-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DKDAXhXWMdUyUXKFOlvEN5a1NIR/ARoR2v+VXe96vklIg+Or347k3tyEmYNpmvqb lXqL3Jnx5auACaALd7JXFA== 0000898430-02-001975.txt : 20020515 0000898430-02-001975.hdr.sgml : 20020515 ACCESSION NUMBER: 0000898430-02-001975 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALT DISNEY CO/ CENTRAL INDEX KEY: 0001001039 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954545390 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11605 FILM NUMBER: 02648328 BUSINESS ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 BUSINESS PHONE: 8185601000 MAIL ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 FORMER COMPANY: FORMER CONFORMED NAME: DC HOLDCO INC DATE OF NAME CHANGE: 19950918 10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDED MARCH 31, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2002 Commission File Number 1-11605 The Walt Disney Company Incorporated in Delaware I.R.S. Employer Identification No. 95-4545390 500 South Buena Vista Street, Burbank, California 91521 (818) 560-1000 Securities Registered Pursuant to Section 12(b) of the Act: Name of Exchange Title of class on Which Registered Common Stock, $.01 par value New York Stock Exchange Pacific Stock Exchange 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO There were 2,040,565,891 shares of common stock outstanding as of May 6, 2002. PART I. FINANCIAL INFORMATION THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data)
Three Months Ended Six Months Ended March 31, March 31, ------------------ ------------------ 2002 2001 2002 2001 ------- ------- ------- -------- Revenues $ 5,904 $ 6,049 $ 12,952 $ 13,482 Costs and expenses (5,299) (5,133) (11,698) (11,416) Amortization of intangible assets (2) (184) (5) (477) Gain on sale of business - - - 22 Net interest expense and other (158) (98) (103) (207) Equity in the income of investees 49 66 119 148 Restructuring and impairment charges - (996) - (1,190) ------- ------- ------- -------- Income before income taxes, minority interests and the cumulative effect of accounting changes 494 (296) 1,265 362 Income taxes (205) (238) (504) (624) Minority interests (30) (33) (64) (63) ------- ------- ------- -------- Income (loss) before the cumulative effect of accounting changes 259 (567) 697 (325) Cumulative effect of accounting changes: Film accounting - - - (228) Derivative accounting - - - (50) ------- ------- ------- -------- Net income (loss) $ 259 $ (567) $ 697 $ (603) ======= ======= ======= ======== Earnings (loss) attributed to: Disney Common Stock $ 259 $ (548) $ 697 $ (486) Internet Group Common Stock - (19) - (117) ------- ------- ------- -------- $ 259 $ (567) $ 697 $ (603) ======= ======= ======= ======== Earnings (loss) per share before cumulative effect of accounting changes attributed to: Disney Common Stock (basic and diluted) $ 0.13 $ (0.26) $ 0.34 $ (0.10) ======= ======= ======= ======== Internet Group Common Stock (basic and diluted) $ n/a $ (0.45) $ n/a $ (2.72) ======= ======= ======= ======== Cumulative effect of accounting changes per Disney share: Film accounting $ - $ - $ - $ (0.11) Derivative accounting - - - (0.02) ------- ------- ------- -------- $ - $ - $ - $ (0.13) ======= ======= ======= ======== Earnings (loss) per share attributed to: Disney Common Stock (basic and diluted) $ 0.13 $ (0.26) $ 0.34 $ (0.23) ======= ======= ======= ======== Internet Group Common Stock (basic and diluted) $ n/a $ (0.45) $ n/a $ (2.72) ======= ======= ======= ======== Earnings (loss) attributed to Disney Common Stock before the cumulative effect of accounting changes adjusted for the impact of SFAS 142 in fiscal 2001 (See Note 6) $ 259 $ (449) $ 697 $ (9) ======= ======= ======= ======== Earnings (loss) per share attributed to Disney Common Stock before the cumulative effect of accounting changes adjusted for the impact of SFAS 142 in fiscal 2001 (See Note 6) Diluted $ 0.13 $ (0.21) $ 0.34 $ 0.00 ======= ======= ======= ======== Basic $ 0.13 $ (0.22) $ 0.34 $ 0.00 ======= ======= ======= ======== Average number of common and common equivalent shares outstanding: Disney Common Stock: Diluted 2,045 2,098 2,043 2,101 ======= ======= ======= ======== Basic 2,039 2,082 2,039 2,082 ======= ======= ======= ======== Internet Group Common Stock (basic and diluted) n/a 42 n/a 43 ======= ======= ======= ========
See Notes to Condensed Consolidated Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except per share data)
March 31, September 30, 2002 2001 ------------ ------------- (unaudited) ASSETS Current assets Cash and cash equivalents $ 1,869 $ 618 Receivables 4,006 3,343 Inventories 663 671 Television costs 1,673 1,175 Deferred income taxes 554 622 Other assets 775 600 ------------ ------------ Total current assets 9,540 7,029 Film and television costs 5,175 5,235 Investments 1,745 2,061 Parks, resorts and other property, at cost Attractions, buildings and equipment 19,463 19,089 Accumulated depreciation (8,146) (7,728) ------------ ------------ 11,317 11,361 Projects in progress 837 911 Land 676 635 ------------ ------------ 12,830 12,907 Intangible assets, net 2,736 2,716 Goodwill, net 17,060 12,106 Other assets 1,394 1,645 ------------ ------------ $ 50,480 $ 43,699 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts and taxes payable and other accrued liabilities $ 4,811 $ 4,603 Current portion of borrowings 867 829 Unearned royalties and other advances 929 787 ------------ ------------ Total current liabilities 6,607 6,219 Borrowings 14,765 8,940 Deferred income taxes 2,364 2,730 Other long term liabilities, unearned royalties and other advances 3,223 2,756 Minority interests 494 382 Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value Authorized - 100 million shares, Issued - none Common stock: Common stock - Disney, $.01 par value Authorized - 3.6 billion shares, Issued - 12,107 12,096 2.1 billion shares Common stock - Internet Group, $.01 par value Authorized - 1.0 billion shares - - Retained earnings 12,440 12,171 Accumulated other comprehensive income 64 10 ------------ ------------ 24,611 24,277 Treasury stock, at cost, 81.4 million Disney shares (1,394) (1,395) Shares held by TWDC Stock Compensation Fund II, at cost 7.8 million and 8.6 million Disney shares (190) (210) ------------ ------------ 23,027 22,672 ------------ ------------ $ 50,480 $ 43,699 ============ ============
See Notes to Condensed Consolidated Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in millions)
Six Months Ended March 31, --------------------------- 2002 2001 ------------ ------------ NET INCOME (LOSS) $ 697 $ (603) OPERATING ITEMS NOT REQUIRING CASH Depreciation 506 472 Equity in the income of investees (119) (148) Minority interests 64 63 Amortization of intangible assets 5 477 Restructuring and impairment charges - 1,190 Cumulative effect of accounting changes - 278 Gain on sale of business - (22) Other 345 340 CHANGES IN WORKING CAPITAL (818) (762) ------------ ------------ (17) 1,888 ------------ ------------ Cash provided by operations 680 1,285 ------------ ------------ INVESTING ACTIVITIES Investments in parks, resorts and other property (486) (896) Acquisitions (net of cash acquired) (2,845) (444) Dispositions 16 132 Proceeds from sale of investments 598 102 Purchase of investments (3) (71) Other (11) (28) ------------ ------------ Cash used by investing activities (2,731) (1,205) ------------ ------------ FINANCING ACTIVITIES Borrowings 2,905 300 Reduction of borrowings (1,147) (2,219) Repurchases of common stock - (266) Commercial paper borrowings, net 1,947 2,288 Exercise of stock options and other 25 76 Dividends (428) (438) ------------ ------------ Cash provided (used) by financing activities 3,302 (259) ------------ ------------ Increase (decrease) in cash and cash equivalents 1,251 (179) Cash and cash equivalents, beginning of period 618 842 ------------ ------------ Cash and cash equivalents, end of period $ 1,869 $ 663 ============ ============
See Notes to Condensed Consolidated Financial Statements THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) 1. These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements. Operating results for the quarter and six months are not necessarily indicative of the results that may be expected for the year ending September 30, 2002. Certain reclassifications have been made in the fiscal 2001 financial statements to conform to the fiscal 2002 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2001. In December 1999, DVD Financing, Inc. (DFI), a subsidiary of Disney Vacation Development, Inc. and an indirect subsidiary of the Company, completed a receivables sale transaction. In connection with this sale, DFI prepares separate financial statements, although its separate assets and liabilities are also consolidated in these financial statements. The terms "Company" and "we" are used in this report to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted. 2. Effective October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142). As a result of adopting SFAS 142, a substantial amount of the Company's goodwill and intangible assets are no longer amortized. Pursuant to SFAS 142, intangible assets must be periodically tested for impairment, and the new standard provides six months to complete the impairment review. During the quarter, the Company completed its impairment review, which indicated that there was no impairment. See Note 6. The Company also adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), effective October 1, 2001. The adoption of SFAS 144 did not have a material impact on the Company's consolidated results of operations and financial position. Effective October 1, 2000, the Company adopted AICPA Statement of Position No. 00-2, Accounting by Producers or Distributors of Films (SOP 00-2), and Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and recorded one-time after-tax charges for the adoption of the standards totaling $228 million (or $0.11 per share) and $50 million (or $0.02 per share), respectively, in the first quarter of the prior year. 3. On October 24, 2001 the Company acquired Fox Family Worldwide, Inc. (FFW) for $5.2 billion, funded with $2.9 billion of new long-term borrowings plus the assumption of $2.3 billion of FFW long-term debt. Upon the closing of the acquisition, the Company changed FFW's name to ABC Family Worldwide, Inc. (ABC Family). Among the businesses acquired was the Fox Family Channel, which has been renamed ABC Family Channel, a programming service that currently reaches approximately 84 million cable and satellite television subscribers throughout the U.S.; a 76% interest in Fox Kids Europe, which reaches more than 31 million subscribers across Europe; Fox Kids channels in Latin America, and the Saban library and entertainment production businesses. Our motivation for the acquisition was to acquire a fully integrated cable channel with a significant international presence and therefore increase shareholder value. We believe that we can reach this objective through the use of new strategies which include cross promotion with our other television properties, repurposing a portion of the programming of the ABC Television Network, utilizing programming from the Disney and ABC libraries, developing original programming and by reducing operating costs. THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) The acquisition of ABC Family has been accounted for in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their respective fair values at the date of acquisition. Fair values were determined by internal studies and independent third party appraisals. The purchase price allocation presented below is preliminary and subject to refinements based on the completion of certain valuation studies and restructuring plans. The following table summarizes the preliminary purchase price allocation of ABC Family's assets acquired and liabilities assumed at the date of acquisition. Receivables $ 192 Programming costs 347 Other assets 516 Intangible assets 18 Goodwill 4,945 -------- Total assets 6,018 -------- Accounts payable and accrued liabilities (525) Other liabilities (248) Minority interest (49) -------- Total liabilities (822) -------- Fair value of net assets acquire 5,196 Borrowings and preferred stock assumed (2,371) -------- Cash purchase price, net of cash acquired $ 2,825 ========
The excess of the purchase price over the fair value of the identifiable net assets acquired of approximately $4.9 billion was allocated to goodwill that was assigned to the Cable Networks reporting unit within the Media Networks segment. None of this amount is expected to be deductible for tax purposes. The Company's condensed consolidated results of operations have incorporated ABC Family's activity on a consolidated basis from October 24, 2001, the date of acquisition. On a pro forma basis, adjusting only for the assumption that the acquisition of ABC Family and related incremental borrowings had occurred at the beginning of fiscal 2001, revenues for the six months ended March 31, 2002 and 2001 are $12,983 million and $13,805 million, respectively. Pro forma and as-reported net income (loss) and earnings (loss) per share for both periods were approximately the same. The unaudited pro forma information is not necessarily indicative of the results of operations had the acquisition actually occurred at the beginning of fiscal 2001, nor is it necessarily indicative of future results. 4. The ABC Family acquisition resulted in an initial increase in the Company's borrowings totaling $5.2 billion, including senior notes originally issued by FFW valued at $1.1 billion, with an effective interest rate of 8.4% maturing in 2008; FFW preferred stock totaling $400 million with an effective cost of capital of 5.25% and commercial paper with an effective interest rate, including the impact of interest rate swaps, of 3.8%. The senior notes are callable at a premium beginning November 1, 2002. As of March 31, 2002, total borrowings were $15.6 billion. THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) 5. During the first quarter of fiscal 2002, the Company sold its remaining shares of Knight-Ridder, Inc. received in connection with the disposition of certain publishing operations in fiscal 1997. The pre-tax gain of $216 million on the sale is reported in "net interest expense and other" in the Condensed Consolidated Statements of Income. 6. Pursuant to SFAS 142, substantially all of the Company's intangible assets will no longer be amortized, and the Company is required to perform an annual impairment test for goodwill and intangible assets. Goodwill and intangible assets are allocated to various reporting units, which are either the operating segment or one reporting level below the operating segment. The Company's reporting units for purposes of applying the provisions of SFAS 142 are: Cable Networks, Television Broadcasting, Radio, Studio Entertainment, Consumer Products and Parks and Resorts. SFAS 142 requires the Company to compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss would be recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value. The impairment test for intangible assets consists of comparing the fair value of the intangible asset to its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized. Fair value for goodwill and intangible assets are determined based on discounted cash flows and appraised values. The following table provides a reconciliation of reported net loss for the prior-year six months to adjusted loss had SFAS 142 been applied as of the beginning of fiscal 2001:
Six Months Ended March 31, 2001 -------------------- Earnings Amount per share --------- -------- Reported net loss attributed to Disney Common Stock $ (486) $ (0.23) Cumulative effect of accounting changes 278 0.13 --------- -------- Reported loss attributed to Disney Common Stock before the cumulative effect of accounting changes (208) (0.10) Add back amortization (net of tax): Goodwill 174 0.08 Indefinite life intangible assets 25 0.02 --------- -------- Adjusted loss attributed to Disney Common Stock before the cumulative effect of accounting changes $ (9) $ 0.00 ========= ========
The changes in the carrying amount of goodwill for the six months ended March 31, 2002, are as follows:
Media Networks Other Total --------- -------- -------- Balance as of October 1, $ 12,042 $ 64 $ 12,106 2001 Goodwill acquired during the period 4,945 9 4,954 -------- -------- -------- Balance as of March 31, 2002 $ 16,987 $ 73 $ 17,060 ======== ======== ========
Amortizable intangible assets at March 31, 2002 consisted of intellectual copyrights of $297 million amortized over 10-31 years, and stadium facility leases and other of $111 million amortized primarily over 33 years. Intangible assets with indefinite lives at March 31, 2002 were FCC licenses of $1,366 million and ESPN trademark and other of $962 million. THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) 7. The Company has a 39% interest in Euro Disney S.C.A., which operates the Disneyland Resort Paris. Euro Disney's second theme park, Walt Disney Studios, opened on March 16, 2002. As of March 31, 2002, the total of the Company's investment, accounts and notes receivable from Euro Disney totaled $394 million, including investments and advances associated with Walt Disney Studios and $39 million (45 million Euros) that Euro Disney has drawn under a $146 million (167 million Euros) line of credit with the Company. It is expected that Euro Disney will draw additional amounts under the credit line during fiscal 2002. As of March 31, 2002, Euro Disney had, on a US GAAP basis, total assets of $2.9 billion (3.3 billion Euros) and total liabilities of $2.8 billion (3.2 billion Euros), including borrowings of $1.9 billion (2.2 billion Euros). 8. Diluted earnings per share amounts are calculated using the treasury stock method and are based upon the weighted average number of common and common equivalent shares outstanding during the period. For the quarter ended March 31, 2002 and 2001, options for 126 million and 102 million shares, respectively, were excluded from the Disney diluted earnings per share calculation as they were anti-dillutive. For the six months ended March 31, 2002 and 2001, options for 145 million and 67 million shares, respectively, were excluded. 9. Comprehensive income (loss) is as follows:
Three Months Six Months Ended March 31, Ended March 31, ---------------- --------------- 2002 2001 2002 2001 ------- ------ ------- ------ Net income (loss) $ 259 $ (567) $ 697 $(603) Cumulative effect of adoption of SFAS 133, net of tax - - - 60 Market value adjustments for investments and hedges, net of tax (11) 66 16 56 Foreign currency translation, net of tax (2) - 38 (3) ------- ------ ------- ------ Comprehensive income (loss) $ 246 $ (501) $ 751 $(490) ======= ====== ======= ======
THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) 10. The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment operating income amounts are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.
Three Months Six Months Ended March 31, Ended March 31, ----------------- ----------------- 2002 2001 2002 2001 ------- ------- ------- ------ Revenues: Media Networks $ 2,196 $ 2,258 $ 5,172 $ 5,225 ------- ------- ------ ------- Parks and Resorts 1,525 1,650 2,958 3,374 ------- ------- ------ ------- Studio Entertainment Third parties 1,586 1,548 3,378 3,385 Intersegment 17 25 30 38 ------- ------- ------ ------- 1,603 1,573 3,408 3,423 ------- ------- ------ ------- Consumer Products Third parties 597 593 1,444 1,498 Intersegment (17) (25) (30) (38) ------- ------- ------ ------- 580 568 1,414 1,460 ------- ------- ------ ------- $ 5,904 $ 6,049 $12,952 $ 13,482 ======= ======= ====== ======= Segment operating income: Media Networks $ 309 $ 445 $ 551 $ 971 Parks and Resorts 280 329 467 713 Studio Entertainment 27 164 176 316 Consumer Products 86 87 261 256 ------- ------- ------ ------- $ 702 $ 1,025 $ 1,455 $ 2,256 ======= ======= ====== =======
We evaluate the performance of the Company's operating segments based on segment operating income. A reconciliation of segment operating income to income before income taxes, minority interests and the cumulative effect of accounting changes is as follows:
Three Months Six Months Ended March 31, Ended March 31, ----------------- ----------------- 2002 2001 2002 2001 ------- ------- ------- ------ Segment operating income $ 702 $ 1,025 $ 1,455 $ 2,256 Corporate and unallocated shared expenses (97) (109) (201) (190) Amortization of intangible assets (2) (184) (5) (477) Gain on sale of business - - - 22 Net interest expense and other (158) (98) (103) (207) Equity in the income of investees 49 66 119 148 Restructuring and impairment charges - (996) - (1,190) ------- ------- ------- ------ Income before income taxes, minority interests and the cumulative effect of accounting changes $ 494 $ (296) $ 1,265 $ 362 ======= ======= ======= ======
THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except per share data) 11. 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. Except for the matters described below, management does not expect a material impact to its results of operations, financial position or cash flows by reason of these actions. During the period covered by this report, there were no material developments in the proceeding previously reported in the Company's annual report on Form 10-K for fiscal year 2001, All Pro Sports Camps, Inc. et al. v. Walt Disney Company et al. Stephen Slesinger, Inc. v. The Walt Disney Company. In this lawsuit, filed on February 27, 1991 and pending in the Los Angeles County Superior Court, the plaintiff claims that a Company subsidiary defrauded it and breached a 1983 licensing agreement with respect to certain Winnie the Pooh properties, by failing to account for and pay royalties on revenues earned from the sale of Winnie the Pooh movies on videocassette and from the exploitation of Winnie the Pooh merchandising rights. The plaintiff seeks damages for the licensee's alleged breaches as well as confirmation of the plaintiff's interpretation of the licensing agreement with respect to future activities. The plaintiff also seeks the right to terminate the agreement on the basis of the alleged past breaches. The Company disputes that the plaintiff is entitled to any damages or other relief of any kind, including termination of the licensing agreement. The claim is currently scheduled for trial in February 2003. Given the number of outstanding issues and the uncertainty of their ultimate disposition, management is unable to predict the magnitude of any potential determination of the plaintiff's claims. Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of these two matters will have on the Company's results of operations, financial position or cash flows. 12. The Company's contractual commitments other than leases were approximately $15.4 billion as of March 31, 2002, including approximately $11.7 billion for sports programming rights. The commitments include obligations under a six-year agreement entered into on January 22, 2002, with the National Basketball Association (NBA) to broadcast more than 100 regular and post-season games per year, including the NBA finals, beginning with the 2002-03 season. The agreement included distribution rights for related NBA programming and content and extended several existing agreements. 13. The Internal Revenue Service (IRS) is currently examining the Company's federal income tax returns for 1993 through 1995. While the audit is not complete, the IRS has recently indicated its intention to challenge certain of the Company's tax positions. We believe that the Company's tax positions comply with applicable tax law and intend to defend the Company's positions vigorously. The ultimate disposition of these matters could require the Company to make additional payments to the IRS. Nonetheless, we believe that the Company has adequately provided for any foreseeable payments related to these matters and consequently do not anticipate any material earnings impact from the ultimate resolution of these matters. THE WALT DISNEY COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEASONALITY The Company's businesses are subject to the effects of seasonality. Consequently, the operating results for the quarter and six months ended March 31, 2002 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year. Media Networks revenues are influenced by advertiser demand and the seasonal nature of programming, and generally peak in the spring and fall. Studio Entertainment revenues fluctuate based upon the timing of theatrical motion picture, home video (VHS and DVD) and television releases. Release dates for theatrical, home video and television products are determined by several factors, including timing of vacation and holiday periods and competition in the market. Parks and Resorts revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal 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. Consumer Products revenues are influenced by seasonal consumer purchasing behavior and the timing of animated theatrical releases. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) AS-REPORTED RESULTS OF OPERATIONS Net income was $259 million compared to a net loss of $567 million in the prior-year quarter. Net income and earnings per share attributed to Disney common stock were $259 million and $0.13, respectively, compared to a net loss and loss per share of $548 million and $0.26, respectively in the prior-year quarter. Results for the prior-year quarter included restructuring and impairment charges totaling $1.0 billion. The current quarter reflects the cessation of amortization of intangible assets, due to the adoption of SFAS 142, effective October 1, 2001. Net loss and loss per share after adjusting for the impact of SFAS 142 attributed to Disney common stock for the prior-year quarter were $449 million and $0.21, respectively. Excluding the year-over-year impact of the restructuring charges, results for the current quarter reflected lower segment operating income and equity in the income of investees and higher net interest expense and other, partially offset by decreased corporate and unallocated shared expenses. Decreased segment operating income primarily reflected lower Studio Entertainment, Media Networks and Parks and Resorts results. Lower equity in the income of investees reflected declines at the cable services driven by the soft advertising market and increased pre-opening costs at Euro Disney due to the opening of Walt Disney Studios at the Disneyland Resort Paris during the quarter. Increases in net interest expense and other were driven by higher average debt balances, primarily due to the incremental borrowings related to the ABC Family acquisition. Decreased corporate and unallocated shared expenses were driven by the timing of expenses and lower costs due to the rollout of the Disney Club, a customer loyalty and appreciation program, in the first quarter of the prior year, partially offset by higher costs for new financial and human resources information technology systems, which are intended to improve productivity and reduce costs. For the six months, net income was $697 million compared to a net loss of $603 million in the prior-year period. Net income and earnings per share attributed to Disney common stock were $697 million and $0.34, respectively, for the current-year period compared to a net loss and loss per share of $486 million and $0.23 in the prior-year period. Results for the current period include a pre-tax gain ($216 million or $0.07 per share) on the sale of the remaining shares of Knight-Ridder, Inc., operations of ABC Family acquired on October 24, 2001, incremental interest expense for borrowings related to that acquisition and the cessation of amortization of goodwill and intangible assets, due to the adoption of SFAS 142 effective October 1, 2001. The prior-year period included restructuring and impairment charges ($1.2 billion or $0.44 per share attributed to Disney common stock) and the cumulative effect of accounting changes ($278 million or $0.13 per share). Loss attributed to Disney common stock before the cumulative effect of accounting changes adjusted for the impact of SFAS 142 was $9 million for the prior-year period. Excluding the year-over-year impact of the restructuring charges, results for the six months were driven by lower segment operating income and equity in income of investees and higher corporate and unallocated shared expenses, partially offset by lower net interest expense and other. Decreased segment operating income reflected lower Media Networks, Parks and Resorts and Studio Entertainment results. Lower equity in the income of investees reflected decreases at the cable services resulting from the soft advertising market and pre-opening costs at Euro Disney due to the opening of Walt Disney Studios. Higher corporate and unallocated shared expenses were driven by strategic initiatives designed to promote the Disney brand and costs for new financial and human resources information technology systems, partially offset by timing of expenses and lower cost due to the rollout of the Disney Club in the prior-year period. Lower net interest expense and other reflected the gain on the sale of Knight-Ridder, Inc. shares, partially offset by higher average debt balances due to the acquisition of ABC Family. On October 24, 2001 the Company acquired ABC Family for $5.2 billion, funded with $2.9 billion of new long-term borrowings plus the assumption of $2.3 billion of long-term debt (see Note 3 to the Condensed Consolidated Financial Statements). The current period includes the operations of ABC Family and incremental interest expense for acquisition-related borrowings from the date of acquisition. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) PRO FORMA RESULTS OF OPERATIONS To enhance comparability, the unaudited pro forma information that follows presents consolidated results of operations as if the acquisition of ABC Family, the conversion of the Internet Group common stock into Disney common stock, the closure of the GO.com portal business and the adoption of new goodwill and intangible asset accounting rules (see Notes 2 and 3 to the Condensed Consolidated Financial Statements) had occurred at the beginning of fiscal 2001. The acquisition of ABC Family resulted in a $5.2 billion increase in borrowings. Pro forma net interest and other has been adjusted as if these incremental borrowings had been outstanding as of the beginning of the periods presented. The unaudited pro forma information is not necessarily indicative of the results of operations had these events actually occurred at the beginning of fiscal 2001, nor is it necessarily indicative of future results.
Three Months Ended Six Months Ended March 31, March 31, ---------------- ---------------- (unaudited; in millions, % % except per share data) 2002 2001 Change 2002 2001 Change ------- ------- ------ ------- ------ ------ Revenues $ 5,904 $ 6,215 (5)% $ 12,983 $ 13,792 (6)% Costs and expenses (5,299) (5,237) (1)% (11,725) (11,590) (1)% Amortization of intangible assets (2) (5) 60 % (5) (13) 62 % Gain on sale of business - - - - 22 n/m Net interest expense and other (158) (151) (5)% (115) (316) 64 % Equity in the income of investees 49 67 (27)% 119 153 (22)% Restructuring and impairment charges - (134) n/m - (328) n/m ------- ------- -------- ------- Income before income taxes, 494 755 (35)% 1,257 1,720 (27)% minority interests and the cumulative effect of accounting changes Income taxes (205) (283) 28 % (501) (688) 27 % Minority interests (30) (32) 6 % (64) (63) (2)% ------- ------- -------- ------- Income before the cumulative effect of accounting changes 259 440 (41)% 692 969 (29)% Cumulative effect of accounting changes: Film accounting - - - - (228) n/m Derivative accounting - - - - (50) n/m ------- ------- -------- ------- Net income $ 259 $ 440 (41)% $ 692 $ 691 - ======= ======= ======== ======= Earnings per share before the cumulative effect of accounting changes (basic and diluted) $ 0.13 $ 0.21 (38)% $ 0.34 $ 0.46 (26)% ======= ======= ======== ======= Earnings per share including the cumulative effect of accounting changes (basic and diluted) (1) $ 0.13 $ 0.21 (38)% $ 0.34 $ 0.33 3 % ======= ======= ======== ======== Earnings before the cumulative effect of accounting changes, excluding the investment gain in fiscal 2002, restructuring and impairment charges and gain on the sale of business in fiscal 2001 $ 259 $ 524 (51)% $ 556 $ 1,181 (53)% ======= ======= ======= ======== Earnings per share before the cumulative effect of accounting changes, excluding the investment gain in fiscal 2002, restructuring and impairment charges and gain on sale of business in fiscal 2001: Diluted $ 0.13 $ 0.25 (48)% $ 0.27 $ 0.56 (52)% ======= ======= ====== ======== Basic $ 0.13 $ 0.25 $ 0.27 $ 0.57 ======= ======= ====== ======== Average number of common and common equivalent shares outstanding: Diluted 2,045 2,105 2,043 2,108 ======= ======= ====== ======== Basic 2,039 2,089 2,039 2,090 ======= ======= ====== ========
------------------------------------- (1) The per share impacts of the film and derivative accounting changes for the prior year were $(0.11) and $(0.02), respectively. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) The following table provides a reconciliation of as-reported earnings per share attributed to Disney common stock to pro forma earnings per share.
Three Months Six Months Ended March 31, Ended March 31, ----------------- ----------------- (unaudited) 2002 2001 2002 2001 ------- -------- -------- ------- As-reported earnings (loss) per share attributed to Disney common stock $ 0.13 $ (0.26) $ 0.34 $ (0.23) Adjustment to attribute 100% of Internet Group operating results to Disney common stock (72% included in as-reported amounts) - (0.01) - (0.06) Adjustment to exclude pre-closure GO.com portal operating results and amortization of intangible assets - 0.02 - 0.09 Adjustment to exclude GO.com restructuring and impairment charges - 0.40 - 0.40 Adjustment to exclude goodwill and intangible assets amortization pursuant to SFAS 142 - 0.06 - 0.13 Adjustment to exclude the cumulative effect of accounting changes - - - 0.13 ------- -------- -------- ------- Pro forma earnings per share before the cumulative effect of accounting changes 0.13 0.21 0.34 0.46 Adjustment to exclude restructuring and impairment charges - 0.04 - 0.10 Adjustment to exclude investment gain in fiscal 2002 - - (0.07) - ------- -------- -------- ------- Pro forma earnings per share before the cumulative effect of accounting changes, excluding the investment gain in fiscal 2002 and restructuring and impairment charges and gain on the sale of business in fiscal 2001 $ 0.13 $ 0.25 $ 0.27 $ 0.56 ======= ======== ======= =======
- ----------------------------------------------- The impact of the gain on sale of a business on fiscal 2001 and the pro forma impact of ABC Family on both periods was less than $0.01. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Business Segment Results - Quarter
Three Months Ended March 31, ----------------------------------------------- (unaudited, in millions) As Reported Pro Forma ----------------- ----------------- Revenues: 2002 2001 2002 2001 % Change ------- ------- ------- ------- --------- Media Networks $ 2,196 $ 2,258 $ 2,196 $ 2,417 (9)% Parks and Resorts 1,525 1,650 1,525 1,650 (8)% Studio Entertainment 1,603 1,573 1,603 1,573 2 % Consumer Products 580 568 580 575 1 % ------- ------ ------ ------ $ 5,904 $ 6,049 $ 5,904 $ 6,215 (5)% ======= ====== ====== ====== Segment operating income: Media Networks $ 309 $ 445 $ 309 $ 503 (39)% Parks and Resorts 280 329 280 329 (15)% Studio Entertainment 27 164 27 164 (84)% Consumer Products 86 87 86 91 (5)% ------- ------ ------ ------ $ 702 $ 1,025 $ 702 $ 1,087 (35)% ======= ====== ====== ======
The Company evaluates the performance of its operating segments based on segment operating income. The following table reconciles segment operating income to income (loss) before income taxes and minority interests.
Three Months Ended March 31, ---------------------------------------------- As Reported Pro Forma ----------------- ----------------- (unaudited, in millions) 2002 2001 2002 2001 % Change ------- ------- ------- ------- --------- Segment operating income $ 702 $ 1,025 $ 702 $ 1,087 (35)% Corporate and unallocated shared expenses (97) (109) (97) (109) 11 % Amortization of intangible assets (2) (184) (2) (5) 60 % Net interest expense and other (158) (98) (158) (151) (5)% Equity in the income of investees 49 66 49 67 (27)% Restructuring and impairment charges - (996) - (134) n/m ------- ------- ------ ------- Income (loss) before income taxes and minority interests $ 494 $ (296) $ 494 $ 755 (35)% ======= ======= ====== =======
Segment earnings before interest, income taxes, depreciation and amortization (EBITDA) is as follows:
Three Months Ended March 31, ---------------------------------------------- As Reported Pro Forma ----------------- ----------------- (unaudited, in millions) 2002 2001 2002 2001 % Change ------- ------- ------- ------- --------- Media Networks $ 354 $ 489 $ 354 $ 548 (35)% Parks and Resorts 441 468 441 468 (6)% Studio Entertainment 37 175 37 175 (79)% Consumer Products 102 112 102 116 (12)% ------- ------- ------- ------- $ 934 $ 1,244 $ 934 $ 1,307 (29)% ======= ======= ======= =======
THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Management believes that segment EBITDA provides additional information useful in analyzing the underlying business results. However, segment EBITDA is a non-GAAP financial metric and should be considered in addition to, not as a substitute for, reported segment operating income. Media Networks The following table provides supplemental revenue and operating income detail for the Media Networks segment:
(unaudited, in millions) Pro Forma --------------------------------- Three Months Ended March 31, 2002 2001 % Change ---------- --------- --------- Revenues: Broadcasting $ 1,290 $ 1,513 (15)% Cable Networks 906 904 - ---------- --------- $ 2,196 $ 2,417 (9)% ========== ========= Segment operating income: Broadcasting $ (11) $ 167 n/m Cable Networks 320 336 (5)% ---------- --------- $ 309 $ 503 (39)% ========== =========
On a pro forma basis, Media Networks revenues decreased 9%, or $221 million, to $2.2 billion, driven by decreases of $223 million at Broadcasting. The decrease at Broadcasting was driven by declines at the ABC television network due to lower ratings and lower advertising rates from upfront sales and at the Company's owned television stations due to the weak advertising market and the impact of lower network ratings. Revenues at the Cable Networks were essentially flat as increased affiliate revenues at ESPN and increased domestic and international subscribers at the Disney Channel were offset by lower advertising revenues due to the weak advertising market. On a pro forma basis, segment operating income decreased 39%, or $194 million, to $309 million, driven by decreases of $178 million at Broadcasting, resulting from decreased revenues, partially offset by lower costs and expenses. Costs and expenses, which consist primarily of programming rights costs and amortization, production costs, distribution and selling expenses and labor costs, decreased by 1%, or $27 million, for the quarter. Decreased costs were driven by lower costs at the Internet Group web sites reflecting the prior-year restructuring, lower distribution costs, and decreased amortization and production costs, partially offset by higher sports programming costs at ESPN. As-reported revenues decreased 3% to $2.2 billion and segment operating income decreased 31% to $309 million. As-reported amounts for the prior-year period include revenues and losses of the GO.com portal (which was closed in February 2001) and exclude ABC Family operations. The Company has various contractual commitments for the purchase of broadcast rights for sports and other programming, including the National Football League (NFL), National Basketball Association (NBA), Major League Baseball (MLB), National Hockey League (NHL) and various college football conference and bowl games. The costs of these contracts have increased significantly in recent years. We have implemented a variety of strategies, including marketing efforts, to reduce the impact of the higher costs. The impact of these contracts on the Company's results over the remaining term of the contracts is dependent upon a number of factors, including the strength of advertising markets, effectiveness of marketing efforts and the size of viewer audiences. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) The Company has investments in cable operations that are accounted for as unconsolidated equity investments. The table below presents operating income from cable television activities, which comprise the Cable Networks and the Company's cable equity investments:
(unaudited, in millions) Pro Forma --------------------------------- Three Months Ended March 31, 2002 2001 % Change ---------- --------- --------- Operating income: Cable Networks $ 320 $ 336 (5)% Equity investments: A&E Television, Lifetime Television and E! Entertainment Television 128 170 (25)% Other 36 56 (36)% ---------- --------- Operating income from cable television activities 484 562 (14)% Partner share of operating income (136) (190) 28 % ---------- --------- Disney share of operating income $ 348 $ 372 (6)% ========== =========
Note: Operating income from cable television activities presented in this table represents 100% of both the Company's owned cable businesses and its cable equity investees. The Disney share of operating income represents the Company's interest in cable television operating income. Cable Networks are reported in "Segment operating income" in the statements of income. Equity investments are accounted for under the equity method, and the Company's proportionate share of the net income of its cable equity investments is reported in "Equity in the income of investees" in the statements of income. We believe that operating income from cable television activities provides additional information useful in analyzing the underlying business results. However, operating income from cable television activities is a non-GAAP financial metric and should be considered in addition to, not as a substitute for, segment operating income. The Company's share of cable television operating income decreased 6%, or $24 million, to $348 million, reflecting higher programming costs at ESPN and the weak advertising market, at both ESPN and the cable equity investments, partially offset by higher cable network affiliate revenues and continued improvements at both the domestic and international Disney Channels. Parks and Resorts Revenues decreased 8%, or $125 million, to $1.5 billion, driven primarily by decreases of $136 million at the Walt Disney World Resort, partially offset by increased royalties of $17 million from the Tokyo Disney Resort. At the Walt Disney World Resort, decreased revenues reflected lower attendance, guest spending and hotel occupancy resulting from continued disruption in travel and tourism. Lower guest spending at Walt Disney World also reflected ticket and other promotional programs. Increased royalties at the Tokyo Disney Resort were due primarily to the opening of Tokyo DisneySea in the fourth quarter of the prior year. Revenues at the Disneyland Resort were comparable to the prior year as increased attendance due to a full period of Disney's California Adventure was offset by lower guest spending due to ticket and other promotional programs. Segment operating income decreased 15%, or $49 million, to $280 million, reflecting revenue declines at the Walt Disney World Resort, partially offset by the absence of pre-opening costs at the Disneyland Resort and higher royalties from the Tokyo Disney Resort. Costs and expenses, which consist principally of labor, costs of merchandise, food and beverages sold, depreciation, repairs and maintenance, entertainment and marketing and sales expense, decreased 6% or $76 million, driven by decreases at the Disneyland Resort due to the absence of non-recurring pre-opening costs for Disney's California Adventure, which opened in the second quarter of the prior year. Additionally, volume decreases at the Walt Disney World Resort contributed to lower costs and expenses. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Studio Entertainment Revenues increased 2%, or $30 million, to $1.6 billion, driven by an increase of $80 million in domestic theatrical motion picture distribution, partially offset by a decrease of $44 million in worldwide television distribution. In domestic theatrical motion picture distribution, the increase was due to the strong performance of Snow Dogs and Peter Pan II: Return to Never Land as well as an increased number of releases during the quarter. Worldwide home video revenues were comparable to the prior year as strong DVD sales from Atlantis, Cinderella II: Dreams Come True, Pearl Harbor and other live-action titles were offset by lower VHS unit sales reflecting the prior-year success of Lady and the Tramp II: Scamp's Adventure and Remember the Titans as well as decreased revenues from the rental business due to fewer titles being available in the current quarter. The declines in worldwide television distribution revenues reflected better performing live-action titles in the prior-year quarter. Segment operating income decreased 84%, or $137 million, to $27 million, driven by increased costs in domestic theatrical motion picture distribution and worldwide home video and revenue declines in worldwide television distribution. Costs and expenses, which consist primarily of production cost amortization, distribution and selling expenses, product costs and participation costs increased 12%, or $167 million. Higher costs and expenses in domestic theatrical motion picture distribution reflected increased distribution and marketing expenses due to the higher number and timing of releases during the quarter. In worldwide home video, cost increases reflected higher marketing and distribution costs for Atlantis and Cinderella II:Dreams Come True, partially offset by lower participation costs. Consumer Products On a pro forma basis, revenues increased 1%, or $5 million, to $580 million, reflecting increases of $20 million at the Disney Store and $12 million in publishing operations, offset by a decline of $35 million in worldwide merchandise licensing. These increases reflected positive comparative store sales both domestically and internationally at the Disney Store and the successful release by the publishing group of Lucky Man: A Memoir by Michael J. Fox and Hope Through Heartsongs. The decrease in merchandise licensing revenue was driven by lower minimum guarantee payments in the current quarter. On a pro forma basis, segment operating income decreased 5%, or $5 million, to $86 million, reflecting declines at worldwide merchandise licensing, partially offset by revenue increases discussed above and cost reductions at the Disney Store. Costs and expenses, which consist primarily of labor, product costs, including product development costs, distribution and selling expenses and leasehold expenses, increased 2% or $10 million, driven by higher sales volume at the continuing Disney Stores and publishing, partially offset by lower costs due to the closure of certain Disney Store locations. As-reported revenues increased 2% to $580 million and segment operating income decreased 1% to $86 million. As-reported amounts exclude ABC Family operations in the prior-year period. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Business Segment Results - Six Months
Six Months Ended March 31, ------------------------------------------------ (unaudited, in millions) As Reported Pro Forma ----------------- ----------------- Revenues: 2002 2001 2002 2001 % Change ------- ------- -------- -------- -------- Media Networks $ 5,172 $ 5,225 $ 5,202 $ 5,516 (6)% Parks and Resorts 2,958 3,374 2,958 3,374 (12)% Studio Entertainment 3,408 3,423 3,408 3,423 - Consumer Products 1,414 1,460 1,415 1,479 (4)% ------- ------- ------- ------- $12,952 $ 13,482 $12,983 $ 13,792 (6)% ======= ======= ======= ======= Segment operating income: Media Networks $ 551 $ 971 $ 555 $ 1,094 (49)% Parks and Resorts 467 713 467 713 (35)% Studio Entertainment 176 316 176 316 (44)% Consumer Products 261 256 261 269 (3)% ------- ------- ------- ------- $ 1,455 $ 2,256 $ 1,459 $ 2,392 (39)% ======= ======= ======= =======
The Company evaluates the performance of its operating segments based on segment operating income. The following table reconciles segment operating income to income before income taxes and minority interests.
Six Months Ended March 31, ------------------------------------------------ As Reported Pro Forma ----------------- ----------------- (unaudited, in millions) 2002 2001 2002 2001 %Change ------- ------- ------- ------- -------- Segment operating income $ 1,455 $ 2,256 $ 1,459 $ 2,392 (39)% Corporate and unallocated shared expenses (201) (190) (201) (190) (6)% Amortization of intangible assets (5) (477) (5) (13) 62 % Gain on sale of businesses - 22 - 22 n/m Net interest expense and other (103) (207) (115) (316) 64 % Equity in the income of investees 119 148 119 153 (22)% Restructuring and impairment charges - (1,190) - (328) n/m ------- ------- ------- ------- Income before income taxes and minority interests $ 1,265 362 $ 1,257 $ 1,720 (27)% ======= ======= ======= =======
Segment EBITDA is as follows:
Six Months Ended March 31, ------------------------------------------------ As Reported Pro Forma ----------------- ----------------- (unaudited, in millions) 2002 2001 2002 2000 % Change ------- ------- ------- ------- -------- Media Networks $ 642 $ 1,060 $ 647 $ 1,185 (45)% Parks and Resorts 789 995 789 995 (21)% Studio Entertainment 197 340 197 340 (42)% Consumer Products 290 305 290 318 (9)% ------- ------- ------- ------- $ 1,918 $ 2,700 $ 1,923 $ 2,838 (32)% ======= ======= ======= =======
THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) We believe that segment EBITDA provides additional information useful in analyzing the underlying business results. However, segment EBITDA is a non-GAAP financial metric and should be considered in addition to, not as a substitute for, reported segment operating income. Media Networks The following table provides supplemental revenue and operating income detail for the Media Networks segment:
(unaudited, in millions) Pro Forma --------------------------------- Six Months Ended March 31, 2002 2001 % Change ---------- --------- --------- Revenues: Broadcasting $ 2,766 $ 3,315 (17)% Cable Networks 2,436 2,201 11 % --------- --------- $ 5,202 $ 5,516 (6)% ========= ========= Segment operating income: Broadcasting $ (87) $ 454 n/m Cable Networks 642 640 - --------- --------- $ 555 $ 1,094 (49)% ========= =========
On a pro forma basis, revenues decreased 6%, or $314 million, to $5.2 billion, reflecting a decrease of 17%, or $549 million, at Broadcasting, partially offset by an increase of 11%, or $235 million, at the Cable Networks. The decrease at Broadcasting was driven by declines at the ABC television network, the Company's owned television stations and radio operations due to lower ratings and the soft advertising market. Increases at the Cable Networks were driven by higher affiliate revenues, partially offset by lower advertising revenues due to the soft advertising market. On a pro forma basis, segment operating income decreased 49%, or $539 million, to $555 million, driven by decreases of $541 million at Broadcasting, primarily due to decreased revenues. Cable operating income was comparable to the prior year as revenue gains were offset by cost increases. Costs and expenses increased 5%, or $225 million, driven by higher sports programming costs at ESPN, principally for NFL broadcasts. As-reported revenues remained flat at $5.2 billion and segment operating income decreased 43% to $551 million. As-reported amounts include a partial period of ABC Family operations in the current period and GO.com portal losses (which was closed in February 2001) in the prior-year period. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) The Company has investments in cable operations that are accounted for as unconsolidated equity investments. The table below presents operating income from cable television activities, which comprise the Cable Networks and the Company's cable equity investments:
(unaudited, in millions) Pro Forma --------------------------------- Six Months Ended March 31, 2002 2001 % Change ---------- --------- --------- Operating income: Cable Networks $ 642 $ 640 - Equity investments: A&E Television, Lifetime Television and E! Entertainment Television 294 356 (17)% Other 101 122 (17)% --------- --------- Operating income from cable television activities 1,037 1,118 (7)% Partner share of operating income (328) (396) 17 % --------- --------- Disney share of operating income $ 709 $ 722 (2)% ========== =========
Note: Operating income from cable television activities presented in this table represents 100% of both the Company's owned cable businesses and its cable equity investees. The Disney share of operating income represents the Company's interest in cable television operating income. Cable Networks are reported in "Segment operating income" in the statements of income. Equity investments are accounted for under the equity method, and the Company's proportionate share of the net income of its cable equity investments is reported in "Equity in the income of investees" in the statements of income. The Company's share of cable television operating income decreased 2%, or $13 million, to $709 million. The decrease was driven by lower revenues due to the weak advertising market at both ESPN and the cable equity affiliates as well as higher sports programming costs at ESPN, partially offset by higher affiliate revenues at the Cable Networks. Parks and Resorts Revenues decreased 12%, or $416 million, to $3.0 billion, driven primarily by decreases of $451 million at the Walt Disney World Resort, partially offset by growth of $24 million at the Disneyland Resort and increased royalties of $32 million from the Tokyo Disney Resort. At the Walt Disney World Resort, decreased revenues reflected lower attendance, guest spending and hotel occupancy resulting from continued disruption in travel and tourism. The opening of Disney's California Adventure, Downtown Disney District and the Grand Californian Hotel during the second quarter of the prior year, as well as the strength of local attendance due primarily to the success of the Annual Passport program, drove increased attendance and occupied room nights at the Disneyland Resort. Both Walt Disney World and Disneyland experienced lower guest spending due to ticket and other promotional programs. The increased royalties at Tokyo Disney Resort were due to the opening of the Tokyo DisneySea theme park and the Tokyo DisneySea Hotel Mira Costa in the fourth quarter of the prior year. Segment operating income decreased 35%, or $246 million, to $467 million, driven by revenue declines at the Walt Disney World Resort, partially offset by decreased costs and expenses. Costs and expenses decreased 6%, or $170 million, driven primarily by volume decreases and productivity and cost reduction initiatives at Walt Disney World and the absence of pre-opening costs for Disney's California Adventure. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Studio Entertainment Revenues decreased $15 million to $3.4 billion, driven by decreases of $25 million in television distribution, partially offset by an increase of $13 million in theatrical motion picture distribution. The decline in worldwide television distribution was due to better performing live-action titles in the prior year. Worldwide home video sales were comparable to the prior year as stronger DVD sales driven by Pearl Harbor, Snow White and the Seven Dwarfs, Atlantis, Princess Diaries and other live-action titles were offset by lower revenues from the rental business and lower VHS sales in the current-year period reflecting the prior-year success of Disney/Pixar's Toy Story 2, Lady and the Tramp II: Scamp's Adventure, Dinosaur and Remember the Titans. In theatrical motion picture distribution, revenues increased domestically due to strong performances of Disney/Pixar's Monster's Inc., Snow Dogs and Peter Pan II: Return to Never Land as well as an increased number of releases in the current-year period. This increase was partially offset by declines internationally as the success of Monsters, Inc. faced difficult comparisons to the prior-year, which had more releases including Unbreakable, Dinosaur and 102 Dalmatians. Segment operating income decreased 44%, or $140 million, to $176 million, driven by declines in theatrical motion picture distribution, television distribution and worldwide home video. Operating income declines in theatrical motion picture distribution and home video were driven by cost increases. The decrease in television distribution was due to revenue declines. Costs and expenses increased 4% or $125 million. In worldwide theatrical motion picture distribution, cost increases were driven by higher distribution and marketing expenses domestically due to an increased number and timing of releases during the current-year period, partially offset by decreases internationally due to a fewer number of releases in the current year. Increased costs in worldwide home video reflected higher marketing and distribution costs for Pearl Harbor, Snow White and the Seven Dwarfs and Atlantis, partially offset by lower participation costs. Consumer Products On a pro forma basis, revenues decreased 4%, or $64 million, to $1.4 billion, reflecting declines in worldwide merchandise licensing of $49 million and Disney Interactive of $40 million, partially offset by increases in publishing operations of $15 million and the Disney Store of $8 million. The decline in worldwide merchandise licensing was driven by lower guarantee payments in the current period. Lower revenues at Disney Interactive reflected weaker performing personal computer CD-ROM titles, due in part to the softening in the personal computer market. The increases at the Disney Store were primarily in North America, driven by higher comparative store sales. Higher publishing revenues were due to successful book releases during the current period. On a pro forma basis, segment operating income decreased 3%, or $8 million, to $261 million, reflecting declines at worldwide merchandise licensing and Disney Interactive, partially offset by increases at the Disney Store. Costs and expenses, decreased 5% or $56 million, primarily driven by lower costs at Disney Interactive and worldwide merchandise licensing due to revenue declines and at the Disney Store due to closures and lower advertising costs, partially offset by increased costs at publishing due to higher sales volume. As-reported revenues decreased 3% to $1.4 billion and segment operating income increased 2% to $261 million. As-reported amounts exclude ABC Family operations in the prior year and a partial period in the current year. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) FINANCIAL CONDITION For the six months ended March 31, 2002, cash provided by operations decreased $605 million to $680 million, reflecting lower pre-tax income before non-cash charges. During the six months, the Company invested $486 million in parks, resorts and other properties. The decrease from the prior year was due to the completion of Disney's California Adventure, which opened in February 2001. In January 2002, the ABC Television Network and ESPN reached a six-year agreement with the NBA to televise more than 100 regular and post-season games. At March 31, 2002, contractual commitments for sports programming rights totaled $11.7 billion, primarily for NFL, NBA, college football, MLB and NHL. Total contractual commitments other than leases, including commitments to purchase broadcast programming, totaled $15.4 billion. Substantially all of this amount is payable over the next six years. We expect that the ABC Television Network, ESPN, ABC Family, The Disney Channels and the Company's television and radio stations will continue to enter into programming commitments to purchase the broadcast rights for various feature films, sports and other programming. On October 24, 2001, the Company acquired ABC Family for $5.2 billion, funded with $2.9 billion of new long-term borrowings, plus the assumption of $2.3 billion of borrowings (of which $867 million was subsequently repaid). During the six months, the Company increased its commercial paper borrowings by $1.9 billion and issued debt with proceeds of $2.9 billion, consisting of $1.7 billion of global bonds, $330 million of retail callable bonds and medium-term notes and $832 million of euro-yen notes. These borrowings have effective interest rates, including the impact of interest rate swaps, ranging from 2.5% to 7.0% and mature in fiscal 2005 through fiscal 2032. During the six months, the Company repaid approximately $280 million of term debt, which either matured or was called during the quarter. Additionally, during the six months the Company repaid approximately $867 million of debt assumed in the acquisition of ABC Family. Commercial paper borrowings outstanding as of March 31, 2002 totaled $2.7 billion, with maturities of up to one year, supported by a $2.25 billion bank facility, which expires in 2003 and a $2.25 billion bank facility, which expires in 2005. These bank facilities allow for borrowings at LIBOR-based rates plus a spread, depending upon the Company's public debt rating. As of March 31, 2002, the Company had not borrowed against these bank facilities. The Company has a 39% interest in Euro Disney S.C.A., which operates the Disneyland Resort Paris. As of March 31, 2002, Euro Disney has drawn $39 million (45 million Euros) under a $146 million (167 million Euros) line of credit with the Company and it is expected that Euro Disney will draw additional amounts under the credit line during fiscal 2002. As of March 31, 2002, Euro Disney had, on a US GAAP basis, total assets of $2.9 billion (3.3 billion Euros) and total liabilities of $2.8 billion (3.2 billion Euros) including borrowings of $1.9 billion (2.2 billion Euros). The Company also paid $428 million in dividends during the first quarter of the current year. Recent events have caused significant changes in the insurance market which are impacting the cost and availability of the Company's insurance coverage. However, the Company believes that as renewals for various policies occur, it will be able to continue to obtain reasonable levels of coverage based on our historical loss experience. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) We believe that the Company's financial condition is strong and 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. However, the Company's operating cash flow and access to the capital markets can be impacted by macroeconomic factors outside of its control. In addition to macroeconomic factors, the Company's borrowing costs can be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on certain credit measures such as interest coverage and leverage ratios. OTHER MATTERS Accounting Policies and Estimates We believe that the application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 of the Consolidated Financial Statements in the 2001 Annual Report. Film and television revenues and costs We expense the cost of film and television production and participations as well as multi-year sports rights over the applicable product life cycle based upon the ratio of the current period's gross revenues to the estimated remaining total gross revenues. These estimates are calculated on an individual production basis for film and television and on an individual contract basis for sports rights. Estimates of total gross revenues can change due to a variety of factors, including the level of market acceptance, advertising rates and subscriber fees. Television network and station rights for theatrical movies, series and other programs are charged to expense based on the number of times the program is expected to be shown. Estimates of usage of television network and station programming can change based on competition and audience acceptance. Accordingly, revenue estimates and planned usage are reviewed periodically and are revised if necessary. A change in revenue projections or planned usage could have an impact on our results of operations. Costs of film and television productions and programming costs for our television and cable networks are subject to valuation adjustments pursuant to the applicable accounting rules. The values of the television program licenses and rights are reviewed using a daypart methodology. The Company's dayparts are: early morning, daytime, late night, prime time, news, children's and sports. A daypart is defined as an aggregation of programs broadcast during a particular time of day or programs of a similar type. Estimated values are based upon assumptions about future demand and market conditions. If actual demand or market conditions are less favorable than our projections, film, television and programming cost write-downs may be required. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Revenue Recognition The Company has revenue recognition policies for its various operating segments, which are appropriate to the circumstances of each business. See Note 1 of the Consolidated Financial Statements in the 2001 Annual Report for a summary of these revenue recognition policies. We record reductions to revenues for estimated future returns of merchandise, primarily home video, DVD and software products, and for customer programs and sales incentives. These estimates are based upon historical return experience, current economic trends and projections of customer demand for and acceptance of our products. Differences may result in the amount and timing of our revenue for any period if actual performance varies from our estimates. Goodwill, Intangible assets, Long-lived assets and investments Effective October 1, 2001, we adopted SFAS 142, as described more fully in Note 6 of the Condensed Consolidated Financial Statements. SFAS 142 requires that goodwill and other intangible assets be tested for impairment within six months of the date of adoption and then on a periodic basis thereafter. During the six-month period ended March 31, 2002, we completed our impairment testing and determined that there were no impairment losses related to goodwill and other intangible assets. In assessing the recoverability of goodwill and other intangible assets, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. If these estimates or related projections change in the future, we may be required to record impairment charges for these assets. Long-lived assets include certain long-term investments. The fair value of the long-term investments is dependent on the performance of the companies we invest in, as well as volatility inherent in the external markets for these investments. In assessing potential impairment for these investments, we will consider these factors as well as forecasted financial performance of our investees. If these forecasts are not met, impairment charges may be required. Contingencies and Litigation We are currently involved in certain legal proceedings and, as required, have accrued our estimate of the probable costs for the resolution of these claims. This estimate has been developed in consultation with outside counsel and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Income Tax Audits The IRS is currently examining the Company's federal income tax returns for 1993 through 1995. While the audit is not complete, the IRS has recently indicated its intention to challenge certain of the Company's tax positions. We believe that the Company's tax positions comply with applicable tax law and intend to defend the Company's positions vigorously. The ultimate disposition of these matters could require the Company to make additional payments to the IRS. Nonetheless, we believe that the Company has adequately provided for any foreseeable payments related to these matters and consequently do not anticipate any material earnings impact from the ultimate resolution of these matters. Accounting Changes Effective October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142). As a result of adopting SFAS 142, a substantial amount of the Company's intangible assets are no longer amortized. Pursuant to SFAS 142, intangible assets must be periodically tested for impairment, and the new standard provides six months to complete the impairment review. During the quarter, the Company completed its initial impairment review, which indicated that there was no impairment. See Note 6 to the Condensed Consolidated Financial Statements. The Company also adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), effective October 1, 2001. The adoption of SFAS 144 did not have a material impact on the Company's consolidated results of operations and financial position. MARKET RISK Interest Rate Risk Management The Company is exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on earnings and cash flows and on the market value of the Company's investments and borrowings. We maintain fixed-rate debt as a percentage of our net debt between a minimum and maximum percentage, which is set by policy. We use interest rate swaps and other instruments to manage net exposure to interest rate changes related to our borrowings and investments and to lower the Company's overall borrowing costs. We do not enter into interest rate swaps for speculative purposes. Significant interest rate risk management instruments held by the Company during the quarter included pay-floating and pay-fixed swaps. Pay-floating swaps, which expire in one to 30 years, effectively convert medium- and long-term obligations to LIBOR-indexed variable rate instruments. Pay-fixed swaps, which expire in one to two years, effectively convert floating-rate obligations to fixed-rate instruments. THE WALT DISNEY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued) Foreign Exchange Risk Management The Company transacts business in virtually every part of the world and is subject to risks associated with changing foreign exchange rates. Our objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on our core business issues and challenges. Accordingly, the Company enters into various contracts that 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, we maintain hedge coverage between minimum and maximum percentages of its anticipated foreign exchange exposures for periods of up to five years. The gains and losses on these contracts offset changes in the value of the related exposures. It is our policy to enter into foreign currency transactions only to the extent considered necessary to meet these objectives. The Company does not enter into foreign currency transactions for speculative purposes. We use forward and option strategies that provide for the sale of foreign currencies to hedge probable, but not firmly committed, revenues. We also use forward contracts to hedge foreign currency assets and liabilities. These forward and option contracts mature within three years. While these hedging instruments are subject to fluctuations in value, such fluctuations should offset changes in the value of the underlying exposures being hedged. The principal currencies hedged are the European euro, Japanese yen, British pound and Canadian dollar. Cross-currency swaps are used to hedge foreign currency-denominated borrowings. Other Derivatives The Company holds warrants in both public and private companies. These warrants, although not designated as hedging instruments, are deemed derivatives if they contain a net-share settlement clause. During the quarter, the Company recorded the change in fair value of certain of these instruments to current earnings. FORWARD LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for "forward- looking statements" made by or on behalf of the Company. We may from time to time make written or oral statements that are "forward-looking", including statements contained in this report and other filings with Securities and Exchange Commission and in reports to our shareholders. All statements that express expectations and projections with respect to future matters may be affected by changes in the Company's strategic direction, as well as by developments beyond the Company's control. These developments may include changes in global, political or economic conditions that may, among other things, affect the international performance of the Company's theatrical and home video releases, television programming and consumer products; regulatory and other uncertainties associated with the Internet and other technological developments, and the launching or prospective development of new business initiatives. All forward-looking statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that our expectations will necessarily come to pass. Factors that may affect forward-looking statements. For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. A list of such factors is set forth in the Company's Annual Report on Form 10-K for the year ended September 30, 2001 under the heading "Factors that may affect forward-looking statements." PART II. OTHER INFORMATION Item 1. 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. Except as set forth below, management does not expect a material impact to its results of operations, financial position or cash flows by reason of these actions. In re The Walt Disney Company Derivative Litigation. William and Geraldine Brehm and 13 other individuals filed an amended and consolidated complaint on May 28, 1997 in the Delaware Court of Chancery seeking, among other things, a declaratory judgment against each of the Company's directors as of December 1996 that the Company's 1995 employment agreement with its former president, Michael S. Ovitz, was void, or alternatively that Mr. Ovitz's termination should be deemed a termination "for cause" and any severance payments to him forfeited. On October 8, 1998, the Delaware Court of Chancery dismissed all counts of the amended complaint. On February 9, 2000, the Supreme Court of Delaware affirmed the dismissal but ruled also that the plaintiffs should be permitted to file an amended complaint in accordance with the Court's opinion. The plaintiffs filed their amended complaint on January 3, 2002. The Company's directors have moved to dismiss the amended complaint. Similar or identical claims have also been filed by the same plaintiffs (other than William and Geraldine Brehm) in the Superior Court of the State of California, Los Angeles County, beginning with a claim filed by Richard and David Kaplan on January 3, 1997. On May 18, 1998, an additional claim was filed in the same California court by Dorothy L. Greenfield. On September 25, 2001, Ms. Greenfield sought leave to amend her claim, but withdrew her request to amend on January 3, 2002. All of the California claims have been consolidated and stayed pending final resolution of the Delaware proceedings. During the period covered by this report, there were no material developments in the other proceeding previously reported in the Company's annual report on Form 10-K for fiscal year 2001, All Pro Sports Camps, Inc. et al. v. Walt Disney Company et al. Stephen Slesinger, Inc. v. The Walt Disney Company. In this lawsuit, filed on February 27, 1991 and pending in the Los Angeles County Superior Court, the plaintiff claims that a Company subsidiary defrauded it and breached a 1983 licensing agreement with respect to certain Winnie the Pooh properties, by failing to account for and pay royalties on revenues earned from the sale of Winnie the Pooh movies on videocassette and from the exploitation of Winnie the Pooh merchandising rights. The plaintiff seeks damages for the licensee's alleged breaches as well as confirmation of the plaintiff's interpretation of the licensing agreement with respect to future activities. The plaintiff also seeks the right to terminate the agreement on the basis of the alleged past breaches. The Company disputes that the plaintiff is entitled to any damages or other relief of any kind, including termination of the licensing agreement. The claim is currently scheduled for trial in February 2003. If each of the plaintiff's claims were to be confirmed in a final judgment, damages could total as much as several hundred million dollars and adversely impact the value to the Company of any future exploitation of the licensed rights. However, given the number of outstanding issues and the uncertainty of their ultimate disposition, management is unable to predict the magnitude of any potential determination of the plaintiff's claims. Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of these three matters will have on the Company's results of operations, financial position or cash flows. PART II. OTHER INFORMATION (continued) ITEM 4. Submission of Matters to a Vote of Security Holders The following matters were submitted to a vote of security holders during the Company's annual meeting of shareholders held on February 19, 2002. Description of Matter
Votes Authority 1. Election of Directors Cast For Withheld ----------- ----------- Reveta F. Bowers 1,630,088,721 49,282,853 John E. Bryson 1,630,753,581 48,617,993 Roy E. Disney 1,631,633,573 47,738,001 Michael D. Eisner 1,622,270,705 57,100,869 Judith L. Estrin 1,631,126,538 48,245,036 Stanley P. Gold 1,630,788,386 48,583,188 Robert A. Iger 1,626,836,785 52,534,789 Monica C. Lozano 1,630,947,681 48,423,893 George J. Mitchell 1,611,230,836 68,140,738 Thomas S. Murphy 1,623,845,743 55,525,831 Leo J. O'Donovan, S.J. 1,630,061,801 49,309,773 Sidney Poitier 1,629,360,888 50,010,686 Robert A. M. Stern 1,623,149,006 56,222,568 Andrea L. Van de Kamp 1,630,413,585 48,957,989 Raymond L. Watson 1,630,080,875 49,290,699 Gary L. Wilson 1,623,594,876 55,776,698
Broker For Against Abstentions Non-Votes ------------- ------------ ------------ ----------- 2. Ratification of PricewaterhouseCoopers LLP as independent accountants 1,630,349,265 35,693,363 13,328,946 3. Approval of the 2002 Executive Performance Plan 1,579,664,445 80,996,189 18,710,940 4. Stockholder proposal relating to independent accountants 495,788,502 707,889,178 73,530,755 402,163,139 5. Stockholder proposal relating to labor standards for China 76,735,909 1,088,542,859 111,929,667 402,163,139 6. Stockholder proposal relating to theme park safety reporting 62,464,931 1,122,424,179 92,319,325 402,163,139 7. Stockholder proposal relating to stock options 87,997,412 1,142,868,208 46,342,815 402,163,139
PART II. OTHER INFORMATION (continued) ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 (a) Amended and Restated Disney Salaried Retirement Plan 10 (b) Amended and Restated Disney Salaried Savings and Investment Plan 10 (c) Disney Severance Pay Plan 10 (d) Amended and Restated ABC, Inc. Savings and Investment Plan (b) Reports on Form 8-K The following current report on Form 8-K was filed by the Company during the Company's second fiscal quarter: (1) Current report on Form 8-K dated January 31, 2002 setting forth (a) the earnings release for the fiscal quarter ended December 31, 2001 and (b) text of the conference call concerning the earnings release. SIGNATURE Pursuant to the requirements 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) By: /s/ THOMAS O. STAGGS (Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer) May 15, 2002 Burbank, California EX-10.(A) 3 dex10a.txt AMENDED AND RESTATED DISNEY SRP EXHIBIT 10(A) DISNEY SALARIED RETIREMENT PLAN As Amended and Restated (February 2002) Effective January 1, 1997 ARTICLE 1 PURPOSE OF PLAN 1.01 Type of Benefits The purpose of the Disney Salaried Retirement Plan is to provide retirement, health and welfare benefits for retired Participants and disability benefits for disabled Participants. 1.02 Restatement Date and Effective Date At the Restatement Date of January 1, 1988, the Plan amended, restated and merged the Predecessor Plans, and benefits payable under the Predecessor Plans are payable under the Plan, provided that persons who retired, died or terminated employment with an Employer prior to January l, 1988, shall receive benefits under the terms and conditions of the Predecessor Plans. The Plan is amended and restated herein effective as of January 1, 1997. 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. ARTICLE 2 DEFINITIONS 2.01 "Accrued Pension" means, as of any Determination Date, the normal retirement Pension, payable commencing on the Participant's Normal Retirement Date or immediately if the Participant has already attained his Normal Retirement Age, computed under Section 5.02 on the basis of the Participant's Past Service Months, Past Service Average Monthly Compensation, Average Monthly Compensation, Years of Benefit Service, Credited Years of Service and Credited Hours of Service to the Determination Date. 2.02 "Actuarial Equivalent", effective as of January 1, 1999, means the equivalent, payable in an alternate form, of a benefit payable in a normal form under the Plan as described in Section 5.02. Such equivalent shall be calculated as follows: (a) For the purpose of determining alternate forms of benefit in accordance with Sections 6.01, 6.02 and 7.01, such equivalent shall be determined using (i) the Pension Benefit Guaranty Corporation's (PBGC's) interest assumptions under Appendix B to 29 C.F.R. Part 2619 for the December 1 immediately preceding the Determination Date, and (ii) the PBGC's mortality assumptions for healthy participants under Appendix A to 29 C.F.R. Part 2619 using a unisex approach with a blend of 50% of the male mortality rates and 50% of the female mortality rates. (b) For the purpose of determining lump sum payments in accordance with Sections 6.01(c), 6.02(b) and 7.01, such equivalent shall be determined using (i) an interest rate equal to the annual rate of interest on 30-year Treasury securities for the month of September of the Plan Year (the "Lookback Month") preceding the Plan Year in which the Determination Date for the benefit occurs (the "Stability Period"), or if the Determination Date occurs in 1999, the annual rate of interest on 30-year Treasury securities for December 1998 if the December 1998 rate would produce a larger distribution, and (ii) the mortality table prescribed by the Internal Revenue Service for purposes of Code Sections 415(b)(2) and 417(e)(3) in Revenue Ruling 95-6 or any successor thereto. (c) For the purpose of adjustments to Code Section 415 benefit limitations in accordance with Section 5.06, such equivalent shall be determined using (i) if a Participant's Pension begins before age 62, an interest rate of five percent (5%) per year, else the annual rate of interest on 30-year Treasury securities for the Lookback Month of the Stability Period, and (ii) the mortality table prescribed by the Internal Revenue Service for purposes of Code Sections 415(b)(2) and 417(e)(3) in Revenue Ruling 95-6 or any successor thereto. (d) For periods prior to January 1, 1999, the following shall apply as the definition of "Actuarial Equivalent": "Actuarial Equivalent" means the equivalent, payable in an alternate form, of a benefit payable in a normal form under the Plan as described in Section 5.02. Such equivalent shall generally be calculated based on the Pension Benefit Guaranty Corporation's (PBGC's) interest assumptions under Appendix B to 29 C.F.R. Part 2619 for the December 1 immediately preceding the Determination Date (the assumptions shown in the table in effect prior to November 1, 1993, and the assumptions listed in Table I ("Lump Sum Valuations") for periods beginning on and after November 1, 1993) and (a) prior to June 25, 1992, the PBGC's mortality assumptions for healthy participants under Appendix A to 29 C.F.R., Part 2619 assuming that all Participants are female and all Contingent Annuitants and Beneficiaries are male and (b) on and after June 25, 1992, the PBGC's mortality assumptions for healthy participants under Appendix A to 29 C.F.R. Part 2619 using a unisex approach with a blend of 50% of the male mortality rates and 50% of the female mortality rates. The Actuarial Equivalent as of the Determination Date of a Participant's Accrued Pension shall be equal to the greatest of: (i) In the event the Participant has a Year of Benefit Service prior to June 25, 1992, the Actuarial Equivalent as of the Determination Date, calculated using the mortality assumptions described in (a) above and the interest assumptions described above as of the December 1 immediately preceding the Determination Date, of the Participant's Accrued Pension as of June 24, 1992 (or date of termination, if earlier); or (ii) The Actuarial Equivalent as of the Determination Date calculated using the mortality assumptions described in (b) above and the interest assumptions described above as of the December 1 immediately preceding the Determination Date, of the Participant's Accrued Pension as of the Determination Date (or date of termination, if earlier). Notwithstanding the foregoing, effective January 1, 1987, the phrase "the first day of the Plan Year in which the distribution occurs" shall be substituted for "the December 1 immediately preceding the Determination Date" with respect to the calculation of a lump sum payment. 2.03 "Adjustment Factor" means the cost of living adjustment factors prescribed by the Secretary of the Treasury under Sections 401(a)(17) and 415(d) of the Code applied to such items and in such manner as the Secretary shall provide. 2.04 "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. 2.05 "Annuity Starting Date" means, with respect to a Participant, the applicable of: (a) The first day of the first period for which an amount is payable as an annuity under the Plan, or (b) Where the benefit is not payable in the form of an annuity, the first day on which all events have occurred which entitle the Participant to his benefit under the Plan. 2.06 "Associated Plans" means the Walt Disney Productions and Associated Companies' Retirement Plan, the Disneyland and Associated Companies' Retirement Plan, and the Walt Disney World Co. and Associated Companies' Retirement Plan. Prior to January 1, 1991, "Associated Plans" also includes the MAPO Retirement Plan as it existed prior to its January 1, 1991 merger with the Walt Disney Productions and Associated Companies' Retirement Plan. 2.07 "Average Monthly Compensation" means one-sixtieth of the sum of a Participant's Compensation over sixty consecutive calendar months within the one-hundred-twenty-month period preceding the month in which occurs the earliest of: (i) he ceases being a Covered Employee; or (ii) for a Participant whose benefits are determined because of Breaks in Service before Normal Retirement Date, the month in which his Break in Service begins. The sixty consecutive full calendar months selected must be those that produce the highest average. If a Participant is an Employee for fewer than one-hundred twenty months, his sixty-month period for this subsection is determined within the period in which he was an Employee. If a Participant is an Employee for fewer than sixty consecutive full calendar months, his Average Monthly Compensation is his actual Compensation during a period of his completed full consecutive calendar months as an Employee, divided by the number of those consecutive months. A Participant's Average Monthly Compensation cannot exceed one-sixtieth of the average of his Compensation over sixty consecutive calendar months within the one-hundred-twenty-month period preceding the month in which he ceases being a Covered Employee or, for a Participant whose benefits are determined because of a Break in Service, preceding the month in which his Break in Service begins. 2.08 "Beneficiary" means any person, persons or entity, other than a Contingent Annuitant named by a Participant by written designation filed with the Company 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; (c) the Participant's brothers and sisters, (equally), or if none; (d) the Participant's estate. 2.09 "Board of Directors" means the Board of Directors of The Walt Disney Company. 2.10 "Break in Service" means a Plan Year or other 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 Plan Year in which the absence begins or, if the individual would not otherwise have suffered a Break in Service during that Plan Year, in the next following Plan Year. 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. 2.11 "Code" means the Internal Revenue Code of 1986, as it may be amended from time to time. 2.12 "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. 2.13 "Company" means The Walt Disney Company. 2.14 "Compensation" means an Employee's base pay (excluding overtime, bonuses, commissions, 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; (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; (f) Imputed life insurance and all other forms of imputed income; (g) For purposes of determining an Employee's benefits for service after 1983, Earnings after the Employee ceased being a Covered Employee for the last time and if he does not return to Covered Employee status; and (h) Any Compensation in lieu of unused vacation and/or sick pay. Compensation shall not, for Plan purposes, exceed the Maximum Compensation Limitation, or include amounts paid by an Employer prior to its acquisition by the Company. 2.15 "Contingent Annuitant" means a Participant's spouse, or other person designated in writing by a Participant, with Spousal Consent if necessary, to receive benefits under the Plan upon the death of the Participant where such benefit is payable in the form of an annuity with a remainder interest payable for the life of a Contingent Annuitant. 2.16 "Covered Employee" means an Employee who: (a) Is employed by an Employer in a position, division, or department for which the Employer provides coverage under the Plan; (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; (e) Is not a non-resident alien with no U.S. source income with respect to the United States; and (f) Is not covered by any agreement that precludes participation in this Plan. 2.17 "Determination Date" means the date as of which an Accrued Pension or other benefit is calculated. 2.18 "Early Retirement Date" means the first day of the calendar month on or immediately after the later of the Participant's 55th birthday or his completion of five Years of Vesting Service. 2.19 "Effective Date" means the January 1, 1997 effective date of this amended and restated Plan. 2.20 "Eligibility Computation Period," subject to the provisions of Appendices A and C, 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) 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 2.20(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. 2.21 "Eligible Employee" means a Covered Employee who has completed one Eligibility Computation Period. If a Covered Employee was hired after age sixty (60) but before January l, 1988, such individual is an Eligible Employee on the later of (i) January l, 1988, or (ii) when the individual completed one Eligibility Computation Period. An Employee is an Eligible Employee on the day before he satisfies the requirements of Article 3 of the Plan. 2.22 "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 or an Affiliated Employer, including any Leased Employee but excluding any person who serves solely as a director or independent contractor. In determining whether an individual is an Employee for purposes of the Plan, the individual shall only be classified as an Employee with respect to a period of time only if the Employer treated the individual as a common law employee for payroll tax purposes for such period of time, regardless of any later determination that such individual was or may have been a common law employee during such period. Notwithstanding the foregoing, a Leased Employee, although not treated as a common law employee for payroll tax purposes by an Employer, shall be considered an Employee under the Plan. Employee excludes the following: (a) an individual who serves solely as a director or independent contractor or an individual whom the Employer regards to be an independent contractor; (b) an individual who is not classified as an Employee by an Employer, but who is treated as an Employee by reason of being treated as a "common law" employee of the Employer pursuant to the standards prescribed by Internal Revenue Service Ruling 87-41 or any successor thereto; (c) an individual whose basic Compensation for services on behalf of an Employer is not paid directly by an Employer; and (d) an individual working for a company providing goods or services (including temporary employee services) to an Employer whom the Employer does not regard to be a common law employee of the Employer. 2.23 "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. 2.24 "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 Employer, or (a) if earlier, the Employment Commencement Date effective date shown in Appendix A applicable to a Predecessor Employer provided the Employee's employment with such Predecessor Employer immediately preceded employment with an Employer or an Affiliated Employer, or (b) if later, the Employment Commencement Date effective date shown in Appendix A with respect to an Employee's period of employment prior to his Employer's adoption of this Plan. 2.25 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.26 "Flat Benefit" means the Accrued Pension element described in Section 5.02(b). 2.27 "Formula Benefit" means the Accrued Pension element described in Section 5.02(c). 2.28 "Hour of Service" means, with respect to any applicable computation period: (a) Each hour for which an Employee is paid or is entitled to payment for the performance of duties for an Employer or an Affiliated Employer during the applicable computation period. (b) 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, uniformed service duty, (as required by federal or state law), or leave of absence, but: (i) 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); (ii) an hour is not credited where an individual is directly or indirectly paid or is entitled to payment because of a period during which no duties are performed if that payment is made 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 (iii) 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 this 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 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 purposes of 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 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 purposes 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 Section 2.28(a). (h) An Employee who has Leave of Absence due to uniformed service duty shall receive Hours of Service credit in accordance with applicable federal veteran's laws. (i) Notwithstanding the foregoing, to the extent required by federal or state law, an Employee will receive credit for each hour for which the Employee would normally be credited an Hour of Service under the Plan but for a period of leave for the birth, adoption, or placement of a child, to care for a spouse or other immediate family member with a serious illness, or for the Employee's own illness pursuant to the Family and Medical Leave Act of 1993 and its regulations thereunder. 2.29 "Key Plan" means the Walt Disney Productions and Associated Companies' Key Employees Deferred Compensation and Retirement Plan, as amended from time to time. 2.30 "Leased Employee" means any person (other than a person treated as a common law employee by the Company, an Employer or an Affiliated Employer) who, pursuant to an agreement between the Company, an Employer or an Affiliated Employer and any other person ("leasing organization"), performed services for the Company, an Employer, an Affiliated Employer or any related persons determined in accordance with Section 414(n)(6) of the Code on a substantially full-time basis for a period of at least one year and such services are performed under the primary direction or control of the Company, an Employer or an Affiliated Employer. In the case of any person who is a Leased Employee before or after a period of service as a Covered Employee, the entire period during which he performed services as a Leased Employee shall be counted as service as a Covered Employee for all purposes of the Plan, except that he shall not, by reason of being a Leased Employee, become a Participant of the Plan. 2.31 "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 uniformed services of the United States shall be considered an authorized 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. Notwithstanding the foregoing, Leave of Absence shall include any authorized leave pursuant to the Family and Medical Leave Act of 1993 and the regulations thereunder. 2.32 "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 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 for 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. 2.33 "Motion Picture Plan" means the Motion Picture Industry Pension Plan. 2.34 "Normal Retirement Age" means an Employee's 65th birthday. 2.35 "Normal Retirement Date" means the first day of the calendar month on or immediately after an Employee's Normal Retirement Age. 2.36 "Participant" means any person included for participation in the Plan as provided in Article 3 and who continues to be entitled to benefits under the Plan. 2.37 "Past Service Average Monthly Compensation" means one-sixtieth of the sum of a Participant's Compensation over sixty consecutive calendar months within the one-hundred-twenty-month period preceding May l, 1984. The sixty consecutive months selected must be those that produce the highest average. For purposes of this subsection, if a Participant is an Employee for fewer than one hundred twenty months before May l, 1984, his sixty-month period for this subsection is determined within the period before May l, 1984, in which he was an Employee. If a Participant is an Employee for fewer than sixty consecutive months before May l, 1984, his Past Service Average Monthly Compensation is his actual Compensation before May 1, 1984, during his completed full consecutive calendar months as an Employee immediately before May l, 1984, divided by the number of those consecutive months. 2.38 "Past Service Month" means each month before May 1, 1984, for which an Employee who became a Participant on May l, 1984 is credited with any Hours of Service during a period uninterrupted by a separation from service and in which he was a Covered Employee, except that: (a) A Participant who was eligible to participate in the Key Plan and as of December 31, 1984, or earlier declined or is deemed to have declined to participate in the Key Plan is not credited with Past Service Months; (b) A Participant who was not eligible to participate in the Key Plan but was eligible to participate in an Associated Plan and declined or is deemed to have declined to participate in the Associated Plans is not credited with Past Service Months for periods before May l, 1984, in which he was not a participant in the Motion Picture Plan; or (c) A Participant who was eligible to participate in the Motion Picture Plan, but not the Key Plan or an Associated Plan, and declined the Motion Picture Plan, is not credited with Past Service Months. (d) Service after attainment of age 65 is disregarded. However, effective January 1, 1988, for an Employee over age 65 and still actively employed on January 1, 1988, service after age 65 shall be taken into account. 2.39 "Pension" means a Participant's benefit under the Plan, generally payable in the form of an annuity. 2.40 "Plan" means the Disney Salaried Retirement Plan as set forth in this document, or as amended from time to time. 2.41 "Plan Year" means the calendar year. 2.42 "Postponed or Late Retirement Date" means the first day of the calendar month on or immediately after the date that a Participant terminates his employment with an Employer or an Affiliated Employer after his Normal Retirement Date. 2.43 "Predecessor Employer" means a company merged into, consolidated with or absorbed by an Employer, or where substantially all of the assets or business have been acquired by an Employer. 2.44 "Predecessor Plans" means the Disney Salaried Service Pension Plan and the Disney Salaried Supplemental Pension Plan, as they existed prior to January 1, 1988. 2.45 "Pre-May 1984 Service Benefit" means the Accrued Pension element described in Section 5.02(d). 2.46 "Post-April 1984 Service Benefit" means the Accrued Pension element described in Section 5.02(e). 2.47 "Reemployment Commencement Date" means the date an Employee first is credited with an Hour of Service following a prior Break in Service. 2.48 "Restatement Date" means the effective date of the merger of the two Predecessor Plans, January l, 1988. The Predecessor Plans were originally effective as of May 1, 1984. 2.49 "Retirement Date" means a Participant's Normal Retirement Date, Early Retirement Date or Late Retirement Date. 2.50 "Rule of Parity" means a rule pursuant to which a Participant who incurs a Break in Service shall have his Eligibility Computation Periods, Years of Vesting Service and Years of Benefit Service, which occur prior to such Break in Service ignored or restored. If an Employee or Participant incurs a Break in Service and if he has no non-forfeitable Accrued Pension at the time of his Break in Service, 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 or Participant's Eligibility Computation Periods completed prior to the first such Break in Service or five. If the preceding sentence would cause any Eligibility Computation Periods to be disregarded as of December 31, 1984 if that sentence's reference to five were ignored, such Eligibility Computation Periods shall also then be disregarded hereunder. Eligibility Computation Periods previously eliminated by a prior application of this paragraph shall not be counted for purposes of the preceding sentences. For purposes of computing Years of Vesting Service, the Rule of Parity shall be applied under the preceding sentences by substituting "Years of Vesting Service" for "Eligibility Computation Period" in each place it appears. For purposes of computing Years of Benefit Service, the Rule of Parity shall be applied under the preceding sentences by substituting "Years of Benefit Service" for "Eligibility Computation Periods" in each place it appears. 2.51 "Savings Plan" means the Disney Salaried Savings and Investment Plan. 2.52 "Social Security Base" means the annual amount of wages specified as the maximum amount to be included in the determination of Employer contributions for old age, survivors and disability insurance under the provisions of the Federal Insurance Contributions Act at the time in effect. 2.53 "Social Security Retirement Age" means age 65 with respect to a Participant who was born before January 1, 1938; age 66 with respect to a Participant who was born after December 31, 1937 and before January 1, 1955; and age 67 with respect to a Participant who was born after December 31, 1954. 2.54 "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 Contingent Annuitant or Beneficiary other than the spouse. The specified form or specified beneficiary, or Contingent Annuitant 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. 2.55 "Transitional Participant" means an Employee who is a Participant in this Plan for part of this Plan's Plan Year and who is a participant in the Associated Plans or the Disney Associated Companies Retirement Plan for part of that same Plan Year, who is credited with 1,000 Hours of Service during that Plan Year, but who is not credited with a Year of Benefit Service for that Plan Year because of the exclusion in Section 2.59(b). 2.56 "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; provided that, to the extent the assets of this Plan are held pursuant to an annuity contract or other contract issued by an insurance company as provided in Section 401(f) of the Code, then the term "Trust Agreement" shall include such annuity contract or other contract. 2.57 "Trust Fund" means all money or other property which is held by the Trustee, pursuant to the terms of the Trust Agreement. 2.58 "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, including any insurance company which is the issuer of an annuity or other contract qualifying as a Trust Agreement as defined in Section 2.56. 2.59 "Year of Benefit Service," subject to the provisions of Appendices A and C, means each Plan Year after December 31, 1983 for which a Participant is credited with at least 1,000 Hours of Service. In determining a Participant's Years of Benefit Service, the following are disregarded: (a) service before 1984; (b) service other than as a Covered Employee; (c) service prior to a Participant's Year of Benefit Service effective date, as shown in Appendices A and C; (d) Years of Benefit Service ignored under the Rule of Parity; and (e) for purposes of determining a Participant's Flat Benefit only, service during any period in which the Participant's participation in the Motion Picture Plan or other entertainment industry plan requires a contribution from the Employers to that Plan. If a Participant was vested in his Accrued Pension when his Break in Service begins, his Years of Benefit Service before his Break in Service must be restored when he is reemployed by an Employer. A Participant who separates from service and returns without a Break in Service loses no Years of Benefit Services credited before his separation from service occurred. If a Participant who is not vested in his Accrued Pension separates from service and returns after a Break in Service, and if the Rule of Parity does not apply, his Credited Years of Benefit Service at the time he separated from service must be restored when he is reemployed by an Employer. Notwithstanding the foregoing, Years of Benefit Service shall include, to the extent required by law, any period of absence from service with the Employer due to a period of service in the uniformed services of the United States which is counted as years of Vesting Service as provided in Section 2.60(d) and which occurs after the date the Participant meets the eligibility requirements for participation in the Plan. The Participant shall be deemed to have received Compensation during the period of absence at the rate he would have received had he remained employed as an Employee for that period or, if such rate is not reasonably certain, on the basis of the Participant's rate of earnings during the 12-month period immediately preceding such period of absence (or, if shorter, the period of employment immediately preceding such period). 2.60 "Year of Vesting Service," subject to the provisions of Appendices A and C, means, with respect to any Employee, a Plan Year (including calendar years prior to the Effective Date) in which the Employee has been credited with 1,000 or more Hours of Service, subject to the following: (a) If his employment is terminated and he is later reemployed by an Employer or an Affiliated Employer after he has incurred one or more Breaks in Service, his Years of Vesting Service after reemployment shall be aggregated with his prior Years of Vesting Service provided (i) he was previously vested in his Accrued Pension, or (ii) the Rule of Parity does not apply, and he is credited with at least one Year of Vesting Service after his return to employment with an Employer or Affiliated Employer; (b) Service with a Predecessor Employer shall count as Years of Vesting Service only to the following extent: (i) If an Employer continues to maintain a qualified plan sponsored by such Predecessor Employer; or (ii) If, and to the extent, employment with the Predecessor Employer is required to be treated as Years of Vesting Service under applicable law; or (iii) If, and to the extent, granted by the Board of Directors and/or to the extent service with the Predecessor coincides with or postdates the Year of Vesting Service effective date applicable to the Participant and as shown in Appendix A. (c) Service with any other Predecessor Employer or an Affiliated Employer shall not count unless required by law or unless determined by the Board of Directors; (d) If the Employee shall have been absent from the service of an Employer or an Affiliated Employer because of service in the uniform services of the United States and if he shall have returned to the service of an Employer or Affiliated Employer having applied to return while his reemployment rights were protected by law, that absence shall be included in his Years of Vesting Service; (e) If the Employee is on a Leave of Absence, the Company in a uniform and non-discriminatory manner may authorize the inclusion in his Years of Vesting Service of any portion of that period of leave which is not included in his Years of Vesting Service under (d) above; (f) For purposes of determining a Participant's vested interest in his Accrued Pension attributable to his service before May 1, 1984, each Participant's Years of Vesting Service shall not be less than one Year of Vesting Service for each twelve months during the period ending on May 1, 1984 in which he was a Covered Employee without a separation from service, nor are they less than his years of vesting service under the Associated Plans (as defined in the Associated Plans) nor are they less than his years of vesting service under the Motion Picture Plan (as defined in the Motion Picture Plan), provided he was an Employee of an Employer during such period; (g) Notwithstanding any other provision to the contrary, this Plan will not recognize Hours of Service accrued while the Employee is a participant of another plan of the Employer, if the Participant failed to make the required contributions under the terms of that Plan; and (h) Service with an Employer prior to the Employer's adoption of this Plan shall be considered as Vesting Service to the extent provided in Appendix A and to the extent such service coincides with or postdates the Year of Vesting Service effective date applicable to the Participant and as shown in Appendix A. ARTICLE 3 ELIGIBILITY AND PARTICIPATION 3.01 Eligibility Only Eligible Employees may participate in this Plan. 3.02 Participation and Participation in a Qualified Pension Plan An Employee who was a Participant prior to the Restatement Date shall remain a Participant thereafter provided that he remains an Eligible Employee. An Employee who becomes an Eligible Employee in accordance with Section 2.21 of the Plan shall become a Participant as of the first day of the month after he meets such eligibility requirements. Notwithstanding the foregoing, no Employee who is an active participant in any Qualified Pension Plan shall be eligible to participate in this Plan. If any Participant of this Plan who remains an Eligible Employee hereunder also becomes eligible to participate in a Qualified Pension Plan, he shall elect either to remain in the Plan and not participate in such Qualified Pension Plan or to participate therein and terminate his active participation hereunder. Unless an Employee affirmatively elects to actively continue to participate in the Plan, he will be deemed to have elected to participate in the Qualified Pension Plan. If such Employee terminates active participation hereunder, he shall be treated as a transferred Participant under the provisions of Section 3.04. For purposes of this Section 3.02, "Qualified Pension Plan" means any Associated Plan and any other defined benefit plan other than the Plan which is designed to qualify under Section 401 of the Code or any successor provision to such section pursuant to which the Company, an Employer or an Affiliated Employer makes contributions. 3.03 Reemployment of Former Employees and Former Participants Any person reemployed by an Employer as an Eligible Employee who was previously a Participant shall be immediately eligible to become a Participant in the Plan, if previously vested under the provisions of Section 5.05. If such Employee was not vested under the provisions of Section 5.05 and is rehired within five (5) years, such Employee shall immediately become a Participant on his Reemployment Commencement Date. 3.04 Transferred Participants A Participant who remains in the employ of an Employer or an Affiliated Employer, but ceases to be an Eligible Employee, shall continue to be a Participant in the Plan, but shall not accrue benefits under the Plan while his employment status is other than as an Eligible Employee. Pension benefits under this Plan are frozen as of the date of transfer and consider only Years of Benefit Service while an Eligible Employee under this Plan. Pensions earned under other Company sponsored defined benefit plans will be paid under the terms of those plans. Vesting Years of Service will continue to accumulate under this Plan if the Participant remains in the employ of the Company, an Employer or an Affiliated Employer, but only if the Participant makes required contributions under any other qualified plan under which he may become covered on account of employment with any such employer. 3.05 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. ARTICLE 4 CONTRIBUTIONS 4.01 Employer Contributions Each Employer shall, make such contributions to the Plan which are sufficient, on an actuarial basis approved by the Committee, to fund the cost of the benefits provided hereunder for the Participants. 4.02 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 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. 4.03 No Participant Contributions Except for contributions made under the Predecessor Plans, Participants are not required or permitted to make contributions to this Plan. 4.04 No Rollover Contributions A Participant shall not be permitted to transfer or roll over to the Trust Fund any portion of his distribution from any other qualified plan, non-qualified plan, or individual retirement annuity or account. ARTICLE 5 RETIREMENT BENEFITS 5.01 Accrued Pension (a) A Participant's Accrued Pension is a benefit that begins at his Normal Retirement Date and is payable over the lifetime of the Participant. It includes benefits accrued under this Plan attributable to Employer contributions to this Plan (and certain Employee Contribution Accrued Benefits attributable to buy-backs as described in Section 5.02(g)) and benefits accrued before May 1, 1984, under the Associated Plans attributable to Employer contributions and Employee contributions transferred to this Plan under Section 7.03(b) of the Predecessor Plans. (b) The value of a Participant's Accrued Pension is based on his normal retirement Pension as defined in Section 5.02(a) computed as accrued under the appropriate accrual rule, as determined by the Committee, under Section 411(b)(1) of the Code. (c) A Participant's Accrued Pension (computed as if payable annually or computed on a twelve-month basis) never exceeds the greatest amount allowable under the limitations described in Section 5.06. (d) The right of a Participant to his Normal Retirement Benefit shall be fully vested and non-forfeitable as of his Normal Retirement Age provided the Participant is actually employed by an Employer or an Affiliated Employer on such date. 5.02 Normal Retirement Pension (a) Subject to the provisions of Appendix D, a Participant's normal retirement Pension is his Accrued Pension determined as of his Normal Retirement Age as a monthly income for the Participant's life equal to the sum of: (i) the Flat Benefit element described in Section 5.02(b), which element is subject to the special make-whole rules in Section 5.02(f) and the special withdrawal and buy-back rules in Section 5.02(g); (ii) the Formula Benefit element described in Section 5.02(c); (iii) the Pre-May 1984 Service Benefit element (accrued before May l, 1984) described in Section 5.02(d); and (iv) the Post-April 1984 Service Benefit element (accrued after April 30, 1984) described in Section 5.02(e). Prior to January l, 1988 a Participant's Normal Retirement Pension could not exceed the Accrued Pension that would be provided for him if he separated from service at Normal Retirement Age. (b) The Flat Benefit element is the monthly benefit corresponding to his Credited Hours of Service and Credited Years of Service according to the following table:
Credited Credited Monthly Years of Hours of Benefit Service Service Amount 1 1,500 - 2,250 $20.00 1 2,251 or more 30.00 2 3,000 - 3,750 40.00 2 3,751 or more 50.00 3 4,500 - 5,250 60.00 3 5,251 or more 70.00 4 6,000 - 6,750 80.00 4 6,751 or more 90.00 5 7,500 - 8,250 100.00 5 8,251 or more 110.00 6 9,000 - 9,750 120.00 6 9,751 or more 130.00 7 10,500 - 11,250 140.00 7 11,251 or more 150.00 8 12,000 - 12,750 160.00 8 12,751 or more 170.00 9 13,500 - 14,250 180.00 9 14,251 or more 190.00 10 15,000 - 15,749 200.00 10 15,750 or more 210.75 11 16,500 - 17,240 221.50 11 17,250 or more 232.25 12 18,000 - 18,749 243.00 12 18,750 or more 253.75 13 19,500 - 20,249 264.50 13 20,250 or more 275.25 14 21,000 - 21,749 286.00 14 21,750 or more 296.75 15 22,500 - 23,249 307.50 15 23,250 or more 318.25 16 24,000 - 24,749 329.00 16 24,750 or more 339.75 17 25,500 - 26,249 350.50 17 26,250 or more 361.25 18 27,000 - 27,749 372.00 18 27,750 or more 382.75 19 28,500 - 29,249 393.50 19 29,250 or more 404.25 20 30,000 - 30,749 415.00 20 30,750 or more 426.75
21 31,500 - 32,249 438.50 21 32,250 or more 450.25 22 33,000 - 33,749 462.00 22 33,750 or more 473.75 23 34,500 - 35,249 485.50 23 35,250 or more 497.25 24 36,000 - 36,749 509.00 24 36,750 or more 520.75 25 37,500 - 38,249 532.50 25 38,250 or more 544.25 26 39,000 - 39,749 556.00 26 39,750 or more 567.75 27 40,500 - 41,249 579.50 27 41,250 or more 591.25 28 42,000 - 42,749 603.00 28 42,750 or more 614.75 29 43,500 - 44,249 626.50 29 44,250 or more 638.25 30 or more 45,000 or more 650.00
(i) For purposes of this Section 5.02(b), a Participant's Credited Hours of Service and Credited Years of Service are equal to the sum of (A) his Credited Hours of Service and Credited Years of Service before May 1, 1984, under the Associated Plans and (B) after 1983, a Credited Year of Service is granted for every year in which he is credited with a Year of Benefit Service, and his Credited Hours of Service equal his Hours of Service in such Years of Benefit Service. (ii) For purposes of this Section 5.02(b) only, if a Transitional Participant does not earn a Year of Benefit Service under this Plan for any Plan Year after 1983 in which he is a Transitional Participant and does not earn a year of benefit service for such year under any other Company sponsored qualified defined benefit plan to which he may be transferred, then he may be deemed to have completed a Year of Benefit Service under this Plan for the year of transfer in accordance with uniform rules adopted by the Committee. (iii) A Participant is not entitled to a Flat Benefit under this Plan if such Flat Benefit duplicates a benefit to which he is entitled under the Associated Plans, the Disney Associated Companies Retirement Plan, the Motion Picture Plan or any entertainment industry plan to which the Employers have made contributions. (iv) A Participant is not entitled to a Flat Benefit under this subsection to the extent that it duplicates his make-whole benefit described in Section 5.02(f). (v) If a Participant has less than the lowest number of Credited Hours of Service set forth opposite his number of Credited Years of Service in the above table, his Flat Benefit is equal to the lower benefit set forth opposite his Credited Years of Service times a fraction, the numerator of which is the Participant's Credited Hours of Service and the denominator of which is that lowest number of Credited Hours of Service set forth opposite the Participant's number of Credited Years of Service. (c) The Formula Benefit element is a monthly benefit calculated by adding the products of the following formulas: (i) the Participant's Past Service Months multiplied by one-twelfth of the value resulting from adding sixty-five hundredths percent (0.65%) of his Average Monthly Compensation to twenty-five thousandths percent (0.025%) of his Average Monthly Compensation that is greater than $2,500; plus (ii) the Participant's Years of Benefit Service multiplied by the value resulting from adding fifty-five hundredths percent (0.55%) of his Average Monthly Compensation to twenty-five thousandths percent (0.025%) of his Average Monthly Compensation that is greater than $2,500. A Participant's Formula Benefit cannot be greater than the amount that would yield the maximum percentage in the Special Limitation Table below, corresponding to twelve times his Average Monthly Compensation if his Formula Benefit was added to his accrued benefits under the Associated Plans, the Disney Associated Companies' Retirement Plan, Sections 5.02(d) and 5.02(e) of the Plan, the Motion Picture Plan and this Plan's Flat Benefit, and related to twelve times his Average Monthly Compensation. A Participant's Formula Benefit is zero if his accrued benefits under the Associated Plans, the Disney Associated Companies' Retirement Plan, the Plan's Sections 5.02(d) and 5.02(e), the Motion Picture Plan, and this Plan's Flat Benefit equal or exceed his maximum percentage in the following Special Limitation Table:
SPECIAL LIMITATION TABLE Twelve Times Average Maximum Monthly Compensation Percentage Less than $21,000.00 60% 21,000 - 21,999.99 61 22,000 - 22,999.99 62 23,000 - 23,999.99 63 24,000 - 24,999.99 64 25,000 - 25,999.99 65 26,000 - 26,999.99 66 27,000 - 27,999.99 67 28,000 - 28,999.99 68 29,000 - 29,999.99 69 30,000 - 30,999.99 70 31,000 - 31,999.99 71 32,000 - 32,999.99 72 33,000 - 33,999.99 73 34,000 - 34,999.99 74 35,000 - 35,999.99 75 36,000 - 36,999.99 76 37,000 - 37,999.99 77 38,000 - 38,999.99 78 39,000 - 39,999.99 79 40,000 - 40,999.99 80 41,000 - 41,999.99 81 42,000 - 42,999.99 82
43,000 - 43,999.99 83 44,000 - 44,999.99 84 45,000 and over 85
(d) The Pre-May 1984 Service Benefits element is the Participant's Past Service Months multiplied by one-twelfth of the value resulting from adding one and fifteen hundredths percent (1.15%) of his Past Service Average Monthly Compensation to thirty-five hundredths percent (0.35%) of his Past Service Average Monthly Compensation that is greater than $2,500. (e) The Post-April 1984 Service Benefits element is the Participant's Years of Benefit Service multiplied by the value resulting from adding one percent of his Average Monthly Compensation to thirty-five hundredths percent (0.35%) of his Average Monthly Compensation that is greater than $2,500. (f) This Section 5.02(f) defines a make-whole benefit considered to be part of a Participant's Flat Benefit if it results in a payment from this Plan. (i) If an Employee's transfer has the effect of requiring him to become a participant in the Motion Picture Plan and ceasing to be a Participant in this Plan for purposes of accruing his Flat Benefit or has the effect of his becoming a Participant in this Plan and ceasing to be a participant in the Motion Picture Plan, his total benefits under this Plan, the Associated Plans, the Disney Associated Companies Retirement Plan and the Motion Picture Plan must not be less than those that he would have received under this Plan, the Motion Picture Plan, the Associated Plans, the Disney Associated Companies Retirement Plan had he not been so required to become a participant in the Motion Picture Plan or a Participant in this Plan, as the case may be. If the total benefits otherwise payable under such plans are less than those that the Participant would have received had he not been required to become a participant in the Motion Picture Plan or that he would have received had he not been required to become a Participant in this Plan, his Flat Benefit under this Plan is the excess of (A) a benefit calculated under this Plan as though all Hours of Service as an Employee while he was a participant in the Motion Picture Plan were Credited Hours of Service, over (B) the portion of the benefit under the Motion Picture Plan, other Associated Plans and the Disney Associated Companies' Retirement Plan attributable to service as an Employee. If a Participant otherwise entitled to the benefits of this Plan Section 5.02(f) either refuses to participate in the Motion Picture Plan or, having become a participant in that plan voluntarily withdraws from that plan at a time when he has a vested interest in that plan, he forfeits his rights under this Section. (ii) If a Participant in this Plan has transferred from the Motion Picture Plan pursuant to an open enrollment for that purpose: (A) solely for the purpose of applying the rule in Section 5.02(b)(l), he is credited with a Credited Year of Service for each of the Associated Plans' Plan Years during which he completed at least 750 Hours of Service for that year as an Employee while he was a Participant in the Motion Picture Plan; (B) he is credited with a Vesting Credit for each vesting computation period during which he completed Hours of Service as an Employee while he was a Participant in the Motion Picture Plan; and (C) solely for the purpose of determining his eligibility for the benefits described in Section 5.04 and Sections 7.03 and 7.04, his Hours of Service as an Employee under the Motion Picture Plan are deemed to be Credited Hours of Service. (g) A Participant who ceases to be a Covered Employee and who does not become a Participant in the Associated Plans or the Disney Associated Companies' Retirement Plan may elect to receive a lump-sum payment that is equal to his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan. That payment must be made to the Participant within ninety days after receipt of his election in writing. A Participant's benefits distributed from this Plan must always be at least equal to his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan and, if necessary, the Committee must direct a distribution in satisfaction of that liability. If a Participant does not have nonforfeitable accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan and he does not elect to receive his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan, the Committee must direct that he be paid his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan following his fifth consecutive one-year Break in Service. The benefits of a Participant who receives a distribution under this subsection are based on the Plan as in effect on the date as of which the distribution is made to him. A Participant may elect to receive his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan and payment must be made to him within ninety days after receipt of his written election. A Participant's election to withdraw his accumulated contributions as defined in the Associated Plans or the Disney Associated Companies' Retirement Plan pursuant to this subsection does not affect his Accrued Pension attributable to employer contributions. Notwithstanding the above, for Employees with an Hour of Service on or after August 23, 1984, the payment of accumulated contributions must be in the form provided in Section 6.01 unless a Spousal Consent authorizing a lump sum is filed with the Committee. For purposes of this subsection, accumulated contributions shall be defined in accordance with the Associated Plans or the Disney Associated Companies' Retirement Plan. (h) Notwithstanding the preceding provisions of this Section 5.02, a Participant's normal retirement Pension shall not be less than the sum of: (i) His OBRA 1993 Accrued Pension; and (ii) His Accrued Pension determined as of his Normal Retirement Date using Years of Benefit Service and Compensation earned on and after January 1, 1994. For purposes of this subparagraph (2), the Participant's Compensation in each of the relevant years shall not exceed the $150,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect on and after January 1, 1994. (iii) The following definitions apply to the terms used in this Section 5.02(h). (A) "OBRA 1988 Accrued Pension" means the Participant's Accrued Pension determined as if the Participant terminated employment on December 31, 1988 (or date of termination, if earlier). (B) "OBRA 1993 Accrued Pension" means the greater of: (1) The Participant's Accrued Pension, determined using all Years of Benefit Service and Compensation earned prior to December 31, 1993, multiplied by the OBRA 1993 Fraction. For purposes of this subparagraph (A), the Participant's Compensation in each of the relevant years shall not exceed the $200,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect prior to January 1, 1994; or (2) The sum of (I) and (II) below: (I) The Participant's OBRA 1988 Accrued Pension multiplied by the OBRA 1988 Fraction; (II) The Participant's Accrued Pension, determined using Years of Benefit Service and Compensation earned after December 31, 1988, and prior to December 31, 1993, multiplied by the OBRA 1993 Fraction. For purposes of this subparagraph (B)(II), the Participant's Compensation in each of the relevant years shall not exceed the $200,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect prior to January 1, 1994. (C) "OBRA 1988 Fraction" means a fraction, not less than 1, the numerator of which is the Participant's Average Monthly Compensation as of his Normal Retirement Date, taking into account the $150,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect on and after January 1, 1994, and the denominator of which is the Participant's Average Monthly Compensation as of December 31, 1988, determined as if the Participant had terminated employment on December 31, 1988 (or his actual date of termination, if earlier), and without regard to the Maximum Compensation Limitation. (D) "OBRA 1993 Fraction" means a fraction, not less than 1, the numerator of which the Participant's Average Monthly Compensation as of his Normal Retirement Date, taking into account the $150,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect on and after January 1, 1994, and the denominator of which is the Participant's Average Monthly Compensation as of December 31, 1993, determined as if the Participant had terminated employment on December 31, 1993 (or his actual date of termination, if earlier), taking into account the $200,000 Maximum Compensation Limitation (as adjusted in accordance with Section 2.32) in effect prior to January 1, 1994. 5.03 Early or Late Retirement (a) A Participant who has not reached his Normal Retirement Date but who has reached an Early Retirement Date may retire from service on an Early Retirement Date and commence to receive an early retirement Pension as of the first day of the calendar month after he submits to the Committee a written application for retirement benefits and after he separates from service. (b) Unless the Participant otherwise elects, the early retirement Pension shall be a deferred Pension beginning on the Participant's Normal Retirement Date and, subject to the provisions of Section 6.01, shall be equal to his Accrued Pension. However, the Participant may elect to receive an early retirement Pension beginning on the first day of any calendar month on or after his Early Retirement Date but before his Normal Retirement Date. In that case, the Participant's Pension shall be equal to the deferred Pension reduced by 1/180th for each of the first 60 months and 1/360th for each of the next 60 months by which the date the Participant's early retirement Pension begins precedes his Normal Retirement Date. Notwithstanding the foregoing, the Pension payable under this Section 5.03(b) for any Participant who retires from service after completing twenty-five Years of Vesting Service (but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans) shall not be less than his Accrued Pension as of February 28, 1994, reduced by 5% for each year by which the date the Participant's early retirement Pension begins precedes the first day of the calendar month coincident with or next following the Participant's sixty-second birthday, with a pro-rata reduction for any portion of a year. (c) If a Participant retires on a Late Retirement Date or otherwise postpones his retirement Pension, he shall commence to receive a late retirement Pension as of the earlier of the first day of the calendar month after his actual Retirement Date or the date that he is required by law to commence receiving payment of his benefit as provided in Section 6.04(b). (d) A late retirement Pension which commences following a Participant's actual Retirement Date shall, subject to the provisions of Section 6.01, be equal to the amount determined in accordance with Section 5.02(a) but, where applicable, based on the Participant's Compensation, Average Monthly Compensation, Past Service Average Monthly Compensation, Credited Years of Service, Credited Hours of Service, Years of Benefit Service, and Past Service Months through his Late Retirement Date. (e) A late retirement Pension which commences prior to a Participant's Retirement Date in accordance with the requirements of Section 6.04(b) shall be calculated in accordance with Section 5.03(d) above, except that the benefit shall be calculated based on the Participant's Compensation, Average Monthly Compensation, Past Service Average Monthly Compensation, Credited Years of Service, Credited Hours of Service, Years of Benefit Service, Past Service Months through the last day of the Plan Year preceding the date that benefits are to commence to be paid or adjusted rather than as of his Late Retirement Date. In addition, the amount of Pension to which a Participant is entitled under the Plan shall be recalculated annually, during the period that the Participant is still employed by an Employer or an Affiliated Employer, as of the end of each Plan Year with the amount of benefit being paid adjusted as of the first day of the following Plan Year. Notwithstanding the foregoing, the Pension payable under this Section 5.03(b) for any Participant who retires from service after completing twenty-five Years of Vesting Service (but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans) shall not be less than his Accrued Pension as of February 28, 1994 reduced by 5% for each year by which the date the Participant's early retirement pension begins precedes the first day of the calendar month coincidental with or next following the Participant's sixty-second birthday, with a pro-rata reduction for any portion of a year. If a Participant retires on a Late Retirement Date or otherwise postpones his retirement Pension, he shall commence to receive a late retirement Pension as of the earlier of the first day of the calendar month after his actual Retirement Date or the date that he is required by law to commence receiving payment of his benefit as provided in Section 6.04(b). 5.04 Disability (a) An Eligible Disabled Participant is a Participant who has at least ten Years of Vesting Service when he terminates employment on or after having attained age fifty-five but prior to age sixty-five and at such time is determined to have a Disability. An Eligible Disabled Participant's Disability Date is the day on which his disability is deemed to have started. (b) Disability means a total and permanent physical or mental incapacity by bodily injury or disease that prevents an Employee from engaging in any occupation or employment for remuneration or profit, except for purposes of rehabilitation as determined by the Committee, and entitles the Employee to a disability benefit under the provisions of the Social Security Act. (c) A Participant who no longer satisfies each requirement in Section 5.04(b) is no longer an Eligible Disabled Participant. (d) An Eligible Disabled Participant is deemed to receive Compensation at the same base rate he received for the calendar month immediately before his Disability Date, and that amount is credited from his Disability Date to the earliest of: (i) his death; (ii) the date his Disability ceases; or (iii) his Early or Normal Retirement Date. (e) For purposes of determining his Years of Benefit Service, an Eligible Disabled Participant is credited with Hours of Service at the rate of forty-five hours for any week during which he is an Eligible Disabled Participant. 5.05 Termination With Vesting (a) A Participant shall be 100 percent vested in, and have a non-forfeitable right to, his Accrued Pension upon attainment of Normal Retirement Age (provided the Participant is actually employed by an Employer or an Affiliated Employer on such date) or upon completion of five Years of Vesting Service. If the Participant's employment with an Employer or an Affiliated Employer is terminated after he is 100 percent vested in his Accrued Pension for reasons other than retirement or death, he shall be eligible for a deferred vested Pension to commence, as of a date described in Section 5.05(b) below, after the Participant has provided written notification to the Committee of his intention to commence receiving his Pension benefits. (b) The deferred vested Pension shall generally commence to be paid as of the Participant's Normal Retirement Date and, subject to the provisions of Section 6.01, shall be equal to his Accrued Pension. However, if he had completed five Years of Vesting Service on the date of his termination, the Participant may elect to have his vested Pension commence as of the first day of any calendar month after his 55th birthday or his termination date if later, and before his Normal Retirement Date. In that case, the Participant's Pension shall be equal to the vested Pension otherwise payable at his Normal Retirement Date reduced as provided for Early Retirement in Section 5.03, or in Section 5.08, if applicable, with respect to a Participant who terminates service prior to March 1, 1994 after completing 25 years of Vesting Service. 5.06 Maximum Benefit Limitation The Plan Year shall be considered a "limitation year" for purposes of this Section 5.05 and Code Section 415. (a) (i) "Section 415 Compensation" means for the purpose of this Section 5.06, 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 the Company 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) plus amounts which are not includible in the gross income of the Employee under Code Sections 125, 132(f)(4), 402(g)(3) or 457, but excluding: (A) Contributions made by the Company or an Affiliated Employer on behalf of the Participant to the Plan or any other plan of deferred compensation maintained by the Company or an Affiliated Employer; (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. Notwithstanding the foregoing, for Plan Years beginning prior to January 1, 1998, Section 415 Compensation shall not include amounts not includable in the gross income of the Employee under Code Sections 125, 402(g)(3) or 457 and for limitation years prior to January 1, 2001 shall not include elective reductions under Code Section 132(f)(4). (ii) "IRS Interest Rate" means the annual rate of interest on 30-year Treasury Securities as specified by the Commissioner of Internal Revenue for the September (the "look-back month") preceding the stability period. (iii) "IRS Mortality Table" means the mortality table prescribed by the Secretary of the Treasury under Code Section 417(e)(3)(A)(ii)(I) as in effect on the first day of the applicable stability period. (b) Notwithstanding any other provisions of the Plan but subject to the other provisions of this Section 5.06, the maximum annual annuity payments under the Plan (exclusive of any benefits which are not directly related to retirement income benefits) shall not exceed the lesser of: (i) $90,000; or (ii) 100% of the Participant's Section 415 Compensation during the three consecutive calendar years of service during which his compensation was highest. (iii) Less than 10 Years of Participation. If the Participant has not been a Participant in the Plan for at least 10 years, the maximum annual benefit limitation in Section 5.06(b)(i) shall be multiplied by the ratio that the Participant's number of years of participation in the Plan bears to 10. (iv) Less than 10 Years of Vesting Service. If the Participant has not completed 10 Years of Vesting Service, the maximum annual benefit limitation in Section 5.06(b)(ii) shall be multiplied by the ratio that the Participant's number of Years of Vesting Service bears to 10. (v) Payment Before Age 62. If the benefit begins before the Participant attains age 62, the maximum annual benefit limitation in Section 5.06(b)(i) shall be equal to the lesser of the Actuarial Equivalent of the maximum annual benefit limitation at age 62 (as determined in accordance with Section 5.06(b)(vi) below) calculated using: (A) The early retirement reduction factors prescribed in the Plan (or in the absence of prescribed factors, the mortality table and interest rate prescribed in the definition of Actuarial Equivalent); or (B) The IRS Mortality Table and an interest rate equal to 5%. Notwithstanding the foregoing, the mortality decrement shall be applied only on a post-retirement basis where the Plan benefits are not subject to forfeiture upon the Participant's death prior to his Annuity Starting Date. (vi) Payment on or After Age 62 And Before Social Security Retirement Age. If the benefit begins before the Participant's Social Security Retirement Age but on or after the date he attains age 62, the maximum annual benefit limitation in Section 5.06(b)(i) shall be reduced by 5/9 of one percent for each of the first 36 months plus 5/12 of one percent for each additional month (up to 24) by which the Participant is younger than his Social Security Retirement Age at the date his benefit begins. (vii) Payment After Social Security Retirement Age. If the benefit begins after the Participant's Social Security Retirement Age, the maximum annual benefit limitation in Section 5.06(b)(i) shall be equal to the lesser of the Actuarial Equivalent of the maximum annual benefit limitation at the Participant's Social Security Retirement Age calculated using: (A) The deferred retirement factors prescribed in the Plan (or in the absence of prescribed factors, the mortality table and interest rate prescribed in the definition of Actuarial Equivalent); or (B) The IRS Mortality Table and an interest rate equal to 5%. Notwithstanding the foregoing, the mortality decrement shall be applied only on a post-retirement basis where the Plan benefits are not subject to forfeiture upon the Participant's death prior to his Annuity Starting Date. (viii) Cost-of-Living Adjustments. As of January 1 of each calendar year, the dollar limitation as determined by the Commissioner of the Internal Revenue Service for that calendar year shall become effective as the maximum annual benefit limitation in Section 5.06(b)(i) during the limitation year ending within that calendar year. (c) A Participant's benefit shall be subject to the following adjustments before the application of the maximum annual benefit limitation in Section 5.06(b) and, as so modified, shall be subject to such limitation: (i) If the Participant's benefit is payable as a joint and survivor annuity with the Participant's spouse as the Beneficiary, the modification of the Participant's benefit for that form of payment shall be made before the application of the maximum annual benefit limitation in Section 5.06(b) and, as so modified, shall be subject to such limitation. (ii) If the Participant's benefit is payable in a form that is neither described in Section 5.06(c)(i) nor a straight life annuity, the Participant's benefit shall be converted to a straight life benefit before the application of the maximum annual benefit limitation in Section 5.06(b)(i) and, as so modified, shall be subject to such limitation. For purposes of this Section 5.06(c)(ii), the straight life benefit shall be equal to the greater of the Actuarial Equivalent of the benefit otherwise payable to the Participant calculated using: (A) The optional benefit factors prescribed in the Plan (or in the absence of prescribed factors, the mortality table and interest rate prescribed in the definition of Actuarial Equivalent); or (B) The IRS Mortality Table and an interest rate equal to 5% or, if the form of benefit is subject to Section Code 417(e)(3), an interest rate equal to the IRS Interest Rate. (d) The limitations in Section 5.06(b) shall not apply to any Participant who has not at any time participated in any defined contribution plan maintained by the Company or an Affiliated Employer if the Participant's total annual retirement benefit payable under the Plan and all other defined benefit plans maintained by the Company or an Affiliated Employer does not exceed $10,000. (e) For limitation years commencing prior to January 1, 2000, if a Participant is a participant in any qualified defined contribution plan required to be taken into account for purposes of applying the combined plan limitations contained in Code Section 415(e), then for any year the sum of the defined benefit plan fraction and the defined contribution plan fraction, as such terms are defined in said Section 415(e), shall not exceed 1.0. If for any year the foregoing combined plan limitation would be exceeded, the benefit provided under this Plan shall be reduced to the extent necessary to meet that limitation. The purpose of this Section 5.06 is to comply with the provisions of Code Section 415 and any transitional provisions of statutes establishing or amending such Section 415 to the extent not incorporated or reflected in such Section 415, and all terms and provisions of this Section 5.06 shall be interpreted and construed consistent with Section 415 and such other statutory provisions. 5.07 Suspension of Benefits (a) If a Participant in receipt of a Pension is restored to or in service with an Employer as an Eligible Employee on or after January 1, 1992, and he works more than 5 weeks in a calendar quarter, the following shall apply: (i) Subject to administrative procedures, he shall not receive one month's Pension payment which is otherwise due in the immediately following calendar quarter. (ii) Any Years of Vesting Service, Years of Benefit Service, Credited Years of Service and Credited Hours of Service to which he was entitled when he retired or terminated service shall be restored to him, except that benefits for a Participant who does not complete at least 1,000 Hours of Service following his reemployment shall be determined (A) as to his Credited Years of Service, Credited Hours of Service, and Years of Benefit Service accumulated prior to his reemployment date, based on the terms of the Plan and the benefit formulas in effect at his prior termination of employment and (B) as to his Credited Years of Service, Credited Hours of Service and Years of Benefit Service accumulated following his reemployment, based on the terms of the Plan and the benefit formulas in effect at his later termination of employment. Notwithstanding, the preceding provisions of this Section 5.07, the exception of this Section 5.07(a)(ii) shall apply upon reemployment of any Eligible Employee regardless if he is in receipt of a Pension at the time of his reemployment and without regard to the 5 week work criterion. (iii) Subject to the provisions of Section 5.07(a)(ii), upon later retirement or termination of employment, his Pension shall be calculated under the benefit formula in effect upon his latest Retirement Date, based on his Credited Hours of Service, Credited Years of Service and Years of Benefit Service before and after the period when he was not in the service of an Employer, reduced if applicable, in accordance with Section 5.03(b). (iv) The portion of the Participant's Pension upon later retirement payable with respect to Credited Hours of Service, Credited Years of Service and Years of Benefit Service rendered before his previous retirement or termination of service shall never be less than the amount of his previous Pension modified to reflect any option in effect on his later retirement. (v) If a Participant in receipt of a Pension is restored to service with an Employer or an Affiliated Employer, prior to January 1, 1992, his Pension payments will be suspended or any month prior to January 1, 1992 in which he is regularly scheduled to work at least 80 hours per month in any one month period. Upon later retirement or termination prior to January 1, 1992, his Pension shall be calculated in accordance with the preceding provisions of this Section except that if such an Eligible Employee's reemployment occurred on or after his Normal Retirement Date, then his Pension upon later termination or retirement shall be equal to the greater of the benefit calculated as described in Section 5.07(a)(iii)(A) above or the benefit the Participant was receiving as of his rehire date adjusted to be an Actuarial Equivalent for each month subsequent to his rehire date during which he did not receive payment of the benefit and during which he was not regularly scheduled to work at least 80 hours. (vi) The Committee will establish procedures consistent with Department of Labor Regulations Section 2530.203-3 regarding the suspension of benefits under this Section 5.07 including but not limited to, procedures for resumption of benefits, offsetting benefit payments and notice regarding suspension of benefits, and such provisions shall control in the event of conflict between them and the proceeding provisions of this Section. 5.08 Special Early Retirement (a) In lieu of, and notwithstanding the provisions of, Section 5.03, the provisions of this Section 5.08 shall apply in the case of a Participant who: (i) has reached an Early Retirement Date, (ii) retires from service on or after September 15, 1986, and prior to March 1, 1994 (iii) retires from service prior to his Normal Retirement Date, and (iv) has completed at least 25 Years of Vesting Service, but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans. (b) A Participant who retires from service on or after October 1, 1988 and prior to March 1, 1994 but on or after his sixty-second birthday shall commence to receive an early retirement Pension as of the first day of the calendar month coincidental with or immediately following his retirement from service. Subject to the provisions of Section 6.01, the amount of such Pension shall be equal to the Participant's Accrued Pension. (c) A Participant who retires from service on or after October 1, 1988 prior to March 1, 1994 and prior to his sixty-second birthday shall commence to receive an early retirement Pension as of the first day of the calendar month after he submits to the Committee a written application for retirement benefits and after he separates from service. Unless the Participant otherwise elects, the early retirement Pension shall be a deferred Pension beginning on the first day of the month coincidental with or immediately following his sixty-second birthday and, subject to the provisions of Section 6.01, shall be equal to his Accrued Pension. However, the Participant may elect to receive an early retirement Pension beginning on the first day of any calendar month on or after his early Retirement Date but before his sixty-second birthday. In that case, the Participant's Pension shall be equal to the deferred Pension reduced by 5% for each year by which the date the Participant's early retirement Pension begins precedes the first day of the calendar month coincidental with or next following the Participant's sixty-second birthday, with a pro-rata reduction for any portion of year. (d) A Participant who retired from service on or after September 15, 1986 but prior to October 1, 1988 under the conditions specified in Section 5.08(a) above shall have his future Pension payments increased effective with the Pension payment payable as of October 1, 1988. Such increase shall be equal to the additional amount of Pension the Participant would have received at his original Pension commencement date had the provisions of Section 5.08(b) or 5.08(c), whichever is applicable, been in effect on such date. If a Participant covered by this Section 5.08(d) had not yet commenced to receive Pension payments as of October 1, 1988, then the Pension subsequently payable to him from or after October 1, 1988 shall be determined under the provisions of Section 5.08(c). ARTICLE 6 FORM OF PAYMENT OF PENSION BENEFITS 6.01 Automatic Form of Payment (a) If the Participant is not married on the date his Pension begins, his Pension shall be payable in monthly installments ending with the last monthly payment before death, unless the Participant has elected an optional form of benefit as described in Section 6.02. (b) If the Participant is married on the date his Pension begins, and if he has not elected an optional form of benefit as described in Section 6.02, the Pension payable shall be a joint and survivor Pension which is the Actuarial Equivalent of the Pension otherwise payable, providing for a reduced Pension payable to the Participant during his life and after his death a Pension at the rate of one-half the Pension paid to the Participant, payable during the life of, and to, the spouse to whom he is married at the date his Pension begins. Once the payment of Participant's Pension has begun, no adjustment shall be made for any subsequent change in marital status or health, or for any other reason. (c) In any case, an Actuarial Equivalent lump sum payment shall be made in lieu of all benefits if the present value of any Pension is less than $3,500 (effective January 1, 1998, $5,000) or if the monthly Pension payable over the lifetime of the recipient is less than $50.00. The lump sum payment may be made at any time on or after the date the Participant terminates employment. In addition, if a lump sum payment is greater than $3,500 (effective January 1, 1998, $5,000), or if a lump sum payment is to be made after a Participant's Annuity Starting Date, the Participant must consent in writing to such form of distribution and, if he is married, Spousal Consent must also be obtained. 6.02 Options (a) A Participant may, subject to the provisions of Section 6.03, elect to convert the Pension otherwise payable to him into one of the Actuarial Equivalent optional forms of benefit described below. However, if the Contingent Annuitant or Beneficiary selected is not the Participant's spouse, the present value of the Pension payable to the Participant under the option shall always be more than 50 per cent of the present value of the benefits payable under the option to the Participant and his Contingent Annuitant or Beneficiary. Option 1. A Pension payable for the life of the Participant only; Option 2. A modified Pension payable during the Participant's life, and after his death payable at 50% or 100% of the rate of his modified Pension during the life of, and to, the Contingent Annuitant named by him when he elected the option. Option 3. A modified Pension payable during the Participant's life, guaranteed for a 10 year period after the date the Pension begins. If the Participant dies during the designated period, the modified Pension shall be payable for the balance of that period to the Beneficiary named by him when he elected the option; provided that, if there is no designated Beneficiary or the Beneficiary then does not survive the 10 year period, an Actuarial Equivalent lump sum payment of the remaining payments shall be paid to the alternate Beneficiary or, if none, to the estate of the Beneficiary. (b) The following special options and payment apply with respect to the Actuarial Equivalent lump sum value of a Participant's Accrued Benefit attributable to his Past Service Months under Section 5.02(d) (the "Special Lump Sum Payment"). (i) Upon termination of employment, the Participant, with Spousal Consent, may elect to receive the Special Lump Sum Payment. The election must be made within 90 days after employment is terminated for any reason. The election is effective on the date of termination of employment. (ii) If a Participant dies while employed, or after termination of employment but while he is considered an Eligible Disabled Employee pursuant to Section 5.04(a), his spouse, if any, may elect to receive the Special Lump Sum Payment. The election must be made by the spouse within 90 days after the Participant's death. The Special Lump Sum Death Benefit may only be elected by a deceased Participant's spouse, if any, and may not be elected by any other Beneficiary, whether the Participant is or is not married at the date of his death. 6.03 Election of Options (a) A married Participant's election of any option which does not provide for monthly payments to his spouse for life after the Participant's death in an equal amount equal to at least 50% but not more than 100% of the monthly amount payable under the option to the Participant shall be effective only if Spousal Consent to the election is received by the Committee. (b) The Committee shall furnish to each married Participant not less than 30 days or more than 90 days, before his projected Annuity Starting Date, a written explanation in nontechnical language of the terms and conditions of the joint and survivor Pension provided under Section 6.01(b), the financial effect upon the Participant's Pension of making an election under Section 6.02 in lieu of the joint and survivor Pension, the requirement for Spousal Consent as provided in paragraph (a) above, and the right of the Participant to make and to revoke elections. under Section 6.02. An election under Section 6.02 shall be made on a form provided by the Committee, and may be made after that information is furnished to the Participant and during the 90-day election period preceding the Participant's Annuity Starting Date. However, a married Participant may file with the Committee a written request for detailed information as to the amount of his Pension on a joint and survivor basis under Section 6.01(b) and under Option l of Section 6.02. If he makes that request, the period during which an election of Option 1 may be made shall be extended, if necessary, to include the 60 days following receipt by the Participant of that information. (c) An election of an option under Section 6.02 may be revoked on a form provided by the Committee, and subsequent elections and revocations may be made at any time and from time to time during the applicable election period. An election of an optional benefit shall be effective on the date the Participant's Pension begins. A revocation of any election shall be effective when the completed form is filed with the Committee. If a Participant who has elected an optional benefit dies before the date the election of the option becomes effective, the election shall be revoked. If the Contingent Annuitant or Beneficiary designated under an option dies before the date the election of the option becomes effective, the election shall be revoked. (d) Notwithstanding the provisions set forth above, a Participant may, after having received the notice, affirmatively elect to have his benefit commence sooner than 30 days following his receipt of the notice, provided all of the following requirements are met: (i) the Committee clearly informs the Participant that he has a period of at least 30 days after receiving the notice to decide when to have his benefits begin and, if applicable, to choose a particular optional form of payment; (ii) the Participant affirmatively elects a date for his benefits to begin and, if applicable, an optional form of payment, after receiving the notice; (iii) the Participant is permitted to revoke his election until the later of his Annuity Starting Date or seven days following the day he received the notice; (iv) payment does not commence less than seven days following the day after the notice is received by the Participant; and (v) the Participant's Annuity Starting Date is after the date the notice is provided. 6.04 Commencement of Payments (a) Except as otherwise provided in this Article 6, payment of a Participant's Pension shall begin as soon as administratively practicable following the latest of: (i) The Participant's 65th birthday; (ii) The fifth anniversary of the date on which he became a Participant; or (iii) The date he terminates service with an Employer or Affiliated Employer (but not more than 60 days after the close of the Plan Year in which the latest of (i), (ii) or (iii) occurs). (b) Notwithstanding the preceding paragraph, the Participant's Pension shall begin not later than April 1 after the applicable of the following dates: (i) Prior to January 1, 1989: (A) For an Employee who owns a five percent (5%) or more interest in an Employer or an Affiliated Employer (as defined in Section 416(i) of the Code), the last day of the calendar year in which he attains age seventy and one-half (70-1/2); or (B) For any other Employee, the later of: (1) The last day of the calendar year in which he terminates from an Employer or an Affiliated Employer; or (2) The last day of the calendar year in which he attains age seventy and one-half (70-1/2). (ii) After December 31, 1988: Participants who continue to work past age 70 1/2 shall begin to receive their benefit distributions as of April 1 of the year following the calendar year in which they reach age 70 1/2. (c) In addition to the foregoing, to commence benefits under this Plan, the Participant must comply with the administrative procedures established by the Committee. 6.05 Method of Payment for Eligible Rollover Distributions (a) Notwithstanding any provision of the Plan to the contrary, 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 6.05, 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 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 Annuity Starting 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 Annuity Starting Date, he shall be deemed to have elected the method of payment described in Section 6.05(a)(i). (c) Notwithstanding the provisions of Section 6.05(b) above, distributions paid in accordance with Section 6.05(a) may commence less than 30 days after the material described in Section 6.05(b) is given to the Distributee, provided that: (i) If the Distributee is the Participant, the Actuarial Equivalent of the Participant's Accrued Pension does not exceed $3,500 (effective January 1, 1998, $5,000); (ii) If the Distributee is the Participant's Spouse, the Actuarial Equivalent of the Spouse's Pension does not exceed $3,500 (effective January 1, 1998, $5,000); (iii) 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 (iv) After receipt of such notification, he affirmatively elects to receive a distribution. (d) The following definitions apply to the terms used in this Section 6.05: (i) "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, 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 frequent 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 includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and (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 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. ARTICLE 7 DEATH AND WELFARE BENEFITS 7.01 Spouse's Pension (a) If a married Participant dies in active service after having met the requirements for any Pension, or after having terminated from an Employer or an Affiliated Employer after having become entitled to a vested Pension, a spouse's Pension shall be payable to his surviving spouse for life. Such spouse may also be eligible to elect the Special Lump Sum Payment of Section 6.02(b) in lieu of a portion of the spouse's Pension payable pursuant to the provisions of this Article 7. (b) The spouse's Pension shall commence to be paid, unless the spouse makes written election to defer commencement to no later than the date the Participant would have attained age 65, as of the first day of the calendar month following the later of the Participant's date of death or what would have been the Participant's 55th birthday. It shall be equal to: (i) In the case of a Participant who dies after he has completed the requirements for a normal or early retirement Pension, the Pension that would have been payable to the spouse if the Participant had retired under Section 5.01 or 5.03, whichever is applicable, and his Pension had commenced as of the first day of the month in which his death occurred or such later date as is selected; or (ii) In the case of any other Participant, the Pension that would have been payable to the spouse, based on his Accrued Pension at date of death, if he had elected to have his vested Pension begin upon his attainment of age 55 or such later date as is selected (or his date of death, if later) and then had died immediately thereafter. 7.02 Latest Date of Distribution of Spouse's Pension The following rules apply with respect to the latest allowable distribution of death benefits on a Participant's behalf under the Plan in accordance with Section 401(a)(9) of the Code: (a) If the Beneficiary is other than the Participant's spouse, distribution to such Beneficiary shall generally be made or commence within one (l) year of the Participant's date of death; or (b) If the Beneficiary is the Participant's spouse, distribution to such Beneficiary shall generally be made or commence by the date on which the Participant would have attained age seventy and one-half (70-1/2). 7.03 Other Welfare Benefits for Participants Terminating Employment After December 31, 1993: (a) A Participant who: (i) has an Employment Commencement Date (determined without regard to paragraph (a) of Section 2.24 and subject to the provision described in Appendix C, C.3) prior to January 1, 1994 and, except as provided in Sections 7.03(b) and 7.03(e), has no rehire dates with an Employer or an Affiliated Employer after December 31, 1993; (ii) has attained age 65; (iii) has at least 30,000 Credited Hours of Service including Credited Hours of Service as defined in Section 5.02(b) plus credited hours under any of the Associated Plans after April 30, 1984; (iv) has at least twenty years of Vesting Service, but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans; (v) has separated from service on account of Disability as defined in Section 5.04(b), or on or after attainment of age 55 in any other case; and (vi) has begun receiving retirement benefits under the Plan (or, effective April 2, 2001, is eligible to commence receiving retirement benefits); is entitled to this Section's welfare benefits, provided the Participant is not "in competition" with an Employer, or any Affiliated Employer. For purposes of this Section, no Participant shall be considered "in competition" with an Employer, or any Affiliated Employer, unless the Participant had been a Senior Vice President of an Employer (or any Affiliated Employer) for at least five years during his career with an Employer or any Affiliated Employer, and the Participant either becomes a 5% or greater percentage owner of a competing business or is employed by a competing business in a classification of Vice President or higher. Considering the preceding, the determination of competition with an Employer or with any Affiliated Employer shall be made under Committee rules of uniform application. (b) In addition to the provisions of Section 7.03(a) above, a Participant who meets the following requirements shall also be entitled to this Section's welfare benefits: (i) has attained age 62; (ii) has begun receiving early retirement benefits (or, effective April 2, 2001, is eligible to begin receiving early retirement benefits); and (iii) has either (A) separated from service prior to July 1, 1994 and, prior to March 1, 1994, completed at least 30,000 Credited Hours of Service including Credited Hours of Service as defined in Section 5.02(b) plus credited hours under any of the Associated Plans after April 30, 1984, and completed at least twenty years of Vesting Service, but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans or (B) attained age 60 prior to March 1, 1994, and separates from service after completion of at least 30,000 Credited Hours of Service, including Credited Hours of Service as defined in Section 5.02(b) plus credited hours under any of the Associated Plans after April 30, 1984, and completion of at least twenty years of Vesting Service, but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans. If a Participant who meets the requirements of this Section 7.03(b) is rehired by an Employer or an Affiliated Employer subsequent to June 30, 1994 and prior to his attainment of age 55, he will not be entitled to this Section's welfare benefits pursuant to the provisions of this Section 7.03(b). Subsequent eligibility, if any, for this Section's welfare benefits shall be dependent upon fulfillment of the requirements of Section 7.03(a), considering the provisions of Section 7.03(e). If a Participant who meets the requirements of this Section 7.03(b) is rehired by an Employer or an Affiliated Employer on or after his attainment of age 55, he will remain entitled to this Section's welfare benefits pursuant to the provisions of this Section 7.03(b) upon his subsequent retirement. (c) Before his death, a Participant described in Section 7.03(a) or 7.03(b) is entitled to health benefits (including dental or vision benefits, if applicable) according to the standards (or insurance contracts) adopted and announced by the Committee from time to time. Any Participant eligible to receive a benefit under the provisions of this Section may be required to contribute to the cost of such benefit in the discretion of the Committee and in an amount as determined in the discretion of the Committee. If a Participant shall fail to make the required contribution, if any, such Participant's coverage for the benefit under this Section will terminate. The benefits in this Section need not be insured. (d) The spouse and eligible children of a Participant who is eligible under Section 7.03(a) or 7.03(b) for the welfare benefits described in Section 7.03(c) are also eligible for those benefits until the spouse remarries or dies before remarriage. If a Participant dies as an Employee and satisfies the conditions of Section 7.03(a)(1), (3) and (4) and has satisfied the conditions to receive an early retirement pension under Section 2.18, his spouse and eligible children are entitled to the benefits described in this Section, beginning on the Participant's date of death, or if later the date that would have been the Participant's sixty-fifth birthday (sixty-second birthday if the Participant is eligible under Section 7.03(b) above) and ending at the spouse's remarriage or death before remarriage. (e) In general, a Participant who has an Employment Commencement Date or any rehire date with an Employer or an Affiliated Employer that is after December 31, 1993 shall not be entitled to the welfare benefits of this Section or Section 7.04. However, a Participant's rehire date with an Employer or an Affiliated Employer which occurs after December 31, 1993 shall be ignored for purposes of Sections 7.03(a)(1) and 7.04(a) if the Participant satisfies the requirements of subsection (1) and the requirements of either subsection (2) or subsection (3) below: (i) Prior to the rehire date, the Participant has at least 30,000 Credited Hours of Service including Credited Hours of Service as defined in Section 5.02(b) plus credited hours under any of the Associated Plans after April 30, 1984 and has at least twenty years of Vesting Service but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans; and (ii) The Participant attained age 55 prior to or coincidental with his rehire date; or (iii) The Participant fulfilled all of the following conditions: (A) The Participant has only one rehire date which occurs after December 31, 1993 and prior to attainment of age 55; (B) The Participant's period of termination of service immediately prior to the rehire date is less than 366 days; and (C) The Participant's period of reemployment following his rehire date is at least 365 days during which he is credited with at least 1,000 Hours of Service. For purposes of this Section 7.03(e), a Participant shall not be deemed to have a separation from service and shall not be deemed to have a rehire date that occurs subsequent to December 31, 1993 if the Participant's termination of service is on account of Disability as defined in Section 5.04(b) and the Participant returns to service upon recovery from Disability or if the Participant is laid off and recalled within 12 months of the layoff. In such cases and for the purposes of this Section, such Participant shall be treated as if there was no interruption in the continuity of his service. However, a layoff in excess of 12 months is deemed a separation from service as of the first day of layoff. Further, a Participant who has a rehire date due to the acquisition of his employer by an Employer or an Affiliated Employer shall be deemed not to have a rehire date provided his employment terminates within the three-month period commencing on the date of acquisition of his employer. (f) This Section 7.03 and Section 7.04 are intended to comply with Section 401(h) of the Code and must be construed accordingly. (g) As to each Employee who is a five-percent owner as defined in Section 416(i)(1)(B) of the Code during any Plan Year for which contributions are made under this Section's or Section 7.04's welfare benefits, the Committee must cause the appropriate Trustees and co-Trustees to establish and maintain a separate subaccount under the separate account of Section 9.04(b). Each such Employee's separate subaccount must hold the assets used to fund this Section's or Section 7.04's benefits for that Employee and his spouse and dependents. Benefits under this Section or Section 7.04 for an Employee described in this subsection or for his spouse and dependents may be paid only from the separate subaccount maintained for him. 7.04 Other Welfare Benefits for Participants Terminating Employment Prior to January 1, 1994 (a) A Participant who: (i) has attained age sixty-two; (ii) has at least 30,000 Credited Hours of Service for purposes of Section 5.02(b) plus credited hours under any of the Associated Plans after April 30, 1984; (iii) has at least twenty Years of Vesting Service, but only considering Vesting Service accumulated while in an employment classification providing eligibility for participation in this Plan or any of the Associated Plans; (iv) has separated from service prior to January 1, 1994 and has no rehire dates with an Employer or an Affiliated Employer after December 31, 1993 except as provided in Section 7.03(e); and (v) has begun receiving early retirement benefits is entitled to this Section's welfare benefits. (b) Before his death, a Participant described in Section 7.04(a) is entitled to medical benefits (including dental benefits, if applicable) according to the standards (or insurance contracts) adopted and announced by the Committee. Any Participant eligible to receive a benefit under the provisions of this Section may be required to contribute to the cost of such benefit in the discretion of the Committee and in an amount as determined in the discretion of the Committee. If a Participant shall fail to make the required contribution, if any, such Participant's coverage for the benefit under this Section will terminate. The benefits in this Section need not be insured. (c) The spouse and eligible children of a Participant who is eligible for the welfare benefits described in Section 7.04(a) are also eligible for those benefits until the spouse remarries or dies before remarriage. If a Participant dies as an Employee prior to January 1, 1994 and satisfies the conditions of Section 7.04(a)(2) and (3) and has satisfied the conditions to receive early retirement Pension under Section 2.18, his spouse and eligible children are entitled to the benefits described in this Section, beginning on the date that would have been the Participant's sixty-second birthday (or his later death) and ending at the spouse's remarriage or death before remarriage. 7.05 Other Welfare Benefits and Transfer of Employment Notwithstanding any other provision to the contrary, effective January 1, 2000, Participants in the Plan who cease to be Eligible Employees under the Plan because of a transfer to an employment classification providing eligibility for participation in the ABC, Inc. Retirement Plan or the Disney Associated Companies' Retirement Plan will, subject to the provisions of this Plan, continue to earn service credit toward eligibility for welfare benefits described in Section 7.03 while so employed. 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 three (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 it may require in carrying out the terms of the Plan; and may allocate among its members 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 it, in its 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. 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 and full discretion 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 and binding on all persons. 8.07 Prudent Conduct The Committee shall use that degree of care, skill, 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 responsibility or liability for any fiduciary responsibility, obligation or duty under Part 4, Title 1 of ERISA. 8. 10 Indemnification The Committee, the Board of Directors, and the officers, employees and agents of an Employer 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 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 claim is denied, the Committee, within 90 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 180 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 material or information needed to perfect the claim, and an explanation of the review procedure. If no notice is given within the 90-day (or extended 180-day) period, the claim shall be considered denied. 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 a review, during which time 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. 8.13 Records The records of the Employers with respect to length of employment, employment history, base pay, absences, and all other relevant matters may be conclusively relied on by the Plan Administrator. 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 or 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 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 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. 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) having 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 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) At the option of the Committee, any or all of the retirement income benefits payable under the Plan may be provided through the purchase of insured guaranteed annuities. (d) At the option of the Committee, any or all of the health and welfare benefits payable under the Plan may be provided through either the Plan's Trust Fund or the purchase of insurance policies. (e) 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. (f) 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. 9.04 Separate Accounts Within the Plan's Trust Fund separate accounts shall be maintained for: (a) That portion of the Plan's Trust Fund arising out of contributions made by the Employers and Employees for the purposes of funding the retirement income benefits described in Articles 5 and 6 and Section 7.01 hereof; and (b) That portion of the Plan's Trust Fund arising out of contributions made by the Employers alone for the purposes of funding and health and welfare benefits provided in Sections 7.03 and 7.04 hereof. The portion of the contributions, excluding contributions made to fund past service credits, which is allocable to providing health and welfare benefits available under Sections 7.03 and 7.04, including life insurance benefits, if any, shall not exceed 25% of the aggregate contributions to the Plan excluding contributions made to fund past service credits. Each Employer shall designate the portion of its contributions, at the time of such contribution, which is allocable to the funding of health and welfare benefits provided under the Plan. ARTICLE 10 GENERAL PROVISIONS 10.01 Nonalienation Except 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 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; (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. 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, Contingent Annuitant, 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. 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 Non-Duplication of Benefits Any Pension payable under the Plan shall be reduced by any pension paid to a Participant under the terms of any defined benefit pension plan to which an Employer or an Affiliated Employer contributes, directly or indirectly, other than by payment of taxes, to the extent that such pension is based on a period of employment with an Employer or an Affiliated Employer for which a Participant receives credit for Pension benefits under this Plan. 10.07 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 Contingent Annuitant or Beneficiary 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 Contingent Annuitant or Beneficiary or other person to receive payment shall be conclusive. 10.08 Failure to Locate Recipient In the event that the Committee is unable to locate a Participant, Contingent Annuitant, 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, Contingent Annuitant or Beneficiary was entitled shall be declared a forfeiture and shall be used to reduce future Employer contributions to the Plan. If the Participant, Contingent Annuitant or Beneficiary is later located, the benefit which was previously forfeited hereunder shall be restored by means of additional Employer contributions to the Plan. 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 through January 25, 1998, the Committee or its delegate 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 limit shall not apply to amendments necessary to comply with laws or regulations. Effective January 26, 1998, the Committee, or its delegate, shall have the power to amend the Plan to: (i) comply with laws and regulations, or as otherwise may be desirable when prompted by a change in law or regulation; and (ii) make any other change that may be necessary or desirable provided any amendment adopted pursuant to this Section 11.01 shall not increase the Company's annual expense by more than five (5) million dollars. 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 the exclusive benefit of persons entitled to benefits under the Plan before the satisfaction of all liabilities with respect to them. No amendment shall be made which has the effect of decreasing the Accrued Pension of any Participant or of reducing the nonforfeitable percentage of the Accrued Pension of a Participant below the nonforfeitable percentage computed under the Plan as in effect on the date on which the amendment is adopted or, if later, the date on which the amendment becomes effective. In addition, if the Plan is amended to change the vesting requirements of Section 5.05, any Participant with at least three Years of Vesting Service may elect to have his vested percentage computed under the Plan without regard to the amendment. 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. 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. 11.03 Additional Participating Employers (a) With the consent of the Company, any Affiliated Employer may adopt the Plan for its Eligible Employees. An Employer adopting the Plan shall compile and submit all information required by the Committee with reference to its Eligible Employees. An entity will be considered to have adopted the Plan with the consent of the Company if it takes significant action that is consistent with the adoption of the Plan, the Board of Directors or Committee is aware of the action, and neither objects to the action. (b) If an entity adopts the Plan in accordance with Section 11.03(a), 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 Affiliated Employer shall be recognized under the Plan, but subject to the continued qualification of the trust for the Plan as tax-exempt under the Code. (c) Any Employer may withdraw its participation in the Plan on 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 Accrued Pensions of all Participants who have separated from the employ of that Employer shall be determined by the Committee. 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, Pensions payable to Employees employed by the withdrawing Employer shall be payable to such Employees 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 Attributable to Retirement Income Benefits on Plan Termination In case of termination of the Plan, the rights of Participants to the benefits accrued under Articles 5 and 6 and Section 7.01 to the date of termination, to the extent then funded or guaranteed by the Pension Benefit Guaranty Corporation, if greater, shall be nonforfeitable. The portion of the funds of the Plan described in Section 9.04(a) shall be used for the exclusive benefit of persons entitled to benefits under the Plan as of the date of termination, except as provided in Section 4.03. However, any funds not required to satisfy all liabilities of the Plan for benefits shall be returned to the Employers. The Committee shall determine on the basis of actuarial valuation the share of the funds of the Plan allocable to each person entitled to benefits under the Plan in accordance with Section 4044 of ERISA, or corresponding provision of any applicable law in effect at the time. 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 Distribution of Assets Attributable to Health and Welfare Benefits on Plan Termination In the event of termination of the Plan or of the provisions of Sections 7.03 and 7.04, that portion of the assets of the Plan allocable to the separate account referred to in Section 9.04(b) and attributable to contributions of Employer as to which the Plan (or Section 7.03 or 7.04) is terminating, after provision for such expenses as may be incurred, shall be applied toward making provision for the payment of health and welfare benefits in accordance with the benefit schedule in effect as of the date of termination, under the terms and conditions of Sections 7.03 and 7.04. Upon the satisfaction of all liabilities under the Plan to provide such health and welfare benefits, any amount remaining in such separate account shall be returned to the appropriate Employers. 11.07 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. 11.08 Limitations Concerning Highly Compensated Employees or Former Highly Compensated Employees (a) Beginning January 1, 1994, the provisions of Section 11.09 shall apply (i) in the event the Plan is terminated, to any Participant who is a Highly Compensated Employee or former Highly Compensated Employee of the Employers or an Affiliated Company, and (ii) in any other event, to any Participant who is one of the 25 highest compensated employees or former highest compensated employees of the Employers or an Affiliated Company with the greatest compensation in any Plan Year. (b) For the period prior to January 1, 1994, the provisions of Section 11.10 shall apply to any Participant who is one of the 25 highest paid Employees of the Employers or an Affiliated Company on any "Commencement Date" and whose anticipated annual Pension provided under the Plan at Normal Retirement Date exceeds $1,500. "Commencement Date," for purposes of this Section, means the Effective Date of the Plan or the effective date of any amendment to the Plan that increases benefits. 11.09 Limitations Effective January 1, 1994 (a) Beginning January 1, 1994, the provisions of this Section 11.09 shall apply (a) in the event the Plan is terminated, to any Participant who is a Highly Compensated Employee or former Highly Compensated Employee of the Employers or an Affiliated Company, and (b) in any other event, to any Participant who is one of the 25 highest compensated employees of the Employer or an Affiliated Company with the greatest compensation in any Plan Year. (b) The amount of the annual payments to any one of the Participants to whom this Section applies shall not be greater than the sum of: (i) An amount equal to the payments that would be made on behalf of the Participant under a single life annuity that is the Actuarial Equivalent of the sum of the Participant's Accrued Pension and other benefits under the Plan (other than a social security supplement); and (ii) The amount of the payments the Participant is entitled to receive, if any, under a social security supplement. (c) If, after payment of benefits to any one of the Participants to whom this Section applies, the value of Plan assets equals or exceeds 110% of the value of current liabilities (as that term is defined in Section 412(1)(7) of the Code) of the Plan, the provisions of this Section shall not be applicable to the payment of benefits to such Participant. (d) If the value of the Accrued Pension and other benefits of any one of the Participants to whom this Section applies is less than 1% of the value of current liabilities (as that term is defined in Section 412(1)(7) of the Code) of the Plan, the provisions of this Section shall not be applicable to the payment of benefits to such Participant. (e) If the Actuarial Equivalent of the Accrued Pension and other benefits of any one of the Participants to whom this Section applies does not exceed $3,500 (effective January 1, 1998, $5,000), the provisions of this Section shall not be applicable to the payment of benefits to such Participant. (f) To the extent permitted by law and the Plan, if any Participant to whom this Section applies elects to receive a lump sum payment in lieu of his benefit and the provisions of this Section are not met with respect to such Participant, the Participant shall be entitled to receive his benefit in full provided he (i) agrees to repay to the Plan any portion of the lump sum payment which would be restricted by operation of the provisions of this Section and (ii) provides adequate security to guarantee that repayment in accordance with rules established by the Internal Revenue Service. (g) In the event the Plan is terminated, the restrictions of this Section shall not be applicable if the benefits payable to any highly compensated employee and any former highly compensated employee are limited to an amount that is nondiscriminatory under Section 401(a)(4) of the Code. (h) If it is subsequently determined by statute, court decision acquiesced in by the Commissioner of Internal Revenue Service, or ruling by the Commissioner of Internal Revenue that the provisions of this Section are no longer necessary to qualify the Plan under the Code, this Section shall be ineffective without the necessity of further amendment to the Plan. 11.10 Limitations Prior to January 1, 1994 (a) For the period prior to January 1, 1994, the provisions of this Section 11.10 shall apply to any Participant who is one of the 25 highest paid Employees of the Employers or any Affiliated Company on any Commencement Date and whose anticipated annual Pension provided under the Plan at Normal Retirement Date exceeds $1,500. "Commencement Date" means the Effective Date of the Plan or the effective date of any amendment to the Plan that increases the benefits. (b) If the Plan is terminated during the first 10 years after a Commencement Date, the amount of the Pension provided under the Plan for any one of the Participants to whom this Section applies shall not be greater than the amount of Pension that can be provided by the largest of the following amounts: (i) The Employer's contributions (or funds attributable to those contributions) which would have been applied to provide the Pension if the Plan as in effect on the date before that Commencement Date had been continued without change; (ii) $20,000; (iii) The sum of (a) the Employer's contributions (or funds attributable to those contributions) which would have been applied to provide benefits for the Employee if the Plan had been terminated on the day before that Commencement Date, plus (b) an amount computed by multiplying the smaller of $10,000 or 20 percent of the average annual remuneration of that Employee during the last five years of service by the number of years since that Commencement Date; or (iv) The present value of the maximum benefit guaranteed by the Pension Benefit Guaranty Corporation (PBGC), as described in Section 4022(b)(3)(B) of ERISA, determined on the basis of the actuarial assumptions promulgated by the PBGC applicable as of the date of termination of the Plan or the date Pension payments commence, whichever is earlier. (c) Any excess reserves arising by application of the provisions of paragraph (b) above shall be used and applied as provided in the Plan for the benefit of the other persons entitled to benefits under the Plan. However, if sufficient funds are available to provide in full for the Pensions accrued for all other persons entitled to benefits under the Plan to the date of termination of the Plan, those excess reserves shall first be used and applied to provide the accrued Pensions of the Participants whose Pensions have been restricted by operation of the provisions of this Section 11.10. ARTICLE 12 TOP-HEAVY PROVISIONS 12.01 Top-Heavy Determination For purposes of this Section, the Plan shall be "top-heavy" with respect to any Plan Year if, as of the applicable determination date, the top-heavy ratio exceeds 60 per cent. The top-heavy ratio shall be determined as of the applicable valuation date in accordance with Section 416(g)(3) and (4) of the Code utilizing the Plan actuarial assumptions (other than those used to calculate a lump sum) contained in the definition of "Actuarial Equivalent". For purposes of determining whether the Plan is top-heavy, the present value of Accrued Pensions under the Plan will be combined with the present value of accrued benefits or account balances under each other plan in the required aggregation group, and, in the Company's discretion, may be combined with the present value of accrued benefits or account balances under any other qualified plan in the permissive aggregation group. For purposes of determining the top-heavy ratio the present of Accrued Pensions under the Plan shall be combined with the present value of accrued pensions or account balances under each other qualified plan in the required aggregation group and, in the discretion of the Committee, may be combined with the present value of accrued pensions or account balances under any other qualified plan in the permissive aggregation group. Further, the present value of accrued pensions or account balances of all non-key employees who were key employees during any prior Plan Year shall not be taken into account and any distributions made during the five-year period ending on the Applicable Determination Date shall be taken into account. Also, the present value of accrued pension or account balances of Participants who have not performed services for an Employer or an Affiliated Employer during the five-year period ending on the applicable determination date shall not be taken into account. 12.02 Top-Heavy Minimum Benefits and Vesting The following provisions shall be applicable to Participants for any Plan Year with respect to which the Plan is top-heavy: (a) The Accrued Pension of a Participant who is a non-key employee shall not be less than 2% of his average Remuneration multiplied by the number of his Years of Vesting Service, not in excess of 10, during the Plan Years for which the Plan is top-heavy. That minimum benefit shall be payable at a Participant's Normal Retirement Date. If payments commence at a time other than the Participant's Normal Retirement Date, the minimum Accrued Pension shall be of Actuarial Equivalent value to that minimum benefit. No minimum Accrued Pension shall be forfeitable because of the withdrawal of employee contributions under the Associated Plans or the Predecessor Plans. (b) A Participant shall vest in his Accrued Pension in accordance with the following schedule in lieu of the provisions of Section 5.05(a):
Years of Vesting Service Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 or more 100%
(c) The 1.25 multiplier in the definitions of "Defined Benefit Plan Fraction" and "Defined Contribution Plan Fraction" in Section 5.06 shall be reduced to 1.0, and the $51,875 dollar amount in the definition of "Defined Contribution Plan Fraction" in Section 5.06 shall be reduced to $41,500. 12.03 Top-Heavy Definitions The following definitions apply to the terms used in this Section: (a) "applicable determination date" means the last day of the preceding Plan Year; (b) "top-heavy ratio" means the ratio of: (i) The present value of the Accrued Pension under the Plan for key employees to (ii) The present value of the Accrued Pension under the Plan for all key employees and non-key employees. (c) "key employee" means an Employee who is in a category of employees determined in accordance with the provisions of Section 416(i)(l) and (5) of the Code and any regulations thereunder and, where applicable, on the basis of the Employee's Remuneration from an Employer or an Affiliated Employer as defined in Section 5.06 except that Remuneration for purposes of this Article shall not exceed the Maximum Compensation Limitation for any Plan Year; (d) "non-key employee" means any Employee who is not a key employee; (e) "applicable valuation date" means the valuation date coincident with or immediately preceding the last day of the first Plan Year or the preceding Plan Year, whichever is applicable; (f) "average remuneration" means the average annual Remuneration of a Participant for the five consecutive Years of Vesting Service after December 31, 1983 during which he received the greatest aggregate Remuneration from an Employer or an Affiliated Employer, excluding any Remuneration for service after the last Plan Year with respect to which the Plan is top-heavy; (g) "required aggregation group" means any other qualified plan(s) of an Employer or an Affiliated Employer in which there are participants who are key employees or which enable(s) the Plan to meet the requirements of Section 401(a)(4) or 410 of the Code; and (h) "permissive aggregation group" means each plan in the required aggregation group and any other qualified plan(s) of an Employer or an Affiliated Employer in which all participants are non-key employees, if the resulting aggregation group continues to meet the requirements of Section 401(a)(4) and 410 of the Code. 12.04 Non-Top-Heavy Years If the Plan is top-heavy with respect to a Plan Year and ceases to be top-heavy for a subsequent Plan Year, the following provisions shall be applicable: (a) The Accrued Pension in any such subsequent Plan Year shall not be less than the minimum Accrued Pension provided in Section 12.02(a) computed as of the end of the most recent Plan Year for which the Plan was top-heavy. (b) If a Participant has completed three Years of Vesting Service on or before the last day of the most recent Plan Year for which the Plan was top-heavy, the vesting schedule set forth in Section 12.02(b) shall continue to be applicable. (c) If a Participant has completed at least two, but less than three, Years of Vesting Service on or before the last day of the most recent Plan Year for which the Plan was top-heavy, the vesting provisions of Section 5.05 shall again be applicable; provided however, that in no event shall the vested percentage of a Participant's Accrued pension be less than the percentage determined under Section 12.02(b) as of the last day of the most recent Plan Year for which the Plan was top-heavy.
APPENDIX A Recognition of Service with Acquisitions or Predecessor Employers Employment *Years of Years of Participating Employer or Commencement Date Vesting Service Benefit Service Predecessor Employer Effective Date Effective Date Effective Date KHJ-TV, Inc. (prior to Later of date of Date of hire with Later of date of acquisition by K-CAL-TV, hire or January 1, KHJ-TV, Inc. hire or January Inc.) 1989 1, 1989 Vista Federal Credit Later of date of Date of hire with Later of date of Union (with respect to hire or January 1, Vista Federal hire or January Vista Federal Credit 1990 Credit Union 1, 1990 Union employees hired by The Walt Disney Company on January 1, 1990) Associates and Ferren Date of hire with Date of hire with Later of date of (prior to acquisition by Associates and Associates and hire or Walt Disney Imagineering) Ferren Ferren March 19,1993 Marriott, Inc. (with Date of hire with Date of hire with Later of date of respect to cafeteria Marriott, Inc. Marriott, Inc. hire with employees working for Marriott, Inc.or Marriott, Inc. prior to June 1, 1992 their hire by by Walt Disney Imagineering on June 1, 1992) Anaheim Property, Later of date Later of date Later of date Inc. (d.b.a. Pan of hire with of hire with of hire with Pacific Hotel, Anaheim Anaheim Anaheim
Anaheim (prior to Property, Inc. Property, Property, acquisition on or December Inc. or Inc. or December 11, 1995) 11, 1994 December 11, December 11, 1994 1995 Dream Quest Images Date of hire Date of hire Later of prior to acquisition by Dream Quest by Dream date of hire on April 18, 1996 Images Quest Images by Dream Quest Images or April 18, 1996 Jumbo Pictures, Inc. Date of hire Date of hire Later of date (prior to by Jumbo by Jumbo of hire by acquisition on Pictures, Inc. Pictures, Jumbo February 29, 1996) Inc. Pictures, Inc. or September 23, 1996 Golden West Baseball Date of hire Date of hire Later of date Company by Golden West by Golden of hire by Baseball West Baseball Disney Company and Company and Baseball Anaheim Anaheim Enterprises, Angels, LP, Angels, LP, Inc. or May and and 16, 1996 recognition of recognition all Baseball of all Service Baseball (Baseball Service Service is as (Baseball defined in the Service is as Major League defined in Baseball the Major California League Angels' Baseball Pension Plan California For Angels' Non-Uniformed Pension Plan Personnel) For Non-Uniformed Personnel) City of Anaheim Date of hire Date of hire Later of date (with respect to by City of by City of of hire or City of Anaheim Anaheim Anaheim October 1, employees hired on 1996 October 1, 1996 by Disney Baseball Enterprises, Inc. for stadium operations Carlson Travel (with Later of date Date of hire Later of date respect to Carlson of hire by by Carlson of hire by Travel employees Carlson Travel Travel Carlson hired on July 24, or July 24, Travel or 1995 by The Walt 1994 July 24, 1994 Disney Company)
Employment *Years of Years of Participating Employer or Commencement Date Vesting Service Benefit Service Predecessor Employer Effective Date Effective Date Effective Date ABC, Inc. and its Date of hire From date of As provided subsidiaries with ABC, Inc. hire with in Appendix C and ABC, Inc. and subsidiaries subsidiaries
* Vesting Service recognized while an Employee of a Predecessor Employer (prior to employment with an Employer or an Affiliated Employer) or while an Employee of an Employer prior to the Employer's adoption of this Plan is recognized solely for the purposes of Section 5.05. APPENDIX B Year of Benefit Service for 2001 Plan Year Any Participant in the Plan who also participated in and terminated his employment in 2001 under: (i) The Walt Disney Company 2001 Voluntary Separation Plan - Directors and Above; or (ii) The Walt Disney Company 2001 Voluntary Separation Plan - Managers; or (iii) The Walt Disney Company 2001 Voluntary Separation Plan - Salaried and Hourly Employees (collectively "Separation Plans") is deemed to have one "Year of Benefit Service" under the Plan for the 2001 Plan Year if such Participant had not already earned one Year of Benefit Service for the 2001 Plan Year. APPENDIX C Transfer of Participants from the ABC, Inc. Retirement Plan to the Plan This Appendix C provides special provisions for Eligible Employees who transfer to an employment classification on or after February 9, 1996, providing eligibility in this Plan from an employment classification providing eligibility for participation in the ABC, Inc. Retirement Plan ("Transferred ABC Participants"). C.1 Eligibility and Vesting Service Credit. Each Transferred ABC Participant who becomes a Participant in the Plan shall, for eligibility to participate and Years of Vesting Service purposes under the Plan, be credited with all service credited to such Transferred ABC Participants for eligibility and vesting purposes under the ABC, Inc. Retirement Plan immediately prior to transfer to this Plan. C.2 Benefit Calculation. The Accrued Pension of each Transferred ABC -------------------- Participant shall be the greater of: ------- (1) The Accrued Pension under the Plan using all years of accrual service under the ABC, Inc. Retirement Plan prior to transfer to this Plan as Years of Benefit Service under this Plan, but offset by the Transferred ABC Participant's accrued benefit under the ABC, Inc. Retirement Plan; or (2) The Accrued Pension calculated under the Plan using only Years of Benefit Service while an Eligible Employee under the Plan. C.3 Other Welfare Benefits. For purposes of Section 7.03, a Transferred ABC Participant's service for vesting purposes and employment commencement date under the ABC, Inc. Retirement Plan shall be considered in determining eligibility for the other welfare benefits under such Section 7.03. APPENDIX D Sale of Vista United Telecommunications and K-CAL-TV, Inc. ---------------------------------------------------------- (a) Vista United Telecommunications Certain Employees employed by Vista United Telecommunications terminated employment under the Plan as a consequence of the sale of Vista United Telecommunications on February 28, 2001. Any such Employee entitled to benefits under the terms of the Plan as of the date of such termination of employment remains entitled to receive such benefits under the terms of the Plan. (b) K-CAL-TV, Inc. ------------- All Employees employed by K-CAL-TV, Inc. terminated employment under the Plan as a consequence of the sale of K-CAL-TV, Inc. on November 23, 1996. Any such Employee entitled to benefits under the terms of the Plan as of the date of such termination of employment remains entitled to receive such benefits under the terms of the Plan. EX-10.(B) 4 dex10b.txt AMENDED AND RESTATED DISNEY SSIP EXHIBIT 10(b) DISNEY SALARIED SAVINGS AND INVESTMENT PLAN As Amended and Restated (December 1, 2001) Effective January 1, 1997 PREAMBLE 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 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 12.03. The Plan was amended thereafter from time to time. The Plan, as set forth herein and as amended and restated effective January 1, 1997, 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 ("Code"). Although the Plan is intended to qualify as a profit sharing plan, employer contributions hereunder may be made without regard to profits. Pursuant to Article 12, the Company shall have the right to amend or terminate the Plan at any time without notice to the Participants or Beneficiaries if the Company so decides in its sole and absolute discretion. 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. ARTICLE 1 Definitions 1.01 "Adjustment Factor" means any of 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 that is: (a) a member of a controlled group of corporations as defined in Section 414(b) of the Code (determined under Code Section 1563(a) without regard to Code Sections 1563(a)(4) and (e)(3)(C)) with the Company; or (b) any trade or business under common control (as defined in Code Section 414(c)) with the Company; or (c) a member of an affiliated service group (as defined in Code Section 414(m)) that includes the Company; or (d) any other entity required to be aggregated with the Company pursuant to regulations under Code Section 414(o). Notwithstanding the foregoing, for purposes of Sections 1.29 and 14.06, the definitions in Sections 414(b) and (c) of the Code shall be modified by substituting the phrase "more than 50 percent" for the phrase "at least 80 percent" each place it appears in Section 1563(a)(1) of the Code. 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. 1.04 "Aggregate Account" or "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 that 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 "Alternate Payee" means any spouse, former spouse, child or other dependent of a Participant who is recognized by a qualified domestic relations order as having a right to receive all, or a portion, of the benefits payable under the Plan with respect to a Participant. 1.06 "Authorized 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 or retires within the period specified in the Authorized Leave of Absence. An Employer or an Affiliated Employer is not required to authorize any absence due to a strike, a walkout or a lockout as an Authorized Leave of Absence. An absence due to service in the Uniformed Services of the United States shall be considered an Authorized 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. 1.07 "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 someone other than his spouse as the Beneficiary, the Participant must file a Spousal Consent with the Committee. If any Participant fails to designate a Beneficiary, or if the Beneficiary designated by a deceased Participant dies before the Participant, then the Beneficiary shall be deemed to be the Participant's surviving spouse or, if none, then the benefits shall 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 (c) the Participant's brothers and sisters (equally), or if none (d) the Participant's estate. 1.08 "Board" or "Board of Directors" means the Board of Directors of The Walt Disney Company. 1.09 "Break in Service" means an Eligibility Computation Period during which an Employee is credited with less than 501 Hours of Service. Solely for the purpose of determining if an Employee 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 Authorized 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 Employee shall not be treated as having incurred a Break in Service in the Eligibility Computation Period in which the absence begins or, if the Employee would 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 an 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. 1.10 "Code" means the Internal Revenue Code of 1986, as amended. 1.11 "Committee" means the Investment and Administrative Committee of The Walt Disney Company Sponsored Qualified Benefit Plans and Key Employees Deferred Compensation and Retirement Plan. 1.12 "Company" means The Walt Disney Company and its successors. 1.13 "Company Stock" means common stock of the Company. 1.14 "Company Stock Fund" means the Investment Fund established pursuant to Sections 6.01(a) and 6.01(c). 1.15 "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; (f) Imputed life insurance and all other forms of imputed income. Compensation shall not, for Plan purposes, exceed the Maximum Compensation Limitation. 1.16 "Covered Employee" means an Employee who 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. (a) Notwithstanding the above, an Employee as described in any of the following paragraphs shall not be a Covered Employee, except to the extent the Company elects, by written notice, to extend Plan participation to such Employee: (i) an Employee who is represented by a union unless the union and the Employer entered into a collective bargaining or other agreement that provides that the individual may participate in the Plan; (ii) an Employee who is employed by an Employer pursuant to an oral or written agreement that provides that the individual shall not be eligible to participate in the Plan; (iii) an Employee who is a "Leased Employee"; (iv) an Employee who is a non-resident alien with no United States source income; and (v) an Employee designated by an Employer as employed in a division or group, or at a site that the Employer determined, on a nondiscriminatory basis, shall not be eligible to participate in the Plan. (b) For purposes of this definition of "Covered Employee," and notwithstanding any other provisions of the Plan to the contrary, individuals who are not classified by the Company, in its discretion, as employees under Code Section 3121(d) (including but not limited to, individuals classified by the Company as independent contractors and non-employee consultants) and individuals who are classified by the Company, in its discretion, as employees of any entity other than the Company or an Affiliated Employer do not meet the definition of Covered Employee and are ineligible for benefits under the Plan, even if the classification by the Company is determined to be erroneous, or is retroactively revised. In the event the classification of an individual who is excluded from the definition of Covered Employee under the preceding sentence is determined to be erroneous or is retroactively revised, the individual shall nonetheless continue to be excluded from the definition of Covered Employee and shall be ineligible for benefits for all periods prior to the date the Company determines its classification of the individual is erroneous or should be revised. The foregoing sets forth a clarification of the intention of the Company regarding participation in the Plan for any Plan Year, including Plan Years prior to the amendment of this definition of "Covered Employee." 1.17 "Effective Date" means January 1, 1997, the date this amended and restated Plan becomes effective. The Plan was originally effective May 1, 1984. 1.18 "Eligibility Computation Period" means, with respect to an Employee, the applicable of (a) or (b) as follows: (a) the 12-consecutive-month period commencing on the Employee's Employment Commencement Date in which he is credited with at least 1,000 Hours of Service; or (b) the 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 1.18(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. Notwithstanding the foregoing, individuals who (i) became Employees as a result of the acquisition of Anaheim Property, Inc. (d.b.a.) as Pan Pacific Hotel Anaheim or the entity commonly know as the California Angeles, or (ii) were employees of Carlson Travel dedicated to the Disney account who became Employees as a result of an immediate transfer from Carlson Travel shall be deemed to have completed one Eligibility Computation Period on their Employment Commencement Date, provided that they had completed a least one year of prior service with their relevant employers on such date. 1.19 "Eligible Employee" means a Covered Employee who attained age eighteen (18) and completed one Eligibility Computation Period. 1.20 "Employee" means any person receiving Compensation for services rendered to an Employer or an Affiliated Employer, whose Compensation is subject to withholding of United States federal 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. In determining whether an individual is an Employee for purposes of the Plan, the individual shall only be classified as an Employee with respect to a period of time only if the Employer treated the individual as a common law employee for payroll tax purposes for such period of time, regardless of any later determination that such individual was or may have been a common law employee during such period. Notwithstanding the foregoing, a Leased Employee, although not treated as a common law employee for payroll tax purposes by an Employer, shall be considered an Employee under the Plan. Employee excludes the following: (a) an individual who serves solely as a director or independent contractor or an individual whom the Employer regards to be an independent contractor; (b) an individual who is not classified as an Employee by an Employer, but who is treated as an Employee by reason of being treated as a "common law" employee of the Employer pursuant to the standards prescribed by Internal Revenue Service Ruling 87-41 or any successor thereto; (c) an individual whose basic Compensation for services on behalf of an Employer is not paid directly by an Employer; and (d) an individual working for a company providing goods or services (including temporary employee services) to an Employer whom the Employer does not regard to be a common law employee of the Employer. 1.21 "Employer" means the Company and any subsidiary or affiliate of the Company that adopts this Plan in accordance with Section 12.03. 1.22 "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 Employer. 1.23 "Enrollment Date" means the first day of the first payroll period after an Employee becomes an Eligible Employee, or the beginning of any payroll period thereafter, as of which the Eligible Employee elects to commence participation in the Plan in accordance with Section 2.02. 1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.25 "Highly Compensated Employee" means for a Plan Year commencing on or after January 1, 1997, any Employee of the Employer or an Affiliated Employer (whether or not eligible for participation in the Plan) who: (a) was a 5 percent owner (as defined in Section 414(q)(2) and Section 416(i) of the Code) for such Plan Year or the prior Plan Year, or (b) for the preceding Plan Year received Statutory Compensation in excess of $80,000, and was among the highest 20 percent of employees for the preceding Plan Year when ranked by Statutory Compensation paid for that year, excluding, for purposes of determining the number of such employees, such Employees as the Committee may determine on a consistent basis pursuant to Section 414(q) of the Code. The $80,000 dollar amount in the preceding sentence shall be adjusted from time to time for the cost of living in accordance with Section 414(q) of the Code. Notwithstanding the foregoing, Employees who are nonresident aliens and who receive no earned income from the Employer or an Affiliated Employer that constitutes income from sources within the United States shall be disregarded for all purposes of this Section. The Employer's top-paid group election as described above shall be used consistently in determining Highly Compensated Employees for determination years of all employee benefit plans of the Employer and Affiliated Employers to which Section 414(q) of the Code applies (other than a multiemployer plan) that begin with or within the same calendar year, until such election is changed by Plan amendment in accordance with IRS requirements. Notwithstanding the foregoing, the consistency provision in the preceding sentence shall not apply to the Plan Year beginning in 1997 and, for Plan Years beginning in 1998 and 1999, shall apply only with respect to all qualified retirement plans (other than a multiemployer plan) of the Employer and Affiliated Employers. The provisions of this Section 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 inconsistent therewith. 1.26 "Hour of Service" means, with respect to any applicable computation period: (a) each hour for which an Employee is paid or is entitled to payment for the performance of duties for an Employer or an Affiliated Employer during the applicable computation period; (b) 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: (i) no more than 501 Hours of Service are to be credited under this subsection (b) to an Employee for any single continuous period during which he performs no duties (whether or not the period occurs in a single computation period); (ii) an hour is not credited where an individual directly or indirectly is paid or is entitled to payment because of a period during which no duties are performed if that payment is made or is due under a plan maintained solely for the purpose of complying with applicable workers' compensation or unemployment compensation or disability insurance laws; and (iii) Hours of Service will not be credited for a payment that solely reimburses an Employee 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) each hour for which back pay, irrespective of mitigation of damages, is 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 Employee 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 payment of back pay, to the extent that the back pay is awarded or agreed to for a period of time during which an Employee 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 Employee's regular work schedule or, in the case of a payment not calculated in units or time, by dividing the payment in question by the Employee'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 Employee in the computation periods covered by the Employee'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 (45) 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). (h) An Employee who has an Authorized Leave of Absence due to military service shall receive Hours of Service credit in accordance with applicable federal veteran's laws. 1.27 "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. 1.28 "Investment Fund" means the one or more investment funds provided pursuant to Section 6.01(a) hereof. 1.29 "Leased Employee" means any person (other than a person treated as a common law employee of the Employer) who, pursuant to an agreement between the Employer and any other person ("leasing organization"), performed services for the Employer or any related persons determined in accordance with Section 414(n)(6) of the Code on a substantially full-time basis for a period of at least one year and such services are performed under the primary direction of or control by the Employer. In the case of any person who is a Leased Employee before or after a period of service as an Employee, the entire period during which he performed services as a Leased Employee shall be counted as service as an Employee for all purposes of the Plan, except that he shall not, by reason of that status, become a Participant of the Plan. 1.30 "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. 1.31 "Matching Contribution" means the Employer Matching Contribution made to the Plan on behalf of a Participant pursuant to Section 3.02. 1.32 "Maximum Compensation Limitation" means, commencing January 1, 1994, $150,000 per year, adjusted from time to time for the cost of living in accordance with Code Section 401(a)(17)(B). 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 for 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. 1.33 "Participant" means any individual on whose behalf any Accounts are maintained under the Plan, the balance of which has not been distributed in full to him or his Beneficiary. 1.34 "Plan" means the Disney Salaried Savings and Investment Plan as set forth in this document, and as it may be amended from time to time. 1.35 "Plan Year" means the calendar year, except for the short year from May 1, 1984 through December 31, 1984, which was the first year of the Plan. 1.36 "Qualified Domestic Relations Order" means a domestic relations order that creates or recognizes the existence of an Alternate Payee's right to, or assigns to an Alternate Payee the right to, receive all or portion of the benefits payable with respect to a Participant. The order must (a) be a judgment, decree or order (including the approval of a property settlement agreement) that is made pursuant to a state domestic relations law, (b) relate to the provision of child support, alimony payments or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of the Participant, and (c) otherwise meets the requirements of Section 206(d)(3) of ERISA and Section 414(p) of the Code, as determined by the Committee. 1.37 "Reemployment Commencement Date" means the date an Employee first is credited with an Hour of Service following a prior Break in Service. 1.38 "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. 1.39 "Rollover Contribution" means a Rollover Contribution made to the Plan by a Participant pursuant to Section 3.05. 1.40 "Rule of Parity" means a rule pursuant to which an Employee who incurs a Break in Service shall have his Eligibility Computation Periods that occur prior to such Break in Service ignored or restored. If an Employee incurs a Break in Service prior to becoming eligible to participate 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 shall not be counted for purposes of the this subsection. 1.41 "Section 402(g) Limit" means $7,000 (subject to adjustment in accordance with Code Section 402(g)(5) each calendar year) for any taxable year of a Participant. 1.42 "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. 1.43 "Special Contribution" means the Employer Special Contribution made to the Plan on behalf of a Participant pursuant to Section 3.03. 1.44 "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. 1.45 "Statutory Compensation" means the wages, salaries, and other amounts paid in respect of an Employee for services actually rendered to an Employer or an Affiliated Employer, including by way of example overtime, bonuses, and commissions, but excluding deferred compensation, stock options, and other distributions that receive special tax benefits under the Code. For purposes of determining Highly Compensated Employees under Section 1.25 and key employees under Article 13, Statutory Compensation shall include amounts contributed by the Employer pursuant to a salary reduction agreement that are not includable in the gross income of the Employee under Section 125, (effective January 1, 2001, 132(f)), 402(e)(3), 402(h), or 403(b) of the Code. For all other purposes, Statutory Compensation also shall include the amounts referred to in the preceding sentence, unless the Committee directs otherwise for a particular Plan Year. Statutory Compensation for a Plan Year shall not exceed the Maximum Compensation Limitation, provided that such Limitation shall not be applied in determining Highly Compensated Employees under Section 1.25. 1.46 "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. 1.47 "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. 1.48 "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. 1.49 "Trust Fund" means all money or other property that is held by the Trustee, pursuant to the terms of the Trust Agreement. 1.50 "Trustee" means the entity or its successor acting as the trustee under the Trust Agreement, or any other trustee or trustees designated in any trust agreement or agreements that may be established to carry out the purposes of this Plan. 1.51 "Valuation Date" means the date as of which the Trustee shall determine the value of the assets in the Trust Fund for purposes of enabling the Committee or its delegate to determine the value of the Aggregate Accounts. ARTICLE 2 Eligibility and Participation 2.01 Eligibility Only Eligible Employees may participate in this Plan. 2.02 Participation Any individual who was a Participant in the Plan immediately preceding the Effective Date shall be considered a Participant on the Effective Date. Thereafter, an Eligible Employee shall become a Participant as of the first Enrollment Date after he: (a) authorizes his Tax-Deferred Contributions in accordance with Section 3.01; (b) names a Beneficiary; and (c) selects investment fund(s) pursuant to Article 6. The Company may, in its sole and absolute discretion, waive any or all of the participation requirements set forth above for the Employees of any Employer. 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 on meeting the requirements of Section 2.02. 2.04 Reemployment After Military Leave (a) Notwithstanding any provision of this Plan to the contrary, contributions, benefits, and service credit with respect to qualified uniformed service duty will be provided in accordance with Section 414(u) of the Code. In such a case, without regard to any limitations on contributions set forth, a Participant who is reemployed on or after August 1, 1990 because of a period of service in the Uniformed Services of the United States may elect to contribute to the Plan the Tax-Deferred Contributions that could have been contributed to the Plan in accordance with the provisions of the Plan had he remained continuously employed by the Employer throughout such period of absence ("make-up contributions"). The amount of make-up contributions shall be determined on the basis of the Participant's Compensation in effect immediately prior to the period of absence and the terms of the Plan at such time. Any Tax-Deferred Contributions so determined shall be limited as provided in Articles 3, 4 and 14 with respect to the Plan Year or Years to which such contributions relate rather than to the Plan Year in which payment is made. Any payment to the Plan described in this paragraph shall be made during the applicable repayment period. The repayment period shall equal three times the period of absence, but not longer than five years, and shall begin on the latest of: (i) the Participant's date of reemployment, (ii) October 13, 1996, or (iii) the date the Employer notifies the Employee of his rights under this Section. Earnings (or losses) on make-up contributions shall be credited commencing with the date the make-up contribution is made in accordance with the provisions of Article 6. (b) With respect to a Participant who makes the election described in paragraph (a) above, the Employer shall make Matching Contributions and, if applicable, Special Contributions on the make-up contributions in the amount described in Articles 3, 4, and 14, respectively, as in effect for the Plan Year to which such make-up contributions relate. Employer Matching Contributions and if applicable, Special Contributions under this paragraph shall be made during the period described in paragraph (a) above. Earnings (or losses) on Matching Contributions and Special Contributions shall be credited commencing with the date the contributions are made in accordance with the provisions of Article 6. Any limitations on Matching Contributions described in Articles 3, 4, and 14 shall be applied with respect to the Plan Year or Years to which such contributions relate rather than to the Plan Year or Years in which payment is made. (c) All contributions under this Section are considered "annual additions," as defined in Section 415(c)(2) of the Code, and shall be limited in accordance with the provisions thereof with respect to the Plan Year or Years to which such contributions relate rather than to the Plan Year in which payment is made. 2.05 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; (c) he shall continue to participate in income allocations pursuant to Section 4.02(a); and (d) the provisions of Articles 6 and 8 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. 2.06 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 are distributed to him. ARTICLE 3 Contributions 3.01 Tax-Deferred Contributions (a) A Tax-Deferred Contribution represents an agreement by an Eligible Employee with his Employer to accept a reduction in Compensation in consideration of a contribution to the Plan by the Employer on the Participant's behalf in the same amount. (b) In accordance with rules that the Committee shall prescribe from time to time, an Eligible Employee may 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. Tax-Deferred Contributions may be any whole percentage of a Participant's Compensation between one (1) percent and ten (10) percent (effective January 1, 1998, such limit shall be raised to fifteen (15) 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 ask the Committee to calculate his Tax-Deferred Contributions in such a manner that his regular payroll reductions result in the maximum Matching Contribution. Tax-Deferred Contribution elections are effective following the Participant's Enrollment Date or as soon as administratively feasible thereafter. (c) An election of Tax-Deferred Contributions shall remain in force until changed in the form and manner specified by the Committee. A Participant may 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. Notwithstanding the foregoing, if a Participant is reclassified or transferred to an employment category not included among Eligible Employees, deferrals shall cease as of the first payroll period in which the reclassification or transfer is effective. (d) Tax-Deferred Contributions shall be transmitted to the Trustee as of the earliest date on which such contributions can reasonably be segregated from the Employer's general assets, but no later than the fifteenth business day of the month following the payroll month in which the Tax-Deferred Contribution was deducted from the Participant's Compensation. (e) All Tax-Deferred Contributions are subject to the limitations of Article 14 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 Employers, including any extensions granted for the filing of such tax returns. (c) All Matching Contributions are subject to the limitations of Article 14 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 to correct an Average Deferral Percentage test failure under Section 14.02, or to correct an Average Contribution test failure under Section 14.03, or to eliminate discrimination under any tax-qualified Plan of the Employers under Section 401(a)(4) or 410(b) of the Code, or as a result of the reallocation of excess annual additions under Section 14.06. (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 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 granted for the filing of such tax returns. (e) All Special Contributions are subject to the limitations of Article 14 and the further limitations of this Article. 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 Code. All Participant Tax-Deferred Contribution elections, Matching Contributions and Special Contributions are specifically conditioned on such deductibility. (b) All contributions of the Employers shall be in cash, except that Matching Contributions and Special Contributions may be made in the form of Company Stock. 3.05 Rollover Contributions (a) Subject to Committee procedures, a Covered Employee, regardless of whether he is an Eligible Employee, may "roll over" in cash to the Trust Fund a distribution or direct rollover that is from (a) another plan that meets the requirements of Section 401(a) of the Code (the "Other Plan"), or (b) an individual retirement account that satisfies the requirements for a "Conduit IRA" under Section 408 of the Code and to which the Covered Employee previously deposited a distribution received from 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 or the Conduit IRA. However, such requirement shall not apply with respect to a direct rollover from the Other Plan or Conduit IRA. (c) 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. 3.06 After Tax-Contributions Effective 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 nonforfeitable at all times. ARTICLE 4 Allocations to Participants' Accounts 4.01 Individual Accounts 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 any or all of the following separate accounts: a Tax-Deferred Account, a Matching Account, a Special Account, a Rollover Account and 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. 4.02 Account Allocations The Accounts of Participants and Beneficiaries shall be adjusted in accordance with the following: (a) Income: As of each Valuation Date, each Investment Fund shall be revalued separately. Based on such revaluation of the Investment Funds, each Account shall be revalued as of the applicable Valuation Date to reflect its proportionate share of investment experience since the immediately preceding Valuation Date. (b) Tax-Deferred Contributions: As of each Valuation Date, the Tax-Deferred Contributions received by the Trust Fund since the immediately preceding Valuation Date shall be allocated to the 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 since the immediately preceding Valuation Date 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 since the immediately preceding Valuation Date 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 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 since the immediately preceding Valuation Date 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 Sections 401(k), 401(m) and 415 of the Code as set forth in Article 14. 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. 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 is distributed. ARTICLE 5 Vesting 5.01 Nonforfeitability Except as provided in Sections 1.41 and 11.07 and Article 14, the interest of each Participant in his Aggregate Account shall be 100% vested and nonforfeitable 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 on his Reemployment Commencement Date, the provisions of Section 2.05 shall apply. To the extent required by law, the notice of suspension of benefits described in Department of Labor Regulation Section 2530.203-3(b)(4) shall be provided. ARTICLE 6 Investment Elections and Voting of Company Stock 6.01 Investment Options (a) The Committee shall have the authority to direct the Trustee to maintain the assets of the Trust Fund in multiple Investment Funds so as to provide alternative investment vehicles for the assets of the Plan. The Committee, in its sole discretion, shall have the authority to add, limit, or eliminate the availability of any Investment Fund established pursuant to this Article 6. Subject to the provisions of Section 6.01(e), the Committee shall adopt such rules and procedures as it deems advisable with respect to all matters relating to the selection and use of the Investment Funds, provided that all Participants are treated uniformly. If there is an inconsistency between such rules and the provisions of Section 6.01, the Committee's rules and procedures shall govern. (b) Except to the extent that a Participant's loan is considered a separate investment pursuant to Section 7.01, each Participant shall designate, in any proportion, the Investment Fund(s) under which his Tax-Deferred, After-Tax, and Rollover Contributions are to be invested. Such designation shall be in the form and manner prescribed by the Committee. All Matching Contributions and Special Contributions shall be invested in the Company Stock Fund. Notwithstanding the foregoing, effective December 10, 2001 a Participant who has attained age 55 may, by submitting a notification to the Committee in such manner and form, and at such time, as the Committee shall prescribe, direct that all or a part of the value of his Matching Account and/or Special Account attributable to the Company Stock Fund be liquidated and transferred to any of the other available Investment Funds. (c) Investments in the Company Stock Fund shall consist primarily of shares of Company Stock. Effective December 10, 2001 this Investment Fund shall be an "employee stock ownership plan" (herein after referred to as "ESOP") within the meaning of Section 4975(e)(7) of the Code. To satisfy daily Participant requests for transfers and payments, the Company Stock Fund also shall include cash or short-term liquid investments in accordance with this paragraph. The Company shall, after consultation with the Trustee, establish and communicate to the Trustee in writing a target liquidity percentage and drift allowance for such short-term liquid investments. The Trustee is responsible for ensuring that the actual cash held in the Company Stock Fund falls within the agreed on range over time. Each Participant's proportional interest in the Company Stock Fund shall be measured in units of participation rather than in shares of Company Stock. Such units shall represent a proportionate interest in all of the assets of the Company Stock Fund, which include shares of Company Stock, short-term investments and, at times, receivables for dividends and/or Company Stock sold and payables for Company Stock purchased. A Net Asset Value ("NAV") per unit will be determined as of each Valuation Date for each unit outstanding of the Company Stock Fund. The NAV shall be adjusted by gains or losses realized on sales of Company Stock, appreciation or depreciation in the market price of those shares owned, interest on the short-term investments held by the Company Stock Fund, expenses that pursuant to the Company's direction the Trustee accrues from the Company Stock Fund, and commissions on purchases and sales of Company Stock. Dividends received by the Company Stock Fund are reinvested in additional shares of Company Stock (to the extent it is unnecessary to retain such dividends as cash to maintain the target liquidity percentage) and Participants will receive additional units. Any and all rights to sell Company Stock shall be administered in accordance with the Company's insider trading policy. Notwithstanding the foregoing, effective October 1, 2002, except as otherwise provided by the subsequent provisions of this Section 6.01(c), dividends received by this Investment Fund shall be reinvested in additional shares of Company Stock (to the extent it is unnecessary to retain such dividends as cash to maintain the target liquidity percentage), and Participants shall be credited with additional units of participation. Each Participant shall be entitled to elect, at such time and such manner as the Committee shall prescribe, to receive a distribution from the Plan of an amount in cash equal to the Participant's proportional interest in the dividends paid to the ESOP with respect to Company Stock on or after October 1, 2002; provided that a Participant may make such an election with respect to the dividends paid to the ESOP on any given date only if the value of the Participants proportional interest in the dividends paid on such date exceeds $10. (d) A Participant may (i) change his election of Investment Funds with respect to his future contributions, or (ii) redesignate the proportions and/or the Investment Funds in which amounts already allocated to his Tax-Deferred, After-Tax and Rollover Accounts shall be invested. Elections made under this Section 6.01(d) shall be in the form and manner prescribed by the Committee. (e) If a Participant dies, his Beneficiary has the same investment election rights as the Participant had prior to his death, until the Participant's Aggregate Account is distributed to the Beneficiary. (f) 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 that are the direct and necessary result of investment instructions given by a Participant or a Beneficiary. (g) 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 Plan shall not be construed as a recommendation for investment in that particular Investment Fund. 6.02 Voting of Company Stock (a) Voting (i) Shares Credited to Participants' Accounts. Each Participant with an interest in the Company Stock Fund shall have the right to direct the Trustee as to the manner in which the Trustee is to vote (including not to vote) that number of shares of Company Stock reflecting such Participant's proportional interest in the Company Stock Fund. Directions from a Participant to the Trustee concerning the voting of Company Stock shall be communicated in writing, or by mailgram or similar means. These directions shall be held in confidence by the Trustee and shall not be divulged to the Company, or any officer or employee thereof, or any other person. On its receipt of the directions, the Trustee shall vote the shares of Company Stock reflecting the Participant's proportional interest in the Company Stock Fund as directed by the Participant. The Trustee shall vote shares of the Company Stock reflecting the Participant's proportional interest for which it received no direction from the Participant in the same proportion one each issue as it votes those shares credited to Participants' Accounts for which it received voting directions from Participants. (ii) Shares Not Credited to Participants' Account. The Trustee shall vote the number of shares of Company Stock not credited to Participants' Accounts in the same proportion on each issue as it votes those shares credited to Participants' Accounts for which it received voting directions from Participants. (b) Tender Offers (i) Shares Credited to Participants' Accounts. Each Participant shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Company Stock reflecting such Participant's proportional interest in the Company Stock Fund. Directions from a Participant to the Trustee concerning the tender of Company Stock shall be communicated in writing, or by mailgram or such similar means. These directions shall be held in confidence by the Trustee and shall not be divulged to the Company, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. The Trustee shall tender or not tender shares of Company Stock as directed by the Participant. The Trustee shall not tender shares of Company Stock reflecting a Participant's proportional interest in the Company Stock Fund for which it received no direction from the Participant. (ii) Shares Not Credited to Participants' Accounts. The Trustee shall tender the number of shares of Company Stock not credited to Participants' Accounts in the same proportion as the total number of shares of Company Stock credited to Participants' Accounts for which it received instructions from Participants. (iii) Withdrawal of Tender. A Participant who has directed the Trustee to tender some or all of the shares of Company Stock reflecting the Participant's proportional interest in the Company Stock Fund may, at any time prior to the tender offer withdrawal deadline, direct the Trustee to withdraw some or all of the tendered shares reflecting the Participant's proportional interest, and the Trustee shall withdraw the directed number of shares from the tender offer prior to the tender offer withdrawal deadline. Prior to the withdrawal deadline, if any shares of Company Stock not credited to Participants' Accounts have been tendered, the Trustee shall redetermine the number of shares of Company Stock that would be tendered under Section 6.02(b)(ii) if the date of the foregoing withdrawal were the date of determination, and withdraw from the tender offer the number of shares of Company Stock not credited to Participants' Accounts necessary to reduce the amount of tendered Company Stock not credited to Participants' Accounts to the amount so redetermined. A Participant shall not be limited as to the number of directions to tender or withdraw that the Participant may give to the Trustee. (iv) A direction by a Participant to the Trustee to tender shares of Company Stock reflecting the Participant's proportional interest in the Stock Fund shall not be considered a written election under the Plan by the Participant to withdraw, or have distributed, any or all of his withdrawable shares. The Trustee shall credit to each proportional interest of the Participant from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Company Stock tendered from the interest. (c) Whenever Participants' right to vote 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. ARTICLE 7 Participant Loans 7.01 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, After-Tax, Matching, Special and Rollover Accounts in accordance with the rules of this Section and the Plan's loan rules, which shall be considered to be a part of the Plan. (a) A Participant or Alternate Payee may have only one outstanding loan at a time. (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 (ii) 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 to Participants made prior to January 1, 2002 require Spousal Consent. From and after January 1, 2002, Spousal Consent for a loan will not be required. (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 accordance with the administrative procedures set forth by the Committee. (f) Each loan shall be made at a reasonable rate of interest determined in accordance with the Plan's loan rules. 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. (g) Each loan shall be treated as a separate investment of the funds credited to a Participant's or Alternate Payee's Tax-Deferred, After-Tax, Matching, Special or Rollover Account. (h) Loan proceeds shall be taken first from the Participant's or Alternate Payee's Rollover Account, if any, then his Tax-Deferred Account, After-Tax, then his Matching Account, and finally, his Special Account, if any. Effective for loans funded on or after September 28, 1998, loan proceeds shall be withdrawn from the Participant's or Alternate Payee's Aggregate Accounts in the following order: (i) first, the Rollover Account; (ii) second, the Matching Account; (iii) third, that portion of his Tax-Deferred Account attributable to Tax-Deferred contributions in excess of four (4) percent of the Participant's Compensation; (iv) fourth, that portion of the Tax-Deferred Account attributable to the first four (4) percent of the Participant's Tax-Deferred Contributions; and (v) lastly, the After-Tax Account. (i) 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. (j) Loan documentation will be processed within the time periods established by the Committee in its administrative procedures. 7.02 Repayment of Loans (a) The period of repayment for any loan shall be arrived at by agreement between the Committee and the borrower, but all loans shall become due and payable on termination of 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 purchasing a home that is the Participant's or Alternate Payee's principal residence. (b) Loans may be repaid in full at any time. Partial prepayment is not allowed. (c) On 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 8.03 at that time. (d) Repayment of loans shall be by regular payroll deduction only, and all loans shall be contingent on the borrower's payroll deduction authorization. Loan payments shall be transmitted to the Trustee in accordance with the Committee's usual administrative practice. (e) 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. (f) Notwithstanding the foregoing, in the event a Participant enters the uniformed services of the United States and retains reemployment rights under the law, loan repayments shall be suspended (and interest shall cease to accrue) during the period of leave, and the period of repayment shall be extended by the number of months of the period of service in the uniformed services; provided, however, if the Participant incurs a termination of employment and requests a distribution pursuant to Article 8, the loan shall be canceled, and the outstanding loan balance shall be distributed pursuant to Article 8. ARTICLE 8 Distributions to Participants and Beneficiaries 8.01 Withdrawals from After-Tax Account A Participant may elect to withdraw amounts credited to his After-Tax Account. Such an election may be made only twice in each Plan Year and the minimum withdrawal amount is $500 or, if less, the total value of a Participant's After-Tax Account. Elections under this Section 8.01 shall be on forms approved by the Committee for that purpose. 8.02 Hardship Withdrawals (a) A Participant who has not terminated employment may request a distribution in the event the Participant has a hardship as defined in subsections (b) and (c). Hardship withdrawals are limited to the excess of the total amount of the Participant's Rollover Account, the total amount of the Participant's Matching Account, the value of the Participant's Tax Deferred Account as of December 31, 1988, plus the principal of the Participant's Tax-Deferred Contributions made from and after January 1, 1989 over any outstanding loan the Participant may have and the sum of any prior hardship withdrawal. (b) 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 medical expenses described in Section 213(d) of the Code incurred or to be incurred by the Participant, the Participant's spouse, or any dependents of the Participant (as defined in Section 1520 of the Code), (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant, (iii) the payment of tuition, related educational fees, room and board for the next twelve (12) months of post-secondary education for the Participant, his or her spouse, children, or dependents, (iv) the prevention of the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence, or (v) the payment of funeral expenses for the Participant's spouse, child, parent, mother-in-law, father-in-law, or any dependent as provided in regulations prescribed by the Secretary of the Treasury for exemption purposes. (c) A distribution will be considered necessary to satisfy an immediate and heavy financial need of the Participant only if all three (3) of the following requirements are satisfied: (i) the distribution is not in excess of the amount required to relieve the immediate and heavy financial need of the Participant (taking into account the taxable 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. (d) 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 single lump sum payment. The Committee may request any documentation it may require from a Participant to make a determination that the Participant is eligible for a hardship withdrawal hereunder. (e) On 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 on 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. (f) All hardship withdrawal elections must be made on forms approved by the Committee for that purpose and prior to January 1, 2002 shall require Spousal Consent. 8.03 Distributions on Account of Termination of Employment (a) Except as set forth in Section 8.03(c) below, distribution of a Participant's Aggregate Account shall commence as soon as practicable after the Participant's termination of employment. A Participant's distributable Aggregate Account is based on the value of that Account as of the Valuation 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 that 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 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 (effective January 1, 1998, $5,000) 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 at any time between termination of employment and age 65 an immediate lump sum distribution, payable as soon as practical after receipt of the Participant's election under this Section 8.04(c) at any time between termination of employment and age 65. All elections made pursuant to this Section shall be in the manner approved by the Committee and prior to January 1, 2002 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 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. (g) Effective January 1, 1998, notwithstanding any provision of the Plan to the contrary, a lump sum payment shall be made in lieu of all vested benefits if the value of the vested portion of the Participant's Aggregate Accounts as of his termination of employment amounts to $5,000 or less [$3,500 or less if the date of termination is prior to January 1, 1998]. 8.04 Restrictions and Requirements on Distributions (a) Except for distributions permitted under this Article 8 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 Section 4975(e)(7)) of the Code; (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 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 (ii) or (iii) above unless the Employer continues to maintain the Plan after the disposition. (b) An event described in Section 8.04(a) that otherwise would permit distribution of a Participant's interest in the Plan will not be treated as described in Section 8.04(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 Section 402(e)(4)(D) of the Code. (c) The provisions of this Section 8.04(c) will apply to restrict the Committee's ability to delay the commencement of distributions. Except as otherwise provided in this Article 8, 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 service 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) Notwithstanding any provision of the Plan to the contrary, if a Participant is a five (5) percent owner (as defined in Section 416(i) of the Code), distribution of the Participant's entire Aggregate Account shall begin no later than the April 1 following the calendar year in which he attains age 70 1/2. No minimum distribution payments will be made to a Participant under the provisions of Section 401(a)(9) of the Code on or after January 1, 1997 if the Participant is not a five (5) percent owner as defined above. However, if a Participant who is not a five (5) percent owner (as defined in Section 416(i) of the Code) remains in service after the April 1 following the calendar year in which he attains age 70 1/2, he may make a one-time election to have the provisions of paragraph (ii) apply as if the Participant was a five (5) percent owner. Such election shall be made in accordance with such administrative procedures as the Committee shall prescribe. (ii) In the event a Participant is required to begin receiving payments while in service under the provisions of paragraph (i) above, the Participant shall receive payments, as follows: (A) one lump sum payment on or before the Participant's required beginning date equal to his entire Aggregate Account balance, and (B) annual lump sum payments thereafter of amounts accrued during each calendar year. (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 other payee, such payments must conform to the "incidental benefit" rules of Code Section 401(a)(9)(G) and Treasury Regulation Section 1.401(a)(9)-2. (f) On 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 (5) 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 or its delegate shall provide recipients of a benefit hereunder with appropriate claim forms, election forms, withholding forms and an officially approved notice supplied by the Secretary of the Treasury that specifies certain information regarding the federal income tax treatment of Plan benefits paid in the form of a lump sum. 8.05 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 that exceeds $200, the Distributee may elect, at the time and in the manner prescribed by Committee and in accordance with this Section 8.05, 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 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 thirty (30) days and no more than ninety (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. (c) Notwithstanding the provisions of Section 8.05(b) above, distributions paid in accordance with Section 8.05(a) may commence less than 30 days after the material described in Section 8.05(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 (effective for plan years on or after January 1, 1998, $5,000); (ii) The Distributee is notified that he has the right to a period of at least thirty (30) days after receipt of the material to decide whether or not to elect a distribution; and (iii) After receipt of such notification, the Distributee affirmatively elects to receive a distribution. (d) The following definitions apply to the terms used in this Section 8.05: (i) "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (A) Any distribution that is one of a series of 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 (10) 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 includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); (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; (E) Effective January 1, 1999, any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV). (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, former Employee, Alternate Payee or Beneficiary. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the Alternate Payee pursuant to a qualified domestic relations order are Distributees with respect 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. 8.06 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 8.06(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. (c) If a Trustee is authorized by statute to recover some payments, no Plan provision may be construed to contravene the statute. ARTICLE 9 Administration of Plan 9.01 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 the Committee, consisting of not less than three (3) persons, appointed by the Board to serve at the pleasure of such Board. Any member of the Committee may resign by delivering his written resignation to the Board. 9.02 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 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. 9.03 Meetings The Committee shall hold meetings on such notice, at such place or places, and at such time or times as it may from time to time determine. 9.04 Quorum Any act that 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. 9.05 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. 9.06 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. 9.07 Prudent Conduct The Committee shall use that degree of care, skill, 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. 9.08 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. 9.09 Limitation of Liability The Board, 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 individual 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 I of ERISA. 9.10 Indemnification The Committee, the Board, 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. 9.11 Expenses of Administration All expenses incurred prior to the termination of the Plan that shall arise in connection with the administration of the Plan, including but not limited to the compensation of the Trustee, administrative 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. 9.12 Claims Procedures The Committee ordinarily will 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 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. ARTICLE 10 Management of Funds 10.01 Trust Agreement All the funds of the Plan shall be held by a Trustee appointed from time to time by the Board or, effective as of January 26, 1998, by the Committee under a Trust Agreement adopted, or as amended, by the Board or, effective as of January 26, 1998, the Committee 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 or for the administration of the funds paid over to the Trustee. Effective January 26, 1998, the Committee shall have the power to amend the Trust Agreement, and any other funding vehicle document, to: (a) comply with laws and regulations, or as otherwise may be desirable when prompted by a change in law or regulation; and (b) make any other change that may be necessary or desirable, provided that any amendment adopted pursuant to this subsection shall not increase the Company's annual expense by more than five (5) million dollars. 10.02 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 to, any part of the assets held under the Plan, except as and to the extent expressly provided in the Plan. 10.03 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 needed for benefit payment as well as the long-term growth needed to discharge the Plan's liabilities. The Committee shall review and report to the Board 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. The Committee also shall 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 separate Investment Funds as provided in Article 6, and to the extent required by Participant elections, may be fully invested in Company Stock. (e) The Committee shall periodically report to the Board on its actions, recommendations, and investments. ARTICLE 11 Assignments and Liens 11.01 Nonalienation (a) Except as required by any applicable law or by paragraph (c), 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 that: (i) creates for, or assigns to, a spouse, former spouse, child, or other dependent of a Participant 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; (ii) is made pursuant to a state domestic relations law; (iii) does not require the Plan to provide any type of benefit, or any option, not otherwise provided under the Plan; and (iv) otherwise meets the requirements of Section 206(d) of ERISA, as amended, as a qualified domestic relations order. (b) Notwithstanding anything herein to the contrary, if the amount payable to the Alternate Payee under the Qualified Domestic Relations Order is less than $5,000 ($3,500 if the date of determination is prior to January 1, 1998), such amount shall be paid in one lump sum as soon as practicable following the qualification of the order. Effective January 1, 1998, if the amount exceeds $5,000 ($3,500 if the date of determination is prior to January 1, 1998), it may be paid as soon as practicable following the qualification of the order if the Qualified Domestic Relations Order so provides and the Alternate Payee consents thereto; otherwise, it may not be payable before the earliest of (i) the Participant's termination of employment, (ii) the time such amount could be withdrawn while still employed, or (iii) the Participant's attainment of age 50. (c) A Participant's benefit under the Plan shall be offset or reduced by the amount the Participant is required to pay to the Plan under the circumstances set forth in Section 401(a)(13)(C) of the Code. 11.02 Qualified Domestic Relations Orders Notwithstanding any provisions in this Plan to the contrary, the Committee shall comply with any judgment, decree, or order that the Committee determines to be a Qualified Domestic Relations Order. (a) Establishment of Procedures. The Committee shall establish reasonable written procedures to determine the qualified status of domestic relations orders and to administer distributions under orders determined to be Qualified Domestic Relations Orders, which procedures may include, without limitation, the adoption of one or more model Qualified Domestic Relations Orders. Such procedures shall be consistent with the requirements of Section 206(d) of ERISA and Sections 401(a)(13) and 414(p) of the Code. The Committee shall promptly notify the affected Participant and any other Alternate Payee of the receipt of a domestic relations order and the procedures for determining the qualified status of domestic relations orders. Within a reasonable period after the receipt of such order, the Committee shall determine whether such order is a Qualified Domestic Relations Order and shall notify the Participant and each Alternate Payee of such determination. (b) Disposition of Benefits Pending Determination. During any period in which the qualified status of a domestic relations order is being determined (by the Committee, by a court, or otherwise), the Committee shall make arrangements to account separately for the amounts that would have been payable to each Alternate Payee if the order had been determined to be a Qualified Domestic Relations Order. If within 18 months of the receipt of the order, the order (or modification thereof) is determined to be a Qualified Domestic Relations Order, the Plan shall pay the amounts that have been separately accounted for to the person or persons entitled thereto. If within 18 months of the receipt of the order it is determined that the order is not qualified, or the issue as to whether the order is qualified is not resolved by the end of the 18-month period, then the Plan shall pay the amounts that have been separately accounted for to the person or persons, if any, who would have been entitled to payment of such amounts if there had been no order. Any determination that an order is qualified that is made after the close of the 18-month period shall apply prospectively only. 11.03 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. 11.04 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. 11.05 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. 11.06 Proof of Death and Right of Beneficiary or Other Person The Committee may require and rely on such proof of death and such evidence of the right of any Beneficiary 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. 11.07 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 five (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 later is located, the benefit that was previously forfeited hereunder shall be restored by means of additional Employer contributions to the Plan. 11.08 Electronic Transmission of Notices to Participants Notwithstanding any provision of the Plan to the contrary, any notice required to be distributed to Participants, Beneficiaries and Alternate Payees pursuant to the terms of the Plan may, at the direction of the Committee, be transmitted electronically to the extent permitted by, and in accordance with any procedures set forth in, applicable law and regulations. ARTICLE 12 Amendment, Merger and Termination 12.01 Amendment of Plan (a) The Company, acting through the Board, 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 November 21, 1994 through January 25, 1998, the Committee, or its delegate, may 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 (5) million dollars, except that such five (5) million dollar limit shall not apply to amendments necessary to comply with laws or regulations. Effective January 26, 1998, the Committee, or its delegate, shall have the power to amend the Plan to: (i) comply with laws and regulations, or as otherwise may be desirable when prompted by a change in law or regulation; and (ii) make any other change that may be necessary or desirable provided any amendment adopted pursuant to this Section 12 shall not increase the Company's annual expense by more than five (5) million dollars. (b) Any action required or permitted to be taken by the Board or the Committee under the Plan shall be by resolution adopted by the Board 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. (c) 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 that 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 effect on the date on which the amendment is adopted or, if later, the date on which the amendment becomes effective. 12.02 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 that 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. 12.03 Additional Participating Employers (a) With the consent of the Company, any subsidiary or affiliated corporation or division of such corporation may adopt the Plan for its Eligible Employees. An Employer adopting the Plan shall compile and submit all information required by the Plan Administrator with reference to its Eligible Employees. An entity will be considered to have adopted the Plan with the consent of the Company if it takes significant action that is consistent with the adoption of the Plan, the Board or Committee is aware of the action, and neither objects to the action. (b) If an entity adopts the Plan in accordance with Section 12.03(a), 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. (c) With the approval of the Company, a participating Employer may terminate its participation in the Plan after giving sixty (60) days' notice of its intention to the Company, unless a shorter notice shall be agreed to by the Company. In addition, an Employer will cease to participate in the Plan from and after the date it ceases to be an Affiliated Employer. In either 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 who have separated from the employ of that Employer, shall be determined by the Committee. Subject to the provisions of Section 8.04, those assets shall be distributed as provided in Section 12.05 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 Employees when due under the Plan, but such Employees shall not be considered Eligible Employees from and after the date of withdrawal by their Employer. 12.04 Termination of Plan The Company may terminate the Plan for any reason at any time. 12.05 Distribution of Assets on Plan Termination or a Complete Discontinuance of Contributions (a) Subject to the provisions of Section 8.04, in case of termination of the Plan or a complete discontinuance of contributions under the Plan, the rights of Participants to the benefits accrued under the Plan to date of termination or discontinuance of contributions shall remain fully vested and nonforfeitable. (b) On Plan termination or discontinuance of contributions, the Committee shall instruct the Trustee to allocate any unallocated assets of the Trust Fund among the Aggregate Accounts of Participants and Beneficiaries in accordance with the provisions of Article 12. (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. 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 that distributions must be in a form that the Committee deems consistent with statutory requirements. Except as specifically provided otherwise by law, the 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. 12.05 Notification of Termination On 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. ARTICLE 13 Top-Heavy Provisions 13.01 Priority Over Other Plan Provisions If the Plan is or becomes a Top-Heavy Plan in any Plan Year, the provisions of this Article shall supersede any conflicting provisions of the Plan. However, the provisions of this Article shall 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. 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) "Defined Benefit Dollar Limitation" means, for any Plan Year, $90,000 multiplied by the Adjustment Factor. (b) "Defined Benefit Plan" means a qualified plan other than a Defined Contribution Plan. (c) "Defined Contribution Dollar Limitation" means, for any plan year, $30,000 or, if greater, 25% of the Defined Benefit Dollar Limitation of the same Plan Year. If a short limitation year is created because of a Plan amendment changing the Plan Year to a different 12-consecutive-month period, the Defined Contribution Dollar Limitation for the short Plan Year will not exceed the amount determined in the preceding sentences multiplied by a fraction, the numerator of which is the number of months in the short Plan Year and the denominator of which is 12. (d) "Defined Contribution Plan" means the tax-qualified plan described in Code Section 414(i). (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 Statutory 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 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 one 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 five (5) percent owner of an Employer or an Affiliated Employer, or (iv) a one (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 13.03. (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 that when considered as a group with the Required 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 each qualified plan (including simplified employee pension plans) of an Employer or an Affiliated Employer that enables a Qualified Plan to meet the requirements of Code Section 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) 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) 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) the 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 (5) 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 falls within or ends with the 12-month period ending on the Determination Date, 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 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 (5) 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. 13.03 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 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 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 case 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 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). 13.04 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 14 will be modified by substituting "100%" for "125%" in Sections 13.02(h) and (k). (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 that are in the Required Aggregation Group, and the Minimum Allocation requirements of Section 13.03(a) are met when such requirements are applied with the substitution of "4%" for "3%"; (ii) the Minimum Allocation requirements of Section 13.03(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 (5) 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 that is in the Required Aggregation Group. 13.05 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. ARTICLE 14 Limitations on Contributions and Allocations to Participants' Accounts 14.01 Definitions Used in This Article The following defined terms have the meanings set forth below: (a) "Actual Deferral Percentage" means, with respect to a specified group of Employees, the average of the ratios, calculated separately for each Employee in that group, of (a) the amount of Tax-Deferred Contributions made pursuant to Section 3.01 for a Plan Year (including Tax-Deferred Contributions returned to a Highly Compensated Employee and Tax-Deferred Contributions returned to any Employee) to (b) the Employee's Statutory Compensation for that entire Plan Year, provided that, on the direction of the Committee, Statutory Compensation for a Plan Year shall be counted only if received during the period an Employee is, or is eligible to become, a Participant. The Actual Deferral Percentage for each group and the ratio determined for each Employee in the group shall be calculated to the nearest one one-hundredth of one (1) percent. For purposes of determining the Actual Deferral Percentage for a Plan Year, Tax-Deferred Contributions may be taken into account for a Plan Year only if they: (i) relate to Compensation that either would have been received by the Employee in the Plan Year but for the deferral election or are attributable to services performed by the Employee in the Plan Year and would have been received by the Employee within 2-1/2 months after the close of the Plan Year but for the deferral election; (ii) are allocated to the Employee as of a date within that Plan Year and the allocation is not contingent on the participation or performance of service after such date; and (iii) are actually paid to the Trustee no later than twelve (12) months after the end of the Plan Year to which the contributions relate. (b) "Contribution Percentage" means, with respect to a specified group of Employees, the average of the ratios, calculated separately for each Employee in that group, of (a) the sum of the Employee's Matching Contribution and Special Contribution for that Plan Year (excluding any Matching Contribution or Special Contributions forfeited under the provisions of Sections 3.01 and 14.02) to (b) his Statutory Compensation for that entire Plan Year provided that, on the direction of the Committee, Statutory Compensation for a Plan Year shall be counted only if received during the period an Employee is, or is eligible to become, a Participant. The Contribution Percentage for each group and the ratio determined for each Employee in the group shall be calculated to the nearest one one-hundredth of one (1) percent. (c) "Earnings" means the amount of income to be returned with any excess deferrals, excess contributions, or excess aggregate contributions under Section 3.01, 14.02, 14.03, or 14.04. Earnings on excess deferrals and excess contributions shall be determined by multiplying the income earned on the Tax-Deferred Account for the Plan Year by a fraction, the numerator of which is the excess deferrals or excess contributions, as the case may be, for the Plan Year and the denominator of which is the Tax-Deferred Account balance at the end of the Plan Year, disregarding any income or loss occurring during the Plan Year. Earnings on excess aggregate contributions shall be determined in a similar manner by substituting the sum of Matching Contributions and Special Contributions for the Tax-Deferred Account, and the excess aggregate contributions for the excess deferrals and excess contributions in the preceding sentence. (d) "Nonhighly Compensated Employee" means for any Plan Year an Employee of the Employer or an affiliated Employer who is not a Highly Compensated Employee for that Plan Year. 14.02 Actual Deferral Percentage Test With respect to each Plan Year commencing on or after January 1, 1997, the Actual Deferral Percentage for that Plan Year for Highly Compensated Employees who are Participants or eligible to become Participants for that Plan Year shall not exceed the Actual Deferral Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year multiplied by 1.25. If the Actual Deferral Percentage for such Highly Compensated Employees does not meet the foregoing test, the Actual Deferral Percentage for such Highly Compensated Employees for that Plan Year may not exceed the Actual Deferral Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year by more than two (2) percentage points, and such Actual Deferral Percentage for such Highly Compensated Employees for the Plan Year may not be more than two (2) times the Actual Deferral Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year (or such lesser amount as the Committee shall determine to satisfy the provisions of Section 14.04). The Employer may elect to use the Actual Deferral Percentage for Nonhighly Compensated Employees for the Plan Year being tested rather than the preceding Plan Year provided that such election must be evidenced by a Plan amendment and once made may not be changed except as provided by the Secretary of the Treasury. Notwitstanding the foregoing, the actual deferral percentage test shall be applied separately to the ESOP and to the remainder of the Plan, as if each were a separate plan. Notwithstanding any preceding provision of the Plan to the contrary, for Plan Years 1997, 1998, 1999, and 2000, the Actual Deferral Percentage Test was performed using the Actual Deferral Percentage for Nonhighly Compensated Employees for the Plan Year being tested in lieu of the preceding Plan Year. The Committee may implement rules limiting the Tax-Deferred Contributions that may be made on behalf of some or all Highly Compensated Employees so that this limitation is satisfied. If the Committee determines that the limitation under this Section has been exceeded in any Plan Year, the following provisions shall apply: (a) The actual deferral ratio of the Highly Compensated Employee with the highest actual deferral ratio shall be reduced to the extent necessary to meet the actual deferral percentage test or to cause such ratio to equal the actual deferral ratio of the Highly Compensated Employee with the next-highest ratio. This process will be repeated until the actual deferral percentage test is passed. Each ratio shall be rounded to the nearest one one-hundredth of one (1) percent of the Participant's Statutory Compensation. The amount of Tax-Deferred Contributions made by each Highly Compensated Employee in excess of the amount permitted under his revised deferral ratio shall be added together. This total dollar amount of excess contributions ("excess contributions") shall then be allocated to some or all Highly Compensated Employees in accordance with the provisions of paragraph (b) below. (b) The Tax-Deferred Contributions of the Highly Compensated Employee with the highest dollar amount of Tax-Deferred Contributions shall be reduced by the lesser of (i) the amount required to cause that Employee's Tax-Deferred Contributions to equal the dollar amount of the Tax-Deferred Contributions of the Highly Compensated Employee with the next-highest dollar amount of Tax-Deferred Contributions or (ii) an amount equal to the total excess contributions. This procedure is repeated until all excess contributions are allocated. The amount of excess contributions allocated to a Highly Compensated Employee, together with earnings thereon, shall be distributed to him in accordance with the provisions of paragraph (c). (c) The excess contributions, together with earnings thereon, allocated to a Participant shall be paid to the Participant before the close of the Plan Year following the Plan Year in which the excess contributions were made, and to the extent practicable, within 2 1/2 months of the close of the Plan Year in which the excess contributions were made. However, any excess contributions for any Plan Year shall be reduced by any Tax-Deferred Contributions previously returned to the Participant under Section 3.01 for that Plan Year. In the event any Tax-Deferred Contributions returned under this Section were matched by Matching [or Special] Contributions, such corresponding Matching [and, if applicable, Special] Contributions, with earnings thereon, shall be forfeited and used to reduce Employer contributions. (d) In the event any Matching (and Special) Contributions subject to forfeiture under this Section have been distributed to the Participant, the Employer shall make reasonable efforts to recover the contributions from the Participant. 14.03 Contribution Percentage Test With respect to each Plan Year commencing on or after January 1, 1997, the Contribution Percentage for that Plan Year for Highly Compensated Employees who are Participants or eligible to become Participants for that Plan Year shall not exceed the Contribution Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year multiplied by 1.25. If the Contribution Percentage for such Plan Year for such Highly Compensated Employees does not meet the foregoing test, the Contribution Percentage for such Highly Compensated Employees for the Plan Year may not exceed the Contribution Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year by more than two (2) percentage points, and the Contribution Percentage for such Highly Compensated Employees for the Plan Year may not be more than two (2) times the Contribution Percentage for the preceding Plan Year for all Nonhighly Compensated Employees for the preceding Plan Year who were Participants or eligible to become Participants during the preceding Plan Year (or such lesser amount as the Committee shall determine to satisfy the provisions of Section 14.04). The Employer may elect to use the actual Contribution Percentage for Nonhighly Compensated Employees for the Plan Year being tested rather than the preceding Plan Year provided that such election must be evidenced by a Plan amendment and once made may not be changed except as provided by the Secretary of the Treasury. Notwitstanding the foregoing, the actual contribution percentage test shall be applied separately to the ESOP and to the remainder of the Plan, as if each were a separate plan. Notwithstanding any preceding provision of the Plan to the contrary, for Plan Years 1997, 1998, 1999, and 2000, the Contribution Percentage Test was performed using the Actual Contribution Percentage for Nonhighly Compensated Employees for the Plan Year being tested in lieu of the preceding Plan Year. If the Committee determines that the limit under this Section 14.03 has been exceeded in any Plan Year, the following provisions shall apply: (a) The actual contribution ratio of the Highly Compensated Employee with the highest actual contribution ratio shall be reduced to the extent necessary to meet the test or to cause such ratio to equal the actual contribution ratio of the Highly Compensated Employee with the next-highest actual contribution ratio. This process will be repeated until the actual contribution percentage test is passed. Each ratio shall be rounded to the nearest one one-hundredth of one (1) percent of a Participant's Statutory Compensation. The amount of Matching Contributions and Special Contributions made by or on behalf of each Highly Compensated Employee in excess of the amount permitted under his revised actual contribution ratio shall be added together. This total dollar amount of excess contributions ("excess aggregate contributions") shall then be allocated to some or all Highly Compensated Employees in accordance with the provisions of paragraph (b) below. (b) The Matching Contributions and Special Contributions of the Highly Compensated Employee with the highest dollar amount of such contributions shall be reduced by the lesser of (i) the amount required to cause that Employee's Matching Contributions and Special Contributions to equal the dollar amount of such contributions of the Highly Compensated Employee with the next-highest dollar amount of such contributions, or (ii) an amount equal to the total excess aggregate contributions. This procedure is repeated until all excess aggregate contributions are allocated. The amount of excess aggregate contributions allocated to each Highly Compensated Employee, together with earnings thereon, shall be distributed or forfeited in accordance with the provisions of paragraph (c) below. (c) If excess aggregate contributions are allocated to a Highly Compensated Employee under paragraph (b) above, so much of the Matching Contributions and Special Contributions, together with earnings, as shall be necessary to equal the balance of the excess aggregate contributions shall be forfeited and applied to reduce Employer contributions. (d) Any repayment or forfeiture of excess aggregate contributions shall be made before the close of the Plan Year following the Plan Year for which the excess aggregate contributions were made and, to the extent practicable, any repayment or forfeiture shall be made within 2 1/2months of the close of the Plan Year in which the excess aggregate contributions were made. In the event any Matching (and Special) Contributions subject to forfeiture have been distributed to the Participant, the Employer shall make reasonable efforts to recover the contributions from the Participant. 14.04 Aggregate Contribution Limitation Notwithstanding the provisions of Sections 14.02 and 14.09, in no event shall the sum of the Actual Deferral Percentage of the group of eligible Highly Compensated Employees and the Contribution Percentage of such group, after applying the provisions of Sections 14.02 and 14.09, exceed the "aggregate limit" as provided in Section 401(m)(9) of the Code and the regulations issued thereunder. In the event the aggregate limit is exceeded for any Plan Year, the Contribution Percentages of the Highly Compensated Employees shall be reduced to the extent necessary to satisfy the aggregate limit in accordance with the procedure set forth in Section 14.09. 14.05 Additional Discrimination Testing Provision (a) If any Highly Compensated Employee is a participant of another qualified plan of the Employer or an Affiliated Employer, other than an employee stock ownership plan described in Section 4975(e)(7) of the Code or any other qualified plan that must be disaggregated under Section 410(b) of the Code, under which tax-deferred contributions or matching contributions are made on behalf of the Highly Compensated Employee or under which the Highly Compensated Employee makes after-tax contributions, the Committee shall implement rules, which shall be uniformly applicable to all employees similarly situated, to take into account all such contributions for the Highly Compensated Employee under all such plans in applying the limitations of Sections 14.02, 14.03, and 14.04. If any other such qualified plan has a plan year other than the Plan Year defined in Section 1.35, the contributions to be taken into account in applying the limitations of Sections 14.02, 14.03, and 14.04 will be those made in the plan years ending with or within the same calendar year. (b) In the event that this Plan is aggregated with one or more other plans to satisfy the requirements of Sections 401(a)(4) and 410(b) of the Code (other than for purposes of the average benefit percentage test) or if one or more other plans is aggregated with this Plan to satisfy the requirements of such sections of the Code, then the provisions of Sections 14.02, 14.03, and 14.04 shall be applied by determining the Actual Deferral Percentage and Contribution Percentage of employees as if all such plans were a single plan. If this Plan is permissively aggregated with any other plan or plans for purposes of satisfying the provisions of Section 401(k)(3) of the Code, the aggregated plans also must satisfy the provisions of Sections 401(a)(4) and 410(b) of the Code as though they were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated under this paragraph (b) only if they have the same plan year. (c) The Employer may elect to use Tax-Deferred Contributions to pass the tests described in Sections 14.03, and 14.04, provided that the test described in Section 14.02 is passed prior to such election and continues to be passed following the Employer's election to shift the application of those Tax-Deferred Contributions from Section 14.02 to Section 14.03. (d) The Employer may authorize that special "qualified nonelective contributions" shall be made for a Plan Year, which shall be allocated in such amounts and to such Participants, who are not Highly Compensated Employees, as the Committee shall determine. The Committee shall establish such separate accounts as may be necessary. Qualified nonelective contributions shall be one hundred (100) percent nonforfeitable when made. Qualified nonelective contributions made before January 1, 1989 and earnings credited thereon as of that date may only be withdrawn by a Participant while in service under the provisions of withdrawal after age 59 1/2hardship withdrawal. Any qualified nonelective contributions made on or after January 1, 1989 and any earnings credited on any qualified nonelective contributions after such date shall only be available for withdrawal under the provisions of withdrawal after age 59 1/2. Qualified nonelective contributions made for the Plan Year may be used to satisfy the tests described in Sections 14.02, 14.03, and 14.04 where necessary. (e) Notwithstanding any provision of the Plan to the contrary, if Employees included in a unit of Employees covered by a collective bargaining agreement are participating in the Plan and not more than two (2) percent of such Employees are Highly Compensated Employees and professionals, then such Employees shall be disregarded in applying the provisions of Sections 14.02, 14.03, and 14.04. However, a separate actual deferral percentage test must be performed for the group of collective bargaining Employees on and after January 1, 1993 on the basis that those Employees are included in a separate cash-or-deferred arrangement. (f) For Plan Years commencing on and after January 1, 1999, if the Employer elects to apply the provisions of Section 410(b)(4)(B) to satisfy the requirements of Section 401(k)(3)(A)(i) of the Code, the Employer may apply the provisions of Sections 14.02, 14.03, and 14.04 by excluding from consideration all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Section 410(a)(1)(A) of the Code. 14.06 Maximum Annual Additions (a) The annual addition to a Participant's Accounts for any Plan Year, which shall be considered the "limitation year" for purposes of Section 415 of the Code, when added to the Participant's annual addition for that Plan Year under any other qualified defined contribution plan of the Employer or an Affiliated Employer, shall not exceed an amount that is equal to the lesser of (i) twenty-five (25) percent of his aggregate remuneration (as defined below) for that Plan Year or (ii) $30,000, as adjusted pursuant to Section 415(d) of the Code. (b) For purposes of this Section, the "annual addition" to a Participant's Accounts under this Plan or any other qualified defined contribution plan (including a deemed qualified defined contribution plan under a qualified defined benefit plan) maintained by the Employer or an Affiliated Employer shall be the sum of: (i) the total contributions, including Tax-Deferred Contributions, made on the Participant's behalf by the Employer and all Affiliated Employers; (ii) all Participant contributions, exclusive of any Rollover Contributions; (iii) forfeitures, if applicable, that have been allocated to the Participant's Accounts under this Plan or his accounts under any other such qualified defined contribution plan, and solely for purposes of clause (i) of paragraph (a) above; and (iv) amounts described in Sections 415(1)(1) and 419A(d)(2) allocated to the Participant. For purposes of this paragraph (b), any Tax-Deferred Contributions distributed under Section 14.02 and any Matching Contributions or Special Contributions distributed or forfeited under the provisions of Section 3.01, 14.02, 14.03, and 14.04 shall be included in the annual addition for the year allocated. However, any loan repayments made under Article 7 and any excess deferrals timely distributed from the Plan under Section 3.01 shall be excluded from the definition of annual addition. (c) For purposes of this Section, the term "remuneration" with respect to any Participant means the wages, salaries, and other amounts paid in respect of such Participant by the Employer or an Affiliated Employer for personal services actually rendered, and shall include amounts contributed by the Employer pursuant to a salary reduction agreement that are not includable in the gross income of the Employee under Section 125 (effective January 1, 2001, - 132(f)), 402(g), or 457 of the Code but shall exclude deferred compensation, stock options, and other distributions that receive special tax benefits under the Code. Notwithstanding the foregoing, for limitation years commencing prior to January 1, 1998, remuneration shall exclude amounts contributed by the Employer or an Affiliated Employer pursuant to a salary reduction agreement that are not includable in the gross income of the Employee under Section 125, 402(g)(3), or 457 of the Code. (d) If the annual addition to a Participant's Accounts for any Plan Year, prior to the application of the limitation set forth in paragraph (a) above, exceeds that limitation due to a reasonable error in estimating a Participant's annual compensation or in determining the amount of Tax-Deferred Contributions that may be made with respect to a Participant under Section 415 of the Code or as the result of the allocation of forfeitures, the amount of contributions credited to the Participant's Accounts in that Plan Year shall be adjusted to the extent necessary to satisfy that limitation in accordance with the following order of priority: (i) The Participant's unmatched Tax-Deferred Contributions under Section 3.01 shall be reduced to the extent necessary. The amount of the reduction shall be returned to the Participant together with any earnings on the contributions to be returned. (ii) The Participant's matched Tax-Deferred Contributions and corresponding Matching Contributions and Special Contributions shall be reduced to the extent necessary. The amount of the reduction attributable to the Participant's matched Tax-Deferred Contributions shall be returned to the Participant together with any earnings on those contributions to be returned, and the amount attributable to the Matching Contributions and Special Contributions shall be forfeited and used to reduce subsequent contributions payable by the Employer. Any Tax-Deferred Contributions returned to a Participant under this paragraph (d) shall be disregarded in applying the dollar limitation on Tax-Deferred Contributions under Section 14.02. (e) Notwithstanding the provisions of paragraph (d) above, if a Participant is participating in another qualified defined contribution plan of the Employer or an Affiliated Employer during a particular limitation year, and the Participant's annual addition for such limitation year, prior to the application of the limitation set forth in paragraph (a) above, exceeds that limitation, the Committee, under uniform rules equally applicable to similarly situated Participants, shall determine how to apply the provisions of paragraph (d) above to satisfy the limitation. In making its decision, the Committee shall take into account the applicable provisions of the other qualified defined contribution plans. (f) For limitation years commencing prior to January 1, 2000, if a Participant has at any time participated in both a qualified defined benefit plan and a qualified defined contribution plan maintained by the Company, an Employer or an Affiliated Employer for a Plan Year, the sum of the Participant's defined benefit plan fraction and defined contribution plan fraction, as such terms are defined in Section 415(e) of the Code for such Plan Year shall not exceed 1.0. In the event the sum of a Participant's defined benefit fraction and defined contribution fraction exceeds 1.0, his benefit under any qualified defined benefit plan maintained by the Company or an Employee shall be reduced until such sum equals 1. 14.07 Return of Contributions (a) If all or part of the Employer's deductions for contributions to the Plan are disallowed by the Internal Revenue Service, the portion of the contributions to which that disallowance applies shall be returned to the Employer without interest but reduced by any investment loss attributable to those contributions, provided that the portion is returned within one year after the disallowance of the deduction. For this purpose, all contributions made by the Employer are expressly declared to be conditioned on their deductibility under Section 404 of the Code. (b) The 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 (1) year after the date of those contributions. (c) In the event that Tax-Deferred Contributions made under Section 3.01 are returned to the Employer in accordance with the provisions of this Section, the elections to reduce Compensation that were made by Participants on whose behalf those contributions were made shall be void retroactive 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, provided, however, that if the contributions are returned under the provisions of paragraph (a) above, the amount of Tax-Deferred Contributions to be distributed to Participants shall be adjusted to reflect any investment gains or losses attributable to those contributions. 14.08 Contributions in Excess of Section 402(g) Limit Return of Contributions In no event shall the Participant's Tax-Deferred Contributions and similar contributions made on his behalf by the Employer or an Affiliated Employer to all plans, contracts, or arrangements subject to the provisions of Section 401(a)(30) of the Code in any calendar year exceed $7,000, as adjusted from time to time for the cost of living pursuant to Section 402(g)(5) of the Code. If a Participant's Tax-Deferred Contributions in a calendar year reach that dollar limit, his election of Tax-Deferred Contributions for the remainder of the calendar year will be canceled. As of the first pay period of the calendar year following such cancellation, the Participant's election of Tax-Deferred Contributions shall again become effective in accordance with his previous election, unless the Participant elects otherwise. In the event that the sum of the Tax-Deferred Contributions and similar contributions to any other qualified defined contribution plan maintained by the Employer or an Affiliated Employer exceeds the dollar limit set forth above for any calendar year, the Participant shall be deemed to have elected a return of Tax-Deferred Contributions in excess of such limit ("excess deferrals") from this Plan. The excess deferrals, together with earnings, shall be returned to the Participant no later than the April 15 following the end of the calendar year in which the excess deferrals were made. The amount of excess deferrals to be returned for any calendar year shall be reduced by any Tax-Deferred Contributions previously returned to the Participant under Section 14.02 for that calendar year. In the event any Tax-Deferred Contributions returned under this paragraph were matched by Matching or Special Contributions under Section 3.02 or 3.03, those Matching and Special Contributions, together with earnings, shall be forfeited and used to reduce Employer contributions. In the event those Matching and Special Contributions subject to forfeiture have been distributed to the Participant, the Employer shall make reasonable efforts to recover the contributions from the Participant. If a Participant makes tax-deferred contributions under another qualified defined contribution plan maintained by an employer other than the Employer or an Affiliated Employer for any calendar year and those contributions when added to his Tax-Deferred Contributions exceed the dollar limit under Section 14.08 for that calendar year, the Participant may allocate all or a portion of such excess deferrals to this Plan. In that event, such excess deferrals, together with earnings, shall be returned to the Participant no later than the April 15 following the end of the calendar year in which such excess deferrals were made. However, the Plan shall not be required to return excess deferrals unless the Participant notifies the Committee, in writing, by March 1 of that following calendar year of the amount of the excess deferrals allocated to this Plan. The amount of any such excess deferrals to be returned for any calendar year shall be reduced by any Tax-Deferred Contributions previously returned to the Participant under Section 14.02 for that calendar year. In the event any Tax-Deferred Contributions returned under this Section 14.08 were matched by Matching or Special Contributions under Section 3.02 or 3.03, those Matching and Special Contributions, together with earnings, shall be forfeited and used to reduce Employer contributions. In the event those Matching and Special Contributions subject to forfeiture have been distributed to the Participant, the Employer shall make reasonable efforts to recover the contributions from the Participant. ARTICLE 15 General Provisions 15.01 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 that such discharge shall have on his rights or potential rights, if any, under the Plan. (c) preclude any person from being or continuing to be an "at will" employee. 15.02 Severability If any provision or any portion of any provision of this Plan shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Plan shall remain valid and enforceable, and the invalid or unenforceable portions or provisions shall remain valid and enforceable as to persons or circumstances unrelated to those as to which there was a holding of invalidity or unenforceability. EX-10.(C) 5 dex10c.txt DISNEY SEVERANCE PAY PLAN EXHIBIT 10(C) DISNEY SEVERANCE PAY PLAN SECTION 1. - INTRODUCTION The Walt Disney Company ("Disney") has adopted this Disney Severance Pay Plan (hereinafter "Plan") effective as of May 15, 2001. The Plan provides severance benefits under the circumstances described below to eligible employees (referred to as "Eligible Employees") of Disney and certain of its subsidiaries and Affiliates (collectively the "Company"). SECTION 2. - DEFINITIONS AND INTERPRETATIONS The following definitions and interpretations of important terms apply to the Plan: (a) Affiliate. A company or business organization which is affiliated with the Company as defined under Securities and Exchange Commission Rule 144(a)(1), as amended from time to time. (b) COBRA. Continuation health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985. (c) Company. Disney and any subsidiary or other Controlled Group Member of Disney that, with the approval of the Plan Administrator and subject to such conditions as the Plan Administrator may impose, adopts the Plan. Any subsidiary or other Controlled Group Member will be considered to have adopted the Plan with the approval of the Plan Administrator if it takes significant action that is consistent with the adoption of the Plan, Disney is aware of the action, and neither objects in writing to the action. The Plan Administrator or a subsidiary or Controlled Group Member may terminate the subsidiary or Controlled Group Member's participation in the Plan by written notice to each other. An entity will cease to be part of the Company, and will cease to participate in the Plan, after the date on which it ceases to be a Controlled Group Member. (d) Controlled Group Member. A member of a controlled group of corporations of which Disney is a member, or an unincorporated trade or business that is under common control with Disney, all as determined under the Sections 414(b) and 414(c) of the Internal Revenue Code. (e) Disney. The Walt Disney Company. (f) Effective Date. May 15, 2001. (g) Eligible Employee. As of his or her Layoff Date, an Employee (i) who is employed in a department or origin identified by the Company as eligible for this Plan; (ii) who does not have a personal services contract with the Company; and (iii) who has not previously agreed either orally or in writing to waive eligibility for this Plan, as determined by the Plan Administrator based on Company records. (h) Employee. Any person employed by the Company on or after the Effective Date as a regular, full-time employee on a payroll maintained in the United States but excluding any employee included in a unit of employees covered by a collective bargaining agreement between the Company and employee representatives unless such bargaining agreement provides for his or her inclusion hereunder. If a collective bargaining agreement does provide for inclusion of a represented employee, his or her participation hereunder will be subject to such modification in Plan terms as may be provided in the applicable collective bargaining agreement. If a person is not treated by the Company as an employee, as conclusively evidenced by failure to withhold taxes from payment made for services rendered, then such person is not considered an Employee under this Plan even if the person is determined to have been a common law employee of the Company by a court of law, a governmental agency or by any other body or means. (i) Employment Position. The classification of an Employee by job responsibility as either a Salaried or an Hourly Employee, a Manager or a Director or Above. An Employee's Employment Position will be determined by the Plan Administrator in its sole and absolute discretion, taking into consideration the following definitions: Salaried or Hourly Employee: An Employee who is neither a Director or Above or a Manager. Manager: An Employee with a title of manager or with a title or job responsibility comparable to that of a manager. Director or Above: An Employee with a title of director or higher or with a title or job responsibility comparable to that of a director or higher position. (j) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. (k) Layoff. The involuntary termination of employment of an Eligible Employee from the Company. In no event will an involuntary termination of employment be considered a Layoff if the involuntary termination of employment is due to Reason. (l) Layoff Date. An Eligible Employee's last day of employment on account of his or her Layoff. (m) Participant. An Eligible Employee who meets the requirements for benefits under the Plan, as set forth in Section 3 of the Plan (entitled "How Do You Become Eligible for Benefits?") An individual will cease being a Participant once payment of all severance pay and other benefits due to such individual under the Plan has been completed and no person will have any further rights under the Plan with respect to such former Participant. (n) Plan Administrator. The Senior Vice President Human Resources of Disney, or any successor appointed by the President or chief operating officer of Disney. (o) Reason. Any one of the following reasons for the discharge or other involuntary termination of an Employee from employment with the Company: (i) any act or omission by the Employee resulting or intended to result in personal gain at the expense of the Company; (ii) the performance by the Employee of his or her employment duties in a manner deemed by the Company to be in any way unsatisfactory; (iii) the improper disclosure by the Employee of proprietary or confidential information or trade secrets of the Company or any Affiliate; (iv) misconduct by the Employee, including, but not limited to fraud, intentional violation of or negligent disregard for the rules and procedures of the Company (including a violation of the Company's business code of conduct), dishonesty, insubordination, theft or other illegal conduct, violent acts or threats of violence, or possession of alcohol or controlled substances on the property of the Company, or any other terminable offense under the Company's policies and practices; (v) the receipt of an offer of employment by the Employee from a Successor Employer to commence promptly following his or her termination of employment by the Company, whether the Eligible Employee accepts the position or not; (vi) any other involuntary termination of an Employee's employment by the Company that does not constitute a Layoff, as determined by the Company in its sole and absolute discretion. For purposes of the Plan, the determination of whether a discharge or other release from employment is for Reason will be made by the Plan Administrator, in its sole and absolute discretion, and such determination will be conclusive and binding on the affected Employee. (p) Successor Employer. Successor Employer means any entity that: (i) assumes operations or functions formerly carried out by the Company (such as the buyer of a facility or any entity to which a Company operation or function has been outsourced); (ii) is an Affiliate of Disney; or (iii) makes a job offer at the request of the Company (such as a joint venture of which Disney or an Affiliate is a member). (q) WARN Act. Worker Adjustment and Retraining Notification Act. (r) Weekly Base Pay. An Eligible Employee's weekly rate of salary or wages as of his or her Layoff Date, as reflected in the records maintained by the Company's payroll department, and will (i) include any salary reduction contributions made on his or her behalf to any plan of the Company, or pursuant to a collective bargaining agreement, under Section 125 or 401(k) of the Internal Revenue Code of 1986, and (ii) exclude bonuses, overtime pay, temporary assignment shift differentials, incentive compensation, Company contributions to or benefits paid from any employee retirement or welfare plan (other than salary reduction contributions to such a plan), and other additional compensation or benefits provided by the Company and, except as provided below, commissions. If a significant portion of an Eligible Employee's compensation is sales-based commissions, as determined by the Plan Administrator in its sole and absolute discretion, then the Employee's Weekly Base Pay will include any commissions actually paid (and not merely accrued) to him or her by the Company during the last 24 full calendar month period of his or her last continuous period of employment with the Company prior to his or her Layoff Date, divided by 104. If an Eligible Employee's last continuous period of employment with the Company is less than 24 full calendar months, then the amount to be included in his or her Weekly Base Pay is the amount of sales-based commissions actually paid (and not merely accrued) to him or her by the Company during the number of full calendar months of his or her last continuous period of employment with the Company prior to his or her Layoff Date, divided by the number of weeks within those full calendar months. (s) Year of Service. The number of consecutive full 12 month periods of an Eligible Employee's employment with the Company and any Controlled Group Member since his or her most recent hire date in which the Eligible Employee is paid by the Company or a Controlled Group Member for the performance of full-time services. Years of Service will be measured in full years and partial Years of Service will be disregarded. If the Company has a bridging of service policy, any prior employment recognized for the Eligible Employee under that policy will be recognized under this Plan and added to the Eligible Employee's most recent period of employment to determine Years of Service except that Years of Service for which the Eligible Employee previously received severance pay from the Company or any Controlled Group Member pursuant to this Plan or any other severance or separation program shall be disregarded. SECTION 3. - HOW DO YOU BECOME ELIGIBLE FOR BENEFITS? (a) Eligibility. You become eligible for benefits under the Plan (i.e., you become a "Participant") if you are an Eligible Employee and your employment termination is a Layoff. (b) Changed Decisions. The Company has the right to cancel a Layoff or reschedule a Layoff Date at any time before your employment terminates. You will not become eligible for benefits under this Plan if your Layoff Date is cancelled or if you voluntarily terminate employment before the Layoff Date specified by the Company. SECTION 4. - WHAT ARE YOUR BENEFITS UNDER THE PLAN? If you are eligible for benefits under the Plan (i.e., you become a Participant), your benefits under the Plan will be as follows: (a) Severance Pay.You will be entitled to receive severance pay under the Plan based on your Employment Position and Years of Service as of your Layoff Date, and which will be equal to the number of weeks determined in accordance with whichever of the following schedules is applicable to you, multiplied by your Weekly Base Pay:
Salaried or Hourly Employee ------------------------------------------------------------------- Years of Service Severance Pay ------------------------------------------------------------------- ------------------------------------------------------------------- Less than 1 year 2 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 1 - 4 years 4 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 5 or more years 1 week for each Year of Service, to a maximum of 52 weeks ------------------------------------------------------------------- Manager ------------------------------------------------------------------- Years of Service Severance Pay ------------------------------------------------------------------- ------------------------------------------------------------------- Less than 1 year 2 weeks
------------------------------------------------------------------- ------------------------------------------------------------------- 1 - 2 years 4 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 3- 4 years 6 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 5 or more years 4 weeks plus 1 week for each Year of Service, to a maximum of 52 weeks ------------------------------------------------------------------- Director or Above ------------------------------------------------------------------- Years of Service Severance Pay ------------------------------------------------------------------- ------------------------------------------------------------------- Less than 2 years 4 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 2 - 3 years 8 weeks ------------------------------------------------------------------- ------------------------------------------------------------------- 4 or more years 4 weeks plus 2 weeks for each Year of Service, to a maximum of 52 weeks -------------------------------------------------------------------
(b) Paid Leave in Lieu of Notice. If you become entitled to severance pay under Section 4(a) on account of Layoff subject to WARN, then, to the extent you have been given less than the WARN-required advance notice of the date your active services will actually terminate, you will be given a Paid Leave in Lieu of Notice for the balance of the WARN-required advance notice period, as follows: (i) During your Paid Leave in Lieu of Notice, you will be an inactive employee but you will be entitled to the same benefit plan benefits and participation rights to which you would have been entitled had your active employment continued, except that you will not accrue any paid leave, paid vacation days or additional severance benefits under this Plan. (ii) If you die during a Paid Leave in Lieu of Notice, your paid leave will end and the full and partial weeks of Weekly Base Pay that you would have received during the balance of the paid leave will be paid to your estate in a lump sum. All other Paid Leave in Lieu of Notice benefits will stop on the day you die and your estate will not be entitled to any additional severance pay under this Plan. (iii) When your Paid Leave in Lieu of Notice ends, you will then be entitled to Severance Pay under Section 4(a), but the amount of Severance Pay otherwise payable will be reduced by the cash wages you received for your paid leave. The WARN-required advance notice period is generally 60 days, but under certain unusual circumstances, may be less. (c) Outplacement Support Benefits. The Company in its sole and absolute discretion may arrange to provide you with, and you may elect to utilize, outplacement counseling services from an outplacement firm selected by the Company. You must complete any outplacement program provided to you within one year after your Layoff Date. The Company will pay the full cost of any such outplacement services provided to you. (d) Stay Bonus. In certain cases, you may be asked to stay with the Company for an extended period prior to your Layoff Date. In such case, the Company may elect, in its sole discretion, to offer you a stay bonus to induce you to remain at work until your Layoff Date. Any such offer by the Company will be made by means of a written stay bonus offer and may contain such contingencies or variations in Plan terms as the Company may determine. For example, a stay bonus may include increased severance pay or may be contingent upon your execution of an agreement releasing the Company from liability for any and all claims specified in the agreement. (e) Other Benefits. (i) Educational Reimbursement. Your Layoff will not affect your eligibility for tuition reimbursement under the Company's Educational Reimbursement Program with respect to any class that you successfully complete and that you began attending with Company approval before your Layoff Date. (ii) Relocation. You will not have to repay any relocation costs you may have otherwise owed the Company on account of premature termination of employment under a relocation agreement previously entered into between you and the Company. (f) Integration With Other Payments. If you are a Participant (that is, you receive benefits under the Plan), you will not be entitled to receive any other severance, separation, notice or termination payments on account of your employment with the Company or any other Controlled Group Member. In addition, benefits under this Plan are not intended to duplicate such benefits as workers' compensation wage replacement benefits, disability benefits, pay-in-lieu-of-notice, severance pay, or similar benefits under other benefit plans, severance programs, employment contracts, or applicable laws, such as the WARN Act and the Paid Leave In Lieu of Notice provisions of Section 4(b). Should such other benefits be payable, benefits payable to a Participant under this Plan will be offset or, alternatively, benefits previously paid under this Plan will be treated as having been paid to satisfy such other benefit obligations. In either case, the Plan Administrator, in its sole discretion, will determine how to apply this provision and may override other provisions in this Plan in doing so. (g) Taxes. Employment and income taxes will be deducted or withheld from benefits under the Plan to the extent required by law, as determined by the Company. SECTION 5. - HOW AND WHEN WILL AMOUNTS BE PAID? Any severance pay payable under Section 4(a) above will be paid to you in a single lump sum payment as soon as practicable following your Layoff Date. If you received your severance pay under Section 4(a) and you are rehired by the Company or any Controlled Group Member prior to the expiration of your Severance Period, you will be required to repay to the Company a portion of your severance pay. The portion of your severance pay that you will be required to repay will be equal to your Weekly Base Pay multiplied by the number of weeks remaining in your Severance Period from and after your date of rehire by the Company or any Controlled Group Member. Your "Severance Period" is the number of weeks used to calculate your severance pay, as specified in the schedule applicable to you under Section 4(a) above. Any other benefits provided to you under Section 4(c) through 4(e) will be provided to you at the time and by the means specified in such Sections. If you are rehired by the Company or any Controlled Group Member, you will not be required to repay any benefits you received under Sections 4(c) through 4(e), but any provisions of a relocation agreement entered into between you and the Company which are still applicable will continue to apply during the period of your rehire and at your later termination of employment. SECTION 6. - AMENDMENT AND TERMINATION Disney, acting through its President in its nonfiduciary capacity as settlor of the Plan, reserves the right, in its sole and absolute discretion, to terminate, amend or modify the Plan, in whole or in part, at any time and for any reason, prospectively or retroactively and with or without advance notice. If the Plan is terminated, amended or modified, your right to participate in, or receive benefits under, the Plan may be changed or eliminated. Neither the establishment of the Plan, nor any modification thereof, nor the payment of any benefits hereunder, will be construed as giving to any Participant, Employee (or any beneficiary of either), or other person any legal or equitable right against the Company or any officer, director or employee thereof, and in no event will the terms and conditions of employment by the Company of any Employee be modified or in any way affected by the Plan. This Plan does not give any Employee any vested right to Plan benefits. No individual may become entitled to additional benefits or other rights under the Plan after the Plan is terminated. SECTION 7. - MISCELLANEOUS PROVISIONS (a) Records. The records of the Company with respect to length of employment, employment history, base pay, absences, and all other relevant matters may be conclusively relied on by the Plan Administrator. (b) Governing Law. This Plan is an employee welfare benefit plan that is regulated by ERISA, a federal law. To the extent, if any, that state laws apply to the Plan, California law shall apply (except to the extent it would require use of another state's law). (c) Severability. Should any provisions of the Plan be deemed or held to be unlawful or invalid for any reason, the balance of the Plan shall remain in effect, unless it is amended or terminated as provided in Section 6. (d) Incompetency. If the Plan Administrator finds that a Participant is unable to care for his or her affairs because of illness or accident, then benefits payable hereunder, unless claim has been made therefor by a duly appointed guardian, committee, or other legal representative, may be paid in such manner as the Plan Administrator will determine, and will constitute a complete discharge of all liability for any payments or benefits to which such Participant was or would have been otherwise entitled under the Plan. (e) Assignment and Alienation. Except as required by law, the benefits payable under this Plan will not be subject to alienation, transfer, assignment, garnishment, execution or levy of any kind, and any attempt to cause any benefits to be so subjected will not be recognized. (f) Plan Not a Contract of Employment. Nothing contained in the Plan will be held or construed to create any liability upon the Company to retain any Employee in its service. All Employees will remain subject to discharge or discipline to the same extent as if the Plan had not been put into effect. Nothing in this Plan shall preclude the Company from terminating an Employee for any reason or no reason or preclude a person from being or continuing to be an at-will employee. (g) Overpayments. If any overpayment is made under the Plan for any reason, the Plan Administrator will have the right to recover the overpayment. The Participant shall cooperate fully with the Plan and return any overpayment. SECTION 8. - WHAT ELSE DO YOU NEED TO KNOW ABOUT THE PLAN? (a) Claim Procedure If you are a Participant in the Plan, you will automatically receive any benefits set forth under Section 4 of the Plan for which you are entitled. If you feel you have not been provided with all benefits to which you are entitled under the Plan, you may file a written claim with the Plan Administrator with respect to your rights to receive benefits from the Plan. You will be informed of the Plan Administrator's decision with respect to your claim within 90 days after it is filed. Under special circumstances, the Plan Administrator may require an additional period of not more than 90 days to review your claim. If this occurs, you will be notified in writing as to the length of the extension, the reason for the extension, and any other information needed in order to process your claim. If your claim is denied, in whole or in part, you will be notified in writing of the specific reason for the denial, the exact Plan provision on which the decision was based, what additional material or information is relevant to your claim, and what procedure you should follow to get your claim reviewed again. If you are not notified within the 90-day (or 180-day, if so extended) period, you may consider your claim to be denied. In either case, you then have 60 days to appeal the decision to the Plan Administrator. Your appeal must be submitted in writing. You may submit a written statement of issues and comments. A decision as to your appeal will be made within 60 days after the appeal is received. Under special circumstances, the Plan Administrator may require an additional period of not more than 60 days to review your appeal. If this occurs, you will be notified in writing as to the length of the extension, not to exceed 120 days from the day on which your appeal was received. If your appeal is denied, in whole or in part, you will be notified in writing of the specific reason for the denial and the exact Plan provision on which the decision was based. The decision on your appeal will be final and binding on all parties and persons affected thereby. If you are not notified within the 60-day (or 120-day, if extended) period you may consider your appeal as denied. (b) Plan Interpretation and Benefit Determination The Plan is administered and operated by the Plan Administrator, who has complete authority, in such person's sole and absolute discretion, to construe the terms of the Plan (and any related or underlying documents or policies), to interpret applicable law, to make findings of fact and to determine the eligibility for, and amount of, benefits due under the Plan to Participants or any persons claiming benefits derivatively through them. All such interpretations and determinations of the Plan Administrator (whether of fact or law) will be final and binding upon all parties and persons affected thereby. If challenged in a legal proceeding, the Plan Administrator's interpretations and determinations will be reviewed under the most deferential abuse of discretion standard of review. If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Plan Administrator in its sole and absolute discretion, the provision shall be considered ambiguous and shall be interpreted by the Plan Administrator in a fashion consistent with its intent, as determined in the sole and absolute discretion of the Plan Administrator. This Section 8(b) may not be invoked by you or any person to require the Plan to be interpreted in a manner inconsistent with its interpretation by the Plan Administrator. (c) Your Rights Under ERISA As a Participant in the Plan, you are entitled to certain rights and protections under ERISA. ERISA provides that all Plan Participants will be entitled to: (i) examine, without charge, at the Plan Administrator's office, and at other specified locations, all Plan documents; and (ii) obtain copies of all Plan documents upon written request to the Plan Administrator, who may make a reasonable charge for the copies. In addition to creating rights for Plan Participants, ERISA imposes duties upon the people who are responsible for the operation of an employee benefit plan. The people who operate your Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of you and other Plan Participants and beneficiaries. No one, including your Company or other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit under this Plan or exercising your rights under ERISA. If your claim for a welfare benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. Within certain time limits specified under Section 8(a) (Claim Procedure), you have the right to have the Plan review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits hereunder which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file a suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest office of the Pension and Welfare Benefits Administrator, U.S. Department of Labor, listed in the telephone directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Pension and Welfare Benefits Administration.
(d) Other Important Facts OFFICIAL NAME OF THE PLAN: Disney Severance Pay Plan SPONSOR: The Walt Disney Company 500 South Buena Vista Street Burbank, CA 91521 EMPLOYER IDENTIFICATION NUMBER (EIN): 95-4545390 PLAN NUMBER: 513 TYPE OF PLAN: Employee Welfare Severance Benefit Plan END OF PLAN YEAR: December 31 TYPE OF ADMINISTRATION: Employer Administered PLAN ADMINISTRATOR: Senior Vice President Human Resources The Walt Disney Company 500 South Buena Vista Street Burbank, CA 91521 (818) 560-1000 EFFECTIVE DATE: May 15, 2001
The Plan Administrator keeps records of the Plan and is responsible for the administration of the Plan. The Plan Administrator will also answer any questions you may have about the Plan. Service of legal process may be made upon the General Counsel of The Walt Disney Company at the address specified above. All benefits under the Plan are paid out of the general assets of the Company. The Plan is not funded and has no assets. EX-10.(D) 6 dex10d.txt AMENDED AND RESTATED ABC, INC. SIP EXHIBIT 10(d) ABC, INC. SAVINGS & INVESTMENT PLAN (September 1, 2001 Restatement) PREAMBLE This document amends and restates in its entirety the ABC, Inc. Savings & Investment Plan (the "Plan"), effective as of September 1, 2001. The most recent previous restatement of the Plan was effective as of April 1, 1998. The purposes of the Plan are to provide eligible employees with opportunities for (i) convenient and regular personal savings; (ii) sharing in contributions by the Company; and (iii) receiving benefits from the Fund, based on the contributions by the Company and the Member and the performance of the Fund's investments. Except as otherwise specifically provided herein, this restatement shall apply only to contributions to the Plan, and the operation of the Plan, from and after September 1, 2001. The operation of the Plan before September 1, 2001, shall be determined under the applicable instruments then in effect, except as otherwise provided herein. In general, the Plan as in effect before the effective date of any amendment shall continue to apply to those who terminated employment before such date. In no event shall any amendment (including any amendment made by this restatement) cause a Member's accrued benefit under the Plan to be less on the date the amendment was adopted (the "Amendment Date") than it was immediately before the Amendment Date. The provisions of Articles I through XVII of the Plan are modified by the provisions of the Schedules attached to the Plan. To the extent that the provisions of the Schedules are inconsistent with the provisions of Articles I through XVII of the Plan, the provisions of the Schedules shall supersede the conflicting provisions in Articles I through XVII. Effective September 1, 2001 (except to the extent that a particular provision of the Plan or the Schedule of Effective Dates specifies a different effective date), the Plan is hereby amended and restated to read in its entirety as follows: ARTICLE I: DEFINITIONS AND CONSTRUCTION 1.01 Definitions. For purposes of the Plan, unless a different meaning is plainly required by the context or is expressly provided, the following words and phrases, when used in capitalized form in the Plan, shall be defined as follows: (a) "Account" - a Member's After-Tax Contribution Account, Pre-Tax Contribution Account, Company Matching Account, and, if applicable, Old Company Matching Account, maintained in accordance with Section 7.07. (b) "Affiliate" - (1) a member of a controlled group of corporations of which the Company is a member, as determined under Section 414(b) of the Code; (2) an unincorporated trade or business that is under common control with the Company, as determined under Section 414(c) of the Code; (3) a member of any affiliated service group that includes the Company, as determined under Section 414(m) of the Code; (4) except to the extent otherwise provided in Treasury Regulations, a leasing organization with respect to the periods of service performed by an individual who is a leased employee, within the meaning Section 414(n) of the Code, with respect to the Company or an Affiliate (determined without regard to this paragraph (4)); and (5) any entity that is required to be aggregated with the Company pursuant to Treasury Regulations under Section 414(o) of the Code; provided that an entity described in this Section shall not be considered an Affiliate during the period preceding the date on which it becomes, or after the date on which it ceases to be, an Affiliate within the meaning of this Section. (c) "After-Tax Contributions" - Member contributions made in accordance with Section 5.02 (or any predecessor thereof). (d) "After-Tax Contribution Account" - the bookkeeping account, maintained in accordance with Section 7.07, that reflects the current value of the Member's After-Tax Contributions. (e) "Alternate Payee" - an alternate payee within the meaning of Section 414(p)(8) of the Code and Section 206(d)(3)(K) of ERISA. (f) "Beneficiary" - a person to whom a death benefit is payable in accordance with Article XII. (g) "Board of Directors" or "Board" - the Board of Directors of the Corporation (or the Executive Committee of the Board of Directors) as constituted from time to time. (h) "Break in Service" - in the case of a Full-Time Employee, the period following a Severance from Service and preceding reemployment by the Company or an Affiliate; and in the case of a Part-Time Employee, any Computation Period during which a Part-Time Employee does not complete at least 501 Hours of Service. (i) "Code" - the Internal Revenue Code of 1986, as from time to time amended. (j) "Committee" - the Employee Benefits Committee provided for in Section 13.01. (k) "Common Stock" - the common stock of Disney. (l) "Company" - the Corporation and any subsidiary or affiliate of the Corporation that, with the approval of the Board of Directors and subject to such conditions as the Board of Directors may impose, adopts the Plan; provided that an entity shall cease to be part of the Company, and shall cease to participate in the Plan, after the date on which it ceases to be a member of the controlled group of corporations that includes the Corporation, as determined under Section 414(b) of the Code. An entity will be considered to have adopted the Plan with the approval of the Board of Directors if it takes significant action that is consistent with the adoption of the Plan, the Board or Committee is aware of the action, and neither objects to the action. (m) "Company Matching Account" - the bookkeeping account, maintained in accordance with Section 7.07, that reflects the current value of the Company Matching Contributions made with respect to the Member on or after the Merger Date. (n) "Company Matching Contribution" - contributions made to the Plan by the Company pursuant to Section 5.04 (or any predecessor thereof). (o) "Compensation" - the amount paid by the Company to a Member who is an Eligible Employee, determined in accordance with Article III. (p) "Computation Period" - the Plan Year. Notwithstanding the foregoing, solely for purposes of Section 2.01, the Computation Period shall be, initially, the 12-consecutive-month period beginning on the first day for which the Employee is entitled to be credited with an Hour of Service described in Section 1.01(cc)(1)(i) (the "Employment Commencement Date"), and thereafter shall be the Plan Year (beginning with the Plan Year that includes the first anniversary of his Employment Commencement Date); provided that, solely for purposes of Section 2.01, an Employee who is credited with 1,000 Hours of Service in both the initial Computation Period and in the Plan Year that includes the first anniversary of his Employment Commencement Date shall be credited with two years of Service. (q) "Corporation" - ABC, Inc., and any successor thereto. (r) "Deferred Retirement Date" - in the case of a Member who is employed by the Company or an Affiliate after his Normal Retirement Date, the first day of the month coincident with or next following his Severance from Service. (s) "Disabled" - the Member's continuous inability, because of sickness or accident, to engage in any and every duty of his occupation. (t) "Disney" - The Walt Disney Company, a Delaware Corporation. (u) "Distribution Date" - the date as of which a withdrawal or distribution is made hereunder. (v) "Eligible Employee" - an Employee who is a regular Full-Time Employee of the Company or a regular Part-Time Employee of the Company and who is remunerated in U.S. currency, except that an individual described by any of the following paragraphs shall not be an Eligible Employee: (1) an Employee of the Company who is represented by a union unless the union and the Employer have entered into a collective bargaining or other agreement that provides that the Employee shall participate in the Plan; or (2) an Employee of the Company if at the time of the adoption of the Plan by the Employer, or thereafter, the Employer elects to exclude some or all employees described in Section 410(b)(3)(C) of the Code and the Employee is excluded from the Plan by reason of such election; or (3) a casual employee; or (4) an individual who is hired for what is intended by the Company to be a temporary period for a position in connection with a special event, such as Olympics coverage or Presidential election coverage; or (5) an individual who is hired in a position for a specific prime time program or series produced by the Entertainment Division of the ABC Television Network; or (6) an individual who is employed by the Company pursuant to an agreement that provides that the individual shall not be eligible to participate in the Plan; or (7) an Employee who is not classified as an employee by the Company, but who is treated as an Employee by reason of being treated as a "common law" employee of the Company pursuant to the standards prescribed by Internal Revenue Service Revenue Ruling 87-41 or any successor thereto; or (8) an Employee who is an Employee by reason of being treated as a "leased employee" of the Company pursuant to Section 414(n) or (o) of the Code; or (9) an Employee whose basic compensation for services on behalf of the Company is not paid directly by the Company. Notwithstanding the provisions of paragraphs (4) and (5) of this Section 1.01(v), an Employee described in either of said paragraphs shall be treated as an Eligible Employee to the extent that the terms of a collective bargaining agreement to which the Company is a party require the Employee to be treated as an Eligible Employee. Expiration of a collective bargaining agreement shall not by itself affect an Employee's status as an Eligible Employee pending execution of a new collective bargaining agreement. (w) "Employee" - a person who is an employee of the Company or an Affiliate, including a "leased employee" (within the meaning of Section 414(n) or (o) of the Code). (x) "Employer" - the Corporation or a subsidiary or affiliate of the Corporation that is part of the Company. (y) "ERISA" - the Employee Retirement Income Security Act of 1974, as from time to time amended. (z) "Full-Time Employee" - an Employee who is designated as full-time by the Employer or Affiliate that employs him under standards uniformly applicable to similarly situated Employees. (aa) "Fund" - the assets of the Plan held by the Trustee. (bb) "Highly Compensated Employee" - an Employee who is a highly compensated active employee within the meaning of Section 414(q) of the Code and the Treasury Regulation thereunder, the provisions of which are hereby incorporated herein by this reference, and any former Employee who had a separation year before the determination year and who was an active Highly Compensated Employee for either such former Employee's separation year or any determination year ending on or after the Employee's 55th birthday. For purposes of determining who is a Highly Compensated Employee under the Plan in accordance with Section 414(q) of the Code and this Section 1.01(bb), the following definitions and rules shall apply: (1) "compensation" means compensation within the meaning of Treasury Regulation Section 1.415-2(d)(2) and (3), including all elective or salary-reduction contributions to a cafeteria plan or a cash or deferred arrangement; (2) "determination year" means the Plan Year for which such determination is made; and (3) "separation year" means the determination year in which the Employee Severs from Service. (cc) "Hour of Service" - (1) each hour for which an Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliate (i) for the performance of duties or (ii) for reasons other than the performance of duties (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence; (2) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate, excluding any hours credited under paragraph (1), above; and (3) solely for the purpose of determining whether a Break in Service has occurred, hours, not in excess of 501, that would have been credited normally (or, if undeterminable, at the rate of eight hours per work day) but for an Employee's absence from work by reason of (i) the Employee's pregnancy, (ii) the birth of the Employee's child, (iii) the placement of a child with the Employee in connection with the Employee's adoption of the child, or (iv) the Employee's caring for such a child immediately following such birth or placement. Hours of Service described in this paragraph (3) shall be credited to the Computation Period in which the absence begins, if necessary to avoid a Break in Service, or if not so necessary, to the immediately following Computation Period. Hours of Service under this paragraph (3) shall be credited only if the Employee timely furnishes to the Employee's Employer (or the appropriate Affiliate if the Employee is employed by an Affiliate) such information as it requires to establish the reason for and the length of the absence. Notwithstanding the foregoing, no more than 501 Hours of Service shall be credited under paragraph (1)(ii) of this Section 1.01(cc) to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not that period occurs in a single Computation Period); an hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the Employee if the payment is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation or unemployment compensation or disability insurance laws; and Hours of Service shall not be credited for a payment that solely reimburses an Employee for medical or medically related expenses incurred by the Employee. An individual who is a "leased employee" (within the meaning of Section 414(n) or (o) of the Code) of the Company or an Affiliate shall be credited with Hours of Service to the same extent as if he had been employed and paid by the Company or the Affiliate for which he performs services; provided that a leased employee shall not be credited with Hours of Service for any period during which the safe harbor requirement of Section 414(n)(5) of the Code is satisfied with respect to such leased employee. The provisions of Labor Regulation Section 2530.200b-2(b) and (c) are incorporated herein by this reference. Notwithstanding anything in this Section 1.01(cc) to the contrary, and except as otherwise required by Labor Regulation Section 2530.200b-3(e), an Employee's Hours of Service before September 1, 2001, shall be determined exclusively by crediting the Employee with 10 Hours of Service for each day in which the Employee completes at least one Hour of Service and without regard to whether the Employee actually completes more (or less) than 10 Hours of Service on that day; provided that if an Employee has completed at least three years of Service on September 1, 2001, whether the Employee completes five years of Service for purposes of Section 9.02(c) shall be determined in accordance with the provisions of this Section 1.01(cc) or the provisions of Section 1.01(cc) in effect on August 31, 2001, which produces the greater number of years of Service for the Employee. (dd) "Investment Committee" - the Investment and Administrative Committee of The Walt Disney Company Sponsored Qualified Benefit Plans and Key Employees Deferred Compensation and Retirement Plan. (ee) "Investment Fund" - an investment fund maintained pursuant to Section 7.03. (ff) "Investment Manager" - a Plan fiduciary (other than the Trustee) that (i) has the power to manage, acquire, or dispose of any asset of the Plan; (ii) has acknowledged in writing that it is a fiduciary with respect to the Plan; and (iii) is registered as an investment adviser under the Investment Advisers Act of 1940, is a bank as defined in that Act, or is an insurance company qualified to perform services described in clause (i) of this Section 1.01(ff) under the laws of more than one State. (gg) "Labor Regulation" - a regulation issued by the Secretary of Labor under ERISA. (hh) "Leave of Absence" - a temporary period of absence (of up to two years) from employment with the Company and the Affiliates that is approved by the Employer or an Affiliate in accordance with rules that shall be applied uniformly, so that all Employees in similar circumstances are treated alike. Any Employee who leaves the Company and the Affiliates directly to perform service in the armed forces of the United States under conditions entitling him to reemployment rights under the laws of the United States shall be regarded as being on a Leave of Absence during his absence from the Company and the Affiliates; provided that if the Employee fails to make application for reemployment with the Company or an Affiliate within the period specified by such laws for the preservation of reemployment rights, the Employee shall be regarded as having Separated from Service on the date the Leave of Absence began. (ii) "Limitation Year" - the calendar year. (jj) "Loan" - a loan by the Plan to a Member in accordance with Article X. (kk) "Lump-Sum Distribution" - a Voluntary Lump-Sum Distribution or a Mandatory Lump-Sum Distribution. (ll) "Mandatory Lump-Sum Distribution" - a single payment made in accordance with Section 12.05 or 12.07. (mm) "Member" - an Eligible Employee who becomes a Member pursuant to Article II, or a former Eligible Employee who previously became a Member pursuant to Article II, but only for so long as such Eligible Employee or former Eligible Employee is considered a Member in accordance with Section 2.02. (nn) "Merger" - the merger of the Corporation with DCB Merger Corp., a Delaware corporation. (oo) "Merger Date" - the effective date of the Merger. (pp) "Normal Retirement Age" - age 65. (qq) "Normal Retirement Date" - the first day of the month coincident with or next following the attainment of Normal Retirement Age. (rr) "Old Company Matching Account" - the bookkeeping account, maintained in accordance with Section 7.07, that reflects the current value of the Company Matching Contributions made with respect to the Member before the Merger Date. (ss) "Optional Form of Payment" - a form of payment described in Section 12.04. (tt) "Part-Time Employee" - an Employee who is not a Full-Time Employee. (uu) "Plan" - the ABC, Inc. Savings & Investment Plan, as the same may be amended from time to time. (vv) "Plan Administrator" - the Corporation when acting in its capacity as the "administrator" of the Plan pursuant to Section 13.11. (ww) "Plan Year" - the calendar year. (xx) "Pre-Tax Contributions" - contributions made to the Plan by the Company at the election of the Member pursuant to Section 5.01 (or any predecessor thereof). (yy) "Pre-Tax Contribution Account" - the bookkeeping account, maintained in accordance with Section 7.07, that reflects the current value of the Pre-Tax Contributions made with respect to a Member. (zz) "Predecessor Company" - an entity or predecessor thereof, prior, in either case, to its becoming, or to its becoming part of, the Company or an Affiliate, as determined by the Board of Directors. (aaa)"Qualified Domestic Relations Order" - a qualified domestic relations order within the meaning of Section 206(d)(3) of ERISA and Section 414(p) of the Code. (bbb)"Retirement" - the Member's retirement under the terms of a defined benefit Tax-Qualified Plan maintained, or contributed to, by the Company or an Affiliate. (ccc)"Rollover Contributions" - contributions to the Plan pursuant to Section 5.06 (or any predecessor thereof). (ddd)"Section" - a section of the Plan, except that where, in context, the term "Section" plainly refers to a statutory or regulatory provision, "Section" shall refer to a section of the pertinent statute or regulation (e.g., Section 401(a) of the Code or Section 3(16)(A) of ERISA). (eee)"Service" - a Member's service with the Company or an Affiliate, computed in accordance with Article IV and used to determine vesting or eligibility for membership under the Plan. (fff)"Sever from Service" - incur a Severance from Service. (ggg)"Severance from Service" - the earlier of (1) the date an Employee terminates employment with the Company and the Affiliates by reason of a quit, discharge, retirement, or death and (2) the first anniversary of the date the Employee is first absent (but not on a Leave of Absence) from employment by the Company and the Affiliates for any other reason. (hhh)"Schedule" - a schedule appearing at the end of the Plan. (iii)"Successor Company" - a former part of the Company, a former Affiliate, or a former part of an Affiliate, after the date on which it ceases to be a part of the Company, an Affiliate, or a part of an Affiliate. (jjj)"Surviving Spouse" - the individual to whom a Member is married on the date of the Member's death. (kkk)"Tax-Qualified Plan" - a plan that is, or that has been determined by the Internal Revenue Service to be, qualified under Section 401(a) or 403(a) of the Code. (lll)"Treasury Regulation" - a regulation issued by the Secretary of the Treasury under the Code. (mmm) "Trust" - any trust that holds all or part of the Fund. Any such trust may also hold the assets of plans other than this Plan. (nnn)"Trust Agreement" - the agreement or agreements entered into by the Corporation evidencing the Trust, as the same may be amended from time to time. (ooo)"Trustee" - the trustee or trustees acting under the Trust Agreement. (ppp)"Valuation Date" - the last business day of each calendar month and any other date or dates designated by the Committee for the valuation of Accounts. (qqq)"Value" - the value of an Account, determined in accordance with Section 7.07. (rrr)"Voluntary Lump-Sum Distribution" - a single payment made in accordance with Article XII (other than a Mandatory Lump-Sum Distribution or a distribution made in accordance with Section 12.04). 1.02 Construction. Unless the contrary is plainly required by the context, wherever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender, and vice versa, and wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form, and vice versa. ARTICLE II: MEMBERSHIP 2.01 Membership. An individual who was a Member on August 31, 2001, shall be a Member on September 1, 2001. Every other Employee shall be eligible to become a Member as of the first day of the month that coincides with or next follows his completion of one year of Service, but only if he is an Eligible Employee on that date. If he is not an Eligible Employee on that date, he shall be eligible to become a Member on the first day of the first calendar month thereafter on which he is an Eligible Employee. 2.02 Duration of Membership. Once an Eligible Employee has become a Member, he shall continue to be a Member until his entire nonforfeitable accrued benefit under the Plan has been distributed or his death, whichever occurs first. Once his entire nonforfeitable accrued benefit under the Plan has been distributed or his death occurs, a Member shall cease to be a Member. 2.03 Reemployment. If a current or former Member is no longer an Eligible Employee, he shall cease to be eligible to participate actively in the Plan, but if he is reemployed by the Company as an Eligible Employee, he shall be eligible to participate actively in the Plan on the first day of the first calendar month occurring on or after the date on which he again performs an Hour of Service (within the meaning of Section 1.01(cc)(1)(i)) for the Company as an Eligible Employee. 2.04 Enrollment. An Eligible Employee who is eligible to become a Member in accordance with the preceding provisions of this Article II may become a Member by enrolling in the Plan in such manner and form, and at such time, as the Committee shall prescribe. Similarly, a Member who has ceased to participate actively in the Plan, but who is eligible to resume active participation, may resume active participation in the Plan by re-enrolling in the Plan in such manner and form, and at such time, as the Committee shall prescribe. 2.05 Veterans' Benefits. Notwithstanding any provision of this Plan to the contrary, in the case of reemployments initiated on or after December 12, 1994, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the Code. ARTICLE III : COMPENSATION 3.01 Compensation. (a) Except as provided in Section 3.01(b), "Compensation" means amounts paid by the Company to a Member who is an Eligible Employee as basic salary and as commissions and sales bonuses, if any, and amounts contributed on behalf of the Member to a cafeteria plan or a cash or deferred arrangement and not included in the Member's gross income for federal income tax purposes under Section 125 or 402(e)(3) of the Code, but excluding bonuses (other than sales bonuses), incentive compensation, profit participation, and compensation for overtime or extended work week and any other items of remuneration. (b) In the case of a Member who is represented by a union, "Compensation" means the amount of covered compensation prescribed by the collective bargaining agreement with the Employer pursuant to which he is treated as an Eligible Employee. 3.02 Compensation Limit. In addition to other applicable limitations that may be set forth in the Plan, and notwithstanding any other contrary provision of the Plan, annual Compensation taken into account under the Plan for the purpose of calculating the contributions to the Plan by or in respect of a Member for any Plan Year shall not exceed the applicable compensation limit under Section 401(a)(17) of the Code and the Treasury Regulation interpreting that Section, adjusted for changes in the cost of living as provided in that Section and the applicable Treasury Regulation. Effective January 1, 1989, the annual compensation used in determining contributions for periods beginning on or after that date was $200,000 (indexed). Effective January 1, 1994, the annual compensation used in determining contributions for periods beginning on or after that date is $150,000 (indexed). ARTICLE IV: SERVICE 4.01 Service. Except as otherwise provided in this Article IV, a Full-Time Employee's Service shall be the sum of the years and fractions of a year of service credited as follows: (a) The Employee's service through December 31, 1983, if any, as determined under the Plan as in effect on December 31, 1983, or under the Plan as in effect on January 1, 1984, whichever results in the greater number of years of Service; plus (b) The Employee's years and fractions of a year in completed months as an Employee of the Company or an Affiliate (but only from the date it became an Affiliate) after December 31, 1983, until he Severs from Service (provided that if an Employee completes an Hour of Service, within the meaning of Section 1.01(cc)(1)(i), before the first anniversary of his Severance from Service, the Severance from Service shall be deemed not to have occurred for purposes of this Section 4.01(b)). 4.02 Service of Part-Time Employees. Except as otherwise provided in this Article IV, a Part-Time Employee's Service shall be determined as follows and without regard to the provisions of Section 4.01: (a) A year of Service shall include any Computation Period beginning before January 1, 1976, if such period qualified as a year of Service under the Plan as in effect on either December 31, 1975, or January 1, 1976. (b) A year of Service shall include any Computation Period beginning after December 31, 1975, in which the Employee completes 1,000 or more Hours of Service with the Company and the Affiliates. 4.03 Other Service-Crediting Provisions. (a) To the extent determined by the Board of Directors, the Member's Service shall include his service as an employee of a Predecessor Company if the Member was an employee of the Predecessor Company when it became, or became a part of, the Company and the Affiliates. (b) An individual who is a "leased employee" (within the meaning of Section 414(n) or (o) of the Code) of the Company or an Affiliate shall be credited with Service to the same extent as if he had been employed and paid by the Company or Affiliate for which he performs services; provided that a leased employee shall not be credited with Service for any period during which the safe harbor requirement of Section 414(n)(5) of the Code is satisfied with respect to the leased employee. 4.04 Interruption of Service. (a) Employment before January 1, 1976, shall be disregarded in determining Service if such employment would have been disregarded under the rules of the Plan with regard to breaks in service as such rules were in effect on December 31, 1975. (b) If a Full-Time Employee Severs from Service before having acquired a nonforfeitable interest in the Value of his Company Matching Account, and if he thereafter returns to employment with the Company or an Affiliate at a time when his Break in Service equals or exceeds the greater of (i) five years and (ii) his years of Service, upon his subsequent return to employment with the Company or an Affiliate, his prior Service shall be disregarded for all purposes. (c) If a Full-Time Employee Severs from Service and returns to employment with the Company or an Affiliate as an Employee, and Section 4.04(b) does not apply, all of his Service shall be added together except for such Service as is disregarded pursuant to the other provisions of this Section 4.04 (by reason of prior or subsequent breaks in service) or Section 4.08; provided that for purposes of determining a Member's nonforfeitable interest in his Company Matching Account, periods of Service shall not be added together pursuant to this Section before the Employee completes one year of Service following his resumption of employment. (d) If a Part-Time Employee incurs a Break in Service before having acquired a nonforfeitable interest in the Value of his Company Matching Account, and if he thereafter returns to employment with the Company or an Affiliate at a time when his Break in Service equals or exceeds the greater of (i) five years and (ii) his years of Service, upon his subsequent return to employment with the Company or an Affiliate, his prior Service shall be disregarded for all purposes. (e) If a Part-Time Employee incurs a Break in Service and returns to employment with the Company or an Affiliate as an Employee, and Section 4.04(d) does not apply, all of his Service shall be added together except for such Service as is disregarded pursuant to the other provisions of this Section 4.04 (by reason of prior or subsequent breaks in service) or Section 4.08; provided that for purposes of determining a Member's nonforfeitable interest in his Company Matching Account, periods of Service shall not be added together pursuant to this Section before the Employee completes one year of Service following his resumption of employment. (f) For purposes of this Section 4.04, all references to the Member's Company Matching Account shall be deemed to refer both to the Member's Company Matching Account and to the Member's Old Company Matching Account, if any. 4.05 Leaves of Absence. (a) The period of a Leave of Absence shall be included in determining an Employee's Service. An Employee shall be deemed to remain an Employee during any Leave of Absence, provided that he returns to employment as an Employee on or before the expiration of the Leave or any extension thereof or shall die during such Leave. (b) If a period of family or medical leave is not otherwise treated as a Leave of Absence pursuant to this Section 4.05, the Employee shall be credited with Service during such period, and shall participate in any Plan changes that become effective during such period, but only to the extent required by the Family and Medical Leave Act of 1993. (c) If a Full-Time Employee is absent from employment with the Company and the Affiliates by reason of (i) the Employee's pregnancy, (ii) the birth of the Employee's child, (iii) the placement of a child with the Employee in connection with the Employee's adoption of the child, or (iv) the Employee's caring for such a child immediately following such birth or placement, the period between the first and second anniversaries of his period of absence shall be treated neither as a period of Service (unless the Employee is otherwise on a Leave of Absence during such period) nor as a Break in Service; provided that this Section 4.05(c) shall apply only if the Employee timely furnishes to the Employee's Employer (or the appropriate Affiliate if the Employee is employed by an Affiliate) such information as it requires to establish the reason for and the length of the absence. 4.06 Employment With a Successor Company. (a) Except as provided in Section 4.06(b), a Member's Service shall not include the Member's years and fractions of a year in completed months as an employee of a Successor Company. (b) The Board of Directors may adopt an amendment to the Plan pursuant to which Members shall continue to accrue Service, to the extent specified in the amendment, for employment with a particular Successor Company identified in the amendment. (c) For purposes of any provision of the Plan that permits a Member to receive a distribution on or after his Severance from Service, the Member shall not be entitled to receive such a distribution during either of the following periods: (1) Any period during which the Member continues to accrue Service with a Successor Company pursuant to a written amendment described in Section 4.06(b). (2) With respect to the Member's Pre-Tax Account, any period during which the Member remains employed by a Successor Company or by a member of the Successor Company's controlled group (within the meaning of Section 414(b), (c), (m), or (o) of the Code) except to the extent that a distribution is permitted by Section 401(k)(2)(B)(i)(II) of the Code and the Treasury Regulation thereunder. 4.07 Fractional Months of Service. Fractional years and months of Service (and fractional years and months of a Break in Service) completed by a Full-Time Employee shall be aggregated. For this purpose, 12 months shall be deemed to equal one year, and 30 days shall be deemed to equal one month. 4.08 Non-duplication. Notwithstanding anything to the contrary in this Article IV, a Member shall not receive credit under the Plan for a single period of service more than once for computing Service. ARTICLE V: CONTRIBUTIONS 5.01 Pre-Tax Contributions. (a) A contribution made pursuant to this Section 5.01 shall be known as a "Pre-Tax Contribution." Subject to the limitations imposed by this Article V and Article VI, each Member may elect that his Employer shall contribute monthly to the Plan a whole percentage of his Compensation (designated by the Member) equal to not less than 1 percent nor more than 10 percent of his Compensation for the Plan Year; provided that such elected whole percentage (of not less than 1 percent nor more than 10 percent) shall be applied separately to the Member's Compensation in each payroll period; and provided further that combined Pre-Tax and After-Tax Contributions on a Member's behalf for any payroll period may not exceed 10 percent of the Member's Compensation in that payroll period. (b) Contributions pursuant to this Section 5.01 shall be made only with respect to amounts that the Member could otherwise elect to receive in cash and that are not currently available to the Employee as of the date of his election. (c) The Pre-Tax Contributions for a calendar month shall be transmitted to the Trustee as soon as practicable after the end of that month, and the Member's Compensation shall be reduced by the amount of the Pre-Tax Contributions made on his behalf. Pre-Tax Contributions made on behalf of a Member shall be credited to his Pre-Tax Contribution Account as soon as practicable after the Pre-Tax Contributions are received by the Trustee. (d) If the limitation imposed by Section 6.01 prevents the Employer from making a Pre-Tax Contribution on behalf of a Member, the Member shall automatically be deemed to have elected to make an After-Tax Contribution equal to the amount of the Pre-Tax Contribution that the Employer was prevented from making except to the extent that the Committee determines that such After-Tax Contributions would cause the Plan to exceed (or to continue to exceed) the actual percentage contribution test imposed by Section 6.03 or to violate (or to continue to violate) the prohibition against multiple use imposed by Section 6.04. 5.02 After-Tax Contributions. (a) A contribution made pursuant to this Section 5.02 shall be known as an "After-Tax Contribution." Subject to the limitations imposed by this Article V and Article VI, each Member may elect to contribute to the Plan a whole percentage of his Compensation (designated by the Member) equal to not less than 1 percent nor more than 10 percent of the Member's Compensation for the Plan Year; provided that such elected whole percentage (of not less than 1 percent nor more than 10 percent) shall be applied separately to the Member's Compensation in each payroll period; and provided further that combined Pre-Tax and After-Tax Contributions on a Member's behalf for any payroll period may not exceed 10 percent of the Member's Compensation in that payroll period. (b) After-Tax Contributions shall be made exclusively by payroll deduction in a manner to be determined by the Committee. (c) The After-Tax Contributions for a calendar month shall be paid to the Trustee as soon as practicable after the end of that month. After-Tax Contributions shall be credited to the Member's After-Tax Contribution Account as soon as practicable after the After-Tax Contributions are received by the Trustee. 5.03 Change in Contribution Rate. (a) Subject to Sections 5.01 and 5.02, a Member may change the rate at which future Pre-Tax Contributions and/or After-Tax Contributions are made on the Member's behalf by notifying the Company in such manner and form, and at such time, as the Company shall require. The change shall become effective as soon as administratively possible after such notice is received. (b) This Section 5.03 also applies to a Member who wishes to elect to suspend future Pre-Tax Contributions and/or After-Tax Contributions and to an Eligible Employee who wishes to commence Pre-Tax Contributions and/or After-Tax Contributions. A Member who has elected to suspend Pre-Tax Contributions and/or After-Tax Contributions may elect to resume making such contributions in accordance with the preceding provisions of this Section 5.03. 5.04 Company Matching Contributions. (a) A contribution made pursuant to this Section 5.04 shall be known as a "Company Matching Contribution." Subject to the limitations imposed by Article VI, each Member's Employer shall make Company Matching Contributions to the Plan in an amount equal to 50 percent of so much of the combined Pre-Tax Contributions and After-Tax Contributions on behalf of the Member as do not exceed five percent of the Member's Compensation. (b) The Company Matching Contributions for a Plan Year shall be made by the Company to the Trustee by the due date for the filing of the Company's federal income tax return for the Plan Year (including any extensions thereof) or at such earlier date or dates as the Company may determine in its sole discretion. Company Matching Contributions made on behalf of a Member shall be credited to his Old Company Contribution Account (for Company Matching Contributions made before the Merger Date) or to his Company Matching Account (for Company Matching Contributions made on or after the Merger Date) as soon as practicable after the Company Matching Contributions are received by the Trustee. 5.05 Contributions Contingent on Deductibility. Each Pre-Tax Contribution and each Company Matching Contribution shall be made on the condition that it is deductible under Section 404 of the Code in the taxable year of the Employer with respect to which the contribution is made. 5.06 Rollover Contributions. (a) A contribution made pursuant to this Section 5.06 shall be known as a "Rollover Contribution." At the discretion of the Committee, an individual who becomes an Eligible Employee as the direct result of the acquisition of a Predecessor Company by the Company may elect to contribute or to transfer to the Fund, in cash, all or part of his account balance under a Tax-Qualified Plan maintained by the Predecessor Company, but only if the contribution or transfer meets such conditions as the Committee may establish and only if the Committee determines that, in the case of a contribution, the amount to be contributed qualifies as an "eligible rollover distribution" within the meaning of Section 402(c)(4) of the Code, or, in the case of a transfer, that the transfer will not cause the Plan to become subject, in whole or in part, to the joint and survivor annuity and qualified preretirement survivor annuity requirements imposed by Sections 401(a)(11)(A) and 417 of the Code, unless otherwise authorized by the Committee. (b) A Member's Rollover Contribution shall be allocated among the segments of the Member's Account as determined by the Committee in its sole discretion. (c) Company Matching Contributions shall not be made with respect to Rollover Contributions. 5.07 Return of Employer Contributions. If a Pre-Tax Contribution or a Company Matching Contribution was made (i) by reason of a mistake of fact, or (ii) on the condition that it was currently deductible as provided in Section 5.05 and such amount is subsequently determined not to be currently deductible as provided in Section 5.05, the contribution (adjusted for any investment losses allocable thereto, but not for any investment gains allocable thereto) shall be refunded to the Company; provided that in the case of a contribution described in clause (i), the refund may be made only within one year after the payment of the contribution; and provided further that in the case of a contribution described in clause (ii), the refund may be made only within one year after the disallowance of the deduction and may be made only to the extent that the deduction was disallowed. 5.08 Two Separate Contracts. Contributions to the Plan shall be made pursuant to two separate contracts for purposes of Section 72(e) of the Code. After-Tax Contributions made after December 31, 1986, plus any gains and minus any losses thereon, shall be allocated to one contract (the "first contract"), and all other contributions to the Plan, plus any gains and minus any losses thereon, shall be allocated to the other contract (the "second contract"). If a Member withdraws After-Tax Contributions from the Plan pursuant to Article XI, the withdrawal shall be made first from the second contract (until all of the Member's After-Tax Contributions thereunder have been withdrawn) and then from the first contract. ARTICLE VI : LIMITATIONS ON CONTRIBUTIONS 6.01 Limit on Pre-Tax Contributions. For Plan Years beginning on or after January 1, 1987, the aggregate elective deferrals (as defined in Section 402(g)(3) of the Code) made on behalf of each Member under the Plan shall not exceed: (a) $7,000 (as adjusted by the Secretary of the Treasury or his delegate for increases in the cost of living pursuant to Section 402(g) of the Code, provided that no such adjustment shall be taken into account hereunder before the Plan Year in which it becomes effective), reduced by (b) the sum of any of the following amounts that were contributed on behalf of the Member for the Plan Year under a plan, contract, or arrangement other than this Plan: (1) any employer contribution under a qualified cash or deferred arrangement (as defined in Section 401(k) of the Code) to the extent not includable in the Member's gross income for the taxable year under Section 402(a)(8) of the Code (determined without regard to Section 402(g) of the Code); (2) any employer contribution to the extent not includable in the Member's gross income for the taxable year under Section 402(h)(1)(B) of the Code (determined without regard to Section 402(g) of the Code); and (3) any employer contribution to purchase an annuity contract under Section 403(b) of the Code under a salary reduction agreement (within the meaning of Section 3121(a)(5)(D) of the Code); provided that no contribution described in this subsection (b) shall be taken into account for the purpose of reducing the dollar limit in subsection (a), above, if the plan, contract, or arrangement is not maintained by the Company or an Affiliate unless the Member has filed a notice with the Committee, in such manner and former, at such time, and containing such information concerning the contribution as the Committee shall require. 6.02 Actual Deferral Percentage Test. For Plan Years beginning after December 31, 1986, the Plan shall satisfy the actual deferral percentage test set forth in Section 401(k)(3) of the Code and Treasury Regulation Section 1.401(k)-1(b), the provisions of which are hereby incorporated herein by this reference. For Plan Years beginning after December 31, 1996, the actual deferral percentage test shall be applied using the prior year testing method set forth in Section 401(k)(3) of the Code and the Treasury Regulations and other guidance issued thereunder. 6.03 Actual Contribution Percentage Test. For Plan Years beginning after December 31, 1986, the Plan shall satisfy the actual contribution percentage test set forth in Section 401(m)(2) of the Code and Treasury Regulation Section 1.401(m)-1(b), the provisions of which are hereby incorporated herein by this reference. For Plan Years beginning after December 31, 1996, the actual contribution percentage test shall be applied using the prior year testing method set forth in Section 401(m)(2) of the Code and the Treasury Regulations and other guidance issued thereunder. 6.04 Prohibition on Multiple Use. For Plan Years beginning after December 31, 1988, the Plan shall not violate the prohibition against multiple use of the alternative methods of compliance with Section 401(k) and (m) of the Code. The prohibition is set forth in Section 401(m)(9) of the Code and Treasury Regulation Section 1.401(m)-2, the provisions of which are hereby incorporated herein by this reference. 6.05 Maximum Contributions. (a) In addition to any other limitation set forth in the Plan and notwithstanding any other provision of the Plan, in no event shall the annual additions to a Member's Account under the Plan, together with the aggregate annual additions to the Member's accounts under all other defined contribution plans required to be aggregated with the Plan under the provisions of Section 415 of the Code, increase to an amount that exceeds the maximum amount permitted under Section 415 of the Code, the provisions of which are incorporated herein by this reference. (b) For Plan Years beginning before January 1, 2000, if the sum of the Member's defined benefit plan fraction and defined contribution plan fraction (as defined in Section 415(e) of the Code) exceeds 1.0 for a Limitation Year (except to the extent permitted under any transition rule described in Section 1106(i) of the Tax Reform Act of 1986 (and any other transition rules that preserved the Member's existing accrued benefit upon the adoption of Section 415 of the Code or upon any subsequent amendment to Section 415), or under Treasury Regulations or other guidance under Section 415), the Company shall cause the annual additions to the Member's Account under the Plan to be reduced to the extent necessary to comply with the limitation imposed by Section 415(e). (c) If the limitations imposed by this Section 6.05 apply to a Member who is entitled to benefits and/or annual additions under one or more tax-qualified plans with which the Plan is aggregated for purposes of Section 415 of the Code, the benefits and/or annual additions under the Plan and such other plan or plans shall be reduced in the following order, to the extent necessary to prevent the Member's benefits and/or annual additions from exceeding the limitations imposed by this Section (after the application of Section 6.07(a)): (1) Benefits under all defined benefit plans in which the Member participated and with which the Plan is aggregated for purposes of Section 415 of the Code, in an order based on the chronology of the accrual of the benefits, beginning with the benefit that accrued last and ending with the benefit that accrued first; and (2) Annual additions under the Plan and all defined contribution plans in which the Member participated and with which the Plan is aggregated for purposes of Section 415 of the Code, in an order based on the chronology of the annual additions to the plans, beginning with the last annual addition and ending with the first annual addition. 6.06 Imposition of Limitations. The Committee may limit the amount of a Member's Pre-Tax Contributions and After-Tax Contributions during a Plan Year to the extent that the Committee determines that the imposition of such a limit is necessary or appropriate to ensure that the Plan will satisfy the requirements of this Article. Any such limitation may be imposed either at the beginning of the Plan Year, during the Plan Year, or both, as determined by the Committee in its discretion. 6.07 Return of Excess Deferrals and Excess Contributions. (a) If a Member's Pre-Tax Contributions or After-Tax Contributions cause the annual additions to a Member's Account to exceed the limit imposed by Section 6.05, such excess contributions (plus or minus any gains or losses thereon) shall be returned to the Member (with priority being given first to the Pre-Tax Contributions and After-Tax Contributions for which no Company Matching Contributions were made and then to After-Tax Contributions rather than to Pre-Tax Contributions). Contributions returned pursuant to this subsection (a) shall be disregarded in applying the limits imposed by Sections 6.01 through 6.04. (b) After any excess annual additions (plus or minus any gains or losses thereon) with respect to a Plan Year have been distributed as provided in subsection (a), above, if a Member's elective deferrals (as defined in Section 402(g)(3) of the Code) with respect to a Plan Year exceed the limit imposed by Section 402(g) of the Code (as incorporated in Section 6.01), the following rules shall apply to such excess (the Member's "excess deferrals"): (1) Not later than the first January 31 following the close of the Plan Year, the Member may allocate to the Plan all or any portion of the Member's excess deferrals for the Plan Year (provided that the amount of the excess deferrals allocated to the Plan shall not exceed the amount of the Member's Pre-Tax Contributions to the Plan for the Plan Year that have not been withdrawn or distributed) and may notify the Employer, in writing, of the amount allocated to the Plan. (2) If excess deferrals have been made to the Plan on behalf of a Member for a Plan Year, the Member shall be deemed to have allocated such excess deferrals to the Plan pursuant to subsection (b)(1), above, and the Plan shall distribute such excess deferrals pursuant to subsection (b)(3), below. (3) As soon as practicable, but in no event later than the first April 15th following the close of the Plan Year, the Plan shall distribute to the Member the amount allocated or deemed allocated to the Plan under subsection (b)(1) or (b)(2), above (plus or minus any gains or losses thereon). The distribution described in this subsection (b)(3) shall be made notwithstanding any other provision of the Plan. (c) After any excess annual additions (plus or minus any gains or losses thereon) with respect to a Plan Year have been distributed as provided in subsection (a), above, after any excess deferrals (plus or minus any gains or losses thereon) with respect to a Plan Year have been distributed as provided in subsection (b), above, and after any action pursuant to Section 6.06 with respect to the Plan Year has been taken, if the actual deferral percentage for the Plan Year of those Members who are Highly Compensated Employees exceeds the limit imposed by Section 6.02, the following rules apply: (1) The amount of the excess contributions for the Plan Year (determined in accordance with paragraph (3), below), plus or minus any gains or losses thereon, shall be distributed to Members who are Highly Compensated Employees on the basis of the portion of the excess contributions attributable to each such Member (determined in accordance with paragraph (4), below). This distribution shall be made as soon as practicable, but in no event later than the close of the Plan Year following the close of the Plan Year with respect to which the excess contributions were made. The gains or losses on excess contributions shall be determined by multiplying the total annual earnings (positive or negative) for the Plan Year in the Member's Pre-Tax Contribution Account by a fraction, the numerator of which is the amount of the excess contributions and the denominator of which is the value of the Member's Pre-Tax Contribution Account as of the last day of the Plan Year, reduced by any positive earnings (or increased by any negative earnings) credited to the Member's Pre-Tax Contribution Account for the Plan Year. (2) In accordance with Treasury Regulations, and subject to such other rules as the Committee shall prescribe, a Member who is a Highly Compensated Employee may elect, in such manner and at such time as the Committee shall prescribe, to treat as an After-Tax Contribution the portion of the excess contributions attributable to him (determined in accordance with paragraph (4), below), except to the extent that such After-Tax Contribution would cause the Plan to exceed (or to continue to exceed) the contribution percentage limit imposed by Section 6.03 or to violate (or to continue to violate) the prohibition against multiple use imposed by Section 6.04. (3) The amount of the excess contributions for a Plan Year is the total of the amounts (if any) by which the Pre-Tax Contributions of each Highly Compensated Employee for the Plan Year would have to be reduced in order that each Highly Compensated Employee's actual deferral ratio not exceed the highest permitted actual deferral ratio under the Plan. To calculate the highest permitted actual deferral ratio under the Plan, the actual deferral ratio of the Highly Compensated Employee with the highest actual deferral ratio is reduced by the amount required to cause his actual deferral ratio to equal the actual deferral ratio of the Highly Compensated Employee with the next highest actual deferral ratio. If a lesser reduction would enable the Plan to satisfy the actual deferral percentage test (determined in accordance with Section 6.02) if only the actual deferral ratio as so reduced were taken into account, only the lesser reduction may be made. This process shall be repeated until the Plan would satisfy the actual deferral percentage test if only the actual deferral ratios as so reduced were taken into account. The highest actual deferral ratio remaining under the Plan after the foregoing leveling process has been completed shall be the highest permitted actual deferral ratio. (4) The portion of the excess contributions for a Plan Year (determined in accordance with paragraph (3), above) that is attributable to a Highly Compensated Employee is determined by (i) reducing the amount of the Pre-Tax Contributions of the Highly Compensated Employee with the largest amount of Pre-Tax Contributions for the Plan Year by the amount required to cause the amount of his Pre-Tax Contributions to equal the amount of the Pre-Tax Contributions of the Highly Compensated Employee with the next largest amount of Pre-Tax Contributions for the Plan Year, (ii) treating the amount of the reduction as the portion of the excess contributions that is attributable to the first Highly Compensated Employee, and (iii) continuing in the same manner until all excess contributions for the Plan Year have been attributed to a Highly Compensated Employee. The distribution described in paragraph (1), above, shall be made notwithstanding any other provision of the Plan. The distribution described in paragraph (1), above, or recharacterized under paragraph (2), above, for a Plan Year with respect to a Member shall be reduced by any excess deferral previously distributed from the Plan to such Member for the Member's taxable year ending with or within such Plan Year. Paragraphs (3) and (4) shall be interpreted and applied in accordance with Section 401(k)(3) of the Code and the Treasury Regulations and other guidance issued thereunder. (d) If a Member's Pre-Tax Contributions or After-Tax Contributions (plus or minus any gains or losses thereon) are returned to him pursuant to the provisions of this Section 6.07, any Company Matching Contributions (plus or minus any gains or losses thereon) with respect to such returned Pre-Tax Contributions or After-Tax Contributions shall be immediately forfeited. Any such forfeitures shall be applied to reduce the Company's obligation to make Company Matching Contributions pursuant to Article V. (e) After any excess deferrals (plus or minus any gains or losses thereon), and any excess contributions (plus or minus any gains or losses thereon), with respect to a Plan Year have been distributed and/or recharacterized, in accordance with subsections (a), (b), (c), and (d), above, and after any action pursuant to Section 6.06 with respect to the Plan Year has been taken, if the contribution percentage for the Plan Year of those Members who are Highly Compensated Employees exceeds the actual contribution percentage limit imposed by Section 6.03, the following rules shall apply: (1) The amount of the excess aggregate contributions for the Plan Year (determined in accordance with paragraph (3), below), plus or minus any gains or losses thereon, shall be distributed (or, if forfeitable, shall be forfeited) as soon as practicable and in any event before the close of the Plan Year following the close of the Plan Year with respect to which the excess aggregate contributions were made. The gains or losses on excess aggregate contributions shall be determined by multiplying the total annual earnings (positive or negative) for the Plan Year in the Member's After-Tax Contribution and Company Matching Accounts by a fraction, the numerator of which is the amount of the excess aggregate contributions and the denominator of which is the value of the Member's After-Tax Contribution and Company Matching Accounts as of the last day of the Plan Year, reduced by any positive earnings (or increased by any negative earnings) credited to the Member's After-Tax Contribution and Matching Contribution Accounts for the Plan Year. (2) Any distribution in accordance with paragraph (2), above, shall be made to Members who are Highly Compensated Employees on the basis of the portion of the excess aggregate contributions attributable to each such Member (determined in accordance with paragraph (4), below). Such distributions shall be made notwithstanding any other provision of the Plan. (3) The amount of the excess aggregate contributions for a Plan Year is the total of the amounts (if any) by which the After-Tax and Company Matching Contributions of each Highly Compensated Employee for the Plan Year would have to be reduced in order that each Highly Compensated Employee's actual contribution ratio not exceed the highest permitted actual contribution ratio under the Plan. To calculate the highest permitted actual contribution ratio under the Plan, the actual contribution ratio of the Highly Compensated Employee with the highest actual contribution ratio is reduced by the amount required to cause his actual contribution ratio to equal the actual contribution ratio of the Highly Compensated Employee with the next highest actual contribution ratio. If a lesser reduction would enable the Plan to satisfy the actual contribution percentage test (determined in accordance with Section 6.03) if only the actual contribution ratio as so reduced were taken into account, only the lesser reduction may be made. This process shall be repeated until the Plan would satisfy the actual contribution percentage test if only the actual contribution ratios as so reduced were taken into account. The highest actual contribution ratio remaining under the Plan after the foregoing leveling process has been completed shall be the highest permitted actual contribution ratio. (4) The portion of the excess aggregate contributions for a Plan Year (determined in accordance with paragraph (3), above) that is attributable to a Highly Compensated Employee is determined by (i) reducing the amount of the After-Tax and Company Matching Contributions of the Highly Compensated Employee with the largest amount of After-Tax and Company Matching Contributions for the Plan Year by the amount required to cause the amount of his After-Tax and Company Matching Contributions to equal the amount of the After-Tax and Company Matching Contributions of the Highly Compensated Employee with the next largest amount of After-Tax and Company Matching Contributions for the Plan Year, (ii) treating the amount of the reduction as the portion of the excess aggregate contributions that is attributable to the first Highly Compensated Employee, and (iii) continuing in the same manner until all excess aggregate contributions for the Plan Year have been attributed to a Highly Compensated Employee. The determination of the excess aggregate contributions under this subsection for any Plan Year shall be made after taking the measures called for by the preceding subsections of this Section 6.07. Paragraphs (3) and (4) shall be interpreted and applied in accordance with Section 401(m)(2) of the Code and the Treasury Regulations and other guidance issued thereunder. (f) If, after all the actions required or permitted by Section 6.06 and the preceding provisions of this Section 6.07 have been taken, the Pre-Tax Contributions, After-Tax Contributions, and Company Matching Contributions of those Members who are Highly Compensated Employees cause the Plan to violate the prohibition against multiple use imposed by Section 6.04, the contribution percentage of those Members shall be reduced to the extent necessary to cause the Plan to comply with that prohibition, and the excess aggregate contributions shall be distributed (or, if forfeitable, shall be forfeited) in the manner described in subsection (e), above. ARTICLE VII: INVESTMENTS AND ACCOUNTS 7.01 Trust and Trustee. The Corporation has entered into a Trust Agreement with the Trustee, in such form and containing such provisions as the Corporation deems appropriate. The Trust Agreement shall be deemed to form a part of the Plan, and any and all rights or benefits that may accrue to any person under the Plan shall be subject to all of the provisions of the Trust Agreement. 7.02 The Fund. All contributions under the Plan shall be made to the Fund held by the Trustee. 7.03 Investment Funds. (a) The Investment Committee shall have the authority to direct the Trustee to maintain the assets of the Fund in multiple Investment Funds so as to provide alternative investment vehicles for the assets of the Plan. Such separate funds shall include, but are not limited to, the Investment Funds described below. Additional funds may be established by the Investment Committee, which shall have sole discretion to determine the number and character of such additional Investment Funds. The Investment Committee, in its sole discretion, shall have the authority to limit or eliminate the availability of any of the Investment Funds established pursuant to this Article VII, including but not limited to the Investment Funds described below. (1) The Walt Disney Company Common Stock Fund - This Investment Fund shall be invested, without distinction between principal and income, principally in The Walt Disney Company Common Stock ("Walt Disney Stock"). Portions of this Investment Fund may be invested by the Trustee in high-grade short-term obligations and money market instruments for purposes of liquidity to meet exchange and distribution requirements. The Trustee shall regularly purchase, or cause to be purchased, Common Stock in the open market in accordance with a non-discretionary purchasing program. Each Member's proportional interest in this Investment Fund shall be measured n units of participation, rather than shares of Walt Disney Stock. Such units shall represent a proportionate interest in all of the assets of this Investment Fund, which includes shares of Walt Disney Stock, short-term investments and at all times, receivables for dividends and/or Walt Disney Stock sold and payables for Walt Disney Stock purchased. A Net Asset Value ("NAV") per unit will be determined as of each Valuation Date for each unit outstanding in this Investment Fund. The NAV shall be adjusted by gains or losses realized on sales of this Investment Fund, appreciation or depreciation in the market price of those shares owned, interest on the short-term investments held by this Investment Fund, expenses that pursuant to the Investment Committee's direction the Trustee accrues from this Investment Fund, and commissions on purchases and sales of Walt Disney Stock. Dividends received by this Investment Fund are reinvested in additional shares of Walt Disney Stock (to the extent it is unnecessary to retain such dividends as cash to maintain the target liquidity percentage) and Members will receive additional units. (2) Loan Fund - The Loan Fund shall consist principally of cash or cash equivalents and promissory notes received in connection with loans made pursuant to Article X. The Loan Fund shall not be available to receive contributions and transfers of funds at the direction of a Member, but shall be administered solely in connection with loans to Members pursuant to Article X. (b) Notwithstanding anything in the Plan to the contrary, the Trustee may, in its discretion, and in accordance with the provisions of the Trust Agreement, hold all or part of the assets allocated to one or more of the Investment Funds in cash or cash equivalents. (c) Dividends, interest, and other distributions with respect to assets allocated to an Investment Fund shall be allocated to, and reinvested in, that Investment Fund. Expenses incurred by the Trustee with respect to an Investment Fund shall be allocated to that Investment Fund. 7.04 Allocation of Contributions. (a) All Pre-Tax, After-Tax, and Rollover Contributions shall be allocated by the Member among the Investment Funds (other than the Loan Fund) in writing at the time and in the manner prescribed by the Committee. A Member may elect to have his Pre-Tax, After-Tax, and Rollover Contributions allocated in any proportion to any one or more of the Investment Funds (other than the Loan Fund). Except as provided in Section 12.04(g), all Company Matching Contributions shall be allocated to The Walt Disney Company Common Stock Fund. (b) If a Member fails to make an allocation in accordance with this Section 7.04 with respect to any portion of the Member's Pre-Tax, After-Tax, and Rollover Contributions, but has made an allocation election with respect to any other portion of his contributions, the unallocated portion of the Member's contributions shall be allocated by the Committee in the same manner as the Member's most recent allocation election with respect to the allocated portions of the Member's contributions. (c) If a Member fails to make any allocation in accordance with this Section 7.04 with respect to his Pre-Tax, After-Tax, and Rollover Contributions, such unallocated funds shall be allocated by the Committee to such Investment Fund as the Committee may prescribe in its discretion. (d) The Committee shall implement (or cause to be implemented) a Member's investment directions in accordance with the terms of this Article VII and such procedures as are prescribed by the Committee. 7.05 Change in Allocation. (a) A Member may change a direction previously given pursuant to Section 7.04 by submitting a notification to the Committee, in such manner and form, and at such time, as the Committee shall prescribe, directing such a change. (b) By submitting a notification to the Committee in such manner and form, and at such time, as the Committee shall prescribe, a Member may direct that all or part of the Value of the Member's Account attributable to a particular Investment Fund be liquidated and transferred to any of the other available Investment Funds (other than the Loan Fund); provided that, except as provided in Section 12.04(g), the Member's Company Matching Account shall be invested at all times entirely in The Walt Disney Company Common Stock Fund. (c) If distribution of the Value of a Member's Account is deferred pursuant to Article XII past the Valuation Date coincident with or next following the date on which he terminates employment with the Company and the Affiliates, the Member may continue to direct the investment of his Account in accordance with subsection (b), above. (d) If all or part of a Member's Account is reallocated in accordance with subsection (b) or (c), above, the Member's Account shall be debited and credited with the appropriate amounts in a manner consistent with Section 7.07 in order to reflect the reallocation. 7.06 Valuation. (a) As of each Valuation Date, the Trustee shall determine the fair market value of the assets in each Investment Fund. (b) The Trustee shall make the valuations called for by subsection (a), above, in accordance with sound and accepted banking and trust accounting practices. Such valuations shall reflect the current fair market value of the assets in each Investment Fund (as determined by the Trustee), the Pre-Tax Contributions, After-Tax Contributions, Rollover Contributions, and Company Matching Contributions received by the Trustee with respect to each Member since the most recent Valuation Date, and the withdrawals and distributions with respect to each Member since the most recent Valuation Date. 7.07 Accounts. (a) A Pre-Tax Contribution Account, an After-Tax Contribution Account, and a Company Matching Account shall be established for each Member. In addition, an Old Company Matching Account shall be established for each Member or Beneficiary for whom, immediately before the Merger Date, there was in effect a Company Matching Account (as that term was defined by the Plan immediately before the Merger Date). The Member's interest in each Investment Fund that is allocable to the Pre-Tax Contributions made on behalf of the Member shall be credited to his Pre-Tax Contribution Account. The Member's interest in each Investment Fund that is allocable to the Member's After-Tax Contributions shall be credited to his After-Tax Contribution Account. The Member's interest in each Investment Fund that is allocable to Company Matching Contributions made before the Merger Date shall be credited to his Old Company Matching Account. The Member's interest in The Walt Disney Company Common Stock Fund that is allocable to Company Matching Contributions with respect to the Member made on or after the Merger Date shall be credited to his Company Matching Account. The Member's interest in each Investment Fund that is allocable to any Rollover Contribution with respect to the Member shall be credited to the Member's Pre-Tax Contribution Account, After-Tax Contribution Account, Old Company Matching Account, and/or Company Matching Account, as determined by the Committee in its discretion. (b) The Value of each Member's Account shall reflect the current fair market value and the gains, losses, income, and expenses of the Investment Funds to which the Account is allocated and the amount of any withdrawals, distributions, and loans (including loan repayments) with respect to the Member. 7.08 Risk of Loss. The Plan and the Company do not guarantee that the fair market value of the Investment Funds, or of any particular Investment Fund, will be equal to or greater than the amounts allocated thereto. The Plan and the Company do not guarantee that the Value of the Accounts will be equal to or greater than the contributions credited thereto. The Members assume all risk of any decrease in the value of the Investment Funds and the Accounts. 7.09 Interests in the Funds. No Member, Surviving Spouse, or Beneficiary shall have any claim, right, title, or interest in or to any specific assets of any Investment Fund or of the Fund until distribution of such assets is made to the Member, Surviving Spouse, or Beneficiary. No Member, Surviving Spouse, or Beneficiary shall have any claim, right, title, or interest in or to the Fund, except as and to the extent expressly provided herein. 7.10 Sole Source of Benefits. Members, Surviving Spouses, and Beneficiaries shall look only to the Trust for the payment of benefits under the Plan, and except as otherwise required by law, the Company assumes no responsibility or liability therefor. ARTICLE VIII: VOTING OF AND TENDER OR EXCHANGE OFFERS FOR COMMON STOCK 8.01 Voting. (a) Each Member with an interest in The Walt Disney Company Common Stock Fund shall have the right to direct the Trustee as to the manner in which the Trustee is to vote (including not to vote) that number of shares of Common Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund (both vested and unvested). Directions from a Member to the Trustee concerning the voting of Common Stock shall be communicated in writing, or by mailgram or similar means. These directions shall be held in confidence by the Trustee and shall not be divulged to the Corporation, or any officer or employee thereof, or any other person. Upon its receipt of the directions, the Trustee shall vote the shares of Common Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund as directed by the Member. With respect to the shares of Common Stock reflecting a Member's proportional interest in The Walt Disney Company Common Stock Fund for which it has received no directions from the Member, the Trustee shall vote such shares in the same proportion (for, against and abstention) on each issue as it votes those shares reflecting Members' proportional interests in The Walt Disney Company Common Stock Fund for which the Trustee received voting directions from Members. Notwithstanding the above, with respect to such shares for which the Trustee has received no voting directions, in the event of a tender offer, the Trustee shall vote such shares in accordance with voting directions received from the Corporation. (b) The Trustee shall vote that number of shares of Common Stock that are not reflected in the Members' proportional interests in The Walt Disney Company Common Stock Fund in the same ratio (for, against and abstention) on each issue as it votes those shares reflecting Members' proportional voting interests in The Walt Disney Company Common Stock Fund for which it receives voting directions from Members. Notwithstanding the above, in the event of a tender offer, the Trustee shall vote such unallocated shares in accordance with voting directions received from the Corporation. 8.02 Tender and Exchange Offers. (a) Upon the commencement of a tender offer for Common Stock, the Corporation shall notify each Member with an interest in The Walt Disney Company Common Stock Fund of the tender offer and utilize its best efforts to timely distribute or cause to be distributed to the Member the same information that is distributed to shareholders of the Corporation in connection with the tender offer, and, after consulting with the Trustee shall provide and pay for a means by which the Member may direct the Trustee whether or not to tender the Company Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund (both vested and nonvested). The Trustee shall certify to the Corporation that the materials have been mailed or otherwise sent to such Members. (b) Each Member shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Common Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund (both vested and nonvested). Directions from a Member to the Trustee concerning the tender of Common Stock shall be communicated in writing, or by mailgram or such similar means as is agreed upon by the Trustee and the Corporation under subsection (a), above. These directions shall be held in confidence by the Trustee and shall not be divulged to the Corporation, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. The Trustee shall tender or not tender shares of Common Stock as directed by the Member. The Trustee shall not tender shares of Common Stock reflecting a Member's proportional interest in The Walt Disney Company Common Stock Fund for which it has received no direction from the Member. (c) The Trustee shall tender that number of shares of Common Stock that are not reflected in the Members' proportional interests in The Walt Disney Company Common Stock Fund which is determined by multiplying the total number of such shares by a fraction of which the numerator is the number of shares of Common Stock reflecting such Members' proportional interests in The Walt Disney Company Common Stock Fund credited to Members' Accounts for which the Trustee received directions from Members to tender (and which have not been withdrawn as of the date of this determination) and of which the denominator is the total number of shares of Common Stock reflected in the proportional interests of all Members under the Plan. (d) A Member who has directed the Trustee to tender some or all of the shares of Common Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund may, at any time before the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares reflecting the Member's proportional interest, and the Trustee shall withdraw the directed number of shares from the tender offer before the tender offer withdrawal deadline. Before the withdrawal deadline, if any shares of Common Stock not reflected in the Members' proportional interests in The Walt Disney Company Common Stock Fund have been tendered, the Trustee shall redetermine the number of shares of Common Stock that would have been tendered under subsection (c), above, if the date of the foregoing withdrawal were the date of determination, and withdraw from the tender offer the number of shares of Common Stock not reflected in the Members' proportional interests in The Walt Disney Company Common Stock Fund necessary to reduce the amount of tendered Common Stock not reflected in the Members' proportional interests in The Walt Disney Company Common Stock Fund to the amount so redetermined. A Member shall not be limited as to the number of directions to tender or withdraw that the Member may give to the Trustee. (e) A direction by a Member to the Trustee to tender shares of Common Stock reflecting the Member's proportional interest in The Walt Disney Company Common Stock Fund shall not be considered an election under the Plan by the Member to withdraw, or to have distributed, any or all of his withdrawable interest in the Plan. The Trustee shall credit to each proportional interest of the Member from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Common Stock tendered from that interest. Pending receipt of directions from the Member or the Committee, in accordance with the Plan, as to which of the remaining Investment Funds the proceeds should be invested in, the Trustee shall invest the proceeds in the Fidelity Retirement Money Market Fund described in Section 7.03(a)(2) of the Plan (as in effect before April 1, 1998) or such other Investment Fund as the Committee may prescribe in its discretion. (f) For purposes of this Section, the number of shares of Common Stock deemed "credited" to or "reflected" in a Member's proportional interest shall be determined as of the last preceding Valuation Date. The trade date is the date the transaction is valued. (g) With respect to all rights other than the right to vote, the right to tender, and the right to withdraw shares previously tendered, in the case of Common Stock credited to a Member's proportional interest in The Walt Disney Company Common Stock Fund, the Trustee shall follow the directions of the Member and if no such directions are received, the directions of the Committee. The Trustee shall have no duty to solicit directions from Members. With respect to all rights other than the right to vote and the right to tender, in the case of Common Stock not reflected in Members' proportional interests in The Walt Disney Company Common Stock Fund, the Trustee shall follow the directions of the Committee. (h) All of the provisions of this Section 8.02 shall apply to exchange offers as well as to tender offers. 8.03 Conversions. All of the provisions of this Article VIII shall apply to securities received as a result of a conversion of Common Stock. ARTICLE IX: VESTING 9.01 Immediately Vested Accounts. A Member shall have at all times a nonforfeitable interest in the Value of his Pre-Tax Contribution Account and in the Value of his After-Tax Contribution Account. 9.02 Company Matching Account. (a) Before January 1, 1995, one-third of the Value of a Member's Company Matching Account attributable to Company Matching Contributions allocated to his Company Matching Account for a particular Plan Year (the "Contribution Year") shall be nonforfeitable at the end of the Contribution Year if the Member is an active Employee on the last day of the Contribution Year. Two-thirds of the Value of the Member's Company Matching Account attributable to the Company Matching Contributions allocated to his Company Matching Account for the Contribution Year shall be nonforfeitable at the end of the Plan Year immediately following the Contribution Year if the Member is an active Employee on the last day of that Plan Year. The entire Value of the Member's Company Matching Account attributable to Company Matching Contributions allocated to his Company Matching Account for the Contribution Year shall be nonforfeitable at the end of the second Plan Year following the Contribution Year if the Member is an active Employee on the last day of that Plan Year. (b) On and after January 1, 1995, one-half of the Value of a Member's Company Matching Account attributable to Company Matching Contributions allocated to his Company Matching Account for any Contribution Year shall be nonforfeitable at the end of that Contribution Year if the Member is an active Employee on the last day of the Contribution Year. The entire Value of the Member's Company Matching Account attributable to Company Matching Contributions allocated to his Company Matching Account for that Contribution Year shall be nonforfeitable at the end of the Plan Year immediately following that Contribution Year if the Member is an active Employee on the last day of that Plan Year. (c) A Member shall have a nonforfeitable interest in the Value of his Company Matching Account upon the first to occur of the following: (1) his completion of five years of Service; (2) his Retirement; (3) his attainment of Normal Retirement Age before he Severs from Service; or (4) his Severance from Service by reason of death or Disability. 9.03 Forfeiture. (a) Notwithstanding any provision of Section 9.02 to the contrary, if any portion of the Value of a Member's Company Matching Account is forfeitable when the Member Severs from Service for a reason other than death, Disability, or Retirement, such portion shall be forfeited immediately. (b) If all or part of the Value of a Member's Company Matching Account is forfeited, and the Member is subsequently reemployed by the Company or an Affiliate without incurring a Break in Service of five years or more, the forfeited portion of the Value of his Company Matching Account shall be restored in full (but without adjustment for any subsequent gains or losses) if the Member repays to the Plan, within five years from the date of such reemployment, the full amount of any previous distributions to him from the Plan. Any amount restored or repaid pursuant to this Section 9.03(b) shall be credited to the Account to which such amount was credited when it was previously forfeited or distributed, as the case may be. (c) Notwithstanding any provision of this Article IX, Company Matching Contributions (plus or minus any gains or losses thereon) may be forfeited pursuant to the provisions of Section 6.07. (d) Forfeitures shall be applied to reduce the Company's obligation to make Company Matching Contributions pursuant to the provisions of Article V. 9.04 Old Company Matching Account. On and after the Merger Date, all references in this Article IX to a Member's Company Matching Account shall be deemed to refer both to the Member's Company Matching Account and to the Member's Old Company Matching Account, if any. ARTICLE X : LOANS 10.01 Eligibility. A Member shall be eligible to borrow from the Plan in accordance with this Article X if (i) the Member is actively employed by the Company or an Affiliate when the Loan is made, (ii) the Member's Account does not show that the Member has an outstanding Loan, and (iii) the Member will not be in default on the Loan under Section 10.11(a)(6) or (7) immediately after the Loan is made. 10.02 Application Procedure. A Member may apply for a Loan by making application in accordance with such procedures as the Committee may prescribe from time to time. 10.03 Promissory Note. A Member may obtain a Loan only if he executes a promissory note in a form approved by the Committee. 10.04 Maximum Amount. The maximum amount a Member may borrow from the Plan is the smallest of: (a) 50% of the Value of his nonforfeitable interest in his Account (determined as of the date the Loan is made), disregarding any amount subject to a Qualified Domestic Relations Order; (b) (1) $50,000 minus (2) the sum of (i) the outstanding balance of any loans from all other Tax-Qualified Plans maintained by the Company and the Affiliates on the date the Loan is made, and (ii) the excess of (A) the highest outstanding balance of all prior plan loans (including both Loans and loans from any other Tax-Qualified Plans maintained by the Company and the Affiliates) during the one-year period ending on the day before the date the current Loan is made, over (B) the outstanding balance of all prior plan loans from Tax-Qualified Plans maintained by the Company and the Affiliates on the date the current Loan is made; and (c) the sum of the Value of the Member's Pre-Tax Contribution Account and the Value of the Member's After-Tax Contribution Account, as of the date the Loan is processed; provided that in no event may a Loan be made in an amount that will require payroll deductions to be made from the Member's compensation that exceeds the amount of the Member's net cash pay from the Company or an Affiliate (after taking into account all other payroll deductions and employment and withholding taxes). 10.05 Minimum Amount. A Loan must be in an amount of at least $1,000. 10.06 Term. The term of a Loan may be for 12, 24, 36, 48, or 60 months, as elected by the Member. 10.07 Interest Rate. The interest rate for a Loan shall be fixed on the date the Loan is approved and shall remain constant during the term of the Loan. The Committee shall establish either the interest rate or the methodology for determining the interest rate. 10.08 Repayment. A Loan must be repaid in level installments of principal and interest by payroll deduction beginning with the Member's paycheck for the first payroll period beginning at least 30 days after the date the Loan is processed. If the Member is subsequently granted an unpaid leave of absence or is transferred to an Affiliate or a position or location within the Company that is not covered by the Plan (or ceases to have sufficient compensation from which the Loan payment can be made), the Member must continue to make timely level installment payments of principal and interest, by certified check, bank check, or money order. 10.09 Prepayment. A Member may prepay a Loan, in full, at any time and without penalty by certified check, bank check, or money order. Partial prepayment of a Loan is not permitted. 10.10 Security. A Member's obligation to repay a Loan shall be secured by the portion of the Value of his nonforfeitable Account equal to the principal amount of the Loan. No other property shall be accepted as security for the Loan. 10.11 Default. (a) A Member shall default on a Loan if any of the following events occurs: (1) the Member's Severance from Service for any reason (including the Member's death); (2) the Member's failure to make any payment of principal or interest on the Loan on the date the payment is due; (3) the Member's failure to perform or observe any covenant, duty, or agreement under the promissory note evidencing the Loan; (4) receipt by the Plan of an opinion of counsel to the effect that (i) the Plan will, or could, lose its status as a Tax-Qualified Plan unless the Loan is repaid or (ii) the Loan violates, or might violate, any provision of ERISA; (5) the occurrence of an event of default with respect to any other loan to the Member under any other plan maintained by the Company or an Affiliate; (6) any portion of the Member's Account that secures the Loan becomes payable to the Member, his Surviving Spouse or Beneficiary, an Alternate Payee, or any other person; (7) the Member makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, or becomes a subject of any wage earner plan under federal or state bankruptcy or insolvency law, or there is commenced against the Member any bankruptcy, insolvency, or similar proceeding that remains undismissed for a period of 60 days (or the Member by an act indicates his consent to, approval of, or acquiescence in any such proceeding); or (8) the termination of the Plan. (b) If a default on a Loan occurs, the entire outstanding balance of the Loan shall be immediately due and payable. (c) If a default on a Loan occurs, but the Member does not pay the entire outstanding balance of the Loan (together with accrued and unpaid interest) by the 60th day after the last day of the month in which the default occurs, the Member's nonforfeitable interest in his Account shall be applied immediately, to the extent lawful and to the extent the Member's Account is then available for withdrawal or distribution in accordance with the applicable provisions of the Plan, to pay the entire outstanding balance of the Loan (together with accrued and unpaid interest); provided that in the case of a default described in Section 10.11(a)(1), the Plan shall distribute the Member's promissory note to the Member (or, if the Member has died, to the Member's Beneficiary) in full satisfaction of the Plan's liability to the Member (or his Beneficiary) with respect to that portion of the Member's nonforfeitable interest in his Account equal to the outstanding balance of the Loan (including accrued and unpaid interest). Notwithstanding the foregoing, no portion of the Member's Pre-Tax Contribution Account shall be distributed or applied to pay an outstanding Loan before the date on which it is otherwise distributable or withdrawable under the Plan. (d) Any failure by the Committee to enforce the Plan's rights with respect to a default on a Loan shall not constitute a waiver of such rights either with respect to that default or any other default. 10.12 Treatment as Investment. A Loan shall be treated by the Plan as a separate investment of a portion of the borrowing Member's Account. All interest received by the Plan with respect to a Member's Loan shall be credited to the Member's Account, and all losses and expenses incurred by the Plan with respect to the Loan (including, without limitation, any collection expenses in the event of default) shall be charged against the Member's Account. 10.13 Ordering Rules. (a) The funds used to finance a Loan shall be derived from the borrowing Member's Account in the following sequence (to the extent necessary to obtain the amount necessary to finance the Loan): (i) the Member's Pre-Tax Contribution Account (to the extent attributable to Pre-Tax Contributions for which Company Matching Contributions were not made), (ii) the Member's Pre-Tax Contribution Account (to the extent attributable to Pre-Tax Contributions for which Company Matching Contributions were made), (iii) the Member's After-Tax Contribution Account (to the extent attributable to After-Tax Contributions for which Company Matching Contributions were not made), and (iv) the Member's After-Tax Contribution Account (to the extent attributable to After-Tax Contributions for which Company Matching Contributions were made). (b) Each repayment of principal and interest shall be (i) credited to the portion(s) of the Account from which the funds used to finance the Loan were derived, in proportion to the ratio of the amount derived from that portion to the total amount derived from the Member's Account to finance the Loan, and (ii) invested in the Investment Funds in accordance with the Member's directions regarding the current Pre-Tax and After-Tax Contributions on his behalf to the Plan (or, if Pre-Tax and After-Tax Contributions are not currently being made on the Member's behalf, in accordance with the most recent directions given by the Member with respect to the investment of Pre-Tax or After-Tax Contributions). 10.14 Fees. A Member who receives a Loan shall pay such fees as the Committee may establish from time to time. The amount, nature and manner of payment of the fees will be established from time to time by the Committee. ARTICLE XI: WITHDRAWALS 11.01 After-Tax Contribution Account. Subject to the restrictions imposed by this Article XI, a Member who is employed by the Company or an Affiliate may withdraw all or part of the Value of his After-Tax Contribution Account at any time. 11.02 Pre-Tax Contribution Account. Subject to the restrictions imposed by this Article XI, a Member who has attained age 59 1/2 and who is employed by the Company or an Affiliate may withdraw all or part of the Value of his Pre-Tax Contribution Account at any time. 11.03 Hardship Withdrawals. (a) Subject to the restrictions imposed by this Article XI, if a Member satisfies the requirements of subsections (b) and (c), below, the Member may withdraw all or part of the Value of his Pre-Tax Contribution Account (excluding any gains on Pre-Tax Contributions other than gains credited to his Pre-Tax Contribution Account as of December 31, 1988) and his nonforfeitable interest in the Value of his Company Matching Account and his Old Company Matching Account, if any. (b) A Member may make a withdrawal pursuant to this Section 11.03 only if he requires the withdrawal for (1) costs directly related to the purchase of his principal residence, or a major rehabilitation of the living quarters in his principal residence, but excluding mortgage payments, (2) the payment of medical expenses described in Section 213(d) of the Code previously incurred by the Member, the Member's spouse, or any dependents of the Member (as defined in Section 152 of the Code), or expenses necessary for these persons to obtain medical care described in Section 213(d) of the Code, (3) the payment of tuition, related educational fees, and room and board expenses for the next 12 months of post-secondary education for the Member, or the Member's spouse, children, or dependents (as defined in Section 152 of the Code), or (4) payments necessary to prevent the eviction of the Member from the Member's principal residence or foreclosure on the mortgage on that residence. (c) A Member may make a withdrawal pursuant to this Section 11.03 only if (1) the amount of the withdrawal does not exceed the amount required to meet the need shown by the Member pursuant to Section 11.03(b), (2) the Member has obtained (or is concurrently obtaining) all distributions, withdrawals, and loans available under the Plan and all other plans maintained by the Company and the Affiliates, and (3) the need shown by the Member pursuant to Section 11.03(b) cannot be satisfied from other resources reasonably available to the Member (including the resources of his spouse and minor children). (d) If a Member seeks to make a withdrawal pursuant to this Section, the Committee shall require the Member to present such evidence and certifications as the Committee considers necessary to determine whether the Member meets the requirements of this Section. 11.04 Notice. The Committee shall provide each Member who, before attaining Normal Retirement Age, applies for a withdrawal pursuant to this Article XI with a written, nontechnical explanation of the Member's right to defer receipt of the withdrawal until Normal Retirement Age. The notice shall be furnished no less than 30 days and no more 90 days before the date as of which the withdrawal is scheduled to be made; provided that the withdrawal may be made less than 30 days after the Member receives the notice if the notice informs the Member of his right to a period of at least 30 days after receiving the notice to consider whether to elect the withdrawal and if the Member, after being informed of this right, affirmatively elects to make the withdrawal. 11.05 Dollar Limitations. A withdrawal pursuant to this Article may be made in any whole dollar amount, except than a withdrawal may not be made for an amount that is less than $250. 11.06 Priority of Accounts. Withdrawals pursuant to this Article shall be made in the following sequence: (a) first, from the Member's After-Tax Contribution Account pursuant to Section 11.01, and after exhaustion of the After-Tax Contribution Account, and (b) then, from the Member's Pre-Tax Contribution Account pursuant to Section 11.02 and Section 11.03 (to the extent then available), and after exhaustion of the Pre-Tax Contribution Account (to the extent than available), and (c) then, from the Member's Old Company Matching Account (to the extent of the Member's nonforfeitable interest therein) pursuant to Section 11.03 (to the extent then available), and (d) last, from the Member's Company Matching Account (to the extent of the Member's nonforfeitable interest therein) pursuant to Section 11.03 (to the extent then available). 11.07 Source of Funds. (a) A withdrawal pursuant to this Article shall be derived from the Investment Funds in which the applicable portion of the Member's Account is invested, in proportion to the percentage of the applicable portion of the Account that is invested in each Investment Fund. (b) A withdrawal from any Investment Fund other than The Walt Disney Company Common Stock Fund shall be paid in cash. (c) A withdrawal from The Walt Disney Company Common Stock Fund shall be made in shares of Common Stock (except that the value of fractional shares shall be distributed in cash); provided that a Member may elect to receive such a withdrawal entirely in cash. 11.08 Valuation. For purposes of this Article XI, the Value of a Member's Account shall be determined as of the Valuation Date determined in accordance with the following rules: (a) If the Member's request for a withdrawal is received by the time prescribed by the Committee, the Valuation Date shall be the Valuation Date coincident with or next following the date on which the request is received or as soon thereafter as practicable; and (b) If the Member's request for a withdrawal is not received by the time prescribed by the Committee, the Valuation Date shall be the Valuation Date that next follows the date on which the request is received or as soon thereafter as practicable; provided that if the Member has not waived the 30-day waiting period in accordance with Section 11.04, the Valuation Date shall be the Valuation Date that coincides with or next follows the expiration of the 30-day waiting period or as soon thereafter as practicable. 11.09 Outstanding Loan. Notwithstanding any other provision of this Article, if a Member's Account shows that the Member has an outstanding balance under a Loan, the Member shall not be permitted to make a withdrawal pursuant to this Article of any portion of the Member's Account that secures the Loan. 11.10 Inactive Employees. An Employee who becomes a Member for the first time on or after January 1, 1995, shall be entitled to make a withdrawal pursuant to this Article XI only if he is actively employed by the Company or an Affiliate on the date he applies for the withdrawal. ARTICLE XII : DISTRIBUTIONS 12.01 Severance from Service Required. Except to the extent otherwise required by Section 12.11, a distribution shall not be made to a Member pursuant to this Article XII before the Member Severs from Service. 12.02 Notice Regarding Form and Payment of Distributions. (a) Subject to the provisions of subsections (b) and (c), below, in the case of a Member whose Distribution Date precedes his Normal Retirement Date, the Committee shall provide the Member with a written, nontechnical explanation of the items described in subparagraphs (i) and (ii), below, no more than 90 days, and no less than 30 days, before his Distribution Date: (i) In the case of a Member described in Section 12.04(a), the material features of the Normal Form of Payment and the Optional Forms of Payment to which the Member is entitled, or that he could elect to receive, under the Plan; and (ii) The Member's right to defer commencement of such benefit until as late as his Normal Retirement Date. (b) Notwithstanding subsection (a), above, the Distribution Date may occur less than 30 days after the Member receives the notice required by subsection (a) if the notice informs the Member of his right to a period of at least 30 days after receiving the notice to consider whether to elect the distribution and if the Member, after being informed of this right, affirmatively consents to the distribution. (c) Notwithstanding the foregoing, no notice pursuant to this Section 12.02 shall be required in the case of a Member who is required to receive a distribution in the form of a Mandatory Lump-Sum Distribution in accordance with Section 12.05. 12.03 Normal Form of Payment. Except as otherwise provided in this Article XII or in an applicable Schedule, the normal form of payment under the Plan shall be a Voluntary Lump-Sum Distribution based on the Value of the Member's nonforfeitable interest in his Account as of the Valuation Date determined in accordance with the following rules: (a) If the Member's request for a distribution is received by the time prescribed by the Committee, the Valuation Date shall be the Valuation Date coincident with or next following the date on which the request is received or as soon thereafter as practicable; and (b) If the Member's request for a distribution is not received by the time prescribed by the Committee, the Valuation Date shall be the Valuation Date that next follows the date on which the request is received or as soon thereafter as practicable; provided that if the Member has not waived the 30-day waiting period in accordance with Section 12.02, the Valuation Date shall be the Valuation Date that coincides with or next follows the expiration of the 30-day waiting period or as soon thereafter as practicable. 12.04 Optional Forms of Payment. (a) Subject to the provisions of Sections 12.05 and 12.11, a Member who first became a Member before April 1, 1994, and who Severs from Service (i) by reason of Retirement or Disability or (ii) at or after attaining Normal Retirement Age may elect to receive the Value of his nonforfeitable interest in his Account in a series of annual installments. (b) The period for which installments are paid pursuant to this Section shall be any whole number of years from a minimum of one year to a maximum period equal to the lesser of (i) the Member's life expectancy as determined under Section 401(a)(9) of the Code and the Treasury Regulations thereunder and (ii) ten years. (c) Subject to the provisions of Section 12.11, the date as of which installment payments begin pursuant to this Section shall be any day selected by the Member, beginning after the Member Severs from Service and no later than the last day of the first Plan Year commencing after the later of (i) the date on which the Member attains Normal Retirement Age and (ii) the date on which the Member Severs from Service. (d) If annual installment payments are made to a Member pursuant to this Section, the amount of each payment shall be equal to the Value of his Account, as of the applicable Valuation Date, multiplied by a fraction, the numerator of which is one and the denominator is the remaining number of installments (including the installment then to be paid). The Valuation Date for the first installment payment shall be determined in accordance with Section 12.03, and the Valuation Date for each subsequent installment payment shall occur on an anniversary thereof or as soon thereafter as practicable. (e) If a Member has elected to receive installment payments pursuant to this Section, the election shall be irrevocable as of the Member's Distribution Date; provided that a Member may elect to accelerate (and to receive in a lump sum) the payment of all (but not less than all) remaining installments at any time. (f) If a Member who elects to receive installment payments pursuant to this Section dies after his initial Distribution Date but before the Value of his nonforfeitable interest in his Account has been fully distributed, the Member's Beneficiary shall be entitled to receive, at the Beneficiary's election, either (i) the remaining installments on the dates they were originally scheduled to be paid (or as soon thereafter as practicable) or (ii) the Value of the Member's nonforfeitable interest in his Account (determined as of the date of the distribution) in a lump-sum payment as of a Valuation Date that occurs as soon as practicable following the Member's death and the Committee's receipt of all information and documentation that it requires before making the distribution. The Beneficiary's election shall be made in such manner and form, and at such time, as the Committee shall prescribe. (g) A Member who elects to receive installment payments pursuant to this Section may, concurrently with such election, elect that all or part of the Value of his Company Matching Account attributable to The Walt Disney Company Common Stock Fund be liquidated and transferred to any of the other available Investment Funds (other than the Loan Fund). 12.05 Mandatory Lump Sum. If, as of any date after a Member Severs from Service, the Value of the Member's nonforfeitable interest in his Account does not exceed $5,000, the Member shall receive an immediate Mandatory Lump-Sum Distribution equal to such Value. For purposes of this Section 12.05, if the Value of the Member's nonforfeitable interest in his Account at the time of any distribution to the Member exceeds $5,000, the Value of the Member's nonforfeitable interest in his Account at the time of any subsequent distribution to the Member also shall be deemed to exceed $5,000. If a Mandatory Lump-Sum Distribution pursuant to this Section 12.05 is delayed for administrative reasons, and the Member dies on or after his Distribution Date, but before the Mandatory Lump-Sum Distribution is paid to him, the Mandatory Lump-Sum Distribution shall be paid to his personal representative. 12.06 Distribution Date. (a) Except as otherwise provided in this Section 12.06 or Section 12.04, 12.05, or 12.11, the Distribution Date of a Member who is entitled to a distribution pursuant to this Article shall be his Normal Retirement Date. (b) (1) A Member who Severs from Service before his Normal Retirement Date may designate any date thereafter and on or before his Normal Retirement Date as his Distribution Date. A Member may make an election under this Section 12.06(b) only if the election meets the requirements imposed by paragraph (2), below. (2) A Member may make an election under this Section, or revoke any such election, before his Distribution Date, but only after the Member receives the notice required by Section 12.02. Any such election, and any revocation of a previous election, shall be made in a form satisfactory to the Committee and delivered to the Committee within the period prescribed by the preceding sentence. (3) A Member may not make an election under this Section, or revoke an election previously made under this Section, on or after the Member's Distribution Date. (c) Subject to the provisions of Sections 12.05 and 12.11, a Member who Severs from Service by reason of Retirement or Disability or after attaining Normal Retirement Age may elect that his Distribution Date shall be a date (designated by the Member) that occurs in the Plan Year following the Plan Year in which his Severance from Service occurs. (d) Subject to the provisions of Sections 12.06(c) and 12.11, the Distribution Date of a Member who Severs from Service after his Normal Retirement Date shall occur as soon as practicable after his Severance from Service. (e) Unless the Member elects otherwise in writing, the Member's Distribution Date shall not occur later than the 60th day after the close of the Plan Year in which the latest of the following occurs: (i) the Member's attainment of Normal Retirement Age, (ii) the tenth anniversary of the year in which the Member commenced participation in the Plan, or (iii) the Member terminates employment with the Company and the Affiliates. This subsection is designed solely to comply with the provisions of Section 401(a)(14) of the Code and Section 206(a) of ERISA; this subsection does not give a Member the right to postpone the Distribution Date beyond the date otherwise required by the terms of the Plan. (f) Notwithstanding any other provision of the Plan, a payment shall not be considered to be made after the Distribution Date merely because actual payment is reasonably delayed for the calculation and/or distribution of the benefit amount if all payments due are actually made. (g) If a Voluntary Lump-Sum Distribution pursuant to this Article XII is delayed for administrative reasons, and the Member dies after his Distribution Date, but before the Voluntary Lump-Sum Distribution is paid to him, the Voluntary Lump-Sum Distribution shall be paid to his personal representative. (h) If a Pre-Tax Contribution, After-Tax Contribution, or Company Matching Contribution is credited to a Member's Account after the Value of his Account has been distributed in its entirety pursuant to this Article XII, the Value of the Member's Account (reflecting such contribution) shall be distributed in accordance with the generally applicable provisions of this Article XII and without regard to any election made by the Member with respect to the prior distribution. 12.07 Death. Except as otherwise provided in Sections 12.05 and 12.06(g), upon the death of a Member, the Value of the Member's nonforfeitable interest in his Account shall be distributed to his Beneficiary as of the Valuation Date coincident with or next following the Member's Normal Retirement Date or as of such earlier Valuation Date as the Beneficiary may elect (on or before such Valuation Date) in such form and manner, and at such time, as the Committee shall prescribe; provided that if, as of any date after the Member's death, the Value of the Member's Account does not exceed $5,000, the Beneficiary shall receive an immediate Mandatory Lump-Sum Distribution equal to such Value in accordance with Section 12.05. 12.08 Designation of Beneficiary. (a) Subject to the remaining provisions of this Section, a Member may designate a Beneficiary under the Plan at any time. (b) Subject to the remaining provisions of this Section, a Member may revoke a prior designation of a Beneficiary at any time by filing a written notice of revocation with the Committee and may designate a new Beneficiary by filing a written designation with the Committee. No such revocation or designation shall be effective unless and until it is received by the Committee before the Member's death in a form and manner that is acceptable to the Committee. (c) Subject to the remaining provisions of this Section, if a Member designates his spouse as his Beneficiary, that designation shall not be revoked or otherwise altered or affected by any (1) change in the marital status of the Member and such spouse, (2) agreement between the Member and such spouse, or (3) judicial decree (such as a divorce decree) affecting any rights that the Member and such spouse might have as a result of their marriage, separation, or divorce (except to the extent that a Qualified Domestic Relations Order directs the designation of a Beneficiary), until and unless the Member revokes his prior designation of Beneficiary and designates a Beneficiary in accordance with this Section, it being the intent of the Plan that any change in the designation of a Beneficiary hereunder may be made by the Member only in accordance with the provisions of this Section or pursuant to a Qualified Domestic Relations Order. (d) Notwithstanding the preceding provisions of this Section, a Member's designation of a Beneficiary other than his Surviving Spouse shall be effective only with the written consent of such Surviving Spouse, witnessed by a representative of the Plan or a notary public, unless the Committee determines that spousal consent cannot be obtained because there is no Surviving Spouse, because the Surviving Spouse cannot be located, or because of other circumstances specified by the Secretary of the Treasury. The consent of a spouse to a Member's designation of a Beneficiary shall be effective only with respect to that spouse and shall not be effective with respect to any subsequent spouse. In the absence of spousal consent in accordance with this Section, a Member who is married on the date of his death shall be deemed to have designated his Surviving Spouse as his Beneficiary unless and to the extent that such designation is inconsistent with a Qualified Domestic Relations Order. (e) After a Member's death, the Member's Beneficiary shall have the same rights and options under the Plan as a Member who is a former Employee of the Company and the Affiliates, including the right to designate a Beneficiary. For example, a Beneficiary shall not have the right to make contributions to the Plan or to obtain a Loan from the Plan. 12.09 Payment Medium. (a) A distribution pursuant to this Article shall be derived from the Investment Funds in which the applicable Account is invested, in proportion to the percentage of the Account invested in each Investment Fund. (b) A distribution from any Investment Fund other than The Walt Disney Company Common Stock Fund shall be paid in cash. (c) A distribution from The Walt Disney Company Common Stock Fund shall be made in shares of Common Stock (except that the value of fractional shares shall be distributed in cash); provided that the distributee may elect to receive such a distribution entirely in cash. 12.10 Risk of Loss. The Value of a Member's nonforfeitable interest in his Account shall continue to be adjusted to reflect the investment performance of the Investment Fund(s) in which his Account is invested (and shall therefore remain subject to the risk of loss) during the period between the Member's Severance from Service and the date when the Member's nonforfeitable interest in his Account has been distributed in full. 12.11 Minimum Required Distributions. (a) The Plan is designed to satisfy the requirements of Section 401(a)(9) of the Code and the Treasury Regulations thereunder without regard to the provisions of this Section 12.11. Nevertheless, to ensure that the Plan complies with those requirements, this Section 12.11 has been added to the Plan. The sole purpose of this Section 12.11 is to limit the manner in which benefits are paid under the Plan to accord with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations thereunder. This Section 12.11 should be interpreted in a manner consistent with that purpose. With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan shall apply the minimum distribution requirements of Section 401(a)(9) of the Code in accordance with the regulations under Section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary; this sentence shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. The provisions of this Section 12.11 shall override any distribution options under the Plan that are inconsistent with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations thereunder. This Section 12.11 does not confer any rights or benefits upon any person. (b) Notwithstanding any other provision of the Plan, except as provided in the following subsection (c) the distribution of the Value of a Member's nonforfeitable interest in his Account shall commence not later than April 1 of the calendar year following the later of (1) the calendar year in which he attains age 70 1/2 and (2) the calendar year in which he retires from employment with the employer maintaining the Plan. (c) Clause (2) of the preceding subsection (b) shall not apply to a Member who is a 5% owner (as defined in Section 416(i)(1)(B) of the Code) with respect to the Plan Year ending with or within the calendar year in which he reaches age 70 1/2. In addition, a Member who became a Member before January 1, 1997, and attains age 70 1/2 before January 1, 1999, may irrevocably elect, at the time and in the manner prescribed by the Committee, to disregard clause (2). Members who were receiving distributions as of December 31, 1996, that were required by this Section as in effect on that date shall not have any right based on clause (2) to stop such distributions. (d) Unless the mode of distribution is a single payment, the Value of a Member's nonforfeitable interest in his Account shall be paid over a period not extending beyond the Member's life or life expectancy, or the joint lives or joint life expectancies of the Member and his Spouse or joint annuitant. If the Member's entire benefit is to be distributed over a period longer than one year, then the amount to be distributed each year shall be no less than the amount prescribed by the Treasury Regulations under Section 401(a)(9) of the Code. (e) If a Member dies before his Distribution Date, any benefit payable after his death shall be distributed to his Surviving Spouse in accordance with this Article XII and shall not begin later than the April 1 following the date on which the Member would have attained age 70 1/2 (or, if later, the first day of the month coincident with or next following the Member's death). (f) Payments shall not be made under the Plan pursuant to any payment schedule authorized by the Plan unless the payment schedule satisfies the incidental benefit requirement set forth in Section 401(a)(9)(G) of the Code and the Treasury Regulation thereunder. (g) This Section 12.11 shall not apply to any method of distribution designated in writing by a Member under the terms of the Plan (or any predecessor thereof) before January 1, 1985, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982. 12.12 Direct Rollover. If a Member, a Surviving Spouse, or an Alternate Payee named in a Qualified Domestic Relations Order is entitled to receive an "eligible rollover distribution" (within the meaning of Section 402(c)(4) of the Code) from the Plan on or after January 1, 1993, the Plan shall, at the election of the recipient, make a direct rollover of the taxable portion of the distribution to an eligible retirement plan. Notwithstanding the foregoing, the recipient may not make a direct rollover if the Corporation reasonably expects the total of such "eligible rollover distributions" from the Plan to the recipient to be less than $200 in the Plan Year; and if a recipient elects to have only a portion of an "eligible rollover distribution" paid to an eligible retirement plan in a direct rollover, that portion must be at least $500. This Section 12.12 is intended, and shall be construed, solely to satisfy the direct rollover requirements of Section 401(a)(31) of the Code: it shall not confer any rights other than those required under Section 401(a)(31) and the Treasury Regulation thereunder. ARTICLE XIII : ADMINISTRATION 13.01 Employee Benefits Committee. The Employee Benefits Committee shall consist of not less than three persons who shall be appointed by the Board of Directors. The members of the Committee may, but need not, be employees, officers, or directors of the Company or an Affiliate. The number of members of the Committee may be increased from time to time by the Board, and such new members shall be appointed by the Board, provided that the total number of members shall at all times be not less than three. Before becoming a member of the Committee, any person appointed to the Committee must accept his appointment in writing. Any member of the Committee may be removed by the Board at any time with or without cause. Any member of the Committee may resign by submitting a written resignation to the Board, and such resignation shall be effective on the date of receipt or on any subsequent date specified therein. A vacancy on the Committee shall be filled by the Board. 13.02 Chairman and Secretary. The Committee shall select a Chairman and may select a Secretary (who may, but need not be, a member of the Committee) to keep its records and to assist it in the performance of its duties. 13.03 Committee Meetings and Votes. The Committee shall hold meetings at such time and place and upon such notice as the Committee may from time to time determine. A majority of the members of the Committee at the time in office shall constitute a quorum. All actions by the Committee shall be by majority vote of the Committee members present at such a meeting, but the Committee may also act without a meeting by consent of a majority of its members evidenced by a resolution signed by a majority of the members then in office. No member of the Committee shall have any right to vote or decide upon any matter relating solely to himself or solely to his rights or benefits under the Plan. 13.04 Evidence of Action of the Committee. The Committee may authorize one or more of its members to sign on its behalf any instructions, notices, or certifications to the Trustee or to any other person. 13.05 Records and Reports. The Committee shall maintain records of its actions and determinations in administering the Plan. All such records, together with such other documents as may be necessary for the administration of the Plan, shall be preserved by the Committee. 13.06 Powers and Duties of the Committee. The Committee shall be a named fiduciary of the Plan and shall have the authority to control and manage the operation and administration of the Plan. The Committee shall have such discretionary power as may be necessary to carry out the provisions of the Plan and to perform its duties hereunder, including, without limiting the generality of the foregoing, the discretionary power to: (a) promulgate and enforce such rules and regulations as it shall deem necessary or appropriate for the administration of the Plan; (b) interpret the Plan and decide all matters arising thereunder, including the right to remedy possible ambiguities, inconsistencies, and omissions; (c) resolve questions relating to individuals' eligibility for participation in the Plan, vesting, forfeitures, the amounts and manner of distribution, and the status of persons as Employees, Eligible Employees, Members, spouses, Surviving Spouses, Beneficiaries, and Alternate Payees; (d) require any person to furnish such documentation, information, or other matter as the Committee may require for the proper administration of the Plan and as a prerequisite to any payment or distribution by the Plan; (e) direct that the Fund be used to pay the reasonable administration expenses of the Plan; (f) employ or retain one or more persons to render advice with respect to its responsibilities under the Plan; (g) employ or retain one or more persons to assist in the administration of the Plan; and (h) impose reasonable restrictions (including temporary prohibitions) on Members' contribution elections, changes in contribution elections, investment elections, changes in investment elections, loans, withdrawals, and distributions to accommodate the administrative requirements of the Plan. All decisions of the Committee relating to matters within its jurisdiction shall be final. 13.07 Professional Assistance. The Committee may engage accountants, attorneys, actuaries, physicians, and such other personnel as it deems necessary or advisable for the proper administration of the Plan. The fees and costs of such services shall be paid by the Company unless they are paid out of the Fund. The Committee shall be entitled to obtain and act on the basis of all tables, valuations, certificates, opinions, and reports furnished by any accountant, attorney, actuary, physician, or other person so engaged. 13.08 Allocation and Delegation of Committee Responsibilities. The Committee may allocate among any of the members of the Committee any of the responsibilities of the Committee under the Plan or delegate to any person (including a third-party administrator) not a member of the Committee authority to carry out any of the responsibilities of the Committee under the Plan. Any such allocation or delegation shall be made pursuant to a written instrument executed by each of the members of the Committee then in office or pursuant to a contract between a third-party administrator and the Corporation and approved by the Committee. Unless such written instrument or contract specifies otherwise, the one or more persons to whom responsibility is allocated or delegated pursuant to this Section shall have the same discretionary powers in carrying out such responsibility as the Committee itself would have had it carried out the responsibility itself. 13.09 Compensation and Expenses. The members of the Committee shall serve without compensation from the Plan, but the Fund shall reimburse the Committee members for all reasonable expenses incurred in the administration of the Plan except to the extent that the expenses are borne by the Company. 13.10 Investment Responsibilities. The Committee shall have the discretionary authority and power to: (a) manage (including the power to acquire and dispose of) any assets under the Plan; (b) appoint an Investment Manager or Managers to manage (including the authority and power to acquire and dispose of) any assets of the Plan, including the power to replace or terminate any such Investment Managers; (c) appoint or direct the appointment of one or more named fiduciaries that do not qualify as Investment Managers to manage (including the power to acquire and dispose of) any assets of the Plan, including the power to replace or terminate any such named fiduciaries; (d) designate one or more investment companies, or other common, collective, or mutual funds, as Investment Funds pursuant to Section 7.03, including the power to replace or eliminate any such Investment Funds; (e) allocate investment responsibilities among the Trustee, the Investment Managers, any named fiduciaries appointed pursuant to subsection (c) of this Section 13.10, and the Investment Committee itself; (f) periodically review and evaluate the performance of the Trustee, the Investment Funds, the Investment Managers, and any named fiduciaries appointed pursuant to subsection (c) of this Section 13.10; and (g) employ or retain one or more persons to render advice with respect to its responsibilities under the Plan. 13.11 Plan Administrator. The Corporation shall be the "administrator" of the Plan for purposes of Section 3(16)(A) of ERISA. 13.12 Multiple Fiduciary Capacities. Any person or group of persons may serve in more than one fiduciary capacity under the Plan. ARTICLE XIV: BENEFIT CLAIMS PROCEDURE 14.01 Claims Procedure. A claim for benefits under the Plan by a Member, Surviving Spouse, Beneficiary, Alternate Payee, or any other person shall be filed by submitting to a person (the "claim administrator") designated by the Committee a written application on a form designated by the Committee. The claim administrator shall, within a reasonable time, consider the claim and shall issue his determination in writing. If the claim is denied in whole or in part by the claim administrator, the claim administrator shall, within a reasonable time, provide the claimant with a written notice setting forth in a manner calculated to be understood by the claimant: (a) The specific reason or reasons for the denial of the claim; (b) Specific reference to pertinent Plan provisions on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure. 14.02 Review Procedure. The Committee shall provide each claimant with a reasonable opportunity to appeal a denial of the claim to the Committee for a full and fair review. The claimant or his duly authorized representative shall be permitted to request a review upon written application to the Committee to review pertinent documents, and to submit issues and comments in writing. The Committee may establish such time limits within which claimants may request review of denied claims as are reasonable in relation to the nature of the benefit that is the subject of the claim and to other attendant circumstances, but which in no event shall be less than 60 days after receipt by the claimant of written notice of denial of his claim. The decision by the Committee with respect to the claim shall be made not later than 60 days after receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible but not later than 120 days after receipt of the request for review. The decision on review shall be in writing, shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based, and shall be written in a manner calculated to be understood by the claimant. To the extent permitted by law, the decision of the claim administrator (if no review is properly requested) or the decision of the Committee on review, as the case may be, shall be final and binding on all parties if it is supported by the facts that were considered and is reasonably based on the applicable provisions of law, the Plan, and the Trust Agreement. 14.03 Required Information. Any person eligible to receive benefits hereunder shall furnish to the claim administrator or the Committee any information or evidence requested by the claim administrator or the Committee and reasonably required for the proper administration of the Plan. Failure on the part of any person to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of any benefits that may be due under the Plan until such information or evidence is received by the claim administrator or the Committee. The claim administrator or the Committee may recoup from the payments to any person any amount previously paid to such person to which he was not entitled under the provisions of the Plan. ARTICLE XV: AMENDMENT, MERGER, AND TERMINATION OF THE PLAN 15.01 Amendment of the Plan. Either the Board of Directors, by duly adopted written resolution, or the Corporation's chief human resource officer, by an executed written instrument, may modify or amend the Plan in whole or in part, prospectively or retroactively, at any time and from time to time; provided that the Corporation's chief human resource officer may not adopt any such modification or amendment unless he determines that the modification or amendment will not have a material financial effect on the financial condition of the Company. The officers of the Corporation may take all actions necessary or appropriate to implement or effectuate any modification or amendment to the Plan. 15.02 Merger or Consolidation of the Plan. To the extent that Section 414(l) of the Code applies, the Plan may not be merged or consolidated with, and its assets or liabilities may not be transferred to, any other plan unless each Member would receive a benefit immediately after the merger, consolidation, or transfer (if each plan then terminated) that 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); provided that the foregoing provisions of this Section 15.02 shall not apply if such alternative requirements as may be imposed by the Treasury Regulations under Section 414(l) of the Code are satisfied. 15.03 Termination of the Plan. (a) Reservation of Right to Terminate. While the Plan was established as a permanent program and the Company expects to continue the Plan indefinitely, the Corporation reserves the right to terminate the Plan, partially or in its entirety, at any time by a written resolution of the Board of Directors. (b) Date of Termination. If the Board of Directors adopts a resolution to terminate the Plan, the Plan shall be terminated as of a date to be specified in the resolution. (c) Rights of Affected Members. In the event of the termination or partial termination of the Plan, or the discontinuance of contributions to the Plan, the rights of all affected Members to benefits accrued to the date of such termination, partial termination, or discontinuance, to the extent funded as of such date, shall be nonforfeitable. The benefits accrued to the date of such a termination, partial termination, or discontinuance shall be determined on the basis of the assumption that the employment of every affected Member terminated on such date (or, if earlier, on the date on which his employment actually terminated). In the event of a termination of the Plan, the benefits accrued to the date of the termination shall be funded only to the extent of the assets in the Fund as of such date; and in the event of a partial termination of the Plan, the benefits accrued by the affected Members shall be funded only to the extent that they would have been funded in the event of a complete termination of the Plan occurring on the date of the partial termination. For purposes of this subsection (c), the Members affected by the termination or partial termination of the Plan, or a discontinuance of contributions to the Plan, shall not include any former Member who does not have a balance in his Account on the date of the termination, partial termination, or discontinuance. 15.04 Design Decisions. Decisions regarding the design of the Plan shall be made in a settlor capacity and shall not be governed by the fiduciary responsibility provisions of ERISA. ARTICLE XVI: MISCELLANEOUS 16.01 Employment Rights Not Affected by Plan. The adoption and maintenance of the Plan shall not be deemed to constitute a contract between the Company and any Employee. Nothing herein contained shall be deemed to give to any Employee the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge any Employee at any time, nor shall it be deemed to give the Company the right to require the Employee to remain in its employ, nor shall it interfere with the Employee's right to terminate his employment. 16.02 Booklets and Brochures Subject to Plan Provisions. The Company shall from time to time issue to Members one or more booklets or brochures summarizing the Plan. In the event of any conflict between the terms of the Plan document and Trust Agreement and the terms of the booklets and brochures, the terms of the Plan document and Trust Agreement shall control. 16.03 Doubt as to Identity. (a) If at any time any doubt exists as to the identity or whereabouts of any person entitled to payment hereunder or the amount or time of such payment, the Corporation may direct the Trustee either (i) to hold such sum in trust, uninvested, and without interest, until distribution is ordered by a court of competent jurisdiction, or (ii) to pay such sum into court in accordance with appropriate rules of law. (b) If, after reasonable efforts, the Committee is unable to determine the whereabouts of any person entitled to payment hereunder within three years after such sum first becomes payable, the Account of such person shall be forfeited and shall be treated as an actuarial gain that shall be used to reduce Company Matching Contributions to the Plan in accordance with Article V. For purposes of the preceding sentence, notice by registered mail sent to such person's most recent address (as reflected in the Plan records) at least once in each of three successive years shall constitute reasonable efforts to locate such person. If, however, such person subsequently makes proper claim to the Company for such sum, the forfeited benefit shall be reinstated, and shall be distributed in accordance with the terms of the Plan. 16.04 Liability Limited. Except as and to the extent otherwise provided by applicable law, no liability whatever shall attach to or be incurred by the shareholders, directors, officers, or employees of the Company or any Affiliate under or by reason of any of the terms and conditions contained in the Plan or in any of the contracts procured pursuant thereto or implied therefrom. 16.05 Overpayments. If any overpayment of benefits is made under the Plan, the amount of the overpayment may be set off against further amounts payable to or on account of the person who received the overpayment until the overpayment has been recovered. The foregoing remedy is not intended to be exclusive. 16.06 Incapacity. If any person is unable to care for his affairs because of illness or accident, unless a duly qualified guardian or other legal representative has been appointed, any payment due from the Plan to that person may be paid, for the benefit of such person, to his spouse, parent, brother, sister, or other person deemed by the Committee to have incurred expenses for such person. 16.07 Assignment and Liens. (a) Nonalienability of Benefits. Subject to subsections (b) and (c), below, the right of any person to any benefit or payment under the Plan shall not be subject to alienation, transfer, assignment, or encumbrance, or otherwise subject to lien, and any such attempt to alienate, transfer, assign, or encumber any benefit or payment under the Plan shall be null and void. (b) Exception for Qualified Domestic Relations Orders. Subsection (a), above, shall not apply to payments made pursuant to a Qualified Domestic Relations Order. The following rules shall apply with respect to Qualified Domestic Relations Orders: (1) Establishment of Procedures. The Committee shall establish reasonable written procedures to determine the qualified status of domestic relations orders and to administer distributions under orders determined to be Qualified Domestic Relations Orders, which procedures may include, without limitation, the adoption of one or more model Qualified Domestic Relations Orders. Such procedures shall be consistent with the requirements of Section 206(d) of ERISA and Sections 401(a)(13) and 414(p) of the Code. The Committee shall promptly notify the affected Member and any other Alternate Payee of the receipt of a domestic relations order and the procedures for determining the qualified status of domestic relations orders. Within a reasonable period after the receipt of such order, the Committee shall determine whether such order is a Qualified Domestic Relations Order and shall notify the Member and each Alternate Payee of such determination. (2) Disposition of Benefits Pending Determination. During any period in which the qualified status of a domestic relations order is being determined (by the Committee, by a court, or otherwise), the Committee shall make arrangements to account separately for the amounts that would have been payable to each Alternate Payee if the order had been determined to be a Qualified Domestic Relations Order. If within 18 months of the receipt of the order, the order (or modification thereof) is determined to be a Qualified Domestic Relations Order, the Plan shall pay the amounts that have been separately accounted for to the person or persons entitled thereto. If within 18 months of the receipt of the order, it is determined that the order is not qualified, or the issue as to whether the order is qualified is not resolved by the end of the 18-month period, then the Plan shall pay the amounts that have been separately accounted for to the person or persons, if any, who would have been entitled to payment of such amounts if there had been no order. Any determination that an order is qualified which is made after the close of the 18-month period shall apply prospectively only. (3) Multiple Spouses. If, as a result of a Qualified Domestic Relations Order, a Member is treated as having more than one spouse, the amount of benefits payable with respect to the Member under the Plan shall not exceed the amount of benefits that would be payable if he had only one spouse. (4) Restrictions on Distributions. If a Qualified Domestic Relations Order requires distribution to an Alternate Payee of all or a portion of the Value of a Member's nonforfeitable interest in his Account, such distribution shall be made without regard to the restriction set forth in Section 12.01. (c) General Limitation. This Section 16.07 is intended to satisfy the requirements of Section 206(d) of ERISA and Sections 401(a)(13) and 414(p) of the Code. This Section 16.07 shall not be construed in a manner that would impose limitations that are more stringent than those required by Section 206(d) of ERISA and Sections 401(a)(13) and 414(p) of the Code. Thus, this Section 16.07 shall not restrict the alienation, transfer, assignment, or encumbrance of any benefit or payment under the Plan to the extent such alienation, transfer, assignment, or encumbrance is permitted under Section 206(d) of ERISA and Sections 401(a)(13) and 414(p) of the Code, and the regulations thereunder. If Congress should provide by statute, or the United States Labor Department, the United States Treasury Department, or the Internal Revenue Service should provide by regulation, ruling, or other guidance of general applicability, that any restriction set forth in this Section 16.07 is no longer necessary for the Plan to meet the requirements of Section 206(d) of ERISA or Section 401(a) of the Code or any other applicable provision of ERISA or the Code then in effect, such restriction shall become void and shall no longer apply, without the necessity of further amendment to the Plan. 16.08 Withholding Taxes. The Committee may make any appropriate arrangements to deduct from all amounts paid under the Plan any taxes reasonably determined to be required to be withheld by any government or government agency. The Member, Surviving Spouse, Beneficiary, or Alternate Payee, as the case may be, shall bear all taxes on amounts paid under the Plan to the extent that no taxes are withheld, irrespective of whether withholding is required. 16.09 Titles and Headings Not to Control. The titles to articles and the headings of sections, subsections, paragraphs, and subparagraphs in the Plan are placed herein for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 16.10 Notice of Process. In any action or proceeding involving the Fund, or any property constituting part or all thereof, or the administration thereof, the Company, the Committee, and the Trustee shall be the only necessary parties, and no Member, spouse, Surviving Spouse, Beneficiary, Alternate Payee, or other person having or claiming to have an interest in the Fund or under the Plan shall be entitled to any notice of process unless such notice is required by federal law. 16.11 Nonreversion. Except as provided in Section 5.07, all Plan assets shall be used for the exclusive benefit of Members, their Surviving Spouses, Beneficiaries, and Alternate Payees and for the payment of the reasonable expenses of administering the Plan and shall not revert to the Company. 16.12 Governing Law. The Plan shall be construed, administered and regulated in accordance with the provisions of ERISA and, to the extent not preempted thereby, in accordance with the laws of the State of New York (without regard to the legislative or judicial conflict of laws rules of any state). 16.13 Interpretation of Plan and Trust. It is the Company's intention that the Plan shall be a qualified profit-sharing plan under Section 401(a) of the Code, that the Trust shall be exempt from federal income tax under Section 501(a) of the Code, and that the Plan and the Trust Agreement shall satisfy the applicable requirements of ERISA. The Plan and the Trust Agreement shall be construed to effectuate the foregoing intention. 16.14 Severability. If any provision of the Plan should be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.15 Complete Statement of Plan. This document is a complete statement of the Plan and, as of September 1, 2001, supersedes all prior plans. The Plan may be amended, modified, or terminated only in writing and then only as provided in Sections 15.01 and 15.03. ARTICLE XVII: TOP-HEAVY PLAN PROVISIONS 17.01 Application of Article XVII. This Article XVII shall apply only if the Plan is Top-Heavy, as defined below. If, as of any Top-Heavy Determination Date, as defined below, the Plan is Top-Heavy, the provisions of Section 17.04 shall take effect as of the first day of the Plan Year next following the Top-Heavy Determination Date and shall continue to be in effect until the first day of any subsequent Plan Year following a Top-Heavy Determination Date as of which it is determined that the Plan is no longer Top-Heavy. 17.02 Definitions Concerning Top-Heavy Status. In addition to the definitions set forth in Article I, the following definitions shall apply for purposes of this Article XVII, and shall be interpreted in accordance with the provisions of Section 416 of the Code and the Treasury Regulations thereunder: (a) Aggregation Group - a group of Company Plans consisting of each Company Plan in the Required Aggregation Group and each other Company Plan selected by the Corporation for inclusion in the Aggregation Group that would not, by its inclusion, prevent the group of Company Plans included in the Aggregation Group from continuing to meet the requirements of Sections 401(a)(4) and 410 of the Code. (b) Annual Compensation - compensation for a calendar year within the meaning of Treasury Regulation Section 1.415-2(d)(11)(ii) to the extent that such compensation does not exceed the annual compensation limit in effect for the calendar year under Section 401(a)(17) of the Code. (c) Company Plan - any Tax-Qualified Plan of the Companies. (d) Key Employee - any employee of the Companies who satisfies the criteria set forth in Section 416(i)(1) of the Code. (e) Required Aggregation Group - one or more Company Plans comprising each Company Plan in which a Key Employee is a participant and each Company Plan that enables any Company Plan in which a Key Employee is a participant to meet the requirements of Section 401(a)(4) or 410 of the Code. (f) Top-Heavy - the Plan is included in an Aggregation Group under which, as of the Top-Heavy Determination Date, the sum of the present value of the cumulative accrued benefits of the Key Employees under all defined benefit plans in the Aggregation Group and the aggregate value of the accounts of Key Employees under all defined contribution plans in the Aggregation Group exceeds 60 percent of the analogous sum determined for all employees. The determination of whether the Plan is Top-Heavy shall be made in accordance with Section 416(g)(2)(B) of the Code and the Treasury Regulations thereunder. (g) Top-Heavy Determination Date - the December 31 immediately preceding the Plan Year for which the determination is made. (h) Top-Heavy Ratio - the percentage calculated in accordance with paragraph (6), above, and Section 416(g)(2) of the Code and the Treasury Regulations thereunder. (i) Top-Heavy Year - a Plan Year for which the Plan is Top-Heavy. 17.03 Calculation of Top-Heavy Ratio. The Top-Heavy Ratio with respect to any Plan Year shall be determined in accordance with the following rules: (a) Determination of Accrued Benefits. The accrued benefit of any current Member shall be calculated, as of the most recent valuation date that is within a 12-month period ending on the Top-Heavy Determination Date, as if the Member had voluntarily terminated employment as of such valuation date. Such valuation date shall be the same valuation date used for computing plan costs for purposes of the minimum funding provisions of Section 412 of the Code. Unless, as of the valuation date, the Plan provides for a nonproportional subsidy, the actuarial present value of the accrued benefit shall reflect a retirement income commencing at age 65 (or attained age, if later). If, as of the valuation date, the plan provides for a nonproportional subsidy, the benefit shall be assumed to commence at the age at which the benefit is most valuable. (b) Aggregation. The Plan shall be aggregated with all Company Plans included in the Aggregation Group. 17.04 Effect of Top-Heavy Status. (a) Minimum Contribution. Notwithstanding Article V, as of the last day of each Top-Heavy Year, the Company shall make, for each Member, (i) the Company contributions it otherwise would have made under the Plan for such Top-Heavy Year, or if greater, (ii) contributions for such Top-Heavy Year that, when added to the contributions made by the Company for such Member (and any forfeitures allocated to his accounts) for such Top-Heavy Year under all other defined contribution plans of the Company, aggregate three percent of his Compensation; provided that the Plan shall meet the requirements of this subsection (a) and subsection (b), below, without taking into account Pre-Tax Contributions or other employer contributions attributable to a salary reduction or similar arrangement. (b) Accelerated Vesting. A Member who has completed at least three years of Service and who is credited with an Hour of Service in a Top-Heavy Year shall have a nonforfeitable interest in his Account. For purposes of determining whether the Member's interest in his Account is nonforfeitable under the preceding sentence, Section 411(a)(3)(B) and (a)(3)(D) of the Code (relating to suspension of benefits and forfeitures upon withdrawal of mandatory contributions, respectively) shall not apply. (c) Reduction in Section 415 Limits. For purposes of applying Section 6.05, the provisions of Section 415(e)(2)(B) and (e)(3)(B) of the Code shall be applied by substituting "1.0" for "1.25" therein. If application of the preceding sentence would otherwise cause a Member to exceed the limits imposed by Section 6.05, then application of the preceding sentence shall be suspended with respect to the Member until he no longer exceeds the limits of Section 6.05, as modified by the preceding sentence. In accordance with Section 416(h)(3) of the Code and the Treasury Regulation thereunder, during the period of such suspension there shall be no Company contributions, forfeitures, or voluntary nondeductible contributions allocated to the Member's accounts under the Plan or any other defined contribution plan of the Companies and no accruals for the Member under any defined benefit plan of the Companies. In addition, during the period of such suspension, for purposes of applying Section 6.05 to the Member, Section 415(e)(6)(B)(i) of the Code shall be applied as modified by Section 416(h)(4) of the Code. (d) Inapplicability to Union Employees. The preceding provisions of this Section 17.04 shall not apply with respect to any employee included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Company, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and the Company. 17.05 Effect of Discontinuance of Top-Heavy Status. If, for any Plan Year after a Top-Heavy Year, the Plan is no longer Top-Heavy, the provisions of Section 17.04 shall not apply with respect to such Plan Year, except that: (1) The accrued benefit of any Member shall not be reduced on account of the operation of this Section 17.05; (2) Each Member shall remain fully vested in any portion of the Member's accrued benefit that was fully vested before the Plan ceased to be Top-Heavy; and (3) Any Member who was a Member in a Top-Heavy Year and who has completed at least three years of Service as of the first day of the Plan Year in which the Plan is no longer Top-Heavy may elect to remain subject to the provisions of Section 17.04(b). 17.06 Intent of Article XVII. This Article XVII is intended to satisfy the requirements imposed by Section 416 of the Code and shall be construed in a manner that will effectuate this intent. This Article XVII shall not be construed in a manner that would impose requirements on the Plan that are more stringent than those imposed by Section 416 of the Code. -----END PRIVACY-ENHANCED MESSAGE-----