Walt Disney Company (DIS)

How are Directors compensated?

Base Compensation.    Effective July 1, 2004, each non-employee Director other than the Chairman of the Board receives an annual retainer of $65,000 and an annual Committee retainer of $10,000 for each Committee of which he or she is a member, payable in quarterly installments in arrears. Committee chairs receive an additional annual retainer of $15,000. Each non-employee Director also receives a quarterly deferred stock unit grant having a value at grant of $15,000, based on the average of the high and low trading prices of Disney stock averaged over the last ten trading days of the quarter. These units are fully vested upon crediting and are distributed to the Director in shares of Disney stock on the second anniversary of the grant date.

Each Director is required to retain at all times stock representing no less than 50% of the after-tax value of exercised options and shares received upon distribution of deferred stock units until he or she leaves the Board.

The Chairman of the Board receives an annual retainer of $500,000, credited quarterly in arrears in installments of $125,000 each (prorated for partial periods of service), and payable 100% in the form of deferred stock units of Disney stock. The number of stock units credited for each full calendar quarter is determined by dividing $125,000 by the average of the high and low trading prices of Disney stock averaged over the last ten trading days of the quarter. The deferred units are fully vested upon crediting, are distributed 100% in shares of Disney stock in January of the year following the year of crediting and are subject to the retention requirement applicable to all other Directors as described above. The Chairman receives no other cash retainer, meeting fees or restricted stock grants, but receives the annual stock option grant described below.

Directors who are also employees of the Company receive no additional compensation for service as a Director.

Under the Company’s Amended and Restated 1997 Non-Employee Directors Stock and Deferred Compensation Plan, non-employee Directors may elect, on an annual basis, to receive all or part of their retainers in Disney stock, distributed after the end of each calendar year, or to defer all or part of their compensation until the termination of their service as a Director. Deferred compensation may be maintained, at the participating Director’s election, in a cash or stock unit account. In addition, the Board may direct the Compensation Committee to establish a stock unit account for an eligible Director and to credit such eligible Director’s stock unit account with stock units instead of paying the retainer and fees in cash on a non-elective basis at such times and in such amounts as the Board determines (i.e., regardless of whether such eligible Director elects to defer any portion of his or her cash compensation under the Plan).

Options.    Each non-employee Director receives an automatic grant, on March 1 of each year, of options to purchase 6,000 shares of the Company’s common stock. For fiscal 2004, Ms. Estrin, Ms. Lozano, Fr. O’Donovan

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and Messrs. Bryson, Chen, Lewis, Matschullat, Mitchell and Wilson received grants under this plan, as did former Directors Thomas Murphy and Raymond Watson. Each option grant, vesting in equal installments over five years and having a ten-year term, permits the holder to purchase shares at their fair market value on the date of grant, which was $26.84 in the case of options granted in 2004. In the event of termination of service by reason of mandatory retirement or permanent disability, the options continue to vest in accordance with their original schedule. In the event of termination of service by reason of death, the options vest immediately. In either case, the options remain exercisable for five years following termination, but in no event longer than the original expiration date of the option. In all other cases, options cease to vest upon termination and all options must be exercised within three months of termination.

Other.    To encourage Directors to personally experience the Company’s products, services and entertainment offerings, the Board adopted a policy effective June 30, 2004, that, subject to availability, entitles each non-employee Director (and his or her spouse, children and grandchildren) to use Company products, attend Company entertainment offerings and visit Company properties (including staying at resorts, visiting theme parks and participating in cruises) at the Company’s expense, up to a maximum of $15,000 in fair market value per calendar year plus reimbursement of associated tax liabilities. In addition, the Company reimburses Directors for travel expenses incurred in connection with attending Board, Committee and shareholder meetings and for other Company-business related expenses (including the travel expenses of spouses and children or grandchildren if they are specifically invited to attend the event for appropriate business purposes), which may include use of Company aircraft if available and approved in advance by the Chairman of the Board or the Chief Executive Officer.

The Company does not provide retirement benefits to Directors under any current program. Three persons who served as Directors during fiscal 2004 are eligible for benefits under a retirement policy terminated as of December 31, 1994, based upon their years of service through that date: Stanley Gold, who was a Director until December 1, 2003, receives 70% of the annual retainer payable to non-employee Directors each year for seven years following such date; Raymond Watson, who was a Director until March 3, 2004, is entitled to receive 100% of the annual retainer for 19 years following his retirement; and Mr. Wilson will be entitled to receive 50% of the annual retainer for five years following his retirement.