As President, Executive shall report to Company's Chairman and Chief Executive
Officer. Executive shall devote his full time and best efforts exclusively to
the Company; provided, however, that the foregoing shall not preclude Executive
-------- -------
from engaging in charitable and community affairs, managing his personal passive
investments and continuing his current board membership with Ziff-Davis
Holdings, Inc., provided that none of such activities or managing shall
interfere with, or be inconsistent with, the performance of his duties
hereunder. Executive shall perform such duties, which shall not be inconsistent
with his position as President of Company, as are assigned to him from time to
time by the Chairman and Chief Executive Officer of Company, and any other
duties undertaken or accepted by Executive. Company agrees to use its best
efforts to cause Executive to be
1
<PAGE>
elected to the Board of Directors of Company (or its successor in interest),
when a seat on the Board becomes available, and to nominate Executive as a
member of the management slate at each annual meeting of stockholders during his
employment hereunder at which Executive's director class comes up for election.
Executive agrees to serve on the Board if elected.
3. SALARY
Executive shall receive a salary of $1,000,000 per annum during the term
hereof. Salary payments shall be made in equal installments in accordance with
Company's then prevailing payroll policy.
4. BONUS
For each full year of the Term completed by Executive, Executive will be
eligible for an annual discretionary bonus which will be determined by the
Compensation Committee of the Board of Directors. Pursuant to Company's
applicable bonus plan as in effect from time to time, such bonus may be
determined according to criteria intended to qualify under Section 162(m) of the
Internal Revenue Code, as amended (the "CODE").
5. STOCK OPTIONS
Executive shall be granted two stock options (individually, "OPTION A" and
"OPTION B") to purchase an aggregate of 5,000,000 shares of common stock of
Company pursuant to Company's 1990 Stock Incentive Plan and related rules or
pursuant to a stock option plan hereinafter adopted by Company having terms no
less favorable to Executive than the 1990 Stock Incentive Plan and related rules
(the applicable plan and rules pursuant to
2
<PAGE>
which such options shall be granted being hereinafter referred to as the "PLAN")
in accordance with, and subject to, the following:
OPTION A:
--------
(a) The exercise price of Option A shall be equal to the fair market value
(determined in accordance with the applicable provisions of the Plan) of
Company's common stock on the date of grant, which date shall be October
16, 1995.
(b) Pursuant to Option A Executive shall have the right to purchase
3,000,000 shares, subject to the terms and conditions hereof and of the
Plan, and such right shall vest in increments of 1,000,000 shares on
September 30 of each year commencing September 30, 1998; provided, however,
-------- -------
that, notwithstanding the foregoing, any portion of Option A scheduled to
vest on a scheduled vesting date shall not vest on such scheduled vesting
date (or at any time thereafter) if Executive's employment by Company
pursuant to this Agreement shall have terminated for any reason whatsoever
more than three months prior to such scheduled vesting date.
(c) In the event that Executive's employment shall be terminated and such
termination shall constitute a Non-Fault Termination (as defined in
subparagraph (d) below), then the vesting schedule of Option A shall be
accelerated and Option A shall become immediately exercisable in its
entirety upon such termination.
(d) Option A shall expire on the earlier of ten years from the date of
grant or 24 months after termination of Executive's employment with
3
<PAGE>
Company; provided, however, that notwithstanding the foregoing, in the
-------- -------
event that Executive's employment with Company shall be terminated without
cause (i.e., in a manner which shall constitute a breach of this Agreement
----
by Company), by reason of death or total and permanent disability pursuant
to Section 11(a)(i) or (ii) hereof, or Executive shall validly terminate
his employment pursuant to Section 12 hereof (any of the foregoing being
herein referred to as a "NON-FAULT TERMINATION"), Option A shall expire on
the later of September 30, 2002, or 24 months after the date of the Non-
Fault Termination (but in no event later than ten years from the date of
grant.)
(e) Except as expressly provided herein, Option A shall be subject to all
of the standard terms and provisions of the Plan (i.e., those terms and
----
provisions which are automatically applicable to any stock option granted
under the Plan in the absence of special action or specification to the
contrary with respect to such stock option by the Compensation Committee of
the Board of Directors of the Company (which Committee currently
administers the Plan)), including without limitation, such modifications
and/or substitutions of the Plan and the options granted thereunder as are
effected in connection with the acquisition by Company of Cap Cities/ABC,
Inc.
OPTION B:
--------
The terms and provisions of Option B shall be identical to the terms and
provisions of Option A in all respects except as follows:
4
<PAGE>
(f) Pursuant to Option B Executive shall have the right to purchase
2,000,000 shares of Company's common stock, subject to the terms and
conditions hereof and of the Plan, and such right shall vest in increments
of 1,000,000 shares on each of September 30, 2001 and September 30, 2002;
provided, however, that notwithstanding the foregoing, any portion of
-------- -------
Option B scheduled to vest on a scheduled vesting date shall not vest on
such vesting date (or at any time thereafter) if Executive's employment
with Company shall have terminated for any reason whatsoever more than
three months prior to such scheduled vesting date.
(g) Notwithstanding any other term or provision of the Plan or this
Agreement, under no circumstances shall Option B vest or become exercisable
prior to October 1, 2000, and in the event that Executive's employment with
Company shall terminate prior to such date for any reason whatsoever,
Option B and all rights and claims of any nature related thereto shall
thereupon irrevocably terminate in their entirety without further action by
any party; after such date Option B shall vest in accordance with its terms
if, and only if, Executive shall have entered into, prior to the earlier of
the first scheduled vesting date of Option B or the date of any event
occurring on or after October 1, 2000 which would give rise to accelerated
vesting if the conditions of this subparagraph were met, an agreement with
Company (which shall be acceptable to Company in its sole and unfettered
discretion or which shall have been entered into pursuant to a Qualifying
Offer (as hereinafter defined in Section 10 hereof) to continue his
employment with Company until at least September 30, 2002; provided,
--------
however, that notwithstanding the foregoing, if Executive is actually
-------
employed by Company on a scheduled vesting date of Option B, the increment
of
5
<PAGE>
Option B scheduled to vest on such date shall vest in accordance with
its terms.
The parties hereto acknowledge that in order to implement certain
provisions of Section 5(d) hereto relating to the continued exercisability of
Option A for more than 24 months after a Non-Fault Termination, an amendment to
the 1990 Stock Incentive Plan is required or a new Plan permitting such
continued exercisability must be adopted. Company will implement such amendment
or adopt such new Plan, subject, however, in each case to receipt by Company of
approval by the shareholders of Company. Accordingly, all of the provisions of
Option A referred to in Section 5(d) above providing for exercisability beyond
24 months after termination of Executive's employment with Company shall be
subject to receipt by Company of such shareholder approval, and in the event
such shareholder approval shall not have been obtained within 18 months from the
date hereof or there shall have been a Non-Fault Termination at any time prior
to receipt by Company of such approval, Company and Executive (or his estate)
shall enter into good-faith negotiations with respect to alternative
compensation for Executive.
6. BENEFITS AND PERQUISITES
Executive shall be entitled to receive the benefits and perquisites
currently made available to the Chairman and Chief Executive Officer of Company.
6
<PAGE>
7. REIMBURSEMENT FOR EXPENSES
Executive shall be expected to incur various business expenses customarily
incurred by persons holding like position, including but not limited to
traveling, entertainment and similar expenses, all of which are to be incurred
by Executive for the benefit of Company. Subject to Company's policy regarding
the reimbursement and non-reimbursement of such expenses (which policy does not
necessarily provide for reimbursement of all such expenses but which shall be
applied to Executive in a manner consistent with the application of such policy
to the Chairman and Chief Executive Officer of Company), Company shall reimburse
Executive for such expenses from time to time, at Executive's request, and
Executive shall account to Company for such expenses.
8. PROTECTION OF COMPANY'S INTERESTS
(a) During the term of Executive's employment by Company, Executive will
not compete in any manner, directly or indirectly, whether as a principal,
employee, consultant, agent, owner or otherwise, with Company or any affiliate
thereof, except that the foregoing will not prevent Executive from holding at
any time less than 5% of the outstanding capital stock of any company whose
stock is publicly traded.
(b) To the extent permitted by law, all rights worldwide with respect to
any and all intellectual or other property of any nature produced, created or
suggested by Executive during the term of his employment or resulting from his
services shall be deemed to be a work made for hire and shall be the sole and
exclusive property of Company. Executive agrees to execute, acknowledge and
deliver to Company, at Company's request, such
7
<PAGE>
further documents as Company finds appropriate to evidence Company's rights in
such property. Any confidential and/or proprietary information of Company or any
affiliate thereof (including, without limitation, any information relating to
the identities, capabilities, compensatory and contractual arrangements and/or
general personnel data of employees of Company and its affiliates to which
Executive has access) shall not be used by Executive or disclosed or made
available by Executive to any person except as required in the course of his
employment, and upon expiration or earlier termination of the term of this
Agreement, Executive shall return to Company all such information that exists in
written or other physical form (and all copies thereof) under his control.
Without limiting the generality of the foregoing, Executive acknowledges signing
and delivering to Company The Walt Disney Company and Associated Companies
Confidentiality Agreement and Statement of Policy Regarding Conflicts of
Interest and Business Ethics and Questionnaire Regarding Compliance and he
agrees that all terms and conditions contained therein, and all of his
obligations and commitments provided for therein, shall be deemed, and hereby
are, incorporated into this Agreement as if set forth in full herein. The
provisions of this Section 8(b) shall survive the expiration or earlier
termination of this Agreement.
9. SERVICES UNIQUE
Executive recognizes that his services hereunder are of a special, unique,
unusual, extraordinary and intellectual character giving them a peculiar value,
the loss of which cannot be reasonably or adequately compensated for in damages,
and in the event of a breach of this Agreement by him (particularly, but without
limitation, with respect to the provisions hereof relating to the exclusivity of
his services and the provisions of Section 8
8
<PAGE>
hereof), Company shall, in addition to all other remedies available to it, be
entitled to equitable relief by way of injunction and any other legal or
equitable remedies.
10. CONTRACT TERMINATION PAYMENT
In the event that Company shall not have made a Qualifying Offer (as
hereinafter defined) to Executive by July 1, 2000, and no other agreement
between Executive and Company relating to the extension of Executive's
employment shall have been entered into by September 30, 2000, Executive shall
be entitled to receive, after Executive's:
(a) having given Company written notice of its failure to deliver a
Qualifying Offer; and
(b) not having received such Qualifying Offer from Company within five
business days from the delivery of such notice to Company,
a contract termination payment of $10,000,000 (the "TERMINATION PAYMENT") from
Company. Such Termination Payment shall be due by the earlier of 30 days after
the date that such payment shall not be subject to Section 162(m) of the Code or
four months after the end of the last fiscal year of the Company during which
Executive was employed by Company, but in no event shall such Termination
Payment be due earlier than October 1, 2000, except as provided in Section 11(c)
hereof. The term "QUALIFYING OFFER" shall mean a written offer of employment to
Executive which (i) shall be for a period of not less than five years from
October 1, 2000, (ii) shall include the types of compensation contained in this
Agreement, (iii) shall constitute a reasonable offer taking into account the
9
<PAGE>
compensation to Executive provided for in this Agreement, the Company's
financial and operating performance during the term of this Agreement and any
other then-current circumstances relevant to the determination of Executive's
compensation by Company for the period specified in clause (i) above, (iv) shall
not contain any terms or provisions which reduce Executive's title or duties as
stated herein, and (vii) shall state that it is irrevocable for 30 days from the
date of delivery thereof. Notwithstanding any other term or provision hereof,
Executive shall be entitled to receive the Termination Payment in accordance
with Section 11(c) hereof in the event of a Non-Fault Termination of Executive's
employment for any reason other than death (it being understood that in the
event of Executive's death prior to payment of the Termination Payment, Company
shall have no obligation under any circumstances to make a Termination Payment
to Executive's estate or any other person or entity).
In the event that the parties shall disagree as to whether or not an offer
timely made by Company in accordance with the foregoing constitutes a Qualifying
Offer, the parties shall submit such disagreement to arbitration by a qualified
individual executive compensation expert of national reputation who shall not
have had dealings with either party during the preceding five years. Upon
failure to agree upon the selection of the arbitrator, each party shall submit a
panel of three qualified arbitrators, the other party may strike two from the
other's list, and the arbitrator shall be selected by lot from the remaining two
names. The arbitrator shall have the authority only to determine (i) whether
the matter is arbitrable under the conditions of this Agreement and (ii) whether
or not the offer made by the Company is a Qualifying Offer.
10
<PAGE>
11. TERMINATION
(a) Company shall have the right to terminate Executive's employment
with Company under the following circumstances:
(i) Upon death of Executive.
(ii) Upon notice from Company to Executive in the event of an illness or
other disability which has totally and permanently incapacitated him from
performing his duties for six consecutive months as determined in good
faith by the Board of Directors.
(iii) For good cause (A) immediately upon notice from Company if Company
shall reasonably determine that the conduct or cause specified in such
notice is not curable; or (B) upon thirty days' notice from Company, if
Company shall determine that the conduct or cause specified in such notice
is curable, unless Executive has, within ten days after the date such
notice has been given by Company, commenced in good faith to cure the
conduct or cause specified in such notice and has completed such cure
within 30 days following the date of such notice. Termination by Company
of Executive's employment for "good cause" as used in this Agreement shall
be limited to gross negligence or malfeasance by Executive in the
performance of his duties under this Agreement or the voluntary resignation
by Executive prior to expiration of the Term (other than pursuant to a
valid termination of employment by Executive in accordance with Section 12
hereof) as an employee of Company without the prior written consent of
Company.
11
<PAGE>
(b) If Executive's employment is terminated pursuant to Section 11(a)(iii)
above, Executive's rights and Company's obligations hereunder and under all
stock options granted in accordance with this Agreement shall forthwith
terminate in their entirety, except that, notwithstanding the foregoing, (i) the
expiration date of any stock options granted in accordance with this Agreement
shall be 30 days after the date of termination pursuant to Section 11(a)(iii),
and (ii) to the extent that any term or provision of this Agreement shall
expressly state that any such right or obligation shall survive termination of
the Agreement pursuant to Section 11(a)(iii) hereof, it shall so survive.
(c) If a Non-Fault Termination of Executive's employment with Company shall
occur, Executive or his estate shall be entitled to receive a lump sum payment
equal to the sum of (x) the present value (based on Company's then current cost
of borrowing for the remainder of the scheduled Term) of 100% of Executive's
base salary for the balance of the term of this Agreement (the percentage of
Executive's salary to be paid in such lump sum after such present value
calculation being referred to herein as the "PRESENT VALUE PERCENTAGE") and (y)
of an amount equal to $7,500,000 multiplied by the product of (A) the Present
Value Percentage (expressed as a decimal) and (B) the number of fiscal years of
Company in the Term not yet completed at the time of termination. The sum of
clauses (x) and (y) above is hereinafter referred to as the "NON-FAULT PAYMENT".
In addition, in the event of a Non-Fault Termination for any reason other than
death, Executive shall be entitled to receive the Termination Payment. Company
may purchase insurance to cover all or any part of its obligations set forth in
the preceding sentence, and Executive agrees to take a physical examination to
facilitate the obtaining of such insurance. The Non-Fault Payment and
Termination Payment (if applicable) shall be made to Executive
12
<PAGE>
(or to his estate, if applicable) not later than the earlier of (i) 30 days
after the date that such payment shall not be subject to Section 162(m) of the
Code, or (ii) four months after the end of the last fiscal year of Company
during which Executive was employed by Company.
(d) Whenever compensation is payable to Executive hereunder during a time
when he is partially or totally disabled and such disability would entitle him
to disability income or to salary continuation payments from Company according
to the terms of any plan now or hereafter provided by Company or according to
any Company policy in effect at the time of such disability, the compensation
payable to him hereunder shall be inclusive of any such disability income or
salary continuation and shall not be in addition thereto. If disability income
is payable directly to Executive by any insurance company under an insurance
policy paid for by Company, the amounts paid to him by said insurance company
shall be considered to be part of the payments to be made by Company to him
pursuant to this Section 11(d) and shall not be in addition thereto.
12. TERMINATION BY EXECUTIVE
Prior to the expiration of the Term, Executive shall have the right to
terminate his employment under this Agreement upon 30 days' notice to Company
given within 60 days following the occurrence of any of the following events,
provided that Company shall have 20 days after the date such notice has been
given to Company in which to cure the conduct or cause specified in such notice:
13
<PAGE>
(a) Executive is not elected or retained in accordance with Section 2 hereof as
President (reporting to Company's Chairman and Chief Executive Officer) and a
director of Company.
(b) Company shall assign duties to Executive hereunder which are materially
inconsistent with his position as President.
(c) Company shall fail to grant Executive's stock options provided for herein
(other than to the extent provided in the last paragraph of Section 5 hereof) or
shall reduce his salary or shall deny Executive eligibility for annual
discretionary bonuses, or Company shall fail to make any compensation payment
required hereunder.
13. FCC PROVISION
Executive acknowledges that he has been provided by Company with a copy of
Section 508 of the Federal Communications Act of 1934, as amended, relating in
part to receiving or paying consideration for product identification in
television programs, that he is familiar with the provisions thereof and that he
will fully comply therewith during the term of this Agreement. Without limiting
the foregoing, however, and whether or not Section 508 is applicable to his
activities, Executive agrees that he will not, without Company's prior written
consent, accept any compensation or gift from any person, firm or corporation
(other than Company) where such compensation or gift is, or may appear to be, in
consideration of his acting in a particular manner in relation to the business
of such person, firm or corporation.
14
<PAGE>
14. EXCLUSIVE REMEDY
Executive acknowledges and agrees that the Non-Fault Payment and
Termination Payment (if applicable) payable in the event of a Non-Fault
Termination, and the provisions relating to any Non-Fault Termination set forth
in Section 5 hereof regarding stock options (including, if applicable, any
alternative provisions which might be subsequently agreed to in accordance with
Section 5 hereof) are fair and reasonable and shall constitute Executive's sole
and exclusive remedy, in lieu of all rights and claims of Executive, at law or
in equity, for a Non-Fault Termination, including, expressly, for termination of
his employment by Company in a manner which shall constitute a breach of this
Agreement, and for all other rights and claims of any nature whatsoever related
to any such termination, and Executive hereby irrevocably waives all rights and
claims of any nature whatsoever in respect of any such termination except for
such Non-Fault Payment, Termination Payment (if applicable) and provisions
relating to stock options. Such payments shall not be limited or reduced by
amounts Executive might earn or be able to earn from any other employment or
ventures during the remainder of the scheduled Term following a Non-Fault
Termination.
15. ASSIGNMENT
Company may assign this Agreement or all or any part of its rights
hereunder to any entity that succeeds to all or substantially all of Company's
assets or that holds, directly or indirectly, all or substantially all of the
capital stock of Company or that is otherwise a successor in interest to Company
generally, and this Agreement shall inure to the benefit of, and be binding
upon, such assignee or successor in interest. This Agreement is personal to
15
<PAGE>
Executive and Executive may not, without the express written permission of
Company, assign or pledge any rights or obligations hereunder to any person,
firm, corporation or other entity.
16. NO CONFLICT WITH PRIOR AGREEMENTS
Executive represents and warrants to Company that neither his commencement
of employment hereunder nor the performance of his duties hereunder conflicts
with any contractual commitment on his part to any third party or violates or
interferes with any rights of any third party.
17. CERTAIN PAYMENTS
The parties believe that the payments to Executive hereunder do not
constitute "Excess Parachute Payments" under Section 280G of the Code.
Notwithstanding such belief, if any payment or benefit under this Agreement is
determined to be an "Excess Parachute Payment" Company shall pay Executive an
additional amount ("Tax Payment") such that (x) the excess of all Excess
Parachute Payments (including payments under this sentence) over the sum of
excise tax thereon under Section 4999 of the Code and income tax thereon under
Subtitle A of the Code and under applicable state law is equal to (y) the excess
of all Excess Parachute Payments (excluding payments under this sentence) over
income tax thereon under Subtitle A of the Code and under applicable state law.
18. KEY MAN INSURANCE
Company shall have the right to secure, in its own name or otherwise, and
at its own expense, life, disability, accident or other insurance covering
16
<PAGE>
Executive and Executive shall have no right, title or interest in or to such
insurance. Executive shall assist Company in procuring such insurance by
submitting to reasonable examinations and signing such applications and other
instruments as may be required by the insurance carriers to which application is
made for any such insurance.
19. POST-TERMINATION OBLIGATIONS
After the expiration or earlier termination of Executive's employment
hereunder for any reason whatsoever, Executive shall not either alone or
jointly, with or on behalf of others, either directly or indirectly, expressly
or impliedly, whether as principal, partner, agent, shareholder, director,
employee, consultant or otherwise, at any time during a period of two years
following such expiration or termination, solicit in any manner whatsoever the
employment or engagement of, either for his own account or for any other person,
firm, company or other entity, any person who is employed by Company or any
affiliated entity, whether or not such person would commit any breach of his
contract of employment by reason of his leaving the service of Company or any
affiliated entity.
20. ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.
(a) This Agreement supersedes all prior and/or contemporaneous agreements
and/or statements, whether written or oral, concerning the terms of Executive's
employment, and no amendment or modification of this Agreement shall be binding
unless set forth in a writing signed by Company and Executive. No waiver by
either party of any breach by the other party of any provision or condition of
this Agreement shall be effective unless in writing and signed by the party
effecting the waiver, and no such waiver shall be
17
<PAGE>
deemed a waiver of any similar or dissimilar provision or condition at the same
or any prior or subsequent time.
(b) Nothing herein contained shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement and any present or future statute, law,
ordinance or regulation, the latter shall prevail, but in such event the
provision of this Agreement affected shall be curtailed and limited only to the
extent necessary to bring it within legal requirements.
(c) This Agreement does not constitute a commitment of Company with regard
to Executive's employment, express or implied, other than to the extent
expressly provided for herein. Upon expiration of the Term, it is the
contemplation of both parties that Executive's employment with Company shall
cease unless an employment agreement with respect to such subsequent period
shall have been entered into, and that neither Company nor Executive shall have
any obligation to the other with respect to continued employment. In the event
that Executive's employment continues for any period of time following the
stated expiration of the Term, unless and until agreed to in a new subscribed
written document, such employment or any continuation thereof is "at will," and
may be terminated without obligation at any time by either party's giving notice
to the other.
(d) Company shall have the right but not the obligation to use Executive's
name or likeness for any publicity or advertising purpose during the term of
Executive's employment with Company. Company is under no obligation to accord
Executive credit for any production.
18
<PAGE>
(e) All payments required to be made to Executive hereunder, whether during
the term of his employment hereunder or otherwise, shall be subject to all
applicable federal, state and local tax withholding laws.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of California. In the event of any controversy or claim
by either party hereunder the prevailing party in any final and legally binding
adjudication (as to which all periods for the filing of any appeal have expired)
with respect to such controversy or claim shall be entitled to reimbursement
from the losing party for reasonable attorney's fees and costs and for all other
reasonable expenses of such adjudication.
21. NOTICES
All notices that either party is required or may desire to give the other
shall be in writing shall be effective (i) upon personal delivery or (ii) three
business days after deposit of same with the United States Postal Service for
delivery by certified mail, return receipt requested, addressed to the party to
be given notice as follows:
To Company: 500 South Buena Vista Street
Burbank, California 91521
Attn: Chairman and Chief Executive Officer
To Executive: Michael S. Ovitz
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
19
<PAGE>
With copies to: Robert L. Adler, Esq.
Munger, Tolles & Olson
355 South Grand Avenue, 35th Floor
Los Angeles, California 90071
and
Michael A. Rubel, Esq.
Del, Rubel, Shaw, Mason & Derin
2029 Century Park East, Suite 3910
Los Angeles, California 90067-3025
Either party may by written notice designate a different address for giving
of notices. The date of mailing of any such notices shall be deemed to be the
date on which such notice is given.
22. HEADINGS
The headings set forth herein are included solely for the purpose of
identification and shall not be used for the purpose of construing the meaning
of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE WALT DISNEY COMPANY
/s/ MICHAEL S. OVITZ By: /s/ MICHAEL D. EISNER
- - -------------------- ---------------------------------------
Michael S. Ovitz Title: Chairman and Chief Executive Officer
20
<PAGE>
EXHIBIT 10(m)
1996 CASH BONUS PERFORMANCE PLAN FOR
ELIGIBLE EXECUTIVE OFFICERS OF DC HOLDCO, INC.
PURPOSE OF PLAN
The purpose of the Plan is to promote the success of the Company by
providing to participating executives bonus incentives that qualify as
performance-based compensation within the meaning of Section 162(m) of the Code.
DEFINITIONS AND TERMS
2.1 ACCOUNTING TERMS. Except as otherwise expressly provided or the
context otherwise requires, financial and accounting terms are used as defined
for purposes of, and shall be determined in accordance with, generally accepted
accounting principles, as from time to time in effect, as applied and reflected
in the consolidated financial statements of the Company, prepared in the
ordinary course of business.
2.2 SPECIFIC TERMS. The following words and phrases as used herein
shall have the following meanings unless a different meaning is plainly required
by the context:
"BASE SALARY" means the aggregate base annualized salary of a
Participant from the Company and all affiliates of the Company at the time of
the adoption of the Plan, or when the Participant first becomes eligible to
participate (if after that time), exclusive of any commissions or other actual
or imputed income from any Company-provided benefits or perquisites, but prior
to any reductions for salary deferred pursuant to any deferred compensation plan
or for contributions to a plan qualifying under Section 401(k) of
<PAGE>
the Code or contributions to a cafeteria plan under Section 125 of the Code.
"BASE SALARY MULTIPLE" means an amount equal to 10 times Base Salary.
"BONUS" means a cash payment or payment opportunity as the context
requires.
"BUSINESS CRITERIA" means one or any combination of Net Income, Return
on Equity, or Return on Assets.
"CAPCITIES ACQUISITION" means the pending acquisition of Capital
Cities/ABC, Inc.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the Committee established to administer the Plan in
accordance with Section 3.1 and Section 162(m) of the Code.
"COMPANY" means DC Holdco, Inc. and any successor, whether by merger,
ownership of all or substantially all of its assets, or otherwise.
"ELIGIBLE EXECUTIVE" means an Executive described in Section 4.4.
"EXECUTIVE" means a person who is or on the effective date of the
CapCities Acquisition will be an "executive officer" as defined in Rule 3b-7
under the Securities Exchange Act of 1934.
"NET INCOME" means the consolidated net income of the Company, as
reported in the audited financial statements of the Company for the Year,
subject to any adjustments required or permitted by the Plan.
"PARTICIPANT" means an Eligible Executive selected to participate in
the Plan by the Committee.
"PERFORMANCE TARGET(S)" means the specific objective goal or goals
(which may be cumulative and/or alternative) that are timely established in
writing by the
2
<PAGE>
Committee for each Executive for the Year in respect of any one or more of the
Business Criteria.
"PLAN" means the 1996 Cash Bonus Performance Plan for Eligible
Executive Officers of the Company, as amended from time to time.
"RETURN ON ASSETS" means Net Income divided by the average of the
total assets of the Company at the end of the four fiscal quarters of the Year,
as reported by the Company in its consolidated financial statements.
"RETURN ON EQUITY" means the Net Income divided by the average of the
common stockholders equity of the Company at the end of each of the four fiscal
quarters of the Year, as reported by the Company in its consolidated financial
statements.
"SECTION 162(m)" means Section 162(m) of the Code, and the regulations
promulgated thereunder, all as amended from time to time.
"TWDC" means The Walt Disney Company.
"YEAR" means the Company's 1996 fiscal year (including the operations
during such fiscal year of its predecessor, TWDC), which represents the
applicable performance period.
ADMINISTRATION OF THE PLAN
3.1 THE COMMITTEE. Prior to the time the Company becomes a public
company, the decision to establish the Plan, the selection of applicable
Business Criteria and Performance Target(s) and the selection of Participants
shall be made by the Compensation Committee of the Board of Directors of TWDC.
Thereafter, the Plan shall be administered by a Committee consisting of at least
three members of the Board of Directors of the Company, duly authorized by the
Board of Directors of the Company to administer the Plan, who (i) are not
eligible to participate in the Plan and (ii) are "outside directors" (within the
meaning of Section 162(m), including applicable transition provisions).
3
<PAGE>
3.2 POWERS OF THE COMMITTEE. The Committee shall have the sole
authority to establish and administer the Performance Target(s) and the
responsibility of determining from among the Eligible Executives those persons
who will participate in and receive Bonuses under the Plan and the amount of
such Bonuses and shall otherwise be responsible for the administration of the
Plan, in accordance with its terms. The Committee shall have the authority to
construe and interpret the Plan and any agreement or other document relating to
any Bonus under the Plan, may adopt rules and regulations governing the
administration of the Plan, and shall exercise all other duties and powers
conferred on it by the Plan, or which are incidental or ancillary thereto.
3.3 REQUISITE ACTION. A majority (but not fewer than two) of the
members of the Committee shall constitute a quorum. The vote of a majority of
those present at a meeting at which a quorum is present or the unanimous written
consent of the Committee shall constitute action by the Committee.
3.4 EXPRESS AUTHORITY (AND LIMITATIONS ON AUTHORITY) TO CHANGE TERMS
AND CONDITIONS OF BONUS. Without limiting the Committee's authority under other
provisions of the Plan, but subject to any express limitation of the Plan, the
Committee shall have the authority to accelerate a Bonus and to waive
restrictive conditions for a Bonus (including forfeiture conditions, but not
Performance Target(s)), in such circumstances as the Committee deems
appropriate.
4. BONUS PROVISIONS.
4.1 PROVISION FOR BONUS. Each Participant may receive a Bonus if and
only if the Performance Target(s) established by the Committee, relative to the
applicable Business Criteria, are attained. The applicable Performance
Target(s) shall be determined by the Committee consistent with the terms of the
Plan and Section 162(m). Notwithstanding the fact that the Performance
Target(s) have been attained, the Company may pay a Bonus of less than the
amount determined by the formula or standard established pursuant to Section 4.2
or may pay no Bonus at all.
4
<PAGE>
4.2 SELECTION OF PERFORMANCE TARGET(S). The specific Performance
Target(s) with respect to the Business Criteria must be established by the
Committee in advance of the deadlines applicable under Section 162(m) and while
the performance relating to the Performance Target(s) remains substantially
uncertain within the meaning of Section 162(m). At the time the Performance
Target(s) are selected, the Committee shall provide, in terms of an objective
formula or standard for each Participant, the method of computing the specific
amount that will represent the maximum amount of Bonus payable to the
Participant if the performance Target(s) are attained, subject to Sections 4.1,
4.7, 5.1 and 5.8.
4.3 MAXIMUM INDIVIDUAL BONUS. Notwithstanding any other provision
hereof, no Executive shall receive a Bonus under the Plan for the Year in excess
of the lesser of $10 million or his or her Base Salary Multiple.
4.4 ELIGIBLE CLASS OF PARTICIPANTS. Eligible Executives include only
Executives at or above the level of Executive Vice President, including the Vice
Chairman, but excluding the Chairman and Chief Executive Officer (whose annual
bonus is set by the terms of this employment agreement).
4.5 EFFECT OF MID-YEAR COMMENCEMENT OF SERVICE. To the extent
compatible with Sections 4.2 and 5.8, if services as an Executive commence after
the adoption of the Plan and the Performance Target(s) are established, the
Committee may grant a Bonus that is proportionately or otherwise adjusted based
on objective factors to take into account the period of actual service.
4.6 CHANGES RESULTING FROM MATERIAL ACQUISITIONS, DISPOSITIONS OR
RECAPITALIZATIONS; EXTRAORDINARY ITEMS; ACCOUNTING CHANGES. Subject to Section
5.8, in the event of a material change in accounting assumptions, principles or
practices after the Performance Target(s) are established, which change affects
the Year's results relative to the Business Criteria, or in the event of a
recapitalization, restructuring, merger, combination, consolidation, change in
capitalization or capital structure or other reorganization (except for the
CapCities Acquisition which will be taken into account by the Committee in
setting the Performance
5
<PAGE>
Target(s) for the Year), or any extraordinary dividend or other extraordinary
distribution (whether in the form of cash, securities or other property) or
acquisition, or other extraordinary event out of the ordinary course of business
in respect of or materially affecting the applicable Business Criteria, then the
Committee may, in the manner and to the extent, if any, it deems appropriate and
equitable to the Participants and consistent with the terms of the Plan,
proportionately adjust any or all of the Performance Target(s), based solely on
objective criteria, so as to neutralize, in the Committee's best judgment, the
effect of the change on the applicable pre-established Performance Target(s) for
the Year.
4.7 COMMITTEE DISCRETION TO DETERMINE BONUSES. The Committee has the
sole discretion to determine the standard or formula pursuant to which each
Participant's Bonus shall be calculated (in accordance with Section 4.2),
whether all or any portion of the amount so calculated will be paid, and the
specific amount (if any) to be paid to each Participant, subject in all cases to
the terms, conditions and limits of the Plan. The Committee may at any time
establish such additional conditions and terms of payment of Bonuses (including
but not limited to the achievement of other financial, strategic or individual
goals, which may be objective or subjective) as it may deem desirable in
carrying out the purposes of the Plan and may take into account such other
factors as it deems appropriate in administering any aspect of the Plan. The
Committee may not, however, increase the maximum amount permitted to be paid to
any individual under Section 4.2 or 4.3 of the Plan.
4.8 COMMITTEE CERTIFICATION. No Executive shall receive any payment
under the Plan unless the Committee has certified, by resolution or other
appropriate action in writing, that the amount thereof has been accurately
determined in accordance with the terms, conditions and limits of the Plan and
that the Performance Target(s) and any other material terms previously
established by the Committee or set forth in the Plan were in fact satisfied.
4.9 TIME OF PAYMENT. Subject to Section 4.8, Bonuses granted by the
Committee under Section 4.8 of the Plan shall be paid as and when determined by
the Committee. Any such payment shall be in cash or cash equivalent,
6
<PAGE>
subject to applicable withholding requirements. The Committee, in its sole
discretion, may defer, with any conditions it deems appropriate, the payout or
vesting of any Bonus.
GENERAL PROVISIONS
5.1 NO RIGHT TO BONUS OR CONTINUED EMPLOYMENT. Neither the
establishment of the Plan nor the provision for or payment of any amounts
hereunder nor any action of the Company, TWDC, the Board of Directors of either
of them or the Committee in respect of the Plan, shall be held or construed to
confer upon any person any legal right to receive, or any interest in, a Bonus
or any other benefit under the Plan, or any legal right to be continued in the
employ of the Company. TWDC and the Company expressly reserve any and all
rights to discharge an Executive in its sole discretion, without liability of
any person, entity or governing body under the Plan or otherwise.
Notwithstanding any other provision hereof and notwithstanding the fact that the
Performance Target(s) have been attained and/or the individual maximum amounts
pursuant to Section 4.2 have been calculated, the Company shall have no
obligation to pay any Bonus hereunder nor to pay the maximum amount so
calculated.
5.2 DISCRETION OF COMPANY, BOARD OF DIRECTORS AND COMMITTEE. Any
decision made or action taken by the Company or TWDC, the Board of Directors of
the Company or TWDC or by the Committee arising out of or in connection with the
construction, administration, interpretation and effect of the Plan shall be
within the absolute discretion of such entity and shall be conclusive and
binding upon all persons. No member of the Committee shall have any liability
for actions taken or omitted under the Plan by the member or any other person.
5.3 ABSENCE OF LIABILITY. A member of the Board or Directors of the
Company or TWDC or of the Committee or any officer of the Company or TWDC shall
not be liable for any act or inaction hereunder, whether of commission or
omission.
5.4 NO FUNDING OF PLAN. The Company shall not be required to fund or
otherwise segregate any cash or any
7
<PAGE>
other assets which may at any time be paid to Participants under the Plan. The
Plan shall constitute an "unfunded" plan of the Company. The Company shall not,
by any provisions of the Plan, be deemed to be a trustee of any property, and
any obligations of the Company to any Participant under the Plan shall be those
of a debtor and any rights of any Participant or former Participant shall be
limited to those of a general unsecured creditor.
5.5 NON-TRANSFERABILITY OF BENEFITS AND INTERESTS. Except as
expressly provided by the Committee, no benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action be void and no such
benefit shall be in any manner liable for or subject to debts, contracts,
liabilities, engagements or torts of any Participant or former Participant.
This Section 5.5 shall not apply to an assignment of a contingency or payment
due after the death of the Executive to the deceased Executive's legal
representative or beneficiary.
5.6 LAW TO GOVERN. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of California.
5.7 NON-EXCLUSIVITY. Subject to Section 5.8, the Plan does not limit
the authority of the Company, the Board or the Committee to grant awards or
authorize any other compensation under any other plan or authority, including,
without limitation, awards or other compensation based on the same Performance
Target(s) used under the Plan. In addition, Executives not selected to
participate in the Plan may participate in other plans of the Company.
5.8 SECTION 162(m) CONDITIONS; BIFURCATION OF PLAN. It is the intent
of the Company that the Plan and Bonuses paid hereunder satisfy and be
interpreted in a manner, that, in the case of Participants who are or may be
persons whose compensation is subject to Section 162(m), satisfies any
applicable requirements as performance-based compensation. Any provision,
application or interpretation of the Plan inconsistent with this intent to
satisfy the standards in Section 162(m) of the Code shall be
8
<PAGE>
disregarded. Notwithstanding anything to the contrary in the Plan, the
provisions of the Plan may at any time be bifurcated by the Board or the
Committee in any manner so that certain provisions of the Plan or any Bonus
intended (or required in order) to satisfy the applicable requirements of
Section 162(m) are only applicable to persons whose compensation is subject to
Section 162(m).
AMENDMENTS, SUSPENSION OR TERMINATION OF PLAN
The Board of Directors or the Committee may from time to time amend,
suspend or terminate in whole or in part, and if suspended or terminated, may
reinstate, any or all of the provisions of the Plan. Notwithstanding the
foregoing, no amendment may be effective without Board of Directors and/or
shareholder approval if such approval is necessary to comply with the applicable
rules of Section 162(m) of the Code.
9
<PAGE>
EXHIBIT 10(s)
DISNEY SALARIED
SAVINGS AND INVESTMENT PLAN
As Amended and Restated
Effective
January 1, 1987
<PAGE>
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PREAMBLE. I
ARTICLE 1 DEFINITIONS
SECTION
- - -------
<S> <C> <C>
1.01. ADJUSTMENT FACTOR 1
1.02. AFFILIATED EMPLOYER 1
1.03. AFTER-TAX ACCOUNT 1
1.04. AGGREGATE ACCOUNT 2
1.05. BENEFICIARY 2
1.06. BOARD OF DIRECTORS 3
1.07. BREAK IN SERVICE 3
1.08. CODE 4
1.09. COMMITTEE 4
1.10. COMPANY 4
1.11. COMPANY STOCK 4
1.12. COMPENSATION 5
1.13. COVERED EMPLOYEE 6
1.14. EFFECTIVE DATE 7
1.15. ELIGIBILITY COMPUTATION PERIOD 7
1.16. ELIGIBLE EMPLOYEE 7
1.17. EMPLOYEE 8
1.18. EMPLOYER 8
1.19. EMPLOYMENT COMMENCEMENT DATE 8
1.20. ENROLLMENT DATE 8
1.21. ERISA 9
1.22. HIGHLY COMPENSATED EMPLOYEE 9
1.23. HOUR OF SERVICE 11
1.24. INCOME 16
1.25. LEASED EMPLOYEE 16
1.26. LEAVE OF ABSENCE 16
1.27. MATCHING ACCOUNT 17
1.28. MATCHING CONTRIBUTION 17
1.29. MAXIMUM COMPENSATION LIMITATION 17
1.30. PARTICIPANT 19
1.31. PLAN 20
1.32. PLAN YEAR 20
1.33. REEMPLOYMENT COMMENCEMENT DATE 20
1.34. RULE OF PARITY 20
1.35. ROLLOVER ACCOUNT 21
</TABLE>
i
<PAGE>
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTINUED PAGE
----
<S> <C> <C>
1.36. ROLLOVER CONTRIBUTION 21
1.37. SECTION 415 COMPENSATION 21
1.38. SECTION 402(G) LIMIT 23
1.39. SPECIAL ACCOUNT 24
1.40. SPECIAL CONTRIBUTION 25
1.41. SPOUSAL CONSENT 25
1.42. TAX-DEFERRED ACCOUNT 26
1.43. TAX-DEFERRED CONTRIBUTIONS 26
1.44. TRUST AGREEMENT 26
1.45. TRUST FUND 26
1.46. TRUSTEE 26
1.47. VALUATION DATE 27
1.48. VALUATION PERIOD 27
ARTICLE 2 PARTICIPATION
2.01. ELIGIBILITY 28
2.02. PARTICIPATION 28
2.03. REEMPLOYMENT OF FORMER EMPLOYEES AND FORMER
PARTICIPANTS 29
2.04. TRANSFERRED PARTICIPANTS 29
2.05 TERMINATION OF EMPLOYMENT AND TERMINATION
OF PARTICIPATION 30
ARTICLE 3 CONTRIBUTIONS
3.01. TAX-DEFERRED CONTRIBUTIONS 31
3.02. MATCHING CONTRIBUTIONS 33
3.03. SPECIAL CONTRIBUTIONS 34
3.04. DEDUCTIBILITY LIMITATIONS AND FORM OF
CONTRIBUTION 36
3.05. ROLLOVER CONTRIBUTIONS 36
3.06. AFTER-TAX CONTRIBUTIONS 39
3.07. RETURN OF CONTRIBUTIONS 39
ARTICLE 4 ALLOCATIONS
4.01. INDIVIDUAL ACCOUNTS 41
4.02. ACCOUNT ADJUSTMENTS 42
4.03. LIMITATION ON ALLOCATIONS 44
4.04. NO GUARANTEE 44
4.05. ANNUAL STATEMENT OF ACCOUNTS 45
</TABLE>
ii
<PAGE>
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTINUED PAGE
----
<S> <C> <C>
ARTICLE 5 VESTING
5.01. NONFORFEITABILITY 46
5.02. SUSPENSION OF BENEFITS 46
ARTICLE 6 DISTRIBUTIONS
6.01. WITHDRAWALS FROM AFTER-TAX ACCOUNT 47
6.02. LOANS TO ACTIVE PARTICIPANTS 47
6.03. HARDSHIP WITHDRAWALS 52
6.04. DISTRIBUTIONS ON ACCOUNT OF TERMINATION OF
EMPLOYMENT 56
6.05 RESTRICTIONS AND REQUIREMENTS ON DISTRIBUTIONS 60
6.06 METHOD OF PAYMENT FOR ELIGIBLE ROLLOVER
DISTRIBUTIONS 65
6.07 RECAPTURE OF PAYMENTS 70
ARTICLE 7 INVESTMENT ELECTIONS AND VOTING OF COMPANY STOCK
7.01 INVESTMENT OPTIONS 72
7.02 VOTING OF COMPANY STOCK 80
ARTICLE 8 ADMINISTRATION OF PLAN
8.01 APPOINTMENT OF PLAN COMMITTEE 82
8.02 DUTIES OF COMMITTEE 82
8.03 MEETINGS 83
8.04 QUORUM 83
8.05 COMPENSATION AND BONDING 84
8.06 ESTABLISHMENT OF RULES AND INTERPRETATION
OF PLAN 84
8.07 PRUDENT CONDUCT 84
8.08 SERVICE IN MORE THAN ONE FIDUCIARY CAPACITY 85
8.09 LIMITATION OF LIABILITY 85
8.10 INDEMNIFICATION 86
8.11 EXPENSES OF ADMINISTRATION 86
8.12 CLAIMS PROCEDURES 87
ARTICLE 9 MANAGEMENT OF FUNDS
9.01 TRUST AGREEMENT 89
9.02 EXCLUSIVE BENEFIT RULE 89
9.03 COMMITTEE POWER AND DUTIES 90
</TABLE>
iii
<PAGE>
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTINUED PAGE
----
ARTICLE 10 GENERAL PROVISIONS
<S> <C> <C>
10.01 NONALIENATION 93
10.02 NO CONTRACT OF EMPLOYMENT 94
10.03 FACILITY OF PAYMENT 95
10.04 INFORMATION 95
10.05 CONSTRUCTION 96
10.06 PROOF OF DEATH AND RIGHT OF BENEFICIARY
OR OTHER PERSON 96
10.07 FAILURE TO LOCATE RECIPIENT 97
ARTICLE 11 AMENDMENT, MERGER AND TERMINATION
11.01 AMENDMENT OF PLAN 98
11.02 MERGER OR CONCLUSION 100
11.03 ADDITIONAL PARTICIPATING EMPLOYERS 101
11.04 TERMINATION OF PLAN 102
11.05 DISTRIBUTION OF ASSETS ON PLAN TERMINATION
OR A COMPLETE DISCONTINUANCE OF CONTRIBUTIONS 102
11.06 NOTIFICATION OF TERMINATION 104
11.07 CHANGE IN CONTROL 104
ARTICLE 12 TOP-HEAVY PROVISIONS
12.01 PRIORITY OVER OTHER PLAN PROVISIONS 106
12.02 DEFINITIONS USED IN THIS ARTICLE 106
12.03 MINIMUM ALLOCATION 112
12.04 MODIFICATION OF AGGREGATE BENEFIT LIMIT 115
12.05 MINIMUM VESTING 117
ARTICLE 13 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
TO PARTICIPANT'S ACCOUNTS
13.01 PRIORITY OVER OTHER CONTRIBUTIONS AND
ALLOCATION PROVISIONS 118
13.02 DEFINITIONS USED IN THIS ARTICLE 118
13.03 GENERAL ALLOCATION LIMITATION 129
13.04 EXCESS ALLOCATIONS 129
13.05 AGGREGATE BENEFIT LIMITATION 133
13.06 NO CONFLICT WITH CODE SECTION 415 134
13.07 LIMITATION ON DEFERRAL CONTRIBUTIONS 135
13.08 LIMITATION ON MATCHING CONTRIBUTIONS 138
13.09 AGGREGATION RULES 139
</TABLE>
iv
<PAGE>
PREAMBLE
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
The Disney Salaried Savings and Investment Plan (the "Plan") was originally
adopted, effective May 1, 1984, by The Walt Disney Company ("Company") by
authorization of the Board of Directors of its predecessor, Walt Disney
Productions, to provide a retirement savings vehicle for certain salaried
employees of the Company and such other participating companies as approved by
the Company as described in Section 11.03. The Plan was subsequently amended
and restated effective June 1, 1990, but the June 1, 1990 restatement did not
contain revisions necessary to bring the Plan into compliance with the Tax
Reform Act of 1986 and subsequent legislation. The June 1, 1990 restatement did
contain provisions contemplating that a portion of the Plan be designated as a
stock bonus plan (assigned plan number 012) in the event the Company determined,
at some future date, to include employee stock ownership plan ("ESOP") features
(as defined in Internal Revenue Code Section 4975(e)(8) and 409(l)) into the
Plan. In 1994, the Company decided that it did not intend to adopt an ESOP in
the near future so that the ESOP provisions have been eradicated from the Plan
document contained herein.
Retroactively effective as of January 1, 1987, Disney has amended and restated
the Plan, as set forth herein, to meet the
i
<PAGE>
requirements of the Tax Reform Act of 1986 and subsequent federal legislation
and regulations and to make other clarifying and desirable revisions. The Plan,
as set forth herein is intended to qualify as a profit sharing plan with a cash
or deferred arrangement under Sections 401(a) and 401(k) of the Internal Revenue
Code. Although the Plan is intended to qualify as a profit sharing plan,
employer contributions hereunder may be made without regard to profits.
The provisions of this Plan shall apply only to an employee who terminates
employment with the employers on or after the Effective Date. A former
employee's eligibility for benefits and the amount of benefits, if any, payable
to or on behalf of a former employee shall be determined in accordance with the
provisions of the Plan in effect on the date his employment terminated. The
benefit payable to or on behalf of a Participant included under the Plan in
accordance with the following provisions shall not be affected by the terms of
any amendment to the Plan adopted after such Participant's employment
terminates, unless the amendment expressly provides otherwise.
ii
<PAGE>
DISNEY SALARIED SAVINGS
AND INVESTMENT PLAN
EFFECTIVE JANUARY 1, 1987
Article 1. Definitions
- - --------- -----------
1.01. "ADJUSTMENT FACTOR" means the cost of living adjustment factors
prescribed by the Secretary of the Treasury under Section 415(d) of
the Code applied to such items and in such manner as the Secretary
shall provide.
1.02. "AFFILIATED EMPLOYER" means any company not participating in the Plan
which is a member of a controlled group of corporations (determined
under Section 1563(a) of the Code without regard to Section 1563(a)(4)
and (e)(3)(C)) with The Walt Disney Company or any trade or business
under common control (as defined in Section 414(c) of the Code) with
The Walt Disney Company, or a member of an affiliated service group
(as defined in Section 414(m) of the Code) which includes The Walt
Disney Company.
1.03. "AFTER-TAX ACCOUNT" means the account maintained for a Participant to
record his after-tax contributions made to the Plan prior to January
1, 1987 and adjustments relating thereto.
1
<PAGE>
1.04. "AGGREGATE ACCOUNT" means the records, including subaccounts,
maintained by the Committee in the manner provided hereunder to
determine the interest of each Participant in the assets of the Plan
and may refer to any or all of the accounts which a Participant may
have under this Plan namely, a Tax-Deferred Account, a Matching
Account, a Rollover Account, a Special Account or an After-Tax
Account.
1.05. "BENEFICIARY" means any person, persons or entity named by a
Participant by written designation filed with the Committee to receive
benefits payable in the event of the Participant's death, provided
that if the Participant is married and he designates other than his
spouse as the Beneficiary, he obtains Spousal Consent. If any
Participant fails to designate a Beneficiary, or if the Beneficiary
designated by a deceased Participant died before him, then the
Beneficiary shall be deemed to be the Participant's surviving spouse,
or if none then the benefits will be paid in accordance with the
following order of priority:
(a) the Participant's children (equally), or if none;
(b) the Participant's parents (equally), or if none;
2
<PAGE>
(c) the Participant's brothers and sisters, (equally), or if none;
(d) the Participant's estate.
1.06. "BOARD OF DIRECTORS" means the Board of Directors of The Walt Disney
Company.
1.07. "BREAK IN SERVICE" means an Eligibility Computation period during
which an Employee has been credited with less than 501 Hours of
Service. Solely for the purpose of determining whether an Employee has
incurred a Break in Service, Hours of Service shall also include hours
granted, on the basis of forty-five (45) hours per week, for periods
during which an Employee is on an approved Leave of Absence.
If an Employee is absent from work because of such Employee's
pregnancy, the birth of a child, placement of an adopted child, or
caring for an adopted or natural child following birth or placement,
the individual shall not be treated as having incurred a Break in
Service in the Eligibility Computation Period in which the absence
begins or, if the individual would
3
<PAGE>
not otherwise have suffered a Break in Service during that Eligibility
Computation Period, in the next following Eligibility Computation
Period. The Committee may require that a Employee file a written
request to receive Hours of Service credit under this paragraph.
Unless otherwise determined by the Committee or an Employer's
personnel practices, an Employee who is absent from work for the
reasons described in this paragraph shall be deemed to have terminated
employment for all purposes of this Plan other than the special Break
in Service rule in this paragraph.
1.08. "CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
1.09. "COMMITTEE" means the Committee appointed by the Board of Directors to
administer the Plan in accordance with Article 8, and to have such
additional powers as provided elsewhere in the Plan.
1.10. "COMPANY" means The Walt Disney Company.
1.11. "COMPANY STOCK" means common stock of The Walt Disney Company.
4
<PAGE>
1.12. "COMPENSATION" means an Employee's base pay (excluding overtime,
bonuses, relocation reimbursement, stock options, or other
extraordinary payments as determined by the Committee) paid during the
calendar year by the Employer in return for the Employee's services.
Compensation does not include:
(a) Employer contributions to any pension plan other than
contributions caused by an Employee's salary deferral reduction
pursuant to Section 401(k) of the Code;
(b) Employer contributions to this Plan or any other plan of deferred
compensation maintained by an Employer other than Tax-Deferred
Contributions;
(c) Fringe benefits not taxable to the Employee;
(d) Payments to or on behalf of an individual after he is no longer
an Employee;
(e) Salary deferral reductions pursuant to a Cafeteria Plan as
described in Section 125 of the Code;
5
<PAGE>
(f) Imputed life insurance and all other forms of imputed income.
Compensation shall not, for Plan purposes, exceed the Maximum
Compensation Limitation .
1.13. "COVERED EMPLOYEE" means an Employee who:
(a) Is employed by an Employer;
(b) Receives Compensation in the form of a salary (as distinguished
from hourly-paid Employees), whether or not such Employee is
exempt for wage-and-hour-law purposes;
(c) Is not a member of a collective-bargaining unit that has a
collective bargaining agent, unless the Board of Directors
specifically waives this requirement;
(d) Is not a Leased Employee; and
(e) Is not a non-resident alien with respect to the United States.
6
<PAGE>
1.14. "EFFECTIVE DATE" means January 1, 1987, the date this amended and
restated Plan becomes effective.
1.15. "ELIGIBILITY COMPUTATION PERIOD" means, with respect to an Employee,
the applicable of (a) or (b) as follows:
(a) A 12 consecutive month period commencing on the Employee's
Employment Commencement Date in which he has been credited with
at least 1,000 Hours of Service; or
(b) Plan Year:
In the case of an Employee who is not credited with at least
1,000 Hours of Service in the 12 month period described in
Section 1.15 (a) above, a Plan Year, commencing with the Plan
Year beginning immediately following the Employee's Employment
Commencement Date, in which he has been credited with at least
1,000 Hours of Service. An Employee's Eligibility Computation
Periods are subject to and may be ignored pursuant to the Rule of
Parity.
1.16 "ELIGIBLE EMPLOYEE" means a Covered Employee who has attained age
eighteen and has completed one Eligibility
7
<PAGE>
Computation Period. An Employee is an Eligible Employee on the day
before he satisfies the requirements of Article 2 of the Plan.
1.17 "EMPLOYEE" means any person receiving compensation for services
rendered to an Employer or an Affiliated Employer, whose compensation
is subject to withholding of income tax and/or for whom Social
Security contributions are made by an Employer, including any Leased
Employee but excluding any person who serves solely as a director or
independent contractor.
1.18 "EMPLOYER" means the Company and any subsidiary or affiliated company
which, with the approval of the Company, adopts this Plan as described
in Section 11.03.
1.19 "EMPLOYMENT COMMENCEMENT DATE" means the first date as of which an
Employee is credited with an Hour of Service for an Employer or an
Affiliated Employee.
1.20 "ENROLLMENT DATE" means the first day of the calendar month after an
Employee becomes an Eligible Employee or the beginning of any payroll
period thereafter as of
8
<PAGE>
which the Eligible Employee elects to commence participation in the
Plan.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.22 "HIGHLY COMPENSATED EMPLOYEE" means any Employee of the Employers or
an Affiliated Employer (whether or not eligible for participation in
the Plan) who satisfies one or more of the following criteria:
(a) During the current Plan year or the preceding Plan Year, the
Employee was at any time a 5% owner of an Employer or an
Affiliated Employer.
(b) During the preceding Plan Year, the Employee received:
(i) Section 415 Compensation in excess of $75,000 multiplied by
the Adjustment Factor;
(ii) Section 415 Compensation in excess of $50,000 multiplied by
the Adjustment Factor and was among the highest 20% of
Employees for that year when ranked by Section 415
Compensation
9
<PAGE>
paid for that year excluding, for purposes of determining
the number of such Employees, such Employees as the Company
may determine on a consistent basis pursuant to Section
414(q)(8) of the Code; or
(iii) Section 415 Compensation greater than 50% of the dollar
limitation on maximum benefits under Section 415(b)(1)(A) of
the Code for such Plan Year and was at any time an officer
of an Employer or an Affiliated Employer (subject to the
limitations of Section 414(q) (5) of the Code).
(c) During the current Plan Year, the Employee meets the criteria
under Section 1.22(b)(i), (ii) or (iii) and is one of the 100
highest-paid Employees of an Employer or an Affiliated Employer.
(d) A former Employee who separated from service prior to the current
Plan Year and who was a 5 percent owner for either (i) the year
he separated from service or (ii) any Plan Year ending on or
after the date the Employee attains age 55.
10
<PAGE>
(e) Notwithstanding the foregoing, Employees who are nonresident
aliens and who receive no earned income from an Employer or an
Affiliated Employer which constitutes income from sources within
the United States shall be disregarded for all purposes of this
Section 1.22.
(f) The Committee may elect to determine the status of Highly
Compensated Employees under the simplified snapshot method
described in IRS Revenue Procedure 93-42, or the extent permitted
under regulations, on a current calendar year basis.
(g) The provisions of this Section 1.22 shall be further subject to
such additional requirements as shall be described in Section
414(q) of the Code and its applicable regulations, which shall
override any aspects of this Section 1.22 inconsistent therewith.
1.23 "HOUR OF SERVICE" means, with respect to any applicable computation
period.
(a) An Hour of Service is each hour for which an Employee is paid or
is entitled to payment for the
11
<PAGE>
performance of duties for an Employer or an Affiliated Employer
during the applicable computation period.
(b) An Hour of Service is each hour for which an Employee is paid, or
is entitled to payment, by an Employer or an Affiliated Employer
on account of a period during which no duties are performed
(regardless of whether the employment relationship has
terminated) because of vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or
leave of absence, but
(1) no more than 501 Hours of Service are to be credited under
this subsection (b) to an individual for any single
continuous period during which he performs no duties
(whether or not the period occurs in a single computation
period);
(2) an hour is not credited where an individual directly or
indirectly paid or is entitled to payment because of a
period during which no duties are performed if that payment
is made
12
<PAGE>
or is due under a plan maintained solely for the purpose of
complying with applicable worker's compensation or
unemployment compensation or disability insurance laws; and
(3) Hours of Service will not be credited for a payment that
solely reimburses an individual for medical or medically
related expenses incurred. For purposes of his subsection
(b), a payment is deemed to be made by or be due from an
Employer or an Affiliated Employer regardless of whether it
is made by or due from that entity directly or indirectly
through a trust fund or insurers (among others) to which
that entity contributes or pays premiums and regardless of
whether contributions made or due to the trust fund or
insurer or other funding vehicle are for the benefit of
particular individuals or are on behalf of a group of
individuals in the aggregate.
(c) An Hour of Service is each hour for which back pay, irrespective
of mitigation of damages, is
13
<PAGE>
either awarded or agreed to by an Employer or Affiliated
Employer. The same Hours of Service must not be credited both
under subsection (a) or (b) and also under this subsection (c).
Thus, for example, if an individual receives a back-pay award
following a determination that he was paid at an unlawful rate
for Hours of Service previously credited, he is not entitled to
additional credit for the same Hours of Service. Crediting of
Hours of Service for back pay awarded or agreed to with respect
to periods described in subsection (b) is subject to the
limitations set forth in that subsection. For example, no more
than 501 Hours of Service are required to be credited for
payments of back pay, to the extent that the back pay is awarded
or agreed to for a period of time during which an individual did
not or would not have performed duties.
(d) For determining Hours of Service for reasons other than the
performance of duties, the special rule provided in 29 C.F.R.
section 2530.200b-2(b) is incorporated by reference. That rule
provides that Hours of Service are credited on the basis of the
number of hours in the individual's regular
14
<PAGE>
work schedule or, in the case of a payment not calculated by
units or time, by dividing the payment in question by the
individual's most recent hourly rate of pay.
(e) For purposes of crediting Hours of Service to computation
periods, the special rule provided in 29 C.F.R. section
2530.200b-2(c) is incorporated by reference. That rule provides
that Hours of Service are credited to an individual in the
computation periods covered by the individual's regular work
schedule during the period of nonperformance.
(f) The determination of Hours of Service must be made from records
of hours worked and hours for which payment is made or due.
(g) For purpose of determining Hours of Service credited each
Employee must be credited with at least forty-five Hours of
Service for each week for which he would be required to be
credited with at least one Hour of Service under subsection (a).
15
<PAGE>
(h) An Employee who has Leave of Absence due to military service
shall receive Hours of Service credit in accordance with
applicable Federal veteran's laws.
1.24 "INCOME" means the net gain or loss of the Trust Fund from
investments, as reflected by interest payments, dividends, realized
and unrealized gains and losses on securities, other investment
transactions and expenses paid from the Trust Fund. In determining the
Income of the Trust Fund as of any date, assets shall be valued on the
basis of their then fair market value.
1.25 "LEASED EMPLOYEE" means any person as so defined in Section 414(n) of
the Code.
1.26 "LEAVE OF ABSENCE" means an absence authorized by an Employer or an
Affiliated Employer under its standard personnel practices as applied
in a uniform and nondiscriminatory manner to all persons similarly
situated, provided that the Employee resumes employment with the
Employer or an Affiliated Employer within the period specified in the
authorization of the Leave of Absence. An absence due to service in
the Armed Forces of the United States shall be considered an
authorized
16
<PAGE>
Leave of Absence provided that the Employee complies with all of the
requirements of Federal law in order to be entitled to reemployment
and provided further that the Employee returns to employment with an
Employer or an Affiliated Employer within the period provided by such
law.
1.27 "MATCHING ACCOUNT" means the account maintained for a Participant to
record Matching Contributions made on his behalf pursuant to Section
3.02 and adjustments relating thereto.
1.28 "MATCHING CONTRIBUTION" means the Employer Matching Contribution made
to the Plan on behalf of a Participant pursuant to Section 3.02.
1.29 "MAXIMUM COMPENSATION LIMITATION" means, effective on or after January
1, 1989, and before January 1, 1994, $200,000 per year. As of January
1 of each calendar year on and after January 1, 1990, and before
January 1, 1994, the Maximum Compensation Limitation as determined by
the Commissioner of Internal Revenue for the calendar year shall
become effective as the Maximum Compensation Limitation taken into
account for Plan purposes for the Plan Year beginning within that
17
<PAGE>
calendar year in lieu of the $200,000 limitation set forth above.
Commencing January 1, 1994, the Maximum Compensation Limitation means
$150,000 per year. If for any calendar year after 1994, the cost-of-
living adjustment described in the following sentence is equal to or
greater than $10,000, then the Maximum Compensation Limitation (as
previously adjusted hereunder) for any Plan Year beginning in any
subsequent calendar year shall be increased by the amount of such
cost-of-living adjustment, rounded to the next lowest multiple of
$10,000. The cost-of-living adjustment shall equal the excess of (i)
$150,000 increased by the adjustment made under Section 415(d) of the
Code of the calendar year, except that the base period for purposes of
Section 415(d)(1)(A) of the Code shall be the calendar quarter
beginning October 1, 1993, over (ii) the Maximum Compensation
Limitation in effect for the Plan Year beginning in the calendar year.
In determining a Participant's compensation for purposes of the
Maximum Compensation Limitation, if any individual is a member of the
family of a 5-percent owner or a Highly Compensated Employee who is in
the
18
<PAGE>
group consisting of the 10 individuals paid the greatest compensation
during the year, then (i) such individual shall not be considered as a
separate employee and (ii) any compensation paid to such individual
(and any applicable benefit on behalf of such individual) shall be
treated as if it were paid to (or on behalf of) the 5-percent owner or
a highly compensated employee; provided, however, that for purposes of
this Section 1.29, the term "family" shall include only the
Participant's spouse and any lineal descendants of the Participant who
have attained age 19 before the close of the year. If, as a result of
the application of the foregoing family aggregation rules, the Maximum
Compensation Limitation is exceeded, then the limit shall be prorated
among the affected individuals in proportion to each such individual's
compensation as determined prior to the application of the Maximum
Compensation Limitation.
1.30 "PARTICIPANT" means any person included for participation in the Plan
as provided in Article 2 and who continues to be entitled to benefits
under the Plan.
19
<PAGE>
1.31 "PLAN" means the Disney Salaried Savings and Investment Plan as set
forth in this document, or as amended from time to time.
1.32 "PLAN YEAR" means the calendar year, except there was a short year
from May 1, 1984 through December 31, 1984 which was the first year of
the Plan.
1.33 "REEMPLOYMENT COMMENCEMENT DATE" means the date an Employee first is
credited with an Hour of Service following a prior Break in Service.
1.34 "RULE OF PARITY" means a rule pursuant to which an Employee who incurs
a Break in Service shall have his Eligibility Computation Periods
which occur prior to such Break in Service ignored or restored. If an
Employee incurs a Break in Service prior to becoming a Participant
hereunder, his Eligibility Computation Periods prior to such Break in
Service shall not be taken into account if the number of consecutive
one year breaks in service equals or exceeds the greater of the
Employee's Eligibility Computation Periods completed prior to the
first such Break in Service or five. Eligibility Computation Periods
previously eliminated by a prior application of this paragraph
20
<PAGE>
shall not be counted for purposes of the preceding sentences.
1.35 "ROLLOVER ACCOUNT" means the account maintained for a Participant to
record his Rollover Contributions to the Trust Fund pursuant to
Section 3.05 and adjustments relating thereto.
1.36 "ROLLOVER CONTRIBUTION" means a Rollover Contribution made to the Plan
by a Participant pursuant to Section 3.05.
1.37 "SECTION 415 COMPENSATION" means wages, salaries, fees for
professional services, and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with an Employer or an
Affiliated Employer to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid
salespersons, compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, reimbursements, and expense allowances), and excluding:
21
<PAGE>
(a) Employer contributions to the Plan or to any other plan of
deferred compensation maintained by an Employer or an Affiliated
Employer, but solely for purposes of determining Highly
Compensated Employees under Section 1.22 and key employees under
Section 12.02(h), Section 415 Compensation shall include Tax-
Deferred Contributions;
(b) Amounts realized from the exercise of a non-qualified stock
option;
(c) Amounts realized when restricted stock is no longer subject to
substantial risk of forfeiture;
(d) Amounts realized from the disposition of stock acquired under a
qualified stock option; and
(e) Other amounts that receive special tax benefits, but solely for
purposes of determining Highly Compensated Employees under
Section 1.22 and key employees under Section 12.02(h), Section
415 Compensation
22
<PAGE>
shall include amounts contributed on an Employee's behalf on a
salary reduction basis to a cafeteria plan under Section 125 of
the Code.
Except for the provisos of Sections 1.37(a) and (e), this definition
of "Section 415 Compensation" is intended to be the definition which
appears in Section 1.415(2)(d)(ll)i of the Income Tax Regulations (Box
1 of IRS Form W-2 or substitute compensation) so that any discrepancy
in the above definition and said regulations shall be resolved in such
a manner as to give full effect to said regulations.
1.38 "SECTION 402(G) LIMIT" means $7,000 (as increased by the Adjustment
Factor every calendar year) for any taxable year of a Participant. In
addition, the amount of a Participant's Tax-Deferred Contributions for
a Plan Year shall be subject to the deferral percentage limitation of
Section 13.07. In the event a Participant's Tax-Deferred Contributions
and other elective deferrals (whether or not under a plan, contract or
arrangement of an Employer or an Affiliated Employer) for any taxable
year exceed the foregoing $7,000 limitation, as adjusted by the
Adjustment
23
<PAGE>
Factor, the excess allocated by the Participant to Tax-Deferred
Contributions hereunder (adjusted for Trust Fund Income in the manner
described in Section 13.07(d)), may in the discretion of the
Committee, be distributed to the Participant no later than April 15
following the close of such taxable year. The amount of Tax-Deferred
Contributions distributed pursuant to this Section with respect to a
Participant for a Plan Year will be reduced by any excess Tax-Deferred
Contributions previously distributed to the Participant pursuant to
Section 13.07(c) for the same Plan Year. In the event any Tax-Deferred
Contributions returned under this Section were matched by Matching
Contributions pursuant to Section 3.02, those Matching Contributions,
together with Income through the end of the Plan Year in which they
were made, shall be forfeited by the Participant and used to reduce
Employer contributions to the Plan.
1.39 "SPECIAL ACCOUNT" means the account maintained for a Participant to
record Special Contributions made on his behalf pursuant to Section
3.03, and adjustments relating thereto.
24
<PAGE>
1.40 "SPECIAL CONTRIBUTION" means the Employer Special Contribution made to
the Plan on behalf of a Participant pursuant to Section 3.03.
1.41 "SPOUSAL CONSENT" means written consent given by a Participant's
spouse to an election made by the Participant of a specified form of
benefit or a designation by the Participant of a specified Beneficiary
other than the spouse. The specified form or specified beneficiary,
shall not be changed unless further Spousal Consent is given, unless
the Spouse expressly waives the right to consent to any future
changes. Spousal Consent shall be duly witnessed by a Plan
representative or notary public and shall acknowledge the effect on
the spouse of the Participant's election. The requirement for Spousal
Consent may be waived by the Committee if it is established to its
satisfaction that there is no spouse, or that the spouse cannot be
located, or because of such other circumstances as may be established
by applicable law. Spousal Consent shall be applicable only to the
particular spouse who provides such consent.
25
<PAGE>
1.42 "TAX-DEFERRED ACCOUNT" means the account maintained for a Participant
to record contributions made on his behalf by an Employer pursuant to
a Tax-Deferred Contribution agreement described in Section 3.01 and
adjustments relating thereto.
1.43 "TAX-DEFERRED CONTRIBUTIONS" means an Employer's contribution made to
the Plan on behalf of a Participant pursuant to a Tax-Deferred
Contribution agreement described in Section 3.01.
1.44 "TRUST AGREEMENT" means the trust agreement or agreements that may be
established from time to time hereunder and as the same may from time
to time be amended and/or restated.
1.45 "TRUST FUND" means all money or other property which is held by
Trustee, pursuant to the terms of the Trust Agreement.
1.46 "TRUSTEE" means the trustee acting under the Trust Agreement, or any
other Trustee or Trustees designated in any trust agreement or
agreements which may be established to carry out the purposes of this
Plan.
26
<PAGE>
1.47 "VALUATION DATE" means the last day of each Plan Year and any other
date determined by the Committee.
1.48 "VALUATION PERIOD" means the period between two consecutive valuation
dates.
27
<PAGE>
ARTICLE 2. ELIGIBILITY AND PARTICIPATION
- - --------- -----------------------------
2.01. ELIGIBILITY
Only Eligible Employees may participate in this Plan.
2.02. PARTICIPATION
An Employee who was a Participant prior to January 1, 1987 shall
remain a Participant provided that he remains an Eligible Employee. An
Employee who becomes an Eligible Employee thereafter shall become a
Participant as of the first Enrollment Date after he files with the
Company, an enrollment form or forms as prescribed by the Committee on
which he:
(a) authorizes his Tax-Deferred Contributions in accordance with
Section 3.01;
(b) names a Beneficiary, and
(c) selects investment funds pursuant to Article 7.
28
<PAGE>
2.03. REEMPLOYMENT OF FORMER EMPLOYEES AND FORMER PARTICIPANTS
Any person employed by an Employer as an Eligible Employee who was
previously a Participant shall be immediately eligible to become a
Participant in the Plan. Any other person reemployed by an Employer
may participate in the Plan upon meeting the requirements of Section
2.02.
2.04 TRANSFERRED PARTICIPANTS
If a Participant remains in the employ of an Employer or an Affiliated
Employer, but ceases to be an Eligible Employee, his participation
under the Plan shall be suspended, provided however that during the
period of his employment in such ineligible position:
(a) he shall cease to have any right to elect Tax-Deferred
Contributions or make Rollover Contributions;
(b) he shall not receive allocations of Matching Contributions or
Special Contributions;
29
<PAGE>
(c) he shall continue to participate in Income allocations pursuant
to Section 4.02(a); and
(d) the provisions of Articles 6 and 7 shall continue to apply.
If an Employee again becomes an Eligible Employee, his rights and
privileges as an Eligible Employee under this Plan shall be restored.
2.05 TERMINATION OF EMPLOYMENT AND TERMINATION OF PARTICIPATION
Under this Plan, termination of employment occurs on the date an
Employee is no longer employed with an Employer or an Affiliated
Employer. An Eligible Employee's participation in the Plan shall
terminate on the date he terminates employment, unless the Participant
is entitled to benefits under the Plan, in which event his
participation shall terminate when those benefits have been
distributed to him.
30
<PAGE>
ARTICLE 3. CONTRIBUTIONS
- - --------- -------------
3.01. TAX-DEFERRED CONTRIBUTIONS
(a) A Tax-Deferred Contribution represents an agreement by a
Participant with his Employer to accept a reduction in
Compensation in consideration of a contribution to the Plan by
the Employer on Participant's behalf in the same amount.
(b) A Participant shall elect to enter into an agreement with his
Employer as described in Section 3.01(a), by indicating the
amount of Tax-Deferred Contributions he wishes to be contributed
by his Employer on his enrollment form, as described in Section
2.02. Tax-Deferred Contributions may be any whole percentage of a
Participant's Compensation between one percent and 10 percent,
but may not exceed the Section 402(g) Limit in any Plan Year.
Tax-Deferred Contributions shall be made by regular payroll
deduction, except that a Participant subject to the Section
402(g) Limit may request the Committee
31
<PAGE>
to calculate his Tax-Deferred Contributions in such a manner so
that his regular payroll reductions will result in the maximum
Matching Contribution. Tax-Deferred Contribution elections are
effective on the first pay period after a Participant files an
enrollment form.
(c) An election of Tax-Deferred Contributions shall remain in force
until changed in writing on forms approved by the Committee. Four
times each Plan Year, a Participant may elect to increase or
decrease the amount of his Tax-Deferred Contributions. A
Participant may also elect to cease contributions at any time.
Elections to increase, decrease or cease Tax-Deferred
Contributions are effective as of the pay period following
receipt by the Committee. A Participant may not change his
election with respect to Tax-Deferred Contributions already made
by payroll deduction.
(d) All Tax-Deferred Contributions shall be credited to the
Participant's Tax-Deferred Account and shall be 100% vested and
non-forfeitable at all times.
32
<PAGE>
(e) Tax-Deferred Contributions shall be transmitted to the Trustee in
the month following the payroll month in which the Tax-Deferred
Contribution was deducted from the Participant's Compensation.
(f) All Tax-Deferred Contributions are subject to the limitations of
Article 13 and the further limitations of this Article.
3.02 MATCHING CONTRIBUTIONS
(a) Each Employer will contribute with respect to Participants
employed by it, a Matching Contribution equal to 50% of the
amounts elected as Tax-Deferred Contributions, but in no event
shall Matching Contributions for any Plan Year for any
Participant exceed 2% of the Participant's Compensation for the
Plan Year. Notwithstanding the foregoing, Matching Contributions
of the Employers are discretionary and are not required.
(b) All Matching Contributions shall be paid to the Trustee no later
than the time prescribed by law for filing the federal income tax
returns of the
33
<PAGE>
Employers, including any extensions which have been granted for
the filing of such tax returns.
(c) All Matching Contributions made on behalf of a Participant shall
be credited to the Participant's Matching Account and shall be
100% vested and non-forfeitable at all times.
(d) All Matching Contributions are subject to the limitations of
Article 13 and the further limitations of this Article.
3.03 SPECIAL CONTRIBUTIONS
(a) Special Contributions are not required and are made at each
Employer's discretion.
(b) Special Contributions may be made in order to correct an Average
Deferral Percentage test failure under Section 13.07, or to
correct an Average Contribution test failure under Section 13.08
or to eliminate discrimination under any tax-qualified Plan of
the Employers under Sections 401(a)(4) or 410(b) of the Code or
as a result of
34
<PAGE>
the reallocation of excess Annual Additions under Section
13.04(a).
(c) Special Contributions are made on behalf of Participants who are
not Highly Compensated Employees and who are actively employed by
the Employer on the last day of the pay period for which a
Special Contribution is made.
(d) All Special Contributions shall be credited to the Participant's
Special Account and shall be 100% vested and non-forfeitable at
all times.
(e) All Special Contributions shall be paid to the Trustee no later
than the time prescribed by law for filing the federal income tax
returns of the Employers including any extensions which have been
granted for the filing of such tax returns.
(f) All Special Contributions are subject to the limitations of
Article 13 and the further limitations of this Article.
35
<PAGE>
3.04 DEDUCTIBILITY LIMITATIONS AND FORM OF CONTRIBUTION
(a) In no event shall the aggregate Tax-Deferred, Matching and
Special Contributions of the Employers exceed the amount
deductible by the Employers for such Plan Year for income tax
purposes as a contribution to the Trust under the applicable
provisions of the Internal Revenue and all Participant Tax-
Deferred Contribution elections, Matching Contributions and
Special Contributions are specifically conditioned upon such
deductibility.
(b) All contributions of the Employers shall be in cash except
Matching Contributions and Special Contributions may be made in
the form of Company Stock.
3.05 ROLLOVER CONTRIBUTIONS:
(a) Effective as of January 1, 1993, and subject to Committee
procedures, a Covered Employee, regardless of whether he has
satisfied the participation requirements of Article 2, may
"rollover" in cash to the Trust Fund a
36
<PAGE>
distribution that is from another plan which meets the
requirements of Section 401(a) of the Code (the "Other Plan").
(b) The procedures approved by the Committee shall include rules
providing that such rollover may be made only if the rollover
occurs on or before the 60th day following the Covered Employee's
receipt of the distribution from the Other Plan, however such
requirement shall not apply with respect to a direct rollover
from the Other Plan and the Committee may provide in its
procedures to waive the 60-day requirement with respect to a
rollover from a "Conduit IRA".
(c) If a Covered Employee had deposited a distribution previously
received from an Other Plan into an individual retirement account
(Conduit IRA) as defined in Section 408 of the Internal Revenue
Code, he may rollover the amount of such distribution plus
earnings thereon from the Conduit IRA to this Plan; provided such
rollover amount is deposited with the Trustee on or before the
60th day following receipt thereof from the Conduit IRA and
provided the Committee has
37
<PAGE>
determined to waive the 60-day requirement of Section 3.05(b) on
behalf of all Covered Employees.
(d) The Committee shall develop such other procedures and may require
such information from a Covered Employee desiring to make a
rollover, as it deems necessary or desirable to determine that
the proposed rollover will meet the requirements of this Section
and that the amount rolled over qualifies for rollover treatment
pursuant to applicable provisions of the Code.
(e) Upon approval by the Committee, the amount rolled over shall be
deposited in the Trust Fund and shall be credited to the Covered
Employee's Rollover Account. Such account shall be 100 percent
vested and non-forfeitable at all times.
Upon such rollover by Covered Employee who is otherwise eligible
to participate in the Plan but who has not yet completed the
participation requirements of Section 2.02, his Rollover Account
shall represent his sole interest in the Plan until he becomes a
Participant.
38
<PAGE>
(f) Only rollover contributions and direct rollovers from Other Plans
are allowed hereunder. A direct transfer of assets from another
tax-qualified plan to this Plan is not permitted.
(g) Until the Committee shall announce otherwise in writing to
Eligible Employees, the provisions of Sections 6.02 and 6.03 do
not apply to Rollover Accounts until the Covered Employee becomes
a Participant.
3.06 AFTER-TAX CONTRIBUTIONS
From and after January 1, 1987, voluntary after-tax contributions are
not permitted under this Plan. Voluntary after-tax contributions made
by a Participant prior to January 1, 1987 are maintained in his After-
Tax Account which is 100% vested and non-forfeitable at all times.
3.07 RETURN OF CONTRIBUTIONS
(a) If all or part of an Employer's deductions under Section 404 of
the Code for contributions to the Plan are disallowed by the
Internal Revenue
39
<PAGE>
Service, the portion of the contributions to which that
disallowance applies shall be returned to the applicable
Employer(s) without interest but reduced by any investment loss
attributable to those contributions. The return shall be made
within one year after the disallowance of deduction.
(b) An Employer may recover without interest the amount of its
contributions to the Plan made on account of a mistake of fact,
reduced by any investment loss attributable to those
contributions, if recovery is made within one year after the date
of those contributions.
(c) In the event that Tax-Deferred Contributions are returned to the
Employers pursuant to this Section 3.07, the agreements to reduce
Compensation which were made by Participants on whose behalf
those contributions were made shall be void retroactively to the
beginning of the period for which those contributions were made.
The Tax-Deferred Contributions so returned shall be distributed
in cash to those Participants for whom those contributions were
made.
40
<PAGE>
ARTICLE 4. ALLOCATION TO PARTICIPANTS ACCOUNTS
- - --------- -----------------------------------
4.01. INDIVIDUAL ACCOUNTS
(a) The Committee shall create and maintain adequate records to disclose
the interest in the Trust Fund of each Participant and Beneficiary.
Such records shall be in the form of individual accounts and credits
and charges shall be made to such accounts in the manner herein
described. When appropriate, a Participant shall have five separate
accounts, a Tax-Deferred Account, a Matching Account, a Special
Account, a Rollover Account or an After Tax Account. The maintenance
of individual accounts is only for accounting purposes, and a
segregation of the assets of the Trust Fund to each account shall not
be required. Distributions and withdrawals made from an account shall
be charged to the account as of the date paid.
(b) Under Article 7, Participants have a choice of investment funds so
that any reference in this Plan to a Tax-Deferred Account, a Matching
Account, a Special Account, a Rollover-Account or an After Tax Account
shall be deemed to mean and include all accounts which
41
<PAGE>
are maintained for the Participant under each investment fund.
4.02 ACCOUNT ADJUSTMENTS
The accounts of Participants and Beneficiaries shall be adjusted
in accordance with the following:
(a) Income: The Income of the Trust Fund for each Valuation Period
shall be allocated to the accounts of Participants and
Beneficiaries who had unpaid balances in their accounts on the
last day of the Valuation Period in proportion to the balances in
such accounts at the beginning of the Valuation Period, but after
first reducing each such account balance by any distributions
from the account during the Valuation Period and increasing such
Account balance by 50% of the Tax-Deferred and Matching
Contributions made during the Valuation Period.
(b) Tax-Deferred Contributions: As of each Valuation Date, the Tax-
Deferred Contributions received by the Trust Fund during the
Valuation Period ending on such Valuation Date shall be allocated
to the
42
<PAGE>
Tax-Deferred Accounts of the Participants on whose behalf such
contributions were made.
(c) Matching Contributions: As of each Valuation Date, the Matching
Contributions received by the Trust Fund during the Valuation
Period shall be allocated to the Matching Account of the
Participants on whose behalf such contributions were made.
(d) Special Contributions: As of each Valuation Date, Special
Contributions received by the Trust Fund during the Valuation
Period shall be allocated to the Special Accounts of Participants
who are not Highly Compensated Employees and who were actively
employed on the last day of the pay period for which the Special
Contribution was made. The allocation for each Participant
eligible to receive a share of the allocation shall be equal to
the total amount of the Special Contribution divided by the total
number of Participants eligible to receive an allocation of
Special Contributions. Therefore, each eligible Participant shall
receive the same dollar amount
43
<PAGE>
of allocation of Special Contributions as each other eligible
Participant.
(e) Rollover Contributions: As of each Valuation Date, the Rollover
Contributions received by the Trust Fund during the Valuation
Period on behalf of a Participant shall be allocated to such
Participant's Rollover Account.
4.03. LIMITATION ON ALLOCATIONS
Notwithstanding any of the foregoing, the amount of contributions that
may be allocated to a Participant's Aggregate Account for a Plan Year
shall be subject to the limitations under Code sections 401(k), 401(m)
and 415 set forth in Article 13.
4.04 NO GUARANTEE
The Employers, the Committee and the Trustee do not guarantee the
Participants or their Beneficiaries against loss or depreciation or
fluctuation of the value of the assets of the Trust Fund.
44
<PAGE>
4.05 ANNUAL STATEMENT OF ACCOUNTS
The Committee will furnish each Participant and each Beneficiary of a
deceased Participant, at least annually, a statement showing the value
of his Aggregate Account at the end of the Plan Year, and the
allocations to and distributions from his Accounts during the Plan
Year. No statement will be provided to a Participant or Beneficiary
after the Participant's entire vested and nonforfeitable interest in
his Accounts has been distributed.
45
<PAGE>
ARTICLE 5. VESTING
- - --------- -------
5.01 NONFORFEITABILITY
Except as provided in Sections 1.38 and 10.07 and Article 13, the
interest of each Participant in his Aggregate Account shall be 100%
vested and non-forfeitable at all times.
5.02 SUSPENSION OF BENEFITS
The nonforfeitable Aggregate Account of a Participant who terminates
employment is not forfeited if he later has a Reemployment
Commencement Date. Payments to the Employee may be suspended, however,
until his later termination of employment. If the Employee is not an
Eligible Employee upon his Reemployment Commencement Date, the
provisions of Section 2.04 shall apply. To the extent required by law,
the notice of suspension of benefits described in Department of Labor
Regulation Section 2530.203-2(b)(4) shall be provided.
46
<PAGE>
ARTICLE 6. DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES
- - --------- -----------------------------------------------
6.01. WITHDRAWALS FROM AFTER-TAX ACCOUNT
A Participant may elect to withdraw amounts credited to his After-Tax
Account. Such an election may only be made twice in each Plan Year and
the minimum withdrawal amount is $500, or if, lesser the total value
of a Participant's After-Tax Account. Elections under this Section
6.01 shall be on forms approved by the Committee for that purpose.
6.02. LOANS TO ACTIVE PARTICIPANTS
The Committee shall direct the Trustee to loan a Participant or
Alternate Payee who is actively employed by an Employer an amount from
his Tax-Deferred, Matching, Special and Rollover Accounts in
accordance with the rules of this Section.
(a) A Participant or Alternate Payee may have only one outstanding
loan at a time.
47
<PAGE>
(b) A Participant's or Alternate Payee's loan shall not be less than
$1,000 and shall not exceed the lesser of (i) $50,000 reduced to
the extent of the Participant's or Alternate Payee's highest
outstanding loan balance during the immediately prior 12-month
period (ending the day before the new loan is granted) or 50% of
the total dollar value of the Participant's or Alternate Payee's
Tax-Deferred, After-Tax, Matching, Special and Rollover Accounts
as of the date the loan is made.
(c) All loans will require Spousal Consent.
(d) All loans shall be subject to the approval of the Committee and
to such rules or regulations as the Committee shall adopt.
(e) An application for a loan by a Participant or Alternate Payee
shall be made in writing to the Committee, whose action thereon
shall be final.
(f) The period of repayment for any loan shall be arrived at by
mutual agreement between the Committee and the borrower, but all
loans shall become due and payable upon termination of
48
<PAGE>
employment. The repayment period shall be in full year increments
and shall not exceed four (4) years, except that a 10-year
repayment period may apply to any loan used for the purpose of
establishing a home which is the Participant's or Alternate
Payee's principal residence.
(g) Each loan shall be made at a reasonable rate of interest
determined by the Committee which as of the Effective Date and
thereafter has been the prime rate charged by the Bank of America
N.T. and S.A. (as of the last business day of the month preceding
the month in which a Participant's or Alternate's Payee's loan
application is submitted to the Committee) plus one percent. The
interest rate so determined with respect to a particular loan
shall be fixed for the duration of such loan. Each loan shall be
secured by the balance remaining in the borrower's Aggregate
Account or by such other security as the Committee may deem to be
adequate.
(h) Each loan shall be treated as a separate investment of the funds
credited to a
49
<PAGE>
Participant's or Alternate Payee's Tax-Deferred, Matching,
Special or Rollover Account. Loan proceeds will be taken first
from the Participant's or Alternate Payee's Rollover Account, if
any, then his Tax-Deferred Account, then his Matching Account,
and finally, his Special Account, if any. Within the Tax-Deferred
Account and the Rollover Account, the loan amount is prorated
among the investment funds the Participant or Alternate Payee had
otherwise elected pursuant to Article 7. Loan payments will be
returned to the investment funds based on the Participant's or
Alternate Payee's current elections under Article 7.
(i) Loans may be repaid in full at any time after the first three
monthly payments are made, however partial prepayment is not
allowed.
(j) Upon the Participant's or Alternate Payee's termination of
employment, the full amount of the loan becomes due and payable,
regardless of whether a distribution is made pursuant to Section
6.04 at that time.
50
<PAGE>
(k) Repayment of loans shall be by regular payroll deduction only,
and all loans shall be contingent on the borrower's and his
spouse's, if any, payroll deduction authorization. Loan payments
shall be transmitted to the Trustee in accordance with the
Committee's usual administrative practice.
(l) In accordance with Code Section 72(p)(3), the Committee shall
notify the borrower that no interest deduction can be claimed
with respect to any loan secured by the borrower's Tax-Deferred
Account.
(m) Loan applications will be processed within the time periods
established by the Committee in its administrative procedures.
(n) Loan defaults shall be treated as taxable distributions pursuant
to Code requirements, but may not be applied to the borrower's
collateral in his Tax-Deferred, Matching or Special Account until
such time as a distribution from such accounts could otherwise be
made under the Plan.
51
<PAGE>
(o) Notwithstanding the preceding provisions of this Section, loans
may not be made from the Rollover Account of a Covered Employee
who is not a Participant unless the Committee announces in
writing to Eligible Employees that such loans are permissible.
(p) For the purposes of the Section, Alternate Payee has the meaning
set forth in Section 10.01.
6.03. HARDSHIP WITHDRAWALS
(a) Subject to the further requirements of this Section, a
Participant who has not terminated employment may request a
distribution in the event of the Participant's hardship, as
defined in this Section. Effective as of December 29, 1993, a
Participant who has terminated employment but has not received a
distribution of his Aggregate Account may make one request for a
distribution on account of a life threatening medical hardship. A
Covered Employee who has a Rollover Account but who is not a
Participant may not elect a hardship distribution from his
Rollover Account until he becomes a Participant or until the
Committee
52
<PAGE>
announces in writing to Eligible Employees that such hardship
distributions are permissible.
(b) For Participants who have not terminated employment, hardship
withdrawals are limited to the excess of the total amount of the
Participant's Rollover Account, if any, plus the value of the
Participant's Tax-Deferred Account and Matching Account as of
December 31, 1988 plus the principle of the Participant's Tax-
Deferred Contributions made from and after January 1, 1989 over
any outstanding loan the Participant may have. For a Participant
who has terminated employment, the Participant must withdraw his
entire Aggregate Account in order to be eligible for a life-
threatening medical hardship withdrawal.
(c) A distribution will be on account of hardship only if the
distribution is necessary to satisfy an immediate and heavy
financial need of the Participant. For purposes of this Plan, a
distribution is made on account of an immediate and heavy
financial need of the Participant only if the distribution is for
(i) the payment of
53
<PAGE>
medical expenses described in Code section 213(d) incurred (or,
from and after December 29, 1993, to be incurred) by the
Participant, the Participant's spouse or any dependents of the
Participant (as defined in Code section 1520, (ii) the purchase
(excluding mortgage payments) of a principal residence for the
Participant, (iii) the payment of tuition for the next twelve
months of post-secondary education for the Participant, his or
her spouse, children, or dependents, (iv) the need to prevent the
eviction of the Participant from his principal residence or
foreclosure on the mortgage of the Participant's principal
residence, or (v) if announced in writing to Participants by the
Committee, the payment of funeral expenses of a family member.
(d) A distribution will be considered necessary to satisfy an
immediate and heavy financial need of the Participant only if all
three of the following requirements are satisfied: (i) the
distribution to a Participant who has not terminated employment
is not in excess of the amount required to relieve the immediate
and heavy financial need of the Participant (taking into account
the taxable
54
<PAGE>
nature of the distribution); (ii) the Participant represents in
writing, on forms provided by the Committee, that the need cannot
be relieved through reimbursement or compensation by insurance or
otherwise, by reasonable liquidation of the Participant's assets,
to the extent such liquidation would not itself cause an
immediate and heavy financial need, by cessation of Tax-Deferred
Contributions under the Plan, or by withdrawals, distributions
(other than hardship distributions) or nontaxable loans (at the
time of the loan) from this Plan or plans maintained by any
Employer or any Affiliated Employer or any other entity by which
the Participant is employed, or by borrowing from commercial
sources on reasonable commercial terms; and (iii) the Committee
determines that it can reasonably rely on the Participant's
written representation.
(e) Distributions pursuant to this Section will be made as soon as
practicable following the Committee's approval of the
Participant's written request for withdrawal and will be made in
the form of a two-party single lump sum payment. The Committee
may request any documentation it may
55
<PAGE>
require from a Participant in order to make a determination that
the Participant is eligible for a hardship withdrawal hereunder.
(f) Upon making a hardship withdrawal, a Participant's Tax-Deferred
Contributions will be suspended for 12 months following the
hardship distribution and may only be resumed upon the
Participant's submission of an election to resume contributions
on a form approved by the Committee. A Participant's Tax Deferred
Contributions, if any, for the Plan Year following the hardship
withdrawal may not exceed the Section 402(g) Limit minus the
amount of Tax-Deferred Contributions he made in the Plan Year of
hardship withdrawal.
(g) All hardship withdrawal elections must be made on forms approved
by the Committee for that purpose and require Spousal Consent.
6.04 DISTRIBUTIONS ON ACCOUNT OF TERMINATION OF EMPLOYMENT
(a) Except as set forth in Section 6.04(c), below, distribution of a
Participant's Aggregate Account shall commence as soon as
practicable after the
56
<PAGE>
Participant's termination of employment. A Participant's
distributable Aggregate Account is based on the value of that
Account as of the Valuation Date immediately proceeding the date
the Aggregate Account is to be distributed, except that there
will be added to the value of the Participant's Aggregate Account
the fair market value of any amounts allocated to his Aggregate
Account under Article 4 after that Valuation Date. If a loan is
outstanding from the Trust Fund to the Participant on the date of
distribution, the amount distributed will be reduced by the
outstanding loan balance. The distribution will be paid to the
Participant's Beneficiary in the event the Participant's
termination of employment is caused by his death. In all other
cases, payment will be made to the Participant.
(b) Distributions will be in the form of a lump sum cash payment
except that any portion of a Participant's Aggregate Account
which is invested in The Walt Disney Company Common Stock Fund
will be distributed in shares of Company Stock, plus cash for any
fractional shares. Notwithstanding
57
<PAGE>
the foregoing, the recipient may elect that the entire
distribution be made in cash.
(c) If the Participant's termination of employment is due to reasons
other than death and if the amount of a Participant's Aggregate
Account exceeds $3,500, the Committee will not automatically
distribute the Participant's Aggregate Account prior to the
Participant's attainment of age 65. In lieu of payment at age 65,
the Participant may elect either one of the following:
(i) an immediate lump sum distribution, payable as soon as
practical after receipt of the Participant's election under
this Section 6.04(c), or
(ii) A deferred lump sum distribution payable upon the
Participant's attainment of age 55 or such older age as the
Participant shall elect, but not older than age 65.
The Participant shall have one year to make the above election.
Such one year shall be measured from the date the Committee mails
the Participant
58
<PAGE>
an election notice specifying the Participant's options under
this Section 6.04(c). If the Participant fails to make an
election in such one-year period, he shall be deemed to have
elected the deferred payment under Section 6.04(c)(ii). Once an
election is made by a Participant pursuant to this Section it may
not be revoked, except that a Participant may elect to change the
age of distribution under 6.04(c)(ii) above at any time provided
the age remains between the ages of 55 and 65. All elections made
pursuant to this Section shall be on forms provided from the
Committee and shall be subject to Spousal Consent.
(d) If a Participant dies prior to receiving the lump sum
distribution of his Aggregate Account under this Section, the
distribution shall be paid to the Participant's Beneficiary, as
soon as practical after the Participant's death.
(e) It is possible for a Participant or Beneficiary to receive a
distribution under this Section before all Matching and Special
Contributions on behalf of the Participant are made to the Trust
Fund. In such case, such additional amounts shall be paid
59
<PAGE>
to the Participant or Beneficiary as soon as practical after the
Trust Fund's receipt thereof.
(f) As provided in Section 5.02, if a Participant who terminated
employment again becomes an Employee before receiving a
distribution of his Aggregate Account, no distribution from the
Trust Fund will be made while he is an Employee, and amounts
distributable to him on account of his prior termination will be
held in the Trust Fund until he is again entitled to a
distribution under the Plan.
6.05 RESTRICTIONS AND REQUIREMENTS ON DISTRIBUTIONS
(a) Except for distributions permitted under this Article 6 with
respect to Participants who suffer a hardship, a Participant's
interest in the Plan will not be distributed before the
Participant's termination of employment or death unless: (i) the
Plan is terminated without the establishment or maintenance by
the Employers of another defined contribution plan (other than an
employee stock ownership plan as defined in Code section
4975(e)(7)) (ii) an Employer that is a corporation disposes of
all or substantially all of the assets used by the Employer in a
trade or business to a person other than an Employer or an
Affiliated Employer but only if the Participant continues
employment with the acquiring employer; or (iii) an Employer that
is a corporation
60
<PAGE>
disposes of its interest in a subsidiary to a person other than
an Employer or an Affiliated Employer but only if the Participant
continues employment with the subsidiary. An event will not be
treated as described in clause (ii) or (iii) above unless the
Employer continues to maintain the Plan after the disposition.
(b) An event described in Section 6.05(a) that would otherwise permit
distribution of a Participant's interest in the Plan will not be
treated as described in Section 6.05(a) unless the Participant
receives a lump sum distribution by reason of the event. A lump
sum distribution for this purpose will be a distribution
described in Code section 402(e)(4), without regard to clauses
(i), (ii), (iii), and (iv) of subparagraph (A), subparagraph (B),
or subparagraph (H) thereof.
61
<PAGE>
(c) The provisions of this Section 6.05(c) will apply to restrict the
Committee's ability to delay the commencement of distributions.
Except as otherwise provided in this Article 6, distribution of
the Participant's interest in his Aggregate Account shall begin
no later than the 60th day after the close of the Plan Year in
which occurs the latest of:
(i) The Participant's 65th birthday;
(ii) The tenth anniversary of the date on which he became a
Participant; or
(iii) The date he terminates services with an Employer or
Affiliated Employer.
(d) The following provisions will apply to limit a Participant's
ability to delay the distribution of benefits.
(i) Distribution of a Participant's entire Aggregate Account
will be made not later than April 1 following the calendar
year in which he attains age 70-1/2.
62
<PAGE>
(ii) Notwithstanding Section 6.05(d)(i) above, if a Participant
attained age 70-1/2 before January 1, 1988 and was not a 5-
percent owner (as such term is defined in Code section
416(i)) at any time during the five-plan-year period ending
in the calendar year in which he attained age 70-1/2, then
distribution of his entire vested and nonforfeitable
interest will be made or commence not later than April 1
following the earlier of (A) the calendar year in which his
employment terminates, or (B) the calendar year in which he
becomes a 5-percent owner.
(iii) If a Participant attained age 70-1/2 during 1988 and had
not terminated employment as of January 1, 1989,
distribution of his entire vested and nonforfeitable
interest will be made or commence not later than April 1,
1990.
(e) In the event that any payments under this Plan are to be made to
someone other than the Participant or jointly to the Participant
and his spouse or
63
<PAGE>
other payee, such payments must conform to the "incidental
benefit" rules of Code section 401(a)(9)(G) and Treasury
Regulation section 1.4019(a)(9)-2.
(f) Upon the death of a Participant, the following distribution
provisions will apply to limit the Beneficiary's ability to delay
distributions. If the Participant dies after distribution of his
benefit has begun, the remaining portion of his benefit, if any,
will continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's
death; but if he dies before distribution of his benefit
commences, his entire benefit will be distributed as soon as
practical after his death but no later than five years after his
death.
(g) Distributions under the Plan to Participants or Beneficiaries
will be made in accordance with Treasury Regulations issued under
Code section 401(a)(9).
(h) The Committee shall provide recipients of a benefit hereunder
with appropriate claim forms,
64
<PAGE>
election forms, withholding forms and an officially approved
notice supplied by the Secretary of the Treasury which specifies
certain information regarding the federal income tax treatment of
Plan benefits paid in the form of a lump sum.
6.06 METHOD OF PAYMENT FOR ELIGIBLE ROLLOVER DISTRIBUTIONS
(a) Notwithstanding any provision of the Plan to the contrary,
effective January 1, 1993, if a Distributee is entitled to
receive an Eligible Rollover Distribution which exceeds $200, the
Distributee may elect, at the time and in the manner prescribed
by Committee, and in accordance with this Section 6.06, to have
his Eligible Rollover Distribution paid in accordance with one of
the following methods:
(i) All of the Eligible Rollover distribution shall be paid
directly to the Distributee;
(ii) All of the Eligible Rollover Distribution shall be paid as a
Direct Rollover to the
65
<PAGE>
Eligible Retirement Plan designated by the Distributee; or
(iii) The portion of the Eligible Rollover as designated by the
Participant, which portion shall be at least $500 or such
lesser amount as the Committee shall determine, shall be
paid as a Direct Rollover to the Eligible Retirement Plan
designated by the Distributee and the balance of the
Eligible Rollover Distribution shall be paid directly to the
Distributee.
(b) No less than 30 days and no more than 90 days prior to the
Distributee's payment date, the Committee shall provide the
Distributee with an election form and a notice that satisfies the
requirements of Section 1.411(a)-11(c) of the Income Tax
Regulations and Section 402(f) of the Code. In the event the
Distributee does not return the signed election form by his
payment date, he shall be deemed to have elected the method of
Payment described in Section 6.06(a)(i).
66
<PAGE>
(c) Notwithstanding the provisions of Section 6.06(b) above,
distributions paid in accordance with Section 6.06(a) may
commence less than 30 days after the material described in
Section 6.06(b) is given to the Distributee provided that:
(i) If the Distributee is the Participant, the value of the
Participant's Aggregate Account does not exceed $3,500;
(ii) The Distributee is notified that he has the right to a
period of at least 30 days after receipt of the material to
consider whether or not to elect a distribution; and
(iii) After receipt of such notification, he affirmatively elects
to receive a distribution.
(d) The following definitions apply to the terms used in this Section
6.06:
(i) "Eligible Rollover Distribution" means any distribution of
all or any portion of the balance to the credit of the
Distributee,
67
<PAGE>
except that an Eligible Rollover Distribution does not
include:
(A) Any distribution that is one of a series of a
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a specified
period of ten years or more;
(B) Any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code;
(C) The portion of any distribution that is not includible
in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect
to employer securities); and
68
<PAGE>
(D) Any other type of distribution that the Internal Revenue
Service announces (pursuant to regulation, notice or
otherwise) is not an Eligible Rollover Distribution
pursuant to Section 402(c) of the Code.
(ii) "Eligible Retirement Plan" means an individual retirement
account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of
the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving Spouse, an Eligible Retirement
Plan is an individual retirement account or individual
retirement annuity.
(iii) "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or
69
<PAGE>
former spouse who is the alternate payee pursuant to a
qualified domestic relations order, as defined in Section
414(p) of the Code, are Distributees with regard to the
interest of the Spouse or former Spouse.
(iv) "Direct Rollover" means a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
6.07 RECAPTURE OF PAYMENTS
(a) By error, it is possible that payments to a Participant or
Beneficiary may exceed the amounts to which the recipient is
entitled. When notified of the error, the recipient must return
the excess to the Trust Fund. This requirement is limited where
explicit statutory provisions require limitation .
(b) To prevent hardship, repayment under Section 6.07(a) may be made
in installments, determined in the sole discretion of the
Committee. A repayment arrangement, however, may not be contrary
to law, and it may not be used as a disguised loan.
70
<PAGE>
(c) If a Trustee is authorized by statue to recover some payments, no
Plan provision may be construed to contravene the statue.
71
<PAGE>
ARTICLE 7. INVESTMENT ELECTIONS AND VOTING OF COMPANY STOCK
- - --------- ------------------------------------------------
7.01. INVESTMENT OPTIONS
(a) Except to the extent that a Participant's loan is considered a
separate investment pursuant to Section 6.02, each Participant
shall designate the investment fund under which his Tax-Deferred,
After Tax and Rollover Contributions are to be invested. All
Matching Contributions and Special Contributions shall be
invested in the Company Stock Fund.
(b) Effective as of June 30, 1992, there are seven such investment
funds, as follows:
(i) GUARANTEED INTEREST CONTRACT FUND ("GIC FUND")
The contracts in this fund are guaranteed by the issuing
insurance companies only and not by the Employers or the
Plan. Money in this fund is invested in group annuity
contracts issued by major life insurance companies or
72
<PAGE>
other interest-bearing obligations with other financial
institutions. The interest rate payable reflects a blend of
the total return on investments made by this fund.
As of July 1, 1992, the GIC Fund will be closed to future
contributions and transfers from other funds. As the GICs
mature, fund balances will be reinvested in the Fidelity
Short-Intermediate Government Portfolio.
(ii) FIDELITY SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO (FORMERLY
KNOWN AS THE FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE
GOVERNMENT PORTFOLIO)
The objective of this portfolio is to seek a high level of
current income consistent with preservation of principal.
The portfolio invests only in fixed income securities issued
by the U.S. government or issued by U.S. government
agencies. It may also buy and sell options and futures
contracts relating to U.S. government or government agency
fixed income securities. The
73
<PAGE>
portfolio generally has a dollar-weighted average maturity of
three to five years. The portfolio's share price, yield and
total return fluctuate because of several factors, and are not
guaranteed.
(iii) FIDELITY U.S. BOND INDEX PORTFOLIO
The objective of this portfolio is to provide investment
results which correspond to the total return on the Lehman
Brothers Aggregate Bond Index, a U.S. investment grade fixed
income index comprised of approximately 6,500 securities. The
portfolio invests in U.S. government, corporate, mortgage, and
asset-backed fixed income securities in proportion to their
representation in the Lehman Brothers Aggregate Bond Index. It
may also buy and sell options and futures contracts relating to
securities in its portfolio. The portfolio generally has a
dollar-weighted average maturity of eight to ten years. The
portfolio's share price, yield and total return fluctuate
because of several factors, and are not guaranteed.
74
<PAGE>
(iv) FIDELITY BALANCED FUND
The objectives of this fund are to provide a high level of
current income while preserving capital, and consider
opportunities for capital appreciation. The fund invests in a
broadly diversified portfolio including U.S. government fixed
income securities, U.S. corporate fixed income securities, and
U.S. equity securities, and may buy and sell options and
futures contracts relating to securities in its portfolio. At
all times, the fund will maintain a minimum 25 percent exposure
to fixed income securities. The fund's share price, yield and
total return fluctuate because of several factors, and are not
guaranteed.
(v) FIDELITY U.S. EQUITY INDEX COMMINGLED POOL
The objective of this pool is to provide investment results
which correspond to the total return on the Standard and Poor's
500 Index, a U.S. equity index comprised of 500 equity
securities. The pool invests in these
75
<PAGE>
equity securities in proportion to their market value weighting
in the S&P 500 Index. The Walt Disney Company Common Stock is a
stock in the S&P 500 Index, and thus may be held by this pool
(Company Stock represents approximately one percent of the S&P
500 Index). The pool may also buy and sell options and futures
contracts relating to securities in its portfolio. This is a
commingled pool managed by Fidelity Management Trust Company,
and is not a mutual fund. The pool's share price, yield and
total return fluctuate because of several factors, and are not
guaranteed.
(vi) FIDELITY MAGELLAN (R) FUND
The objective of this fund is to seek capital appreciation by
investing primarily in common stock and securities convertible
into common stock; however, up to 20 percent of the fund may be
invested in fixed income securities. The fund may also invest
in foreign securities, high-yield securities, and may buy and
sell options and futures contracts
76
<PAGE>
relating to securities in the fund. Company Stock may be held
in the fund. The fund's share price, yield and total return
fluctuate because of several factors, and are not guaranteed.
(vii) THE WALT DISNEY COMPANY COMMON STOCK FUND
Money is invested entirely in Company Stock. The fund's share
price, yield and total return fluctuate in direct correlation
with the stock market and the characteristics of Company Stock,
and are not guaranteed.
(c) Upon Plan enrollment, a Participant shall choose to invest his
contributions in one or any combination of the available investment
funds in multiples of 10%.
(d) A Participant may change his election of investment funds with respect
to his future contributions four times each Plan Year, in multiples of
10%.
77
<PAGE>
(e) A Participant may transfer the current value of his Tax-Deferred,
After-Tax and Rollover Account four times each Plan Year in multiples
of 10%. However, a Participant may not make a direct transfer of funds
between the GIC Fund and the Fidelity Short-Intermediate Government
Portfolio or the Fidelity U.S. Bond Index Portfolio. Amounts
transferred from the GIC Fund must be invested in one or more of the
other investment choices for a period of three months or more before
the amounts can be transferred into the Fidelity Short-Intermediate
Government Portfolio or the Fidelity U.S. Bond Index Portfolio. No
amounts may be transferred to the GIC Fund from and after July 1,
1992.
(f) If a Participant dies, his Beneficiary has the same investment
elections rights as the Participant had prior to his death, until the
Participant's Aggregate Account is distributed to the Beneficiary.
(g) Subject to the provision of Section 7.01(h), the Committee shall adopt
such rules and procedures as it deems advisable with respect to all
matters
78
<PAGE>
relating to the selection and use of the investment funds, provided
that all Participant's are treated uniformly. If there is an
inconsistency between such rules and the provisions of the preceding
provisions of this Section 7.01, such preceding provisions shall be
disregarded.
(h) The Plan is intended to constitute a Plan described in Section 404(c)
of ERISA and Title 29 of the Code of Federal Regulations, Section
2550.404c-1. As such, the Plan's fiduciaries may be relieved of
liability for any losses which are the direct and necessary result of
investment instructions given by a Participant or a Beneficiary.
(i) Each Participant is solely responsible for the selection of his
investment options. The Trustee, the Committee, the Employers, and the
officers, supervisors and other employees of the Employers are not
empowered to advise a Participant as to the manner in which his
accounts shall be invested. The fact that an Investment Fund is
available to Participants for investment under the
79
<PAGE>
Plan shall not be construed as a recommendation for investment in
that particular Investment Fund.
7.02 VOTING OF COMPANY STOCK
(a) Until the Committee announces otherwise, the provisions of this
Section apply to all Company Stock held in The Walt Disney
Company Common Stock Fund.
(b) A Participant may direct the Committee to direct the Trustee
involved in any voting of Company Stock in the Participant's
Aggregate Account using the rules in this Section. Voting shares
of Company Stock held in The Walt Disney Company Common Stock
Fund may be voted by the Trustee holding those shares only
according to the written instructions of the Participant whose
Aggregate Account holds the shares. Such shares that are
unallocated, if any, as of any voting record date or such shares
as to which that Trustee receives no written instructions must be
voted by the Trustee on each matter in the same ratio (for
against, and abstention) as the Trustee was instructed (or
abstentions upon a failure to
80
<PAGE>
instruct) with respect to other identical shares eligible to vote on
such matter as to which direction was received. Options and other
rights (for example, tender tights) inuring to the benefit of shares
of Company Stock allocated to a Participant's Aggregate Account may be
exercised by the Trustee holding those shares only according to the
written instruction of the Participant whose Aggregate Account holds
the shares. Options and similar rights (for example, tender rights)
inuring to the benefit of such shares that are unallocated, if any,
must be exercised by the Trustee holding those shares according to the
same principles set forth in this Section with regard to voting
rights. Participant directions pursuant to this Section may be
itemized or a general (blanket) authorization.
(c) Whenever a Participant's right to voting or a similar right (such as
tender right) is at hand, the Committee must see that the Participants
receive all notices, prospectuses, financial statements, proxies, and
proxy solicitation materials relating to shares of Company Stock held
for their Aggregate Accounts.
81
<PAGE>
ARTICLE 8. ADMINISTRATION OF PLAN
- - --------- ----------------------
8.01 APPOINTMENT OF PLAN COMMITTEE
The general administration of the Plan and the responsibility for
carrying out the provisions of the Plan shall be placed with a
Committee, consisting of not less than 3 persons, appointed by the
Board of Directors to serve at the pleasure of such Board. Any member
of the Committee may resign by delivering his written resignation to
the Board of Directors.
8.02 DUTIES OF COMMITTEE
The members of the Committee shall elect a chairman from their number
and a secretary who may be but need not be one of the members of the
Committee; may appoint from their number such subcommittees with such
powers as they shall determine; and may authorize one or more of their
number or any agent to execute or deliver any instrument or make any
payment on their behalf. In addition, the Committee may retain
counsel, employ agents and provide for such clerical, accounting,
actuarial and consulting services as they may require
82
<PAGE>
in carrying out the provisions of the Plan; and may allocate among
themselves or delegate all or such portion of the duties under the
Plan, other than those granted to the Trustee under the trust
agreement adopted for use in implementing the Plan, as they, in their
sole discretion, shall decide.
8.03 MEETINGS
The Committee shall hold meetings upon such notice, at such place or
places, and at such time or times as it may from time to time
determine.
8.04 QUORUM
Any act which the Plan authorizes or requires the Committee to do may
be done by a majority of a quorum of members. A quorum is 50% of all
members of the Committee then in office. The action of that majority
expressed from time to time by a vote at a meeting or in writing
without a meeting shall constitute the action of the Committee and
shall have the same effect for all purposes as if assented to by all
members of the Committee at the time in office.
83
<PAGE>
8.05 COMPENSATION AND BONDING
No member of the Committee shall receive any compensation from the
Plan for his services as such. Except as may otherwise be required by
law, no bond or other security need be required of any member in that
capacity in any jurisdiction.
8.06 ESTABLISHMENT OF RULES AND INTERPRETATION OF PLAN
Subject to the limitations of the Plan, the Committee from time to
time shall establish rules for the administration of the Plan and the
transaction of its business as it deems necessary or appropriate. The
Committee shall have the power to construe and interpret the plan,
decide all questions of eligibility, and determine the amount, manner
and time of payment of any benefits hereunder. The determination of
the Committee as to any disputed question shall be conclusive.
8.07 PRUDENT CONDUCT
The Committee shall use that degree of care, skill,
84
<PAGE>
prudence and diligence that a prudent man acting in a like capacity
and familiar with such matters would use in his conduct of a similar
situation.
8.08 SERVICE IN MORE THAN ONE FIDUCIARY CAPACITY
Any individual, entity or group of persons may serve in more than one
fiduciary capacity with respect to the Plan and/or the funds of the
Plan.
8.09 LIMITATION OF LIABILITY
The Board of Directors, the Committee, the Employees and any officer,
employee or agent of an Employer or an Affiliated Employer shall not
incur any liability individually or on behalf of any other individuals
or on behalf of an Employer or an Affiliated Employer for any act or
failure to act, made in good faith in relation to the Plan or the
funds of the Plan. However, this limitation shall not act to relieve
any such individual, an Employer or an Affiliated Employer from a
responsibility or liability for any fiduciary responsibility,
obligation or duty under Part 4, Title 1 of ERISA.
85
<PAGE>
8. 10 INDEMNIFICATION
The Committee, the Board of Directors, and the officers, employees and
agents of the Employers or an Affiliated Employer shall be indemnified
against any and all liabilities arising by reason of any act, or
failure to act, in relation to the Plan or the funds of the Plan,
including, without limitation, expenses reasonably incurred in the
defense of any claim relating to the Plan or the funds of the Plan,
and amounts paid in any compromise or settlement relating to the Plan
or the funds of the Plan, except for actions or failures to act made
in bad faith. The foregoing indemnification shall be from the funds of
the Plan to the extent of those funds and to the extent permitted
under applicable law; otherwise from the assets of the Employers.
8.11 EXPENSES OF ADMINISTRATION
All expenses incurred prior to the termination of the Plan which shall
arise in connection with the administration of the Plan, including but
not limited to the compensation of the Trustee, administrative
86
<PAGE>
expenses and proper charges and disbursements of the Trustee and
compensation and other expenses and charges of any enrolled actuary,
counsel, accountant, specialist, or other person who shall be employed
by the Committee in connection with the administration thereof, shall
be paid from the Trust Fund to the extent not paid by the Employers.
8.12 CLAIMS PROCEDURES
The Committee will ordinarily instruct the Trustee to pay benefits
when benefits become available without the necessity of a claim by
Participants, Contingent Annuitants or Beneficiaries. If any
Participant, Contingent Annuitant or Beneficiary makes a written claim
for benefits under the Plan and such benefits are denied, the
Committee, within 60 days of the date the claim is filed (or, if
special circumstances require an extension of time for processing the
claim and written notice is given to the claimant of such extension,
up to 120 days after the original claim is filed), shall give the
claimant notice in writing of the denial of claimed benefits, setting
forth specific reasons for the denial, references to pertinent Plan
provisions, the reason for and description of any additional
87
<PAGE>
material or information needed to perfect the claim and an explanation
of the review procedure. The decision of the Committee shall be final
unless the claimant, within 60 days after receipt of notice of the
decision of the Committee, makes a written request for review of the
decision. The claimant or his authorized representative shall have 30
days after submitting a written request for review during which Plan
documents may be reviewed and written issues and comments may be
submitted. Within 60 days after receipt of the written request for
review, the Committee shall issue a written decision including reasons
for the decision and references to controlling Plan provisions, which
decision shall be final.
88
<PAGE>
ARTICLE 9. MANAGEMENT OF FUNDS
- - --------- -------------------
9.01 TRUST AGREEMENT
All the funds of the Plan shall be held by a Trustee appointed from
time to time by the Board of Directors under a Trust Agreement
adopted, or as amended, by the Board of Directors for use in providing
the benefits of the Plan and paying its expenses not paid directly by
the Employers. The Employers shall have no liability for the payment
of benefits under the Plan nor for the administration of the funds
paid over to the Trustee.
9.02 EXCLUSIVE BENEFIT RULE
Except as otherwise provided in the Plan, no part of the corpus or
income of the funds of the Plan shall be used for, or diverted to,
purposes other than for the exclusive benefit of Participants and
other persons entitled to benefits under the Plan before satisfaction
of all liabilities with respect to them. No person shall have any
interest in or right to any part of the earnings of the funds of the
Plan, or any right in, or
89
<PAGE>
to, any part of the assets held under the Plan, except as to and to
the extent expressly provided in the Plan.
9.03 COMMITTEE POWER AND DUTIES
(a) The Committee may, in its discretion, appoint one or more
investment managers (within the meaning of Section 3(38) of
ERISA) to manage (including the power to acquire and dispose of)
all or part of the assets of the Plan, as the Committee shall
designate. In that event, authority over and responsibility for
the management of the assets so designated shall be the sole
responsibility of that investment manager.
(b) The Committee shall have the duty to advise any investment
adviser or person (including any investment manager) with
discretionary investment authority over all or a portion of the
Plan's Trust Fund of the investment objectives which such person
should observe. Such advice should, looking at the assets of the
Plan as a whole, take into account the short-term cash needs for
benefit payment as well as the long-term growth needed to
discharge the Plan's liabilities. The Committee
90
<PAGE>
shall review and report to the Board of Directors concerning the
performance of all investment advisers and persons with
discretionary investment authority and make such changes in the
appointment of such persons as it deems advisable, except that
any replacement of the Trustee may be made only by the Board of
Directors upon the recommendation of the Committee. The Committee
shall also have the power and authority specified in any
agreements with the Trustee or any investment adviser or
investment manager.
(c) With the approval of the Committee, a portion of the Plan's Trust
Fund may be invested in the Trustee's certificates of deposit, or
in the Trustee's pooled or commingled qualified trust funds.
(d) Notwithstanding the foregoing, the Trust Fund shall consist of
the seven separate Investment Funds as provided in Article 7, and
to the extent required by Participant elections, may be fully
invested in Company Stock.
91
<PAGE>
(e) The Committee shall prepare not less than once per year a report
of its actions, recommendations and investments and shall deliver
a copy of such report to the Board of Directors.
92
<PAGE>
ARTICLE 10. GENERAL PROVISIONS
- - ---------- ------------------
10.01 NONALIENATION
Except as provided in Section 6.02 or as required by any applicable
law, no benefit under the Plan shall in any manner be anticipated,
assigned or alienated, and any attempt to do so shall be void.
However, payment shall be made in accordance with the provisions of
any judgment, decree, or order which:
(a) Creates for, or assigns to, a spouse, former spouse, child or
other dependent of a Participant ("Alternate Payee") the right to
receive all or a portion of the Participant's benefits under the
Plan for the purpose of providing child support, alimony payments
or marital property rights to that spouse, child or dependent;
(b) Is made pursuant to a state domestic relations law;
93
<PAGE>
(c) Does not require the Plan to provide any type of benefit, or any
option, not otherwise provided under the Plan; and
(d) Otherwise meets the requirements of Section 206(d) of ERISA, as
amended, as a "Qualified Domestic Relations Order", as determined
by the Committee.
10.02 NO CONTRACT OF EMPLOYMENT
The Plan shall not be deemed to constitute a contract between any
Employer and any person or to be considered an inducement for the
employment of any person by any Employer. Nothing contained in the
Plan shall be deemed:
(a) To give any person the right to be retained in the service of an
Employer; or
(b) To interfere with the right of any Employer to discharge any
person at any time without regard to the effect which such
discharge shall have upon his rights or potential rights, if any,
under the Plan.
94
<PAGE>
10.03 FACILITY OF PAYMENT
If the Committee shall find that a Participant or other person
entitled to a benefit is unable to care for his affairs because of
illness or accident or is a minor, the Committee may direct that any
benefit due him, unless claim shall have been made for the benefit by
a duly appointed legal representative, be paid to his spouse, a child,
a parent or other blood relative, or to a person with whom he resides.
Any payment so made shall be a complete discharge of the liabilities
of the Plan for that benefit.
10.04 INFORMATION
Each Participant, Beneficiary or other person entitled to a benefit,
before any benefit shall be payable to him or on his account under the
Plan, shall file with the Committee the information that it shall
require to establish his rights and benefits under the Plan.
95
<PAGE>
10.05 CONSTRUCTION
(a) Governing Laws. Except as otherwise provided by ERISA, this Plan
--------------
and all provisions thereof shall be construed and administered
according to the laws of the State of California.
(b) Title and Headings not to Control. The titles to the Articles and
---------------------------------
the headings of Sections in the Plan are placed herein for
convenience of reference only, and in the case of any conflict,
the text of this instrument rather than such titles or headings
shall control.
(c) Gender and Person. The masculine pronoun shall include the
-----------------
feminine, the feminine pronoun shall include the masculine and
the singular shall include the plural wherever the context so
requires.
10.06 PROOF OF DEATH AND RIGHT OF BENEFICIARY OR OTHER PERSON
The Committee may require and rely upon such proof of death and such
evidence of the right of any Beneficiary
96
<PAGE>
or other person to receive the value of the Plan benefits of a
deceased Participant as the Committee may deem proper, and its
determination of death and of the right of that Beneficiary or other
person to receive payment shall be conclusive.
10.07 FAILURE TO LOCATE RECIPIENT
In the event that the Committee is unable to locate a Participant or
Beneficiary who is entitled to payment under the Plan within 5 years
from the date such payment was to have been made, the amount to which
such Participant or Beneficiary was entitled shall be declared a
forfeiture and shall be used to reduce future Matching Contributions
to the Plan. If the Participant or Beneficiary is later located, the
benefit which was previously forfeited hereunder shall be restored by
means of additional Employer contributions to the Plan.
97
<PAGE>
ARTICLE 11. AMENDMENT, MERGER AND TERMINATION
- - ---------- ---------------------------------
11.01 AMENDMENT OF PLAN
The Company, acting through the Board of Directors reserves the right
at any time and from time to time, and retroactively if deemed
necessary or appropriate, to amend in whole or in part any or all of
the provisions of the Plan. Effective as of November 21, 1994, the
Committee may also amend the Plan provided that any amendment adopted
by the Committee may not have an impact on the Company's annual
expense of more than five million dollars, except that such five
million dollar limitation shall not apply to amendments necessary to
comply with laws or regulations. However, no amendment shall make it
possible for any part of the funds of the Plan to be used for, or
diverted to, purposes other than for the exclusive benefit of persons
entitled to benefits under the Plan. No amendment shall be made which
has the effect of decreasing the accrued benefits of any Participant
or of reducing the nonforfeitable percentage of the accrued benefits
of a Participant below the nonforfeitable percentage computed under
the Plan as in
98
<PAGE>
effect on the date on which the amendment is adopted or, if later, the
date on which the amendment becomes effective. Any action required or
permitted to be taken by the Board of Directors or the Committee under
the Plan shall be by resolution adopted by the Board of Directors or
the Committee at a meeting held either in person or by telephone or
other electronic means, or by unanimous written consent in lieu of a
meeting. Notwithstanding the foregoing, any right of the Company or
the Committee to amend the Plan (except for amendments required by law
or non-material amendments which are administrative in nature) or any
right of the Company to cause mergers or asset and liability transfers
or any right of the Employers to take a reversion of the Suspense
Account (as defined in Section 13.04(a))terminate as of the date there
is a Change in Control of the Company which is defined as follows:
(l) any person (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) is or becomes the
beneficial owner, directly or indirectly, to securities of the
Company representing fifty percent or more of the combined
99
<PAGE>
voting power of the Company's then outstanding securities; or
(2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors
cease for any reason to constitute at least a majority of the
Board of Directors, unless the election (or the nomination for
election by the Company shareholders) of each new director was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the
period.
11.02 MERGER OR CONSOLIDATION
The Plan may not be merged or consolidated with, and its assets or
liabilities may not be transferred to, any other plan unless each
person entitled to benefits under the Plan would, if the resulting
plan were then terminated, receive a benefit immediately after the
merger, consolidation, or transfer which is equal to or greater than
the benefit he would have been entitled to receive immediately before
the merger, consolidation, or transfer if the Plan had then
terminated.
100
<PAGE>
11.03 ADDITIONAL PARTICIPATING EMPLOYERS
(a) If any company is or becomes a subsidiary of or associated with
an Employer, the Company may include the employees of that
subsidiary or associated company as participants in the Plan
upon appropriate action by that company necessary to adopt the
Plan. In that event, or if any persons become Employees of an
Employer as the result of merger or consolidation or as the
result of acquisition of all or part of the assets or business
of another company, the Company shall determine to what extent,
if any, previous service with the subsidiary or associated
company shall be recognized under the Plan, but subject to the
continued qualification of the trust for the Plan as tax-exempt
under the Code.
(b) Any Employer may terminate its participation in the Plan upon
appropriate action by it. In that event the assets of the Plan
held on account of Participants in the employ of that Employer,
and any unpaid Aggregate Accounts of all Participants
101
<PAGE>
who have separated from the employ of that Employer, shall be
determined by the Committee. Subject to the provisions of
Section 6.05, those assets shall be distributed as provided in
Section 11.05 if the Plan is terminated or partially terminated
as a result of the withdrawal of such Employer. Otherwise,
benefits payable to Employees employed by the withdrawing
Employer shall be payable to such Employee when due under the
Plan, but such Employees shall not be considered Eligible
Employees from and after the date of withdrawal by their
Employer.
11.04 TERMINATION OF PLAN
The Company may terminate the Plan for any reason at any time.
11.05 DISTRIBUTION OF ASSETS ON PLAN TERMINATION OR A COMPLETE
DISCONTINUANCE OF CONTRIBUTIONS
(a) Subject to the provisions of Section 6.05, in case of
termination of the Plan, or a complete discontinuance of
contributions under the Plan, the rights of Participants to the
benefits accrued
102
<PAGE>
under the Plan to date of termination or discontinuance of
contributions, shall remain fully vested and nonforfeitable.
(b) Upon Plan termination or discontinuance of contributions, the
Committee shall instruct the Trustee to allocate any
unallocated assets of the Trust Fund (exclusive of any Suspense
Account as defined in Section 13.04(a)) among the Aggregate
Accounts of Participants and Beneficiaries in accordance with
the provisions of Article 5.
(c) After providing for payment of any expenses properly chargeable
against the Trust Fund, the Committee may direct the Trustee to
distribute assets remaining in the Trust Fund. Assets in any
Suspense Account must be returned to the Employers in kind,
unless there has been a Change of Control as provided in
Section 11.01. Distributions to Participants or Beneficiaries
may be in cash or in kind and are not subject to the regular
distribution provisions of this Plan except distributions must
be in a form that the Committee determines consistent with
statutory requirements. Except as specifically provided by law,
the
103
<PAGE>
Committee's determination is conclusive on all persons.
(d) In the event of a partial termination of the Plan, the
provisions of this Section shall be applicable to the
Participants affected by the partial termination.
11.06 NOTIFICATION OF TERMINATION
Upon a termination of the Plan in accordance with this Article, the
Committee shall notify the Employers, the Trustee, the Participants
and all other necessary parties. The Committee shall thereafter
continue the administration of the Plan for the purpose of winding up
its affairs and may take all action reasonably required to accomplish
such purpose.
11.07 CHANGE IN CONTROL
Notwithstanding any other provision of this Plan to the contrary, in
the event of a Change in Control as defined in Section 11.01, any
residual assets of the trust fund held in a Suspense Account as
defined in Section 13.04(a) must be used to provide additional
104
<PAGE>
benefits to the Participants, in proportion to their relative
Compensation, or in a per capita allocation, as the Committee shall
determine. If necessary to avoid tax disqualification of the Plan,
such additional benefits shall be provided to the Participants as
additional compensation after the Employers have taken the value of
the Suspense Account as defined in Section 13.04(a) into taxable
income.
105
<PAGE>
ARTICLE 12. TOP-HEAVY PROVISIONS
- - ---------- --------------------
12.01. PRIORITY OVER OTHER PLAN PROVISIONS
If the Plan is or becomes a Top-Heavy Plan in any Plan Year, the
provisions of this Article will supersede any conflicting provisions
of the Plan. However, the provisions of this Article will not operate
to increase the rights or benefits of Participants under the Plan
except to the extent required by the Code section 416 and other
provisions of law applicable to Top-Heavy Plans.
12.02 DEFINITIONS USED IN THIS ARTICLE
The following words and phrases, when used with initial capital
letters, will have the meanings, set forth below.
(a) "DEFINED BENEFIT DOLLAR LIMITATION" means the limitation
described in Section 13.02(f).
106
<PAGE>
(b) "DEFINED BENEFIT PLAN" means the qualified plan described in
Section 13.02(h).
(c) "DEFINED CONTRIBUTION DOLLAR LIMITATION" means the limitation
described in Section 13.02(i).
(d) "DEFINED CONTRIBUTION PLAN" means the tax-qualified plan
described in Section 13.02(k).
(e) "DETERMINATION DATE" means for the first Plan Year of the Plan,
the last day of the Plan Year and for any subsequent Plan Year,
the last day of the preceding Plan Year.
(f) "DETERMINATION PERIOD" means the Plan Year containing the
Determination Date and the four preceding Plan Years.
(g) "INCLUDABLE COMPENSATION" means Section 415 Compensation
limited each year by the Maximum Compensation Limitation.
(h) "KEY EMPLOYEE" means any Employee or former Employee (and the
Beneficiary of a deceased Employee) who at any time during the
Determination
107
<PAGE>
Period was (i) an officer of an Employer or an Affiliated
Employer, if such individual's Includable Compensation
(modified as described below) exceeds 50% of the Defined
Benefit Dollar Limitation, (ii) an owner (or considered an
owner under Code section 318) of one of the ten largest
interests in an Employer or an Affiliated Employer, if such
individual's Includable Compensation exceeds the Defined
Contribution Dollar Limitation, (iii) a 5-percent owner of an
Employer or an Affiliated Employer, or (iv) a l-percent owner
of an Employer or an Affiliated Employer who has annual
Includable Compensation of more than $150,000. The
determination of who is a Key Employee will be made in
accordance with Code section 416(i).
(i) "MINIMUM ALLOCATION" means the allocation described in the
first sentence of Section 12.03.
(j) "PERMISSIVE AGGREGATION GROUP" means the Required Aggregation
Group of Qualified Plans plus any other qualified plan or
qualified plans of an Employer or an Affiliated Employer which,
when considered as a group with the Required
108
<PAGE>
Aggregation Group, would continue to satisfy the requirements
of Code sections 401(a)(4) and 410 (including simplified
employee pension plans).
(k) "PRESENT VALUE" means present value based only on the interest
and mortality rates specified in a Defined Benefit Plan.
(l) "REQUIRED AGGREGATION GROUP" means the group of plans
consisting of (i) each qualified plan (including simplified
employee pension plans) of an Employer or an Affiliated
Employer which enables a Qualified Plan to meet the
requirements of Code sections 401(a)(4) or 410.
(m) "TOP-HEAVY PLAN" means the Plan for any Plan Year in which any
of the following conditions exists: (i) if the Top-Heavy Ratio
for the Plan exceeds 60% and the Plan is not a part of any
Required Aggregation Group or Permissive Aggregation Group of
qualified plans; (ii) if the Plan is a part of a Required
Aggregation Group but not part of a Permissive Aggregation
Group of qualified plans and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60%; or (iii) if the
109
<PAGE>
Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group of qualified plans and the Top-
Heavy Ratio for the Permissive Aggregation Group exceeds 60%.
(n) "TOP-HEAVY RATIO" means a fraction, the numerator of which is
the sum of the Present Value of accrued benefits and the
account balances (as required by Code section 416)) of all Key
Employees with respect to such Qualified Plans as of the
Determination Date (including any part of any accrued benefit
or account balance distributed during the five-year period
ending on the Determination Date), and the denominator of which
is the sum of the Present Value of the accrued benefits and the
account balances (including any part of any accrued benefit or
account balance distributed in the five-year period ending on
the Determination Date) of all Employees with respect to such
qualified plans as of the Determination Date. The value of
account balances and the Present Value of accrued benefits will
be determined as of the most recent Top-Heavy Valuation Date
that fails within or ends with the 12-month period ending on
the Determination Date,
110
<PAGE>
except as provided in Code section 416 for the first and second
Plan Years of a Defined Benefit Plan. The account balances and
accrued benefits of a participant who is not a Key Employee but
who was a Key Employee in a prior year will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, transfers and contributions unpaid as
of the Determination Date are taken into account will be made
in accordance with Code section 416. Employee contributions
described in Code section 219(e)(2) will not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year. The accrued
benefit of any Employee other than a Key Employee will be
determined under the method, if any, that uniformly applies for
accrual purposes under all Qualified Plans maintained by an
Employer or an Affiliated Employer and included in a Required
Aggregation Group or a Permissive Aggregation Group or, if
there is no such method, as if the benefit accrued not more
rapidly than the slowest
111
<PAGE>
accrual rate permitted under the fractional accrual rate of
Code section 411(b)(1)(C). Notwithstanding the foregoing, the
account balances and accrued benefits of any Employee who has
not performed services for an employer maintaining any of the
aggregated plans during the five-year period ending on the
Determination Date will not be taken into account for purposes
of this subsection.
(o) "TOP-HEAVY VALUATION DATE" means the last day of each Plan
Year.
12.03 MINIMUM ALLOCATION
(a) For any Plan Year in which the Plan is a Top-Heavy Plan, each
Participant who is not a Key Employee will receive an
allocation of Employer contributions of not less than the
lesser of 3% of his Includable Compensation for such Plan Year
or the percentage of Includable Compensation that equals the
largest percentage of Participating Employer contributions and
forfeitures allocated to a Key Employee. The Minimum Allocation
is determined without regard to any Social Security
112
<PAGE>
contribution. Tax-Deferred Contributions made on behalf of
Participants who are not Key Employees will not be treated as
Employer contributions for purposes of the Minimum Allocation
in Plan Years beginning after December 31, 1988. Matching
Contributions that are allocated to Participants who are not
Key Employees and that are taken into account in determining a
Participant's Deferral Percentage or Contribution Percentage
for a Plan Year beginning after December 31, 1988 will not be
treated as Employer contributions for such Plan Year for
purposes of the Minimum Allocation. The Minimum Allocation
applies even though under other Plan provisions the Participant
would not otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the Plan Year
because (i) the non-Key Employee fails to make mandatory
contributions to the Plan, (ii) the non-Key Employee's
Includable Compensation is less than a stated amount, or (iii)
the non-Key Employee fails to complete 1,000 Hours of Service
in the Plan Year.
(b) No Minimum Allocation will be provided pursuant to subsection
(a) to a Participant who is not
113
<PAGE>
employed by an Employer or an Affiliated Employer on the last
day of the Plan Year.
(c) If an Employer or an Affiliated Employer maintains one or more
other Defined Contribution Plans covering Employees who are
Participants in this Plan, the Minimum Allocation will be
provided under this Plan, unless such other Defined
Contribution Plans make explicit reference to this Plan and
provide that the Minimum Allocation will not be provided under
this Plan, in which the provisions of subsection (a) will not
apply to any Participant covered under such other Defined
Contribution Plans. If an Employer or an Affiliated Employer
maintains one or more Defined Benefit Plans covering Employees
who are Participants in this Plan, and such Defined Benefit
Plans provide that Employees who are participants therein will
accrue the minimum benefit applicable to top-heavy Defined
Benefit Plans notwithstanding their participation in this Plan
then the provisions of subsection (a) will not apply to any
Participant covered under such Defined Benefit Plans. If an
Employer or an Affiliated Employer maintains one or more
Defined
114
<PAGE>
Benefit Plans covering Employees who are Participants in this
Plan, and the provisions of the preceding sentence do not
apply, then each Participant who is not a Key Employee and who
is covered by such Defined Benefit Plans will receive a Minimum
Allocation determined by applying the provisions of subsection
(a) with the substitution of "5%" in each place that "3%"
occurs therein.
(d) The Participant's Minimum Allocation, to the extent required to
be nonforfeitable under Code section 416(b) and the special
vesting schedule provided in this Article, may not be forfeited
under Code section 411(a)(3)(B)(relating to suspension of
benefits on reemployment) or 411(a)(3)(D) (relating to
withdrawal of mandatory contributions).
12.04 MODIFICATION OF AGGREGATE BENEFIT LIMIT
(a) Subject to the provisions of subsection (b), in any Plan Year
in which the Top-Heavy Ratio exceeds 60%, the aggregate benefit
limit described in Article 13 will be modified by substituting
"100%" for "125%" in Sections 13.02(h) and (k).
115
<PAGE>
(b) The modification of the aggregate benefit limit described in
subsection (a) will not be required if the Top-Heavy Ratio does
not exceed 90% and one of the following conditions is met: (i)
Employees who are not Key Employees do not participate in both
a Defined Benefit Plan and a Defined Contribution Plan which
are in the Required Aggregation Group, and the Minimum
Allocation requirements of Section 12.03(a) are met when such
requirements are applied with the substitution of "4%" for
"3%"; (ii) the Minimum Allocation requirements of Section 12.03
(c) are met when such requirements are applied with the
substitution of "7 1/2%" for "5%"; or (iii) Employees who are
not Key Employees have an accrued benefit of not less than 3%
of their average Includable Compensation for the five
consecutive Plan Years in which they had the highest Includable
Compensation multiplied by their Years of Service in which the
Plan is a Top-Heavy Plan (not to exceed a total such benefit of
30%) expressed as a life annuity commencing at the
Participant's normal retirement age in a Defined Benefit Plan
which is in the Required Aggregation Group.
116
<PAGE>
12.05 MINIMUM VESTING
The vesting provided in Article 5 exceeds the minimum vesting of
Section 416 of the Code and hence special minimum top-heavy vesting
requirements are not required under this Plan.
117
<PAGE>
ARTICLE 13. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS TO PARTICIPANTS'
-------------------------------------------------------------
ACCOUNTS
--------
13.01 PRIORITY OVER OTHER CONTRIBUTION AND ALLOCATION PROVISIONS
The provisions set forth in this Article will supersede any
conflicting provisions of Articles 3 and 4.
13.02 DEFINITIONS USED IN THIS ARTICLE
The following words and phrases, when used with initial capital
letters, will have the meanings set forth below.
(a) "ANNUAL ADDITION" means the sum of the following amounts with
respect to all qualified plans and welfare benefit funds
maintained by the Employers and Affiliated Employers.
(1) the amount of Employer and Affiliated Employer
contributions including Tax-Deferred Contributions with
respect to the
118
<PAGE>
Limitation Year allocated to the Participant's account;
(2) the amount of any forfeitures for the Limitation Year
allocated to the Participant's account;
(3) the amount, if any, carried forward pursuant to Section
13.04 or a similar provision in another qualified plan
and allocated to the Participant's account;
(4) the amount of a Participant's voluntary nondeductible
contributions for the Limitation Year, provided, however,
that the Annual Addition for any Limitation Year
beginning before January 1, 1987 will not be recomputed
to treat all of the Participant's nondeductible voluntary
contributions as part of the Annual Addition;
(5) the amount allocated to an individual medical benefit
account (as defined in Code section 415(1)(2)) which is
part of a Defined Benefit Plan or an annuity plan; and
119
<PAGE>
(6) the amount derived from contributions paid or accrued
after December 31, 1985 in taxable years ending after
such date that are attributable to post-retirement
medical benefits allocated to the separate account of a
key employee (as defined in Code section 419A(d)(3))
under a Welfare Benefit Fund.
A Participant's Annual Addition will not include a (i)
any nonvested amounts restored to his account following
his reemployment before incurring five consecutive one
year Breaks in Service, (ii) any amounts allocated to his
Rollover Account, or (iii) any amounts repaid to the Plan
as principal or interest on a loan pursuant to Section
6.02. Any Tax-Deferred or Matching Contributions
distributed or forfeited under the provisions of Sections
1.38, 13.07 or 13.08 shall be included in Annual
Additions for the year allocated.
(b) "AVERAGE CONTRIBUTION PERCENTAGE" means the average of
the Contribution Percentages of each Participant in a
group of Participants.
120
<PAGE>
(c) "AVERAGE DEFERRAL PERCENTAGE" means the average of the
Deferral Percentages of each Participant in a group of
Participants.
(d) "CONTRIBUTION PERCENTAGE" means the ratio (expressed as a
percentage) determined by dividing the Matching
Contributions and any applicable Special Contributions
made to the Plan on behalf of a Participant who is
eligible to receive such contributions for a Plan Year
(disregarding any Matching Contributions that are taken
into account in determining the Participant's Deferral
Percentage for the Plan Year) by the Participant's
Statutory Compensation for the Plan Year. A Participant
is eligible for purposes of determining his Contribution
Percentage even though no Matching Contributions are made
to the Plan on his behalf because of the suspension of
his Tax-Deferred Contributions under the terms of the
Plan, because of an election not to participate, or
because of the limitations contained in Sections 13.03
through 13.05 of the Plan.
121
<PAGE>
(e) "DEFERRAL PERCENTAGE" means the ratio (expressed as a
percentage) determined by dividing the Tax-Deferred
Contributions and any applicable Special Contributions
made to the Plan on behalf of a Participant who is
eligible to make Tax-Deferred Contributions for all or a
portion of a Plan Year by the Participant's Statutory
Compensation for the Plan Year. In addition, since the
Matching and Special Contributions to the Plan for any
Plan Year satisfy the requirements of Code section
401(k)(2)(B) and (C), a Participant's Deferral Percentage
may be determined by aggregating the Tax-Deferred
Contributions, Matching Contributions and Special
Contributions made to the Plan on his behalf for such
Plan Year. A Participant is eligible to make Tax-Deferred
Contributions for purposes of determining his Deferral
Percentage even though he may not make Tax-Deferred
Contributions because of the suspension of his Tax-
Deferred Contributions under the terms of the Plan,
because of an election not to participate, or because of
122
<PAGE>
the limitations contained in Sections 13.03 and 13.05 of
the Plan.
(f) "DEFINED BENEFIT DOLLAR LIMITATION" means for any
Limitation Year, $90,000, multiplied by the Adjustment
Factor.
(g) "DEFINED BENEFIT FRACTION" means a fraction, the
numerator of which is the Projected Annual Benefit of a
Participant under all Defined Benefit Plans maintained by
the Employers or an Affiliated Employer determined as of
the close of the Limitation Year and the denominator of
which is the lesser of (i) 140% of the Participant's
average Section 415 Compensation that may be taken into
account for the Limitation Year under Code section
415(b)(1)(B), or (ii) 125% of the Defined Benefit Dollar
Limitation, determined as of the close of the Limitation
Year. If the Participant was a participant in a Defined
Benefit Plan maintained by an Employer or an Affiliated
Employer in existence on July 1, 1982, or on May 6, 1986,
the denominator of the Defined Benefit
123
<PAGE>
Fraction will not be less than 125% of the greater of the
Participant's accrued Projected Annual Benefit under such
plan as of the end of the last Limitation Year beginning
before January 1, 1983, or his accrued Projected Annual
Benefit of the end of the last Limitation Year beginning
January 1, 1987. The preceding sentence applies only if
the Defined Benefit Plan satisfied the requirements of
Code section 415 as in effect at the end of such
Limitation Year.
(h) "DEFINED BENEFIT PLAN" means a qualified plan other than
a Defined Contribution Plan.
(i) "DEFINED CONTRIBUTION DOLLAR LIMITATION" means for any
Limitation Year, $30,000 or, if greater, 25% of the
Defined Benefit Dollar Limitation for the same Limitation
Year. If a short Limitation Year is created because of a
Plan amendment changing the Limitation Year to a
different 12-consecutive month period, the Defined
Contribution Dollar Limitation for the short Limitation
Year will not exceed the amount determined in the
preceding
124
<PAGE>
sentences multiplied by a fraction, the numerator of
which is the number of months in the short Limitation
Year and the denominator of which is 12.
(j) "DEFINED CONTRIBUTION FRACTION" means a fraction, the
numerator of which is the sum of the Annual Additions
allocated to the Participant's accounts for the
applicable Limitation Year and each prior Limitation
Year, and the denominator of which is the sum of the
lesser of the following products for each Limitation Year
in which the Participant was an Employee (regardless of
whether a Defined Contribution Plan was in existence for
such Limitation Year) (i) the Defined Contribution Dollar
Limitation (determined for this purpose without regard to
the provisions of Code section 415(c)(6)) effective for
the Limitation Year multiplied by 125%, or (ii) 35% of
the Participant's Section 415 Compensation for such
Limitation Year.
125
<PAGE>
(k) "DEFINED CONTRIBUTION PLAN" means a qualified plan described
in Code section 414(i).
(l) "FAMILY MEMBER" means, with respect to an Employee, the
Employee's spouse and lineal ascendants or descendants and
the spouses of such lineal ascendants or descendants.
(m) "LIMITATION YEAR" means the 12-consecutive-month period used
by a qualified plan for purposes of computing the
limitations on benefits and annual additions under Code
section 415. The Limitation Year for this Plan is the Plan
Year.
(n) "MAXIMUM ANNUAL ADDITION" means with respect to a
Participant for any Limitation Year an amount equal to the
lesser of (i) the Defined Contribution Dollar Limitation, or
(ii) 25% of the Participant's Section 415 Compensation.
(o) "NONHIGHLY COMPENSATED EMPLOYEE" means an Employee who is
neither a Highly Compensated
126
<PAGE>
Employee nor a Family Member of a Highly Compensated
Employee.
(p) "PROJECTED ANNUAL BENEFIT" means the annual benefit (as
defined in Code section 415(b)(2)) to which a Participant
would be entitled under the terms of a Defined Benefit Plan
maintained by an Employer or an Affiliated Employer,
assuming that the Participant will continue employment until
his normal retirement age under the Defined Benefit Plan (or
current age, if later) and that the Participant's Section
415 Compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the
Defined Benefit Plan will remain constant for all future
Limitation Years.
(q) "STATUTORY COMPENSATION" means the earnings paid to an
Employee by the Employers which are subject to reporting on
Internal Revenue Service Form W-2. In addition, Statutory
Compensation includes any contributions made by the
Employers on behalf of an Employee
127
<PAGE>
pursuant to a Tax-Deferral Contribution election under the
Plan or under any other employee benefit plan containing a
cash or deferred arrangement under Code section 401(k) and
any amounts that would have been received as cash but for an
election to receive benefits under a cafeteria plan meeting
the requirements of Code section 125. Effective January 1,
1989, the annual Statutory Compensation of an Employee taken
into account for any purpose for any Plan Year will not
exceed the Maximum Compensation Limitation.
(r) "WELFARE BENEFIT FUND" means an organization described in
paragraph (7), (9), (17) or (20) of Code section 501(c), a
trust, corporation or other organization not exempt from
federal income tax, or to the extent provided in Treasury
Regulations, any account held for an employer by any person,
which is part of a plan of an employer through which the
employer provides benefits to employees or their
beneficiaries, other than a benefit to which Code sections
83(h), 404 (determined
128
<PAGE>
without regard to section 404(b)(2)) or 404A applies, or to which an
election under Code section 463 applies.
13.03 GENERAL ALLOCATION LIMITATION
The Annual Addition of a Participant for any Limitation Year will not
exceed the Maximum Annual Addition. If, except for the application of
this Section, the Annual Addition of a Participant for any Limitation
Year would exceed the Maximum Annual Addition, the excess Annual
Addition attributable to this Plan will not be allocated to the
Participant's Aggregate Account for the Plan Year included in such
Limitation Year, but will be subject to the provisions of Section
13.04. The limitations contained in this Article will apply on an
aggregate basis to all Defined Contribution Plans and all Defined
Benefit Plans (whether or not any of such plans have terminated)
established by the Employers and Affiliated Employers.
13.04 EXCESS ALLOCATIONS
If the Participant is not covered under another Defined Contribution
Plan or a Welfare Benefit Fund maintained
129
<PAGE>
by an Employer or an Affiliated Employer during the Limitation Year
and the amount otherwise allocable to his Account would exceed the
Maximum Annual Addition, the Employer contributions which would cause
the Participant's Annual Addition to exceed the Maximum Annual
Addition will first be returned to the Employers as an amount
contributed as a mistake of fact to the extent permitted by law and/or
second be successively allocated in the manner described in Section
4.02(d) among the Accounts of eligible Participants whose Annual
Additions do not exceed the Maximum Annual Addition. If, after such
allocations have been made, there remain Employer contributions which
cannot be allocated without causing the Annual Addition of a
Participant to exceed the Maximum Annual Addition, the Employer
contributions which result from a reasonable error in estimating the
Participant's Section 415 Compensation or from any other limited facts
and circumstances which the Commissioner of Internal Revenue finds
justifiable under section 1.415-6(b)(6) of the Treasury Regulations
and which cause the Participant's Annual Addition to exceed the
Maximum Annual Addition will be held in a Suspense Account in the
Trust Fund to be carried forward and allocated in subsequent
Limitation Years as provided in Section
130
<PAGE>
4.02. Such Suspense Account will participate in the allocation of
Income of the Trust Fund.
(b) If, in addition to this Plan, the Participant is covered under another
Defined Contribution Plan or a Welfare Benefit Fund maintained by an
Employer or an Affiliated Employer during the Limitation Year, the
following provisions will apply. The Annual Addition which may be
credited to a Participant's Account under this Plan for any such
Limitation Year will not be reduced by the Annual Addition credited to
a Participant's accounts under the other Defined Contribution Plans
and Welfare Benefit Funds for the same Limitation Year. The Annual
Addition with respect to the Participant under the other Defined
Contribution Plans and Welfare Benefit Funds maintained by an Employer
or an Affiliated Employer will be reduced if necessary so that the
Annual Addition under all such Defined Contribution Plans and Welfare
Benefit Funds for the Limitation Year will equal the Maximum Annual
Addition.
(c) If Annual Additions on behalf of a Participant are to be reduced under
this Plan to avoid allocation to the Participant in excess of the
Maximum Annual Addition,
131
<PAGE>
then the reduction shall be accomplished in accordance with the
following order of priority:
(i) the Participant's unmatched Tax-Deferred Contributions, and the
amount of the reduction, plus Income thereon if required by
Income Tax Regulations, shall be returned to the Participant.
(ii) the Participant's matched Tax-Deferred Contributions and
corresponding Matching Contributions shall be reduced to the
extent necessary. The amount of reduction attributable to
Participant's matched Tax-Deferred Contributions shall be
returned to the Participant, plus Income thereon if required by
Income Tax Regulations. The amount of reduction attributable to
Matching Contributions shall be forfeited and used to reduce
subsequent Employer contributions to the Plan.
(iii) Special Contributions, if any, shall be reduced to the extent
necessary, and said reduction shall be forfeited and used to
reduce subsequent Employer contributions to the Plan.
132
<PAGE>
Any Tax-Deferred Contributions returned to the Participant pursuant to
this Section 13.04(c) shall be disregarded in applying the Section
402(g) Limit and in determining the Participant's Deferral Percentage
under Section 13.02(e).
13.05 AGGREGATE BENEFIT LIMITATION
If an Employer or an Affiliated Employer maintains, or at any time
maintained, one or more Defined Benefit Plans covering any Participant
in this Plan, the sum of the Defined Benefit Fraction and the Defined
Contribution Fraction for any Limitation Year will equal no more than
one (1.0). The provisions of the Defined Benefit Plans will govern
the order of reduction of Annual Additions or benefit accruals
necessary to meet this limitation. If the provisions of the Defined
Benefit Plans are silent, the rate of accrual under the Defined
Benefit Plan will be reduced first to meet this limitation. If the
Defined Contribution Plans taken into account in determining the
Participant's Annual Addition under this Article satisfied the
requirements of Code section 415 as in effect for all Limitation Years
beginning before January 1, 1987, an amount will be subtracted from
the
133
<PAGE>
numerator of the Defined Contribution Fraction (not exceeding such
numerator) as prescribed by the Secretary of the Treasury so that the
sum of the Defined Contribution Fraction and the Defined Benefit
Fraction does not exceed 1.0. For purposes of this Section, a
Participant's voluntary nondeductible contributions to a Defined
Benefit Plan will be treated as being part of a separate Defined
Contribution Plan.
13.06 NO CONFLICT WITH CODE SECTION 415
The preceding provisions of this Article are intended to comply with
current provisions of Section 415 of the Code so that the maximum
benefits provided by plans of the Employers and Affiliated Employers
shall be exactly equal to the maximum amounts allowed under Section
415 of the Code and regulations thereunder. If there is a discrepancy
between the provisions of Section 415 of the Code and regulations
thereunder, such discrepancy shall be resolved in such a way as to
give full effect to the provisions of Section 415 of the Code and
regulations thereunder.
134
<PAGE>
13.07 LIMITATION ON DEFERRAL CONTRIBUTIONS
(a) AVERAGE DEFERRAL PERCENTAGE TEST
Notwithstanding any other provision of the Plan, the Average
Deferral Percentage for a Plan Year for Participants who are
Highly Compensated Employees will not exceed the greater of: (i)
the Average Deferral Percentage for Participants who are
Nonhighly Compensated Employees multiplied by 1.25; or (ii) the
lesser of (A) the Average Deferral Percentage for Participants
who are Nonhighly Compensated Employees plus two percentage
points or (B) the Average Deferral Percentage for Participants
who are Nonhighly Compensated Employees multiplied by 2.0. The
multiple use of the alternative test contained in clause (ii) of
this section will be restricted as provided in regulations
prescribed by the Secretary of the Treasury.
(b) SUSPENSION OF TAX-DEFERRED CONTRIBUTIONS
If at any time during a Plan Year the Committee determines, on
the basis of estimates made from
135
<PAGE>
information then available, that the limitation described in
Section 13.07(a) above will not be met for the Plan Year, the
Committee in its discretion may reduce or suspend the Tax-
Deferred Contributions of one or more Participants who are Highly
Compensated Employees to the extent necessary (i) to enable the
Plan to meet such limitation, or (ii) to reduce the amount of
excess Tax-Deferred Contributions that would otherwise be
distributed pursuant to Section 13.07(c) below.
(c) REDUCTION OF EXCESS TAX-DEFERRED CONTRIBUTIONS
If, for any Plan Year, the Average Deferral Percentage for
Participants who are Highly Compensated Employees exceeds the
limitation described in Section 13.07(a) above, the Deferral
Percentage for each such Participant will be reduced (in the
order of Deferral Percentages, beginning with the highest of such
percentages) until the limitation in Section 13.07 (a) is
satisfied. In order to reduce a Participant's Deferral
Percentage, the Participant's excess Tax-Deferred Contributions
will be returned to him. If Matching Contributions are taken
into account
136
<PAGE>
in determining Deferral Percentages, a Participant's Deferral
Percentage will be reduced by returning first Tax-Deferred
Contributions in excess of 4% of Compensation and by returning
next the remaining Tax-Deferred Contributions and Matching
Contributions, in proportion to the amount of such contributions
for the Plan Year. All distributions under this Section 13.07(c)
will include Trust Fund Income for the Plan Year and the
distribution and will be made within two and one-half months
following the close of the Plan Year, if practicable, but in no
event later than the last day of the immediately following Plan
Year. The amount of excess Tax-Deferred Contributions distributed
pursuant to this Section with respect to a Participant for the
Plan Year will be reduced by any Tax-Deferred Contributions
previously distributed to the Participant for the same Plan Year
pursuant to Section 1.38.
In the event any Tax-Deferred Contributions returned under this
Section were matched by Matching Contributions, such
corresponding Matching Contribution, with Income as of the end of
the Plan Year shall be forfeited by the
137
<PAGE>
Participant and used to reduce Employer contributions under the
Plan.
13.08 LIMITATION ON MATCHING CONTRIBUTIONS
(a) AVERAGE CONTRIBUTION PERCENTAGE TEST
Notwithstanding any other provision of the Plan, the Average
Contribution Percentage for a Plan Year for Participants who are
Highly Compensated Employees will not exceed the greater of: (i)
the Average Contribution Percentage for Participants who are
Nonhighly Compensated Employees multiplied by 1.25; or (ii) the
lesser of (A) the Average Contribution Percentage Test for
Participants who are Nonhighly Compensated Employees plus two
percentage points or (B) the Average Contribution Percentage for
Participants who are Nonhighly Compensated Employees multiplied
by 2.0. The multiple use of the alternative test contained in
clause (ii) of this Section will be restricted as provided in
regulations prescribed by the Secretary of Treasury.
138
<PAGE>
(b) REDUCTION OF EXCESS MATCHING CONTRIBUTIONS
If, for any Plan Year, the Average Contribution Percentage for
Participants who are Highly Compensated Employees exceeds the
limitation described in Section 13.08(a) above, the Contribution
Percentage for each such Participant will be reduced (in the
order of Contribution Percentages, beginning with the highest of
such percentages) until the limitation in Section 13.08(a) is
satisfied. In order to reduce a Participant's Contribution
Percentage, the Participant's excess Matching Contributions
(increased by Trust Fund Income for the Plan Year) will be
distributed to the Participant within two and one-half months
following the close of the Plan Year, if practicable, but in no
event later than the last day of the immediately following Plan
Year.
13.09 AGGREGATION RULES
(a) CODE SECTION 415
For purposes of the allocation limitations under
139
<PAGE>
Code section 415 set forth in this Article, all Defined Benefit
Plans ever maintained by an Employer or an Affiliated Employer
will be treated as one Defined Benefit Plan, and all Defined
Conribution Plans ever maintained by an Employer or an Affiliated
Employer will be treated as one Defined Contribution Plan.
(b) CODE SECTION 401(K)
For purposes of the limitation on Tax-Deferred Contributions set
forth in this Article, the Average Deferral Percentage for any
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to have tax-deferred contributions
allocated to his account under two or more plans or arrangements
described in Code section 401(k) that are maintained by the
Employer or any Affiliated Employer will be determined as if all
such tax-deferred contributions were made under a single
arrangement.
(c) CODE SECTION 401(M)
If this Plan satisfies the requirements of Code
140
<PAGE>
section 4l0(b) only if aggregated with one or more other plans,
the Contribution Percentages of all Participants will be
determined as if all such plans were a single plan. In addition,
the Contribution Percentage of a Participant who is a Highly
Compensated Employee for a Plan Year and who is eligible to
receive Tax-Deferred Contributions or Matching Contributions
allocated to his account under two or more Defined Contribution
Plans maintained by an Employer or an Affiliated Employer will be
determined as if all such contributions were made to a single
plan.
(d) FAMILY MEMBERS
For purposes of determining the Contribution Percentage or the
Deferral Percentage of a Participant who is both a Highly
Compensated Employee and either (i) a 5-percent owner, determined
in accordance with Code section 414(q) and the Treasury
Regulations promulgated thereunder, or (ii) one of the 10 most
highly compensated Employees ranked on the basis of Statutory
Compensation paid by an Employer or an Affiliated Employer during
the year, determined in
141
<PAGE>
accordance with Code section 414(q) and the Treasury Regulations
promulgated thereunder, the Tax-Deferred Contributions, Matching
Contributions and Statutory Compensation of such Participant will
include the Tax-Deferred Contributions, Matching Contributions
and Statutory Compensation of Family Members, and Family Members
will be disregarded in determining the Contribution Percentage or
the Deferral Percentage of all other Participants.
142
<PAGE>
EXHIBIT 21
THE WALT DISNEY COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- - ------------------ ----------------------
<S> <C>
Buena Vista Home Video, Inc. California
Buena Vista International, Inc. California
Buena Vista Pictures Distribution, Inc. California
Buena Vista Television California
Disney Development Company Florida
EDL Holding Company Delaware
KCAL-TV, Inc. California
Lake Buena Vista Communities, Inc. Delaware
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>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of income found on pages
34 and 33 of the Company's Form 10-K for 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 1,077
<SECURITIES> 866
<RECEIVABLES> 1,793
<ALLOWANCES> 0
<INVENTORY> 824
<CURRENT-ASSETS> 0
<PP&E> 9,229
<DEPRECIATION> 3,039
<TOTAL-ASSETS> 14,606
<CURRENT-LIABILITIES> 0
<BONDS> 2,984
<COMMON> 1,226
0
0
<OTHER-SE> 5,425
<TOTAL-LIABILITY-AND-EQUITY> 14,606
<SALES> 12,112
<TOTAL-REVENUES> 12,112
<CGS> 0
<TOTAL-COSTS> 9,666
<OTHER-EXPENSES> 184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178
<INCOME-PRETAX> 2,117
<INCOME-TAX> 737
<INCOME-CONTINUING> 1,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,380
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
