Walt Disney Company (DIS)

satisfy the requirement for performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code and related IRS regulations.

The Board of Directors and the Compensation Committee have, subject to shareholder approval, approved amendments to the Amended and Restated 2002 Executive Performance Plan that conform the terms of the 2002 Plan to the proposed amended terms of the 2005 Stock Incentive Plan described above by increasing the number of shares or share units that may be subject to restricted stock and/or restricted units granted to any one individual from 2,500,000 shares in any five-year period to 2,000,000 shares in any single year.

Share authorization limits are included in the plan to assure compliance with Section 162(m) of the Internal Revenue Code and hence to avoid causing grants issued to the individual to be non-tax deductible. The authorization limits are established for this tax-related purpose and do not create target grants for any individual or commit the company to any particular level of grant. The limits contained in the Company’s plans are unduly restrictive when viewed in comparison to limits imposed for this tax-related purpose by other companies. Ninety percent of the Fortune 250 companies that have amended their stock incentive plans in the last two years have an annual share limitation rather than a multi-year limit and over 50% of those companies have annualized limits that are higher than those currently contained in the Company’s plans. The current limitation in the Company’s 2002 Plan could limit the ability of the Company to make equity awards that are fully deductible and, assuming the amendments to the 2005 Plan increasing the number of options that could be issued are approved, could constrain the flexibility of the Company and the Compensation Committee to achieve their equity grant objectives by compelling a grant which, because of a limit on the number of restricted stock and/or restricted units that may be granted to one individual, is much more heavily weighted towards options than would otherwise be optimal. The proposed amendment would preserve

the tax related purpose of the limitation, while affording the Company more flexibility to structure components of equity grants.

The Board of Directors recommends that shareholders approve the terms of the Amended and Restated 2002 Executive Performance Plan. The affirmative vote of a majority of shares represented in person or by proxy and entitled to vote on this item will be required for approval of the terms of the Amended and Restated 2002 Executive Performance Plan. Abstentions will be counted as represented and entitled to vote and will therefore have the effect of a negative vote. Broker non-votes (as described under “Information About Voting and the Meeting — Voting”) will not be considered entitled to vote on this item, and therefore will not be counted in determining the number of shares necessary for approval.

The material terms of the Amended and Restated 2002 Executive Performance Plan are described below.

Eligibility.    The Amended and Restated 2002 Executive Performance Plan is available for performance awards made to key employees (including any officer) of the Company who are (or in the opinion of the Compensation Committee may during the performance period covered by an award become) a “covered employee” for purposes of Section 162(m). A “covered employee” generally includes the five most highly compensated executive officers of the Company.

Business Criteria.    The Compensation Committee administers the plan and is charged with the responsibility for establishing specific targets for each participant in the plan that will, if achieved, allow for deductibility. Concurrently with the selection of these targets, the Committee must establish an objective formula or standard for calculating the maximum bonus payable to each participating executive officer. The targets may be based on one or more of the following business criteria (which are defined in the plan), or on any combination of them, on a

consolidated basis, subject to adjustment as described below:

The targets must be established while the performance relative to the target remains substantially uncertain within the meaning of Section 162(m). The measurement periods are typically a single fiscal year but may include more than one fiscal year.

With respect to certain criteria, the plan generally requires that adjustments be made when determining whether the applicable targets have been met so as to eliminate, in whole or in part, in any manner specified by the Committee at the time the targets are established, the gain, loss, income and/or expense resulting from the following items:

The Committee may, however, provide at the time the targets are established that one or more of these adjustments will not be made as to a specific award or awards. In addition, the Committee may determine at the time the targets are established that other adjustments will be made under the selected business criteria and applicable targets to take into account, in whole or in part, in any manner specified by the Committee, any one or more of the following:

Each of the adjustments described in this paragraph may relate to the Company as a whole or any part of the Company’s business or operations, as determined by the Committee at the time the performance targets are established. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee. Finally, adjustments will be made as necessary to any criteria related to the Company’s stock to reflect changes in corporate capitalization, such as stock splits and certain reorganizations.

The Compensation Committee has established targets for determining deductibility for fiscal 2009 based upon adjusted net income.

Maximums.    Under the plan, the bonuses for the officers subject to the plan may not exceed $55 million in the aggregate in any fiscal year, and the maximum for any single officer may not exceed 50% of the aggregate total.

The Compensation Committee has the discretion to pay less than the maximum amount otherwise payable based on individual performance or other criteria the Committee determines appropriate. Annual bonuses are paid following the close of the fiscal year to which they relate, subject to certification by the Compensation Committee that the applicable criteria have been satisfied in whole or in part.

The maximum number of shares of restricted stock or restricted stock units that may be granted to any one participant under the plan assuming approval of the proposed amendment is 2.0 million in any

year, subject to stock splits and certain other changes in corporate capitalization.

Amendment.    The plan may from time to time be amended, suspended or terminated, in whole or in part, by the Board of Directors or the Compensation Committee, but no amendment will be effective without Board and/or shareholder approval if such approval is required to satisfy the requirements of Section 162(m).

Awards Under the Plan.    The amount of annual bonuses to be paid and the amount of restricted stock or restricted stock units to be awarded in the future to the Company’s current and future executive officers under the plan cannot be determined at this time, as actual amounts will be based on the discretion of the Compensation Committee in determining the awards and actual performance. As discussed on page 65 of this Proxy Statement, the number of restricted stock units awarded to Mr. Iger under the Plan in fiscal 2009 will depend on whether the amendments to the Amended and Restated 2005 Stock Incentive Plan are approved. The number of restricted stock units that would be awarded to Mr. Iger in that circumstance is within the parameters of the existing 2002 Plan and thus the grant is not dependent on whether the amendments to the 2002 Plan are approved. The annual bonuses paid under the plan with respect to fiscal 2008 to the executive officers currently eligible under the plan are set forth in the Summary Compensation Table.