Walt Disney Company (DIS)

by shareholders in 2002, including the eligibility of participants under the plan, the performance criteria under the plan, the maximum individual bonuses under the plan and the maximum number of restricted stock or restricted stock units that can be issued to any one individual in a five-year period under the plan.

Section 162(m) of the Internal Revenue Code requires that the business criteria under the plan be approved by the Company’s shareholders every five years. The Board of Directors unanimously 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.

If the shareholders approve the terms of the Amended and Restated 2002 Executive Performance Plan, the Section 162(m) shareholder approval requirement will be met for awards made through the 2012 annual shareholder meeting. 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 performance targets for each participant in the plan. Concurrently with the selection of performance targets, the Committee must establish an objective formula or standard for calculating the maximum bonus payable to each participating executive officer. The performance 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:

The targets must be established while the performance relative to the target remains substantially uncertain within the meaning of Section 162(m). The performance measurement periods are typically a single fiscal year for bonuses and two fiscal years for vesting of restricted stock units, but may include more than two fiscal years.

With respect to adjusted net income, adjusted earnings per share, adjusted return on assets and adjusted return on equity, the plan generally requires that adjustments be made to net income, earnings per share, return on assets and/or return on equity, as the case may be, when determining whether the applicable performance targets have been met, so as to eliminate, in whole or in part, in any manner specified by the Committee at the time the performance targets are established, the gain, loss, income and/or expense resulting from the following items:

The Committee may, however, provide at the time the performance targets are estab

lished 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 goals are established that other adjustments will be made under the selected business criteria and applicable performance 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 business 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 performance targets for bonuses for fiscal 2007 based upon adjusted net income. The Committee believes that the specific targets constitute confidential business information, the disclosure of which could adversely affect the Company.

Maximums.    Under the plan, the maximum bonus for each fiscal year may not exceed:

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 performance 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 during any consecutive five-year period is 2.5 million, subject to stock splits and certain other changes in corporate capitalization.

Amendment.    The performance 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. The annual bonuses paid under the plan with respect to fiscal 2006 to the executive officers currently eligible under the plan are set forth in the Summary Compensation Table and the number of restricted stock units awarded in fiscal 2006 is set forth in the Long-Term Incentive Performance Based Awards Table.

Nothing in this proposal precludes the Company or the Compensation Committee from making any payment or granting awards that do not qualify for tax deductibility under Section 162(m).