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Disney Board of Directors Sets CEO Search, Refigures Bonus Program

The Walt Disney Co. board of directors met Sept. 19-21, 2004, on the 20th anniversary of Michael Eisner's service as ceo, and voted to reaffirm support for its management team, redesigned the management incentive bonus program and started its search for its next ceo to be chosen by June 2005.

The board noted that the company's performance has been strong, with a greater than 50% increase in earnings projected in the current fiscal year and, barring a downturn in the environment, double-digit growth in earnings targeted through at least 2007. The board formally acknowledged Eisners recent decision to retire from the ceo position.

The compensation committee approved a redesigned Management Incentive Bonus Program for its senior executives and managers to further clarify and formalize the company's practice of linking executive compensation and performance.

Under the new program, which takes effect for Disney's 2005 fiscal year beginning Oct. 1, 2004, 70% of the annual bonus compensation determination for the most senior corporate executives and 70% of the bonus pool determination for other corporate executives and managers will be based on performance against specific financial measures established at the outset of each fiscal year by the compensation committee.

For fiscal year 2005, performance metrics relevant to the bonus and bonus pool determinations will include targeted levels of operating income, economic profit (operating profit after taxes and a charge for capital employed), after-tax free cash flow and earnings per share.

The remaining 30% of the determination will be based upon the committee's assessment of other individual, company-wide or business segment performance objectives.

In the case of the most senior executive officers, the new program will be subject to additional performance criteria and payment limitations under the company's 2002 executive performance plan, as approved by the company's stockholders, allowing these bonuses to be tax deductible to the company under Section 162(m) of the Internal Revenue Code.

For executives and managers at the company's business segments, 50% of the bonus pool determination will be based on segment-level financial performance and 50% will be based on performance against the company-level financial goals and other objectives.

"By further clarifying and making more formal the company's practice of linking bonus compensation and financial performance, the board is underscoring its commitment to strong governance and to motivating and holding accountable the management team in a way that drives meaningful shareholder value," said Judith Estrin, Disney director and chair of the compensation committee. "The compensation committee and the board believe this redesigned bonus compensation program will allow Disney to attract, retain and motivate the best talent in the world by rewarding outstanding performance while ensuring that the company's leaders' compensation is thoroughly aligned with the interests of shareholders. The plan focuses on the key drivers of long term shareholder value and will help reinforce management's commitment to these important financial metrics."

For more information on Disney's redesigned Management Incentive Bonus Program, see www.disney.com/investors.

In its quest to select as the next ceo the board will:* Engage an executive search firm to assist it in selecting a ceo who possesses the qualities and experience the board believes are necessary for this important position.* Consider both internal and external candidates. Bob Iger is the one internal candidate. He is an outstanding executive and the board regards him as highly qualified for the position. However, the board believes that the process should include full consideration of external candidates as well.* Complete the process and announce a successor as soon as possible, with an expected date of completion of June 2005.* Eisner and the board will work to assure a smooth and effective transition.

Keeping with the board's retirement policy provides that "no director may stand for reelection following the calendar year in which that director turned 72 years of age," chairman George Mitchell (who will turn 72 in August 2005) was reminded that if he is elected a director at the 2005 annual meeting, he cannot stand for reelection at the 2006 annual meeting.

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