JEFF KATZENBERG'S 4/96 BREACH OF EMPLOYMENT CONTRACT COMPLAINT

AGAINST THE WALT DISNEY CO.

----- SUPERIOR COURT FOR THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
CASE NO. BC147864

JEFFREY KATZENBERG,
Plaintiff,

vs.
THE WALT DISNEY COMPANY
and DOES 1 through 20, Defendants.

COMPLAINT FOR BREACH OF CONTRACT

Plaintiff alleges as follows:

FIRST CAUSE OF ACTION (Breach of contract as to Post-Termination Payments --

Against All Defendants)

1. Plaintiff is a motion picture and television executive and resident of Los

Angeles County. Defendant The Walt Disney Company ("Disney") is a Delaware
corporation doing business in Los Angeles County and throughout the world as a
motion picture and television production and distribution company, a theme
park owner and operator and the proprietor of other businesses.

2. The true names or capacities, whether individual, corporate, associate or

otherwise, of the defendants named herein as Does 1 through 20 are unknown
to plaintiff, who therefore sues said defendants by such fictitious names, and
plaintiff will amend this complaint to show their true names and capacities
when the same have been ascertained.

3. In or about October, 1984, Katzenberg entered into the employ of Disney as

Chairman of The Walt Disney Studios, a division of Disney, pursuant to a six-
year contract (the "1984 Contract"). By the terms of the 1984 Contract,
Katzenberg was given the responsibility to supervise and direct worldwide
production, maketing and distribution of all Disney's live action and animated
motion pictures and television programs ("Product"). A key element of
Katzenberg's compensation under the 1984 Contract was an Incentive Bonus
provision designed to compensate him to the extent he was able to achieve
success in managing the Disney operations that were placed under his
direction. The Incentive Bonus provision provided for payment to Katzenberg by
Disney of 2% of the gross receipts less cost as defined by the contract ("Profits")
derived by Disney from all Product as defined by the contract put into
production or acquired for distribution during the term of his employment
("1984 Eligible Product"). As provided by the 1984 Contract, payment of the 2%
Incentive Bonus with respect to Profits earned from the exploitation by Disney
of 1984 Eligible product subsequent to expiration of the term of employment
would continue to be paid to Katzenberg pursuant to procedures provided for
in the 1984 Contract.

4. In 1988, prior to expiration of the term of the 1984 Contract, Disney

solicited Katzenberg to enter into a new long-term written employment
contract and Disney and Katzenberg thereafter entered into such a written
employment contract subscribed by Disney and Katzenberg as of October 1,
1988 (the "1988 Contract"). The term of the 1988 Contract was six years,
expiring September 30, 1994, subject to renewal, on the assent of both parties,
for an additional two years, expiring September 30, 1996. The 1988 Contract
provided for Katzenberg to continue to be employed as Chairman of The Walt
Disney Studios and to continue the broad responsibilities he had been
performing under the 1984 Contract.

5. Once again, a key element of Katzenberg's compensation under the 1988

Contract was an Incentive Bonus provision providing for payment to Katzenberg
by Disney of 2% of Disney's Profits from Product put into production or acquired
for distribution during Katzenberg's employment under either the 1988 Contract
or the 1984 Contract ("Eligible Product"). Once again, the 1988 contract
provided for payment of such 2% Incentive Bonus subsequent to the end of the
term of the contract with respect to Profits earned by Disney after the term of
the contract derived from Product that had been put into production or
acquired for distribution during Katzenberg's employment going back to
October of 1984.

6. In the entertainment industry, revenues from live action and animated

feature films and television programming often lag by many years, even
decades, after the efforts and expenditures that are incurred to produce such
products. For example, because of the lengthy time period that can elapse
between commencement of production of an animated film, such as those for
which Disney is note, and distribution of the film, the first revenues from the
film may not be received until years after production commences. Notable
films can continue to generate large revenues for decades thereafter, either by
way of theatrical re-release or in other media such as the sale of videotapes.
By way of example, in 1994, Disney's video re-release of "Snow White," an
animated feature first released over fifty years earlier, generated gross
revenues of some $800 million and profits of over $500 million. Likewise,
successful television shows can realize large syndication revenues years or even
decade after production commenced.

7. For this reason, continued payment of the 2% Incentive Bonus with respect
to Profits realized by Disney after the end of the term of Katzenberg's
employment from the exploitation of Product put into production or acquired
as a result of his efforts during the term of his employment ("Post-Termination
Payments") was of the essence of the agreements between Katzenberg and
Disney.

8. The 1988 contract provided for such Post-Termination Payments to be made

in the following manner: (a) For each of the two fiscal years occurring
subsequent to termination of Katzenberg's employment, Disney was required to
pay the Incentive Bonus calculated as 2% of Profits from Eligible Product
earned in that fiscal year. 1.2 % of such Profits was to be paid within three
months after the end of the fiscal year and the remaining .8% was to be paid
(with interest) in 16 quarterly installments thereafter commencing within six
months after the end of the fiscal year. Disney's fiscal years run from October 1
to September 30. The 1988 Contract employment term expired on September
30, 1994 unless extended to September 30, 1996. (b) With respect to all years
thereafter--i.e., the decades during which Disney would continue to earn
Profits from Eligible Product put into production or acquired during
Katzenberg's employment--an estimate of future profits from eligible Product
was to be established on the second anniversary of the termination of the 1988
Contract. Disney was then required promptly to pay to Katzenberg in a lump-
sum the net present value of 2% of that estimated future amount.

9. Katzenberg's tenure as head of The Walt Disney Studios--Disney's Filmed

Entertainment Division--was one of unparalleled success. For fiscal 1984--the
year prior to Katzenberg's assuming his responsibilities--Disney's Filmed
Entertainment Division generated gross revenues of only $244.5 million and had
an operating income of only $2.2 million. For fiscal 1994, the final year of
Katzenberg's tenure as head of the division, gross revenues were some $4.8
billion, with operating income of over $850 million. Throughout his tenure,
both gross revenues and operating income increased, without exception, each
year. Moreover, the profit levels achieved by Katzenberg as head of the Filmed
Entertainment Division became the driving force for Disney's overall growth in
profitability. While, historically, revenue and profits of the Theme Park division
had dwarfed those of the Filmed Entertainment division, by the end of
Katzenberg's tenure both gross revenues and operating income of the Filmed
Entertainment division far outstripped those of the Theme Parks. The following
chart, the numbers of which are derived from Disney's filings with the
Securities and Exchange Commission, shows the comparative results of Filmed
Entertainment and Theme Parks for the ten fiscal years--1985-1994--that
Katzenberg headed Filmed Entertainment.

DISNEY REVENUE AND INCOME: 1985-1994 (in millions)

Theme Parks..........Revenue............Operating Income
1985................. 1,257.5............255.7
1986................. 1,523.9............403.7
1987................. 1,834.2............548.9
1988................ .2,042.0............564.4
1989................. 2,595.4............785.4
1990................. 3,019.6............889.3
1991................. 2,794.3............546.6
1992................. 3,306.9............644.0
1993................. 3,440.7............746.9
1994................. 3,463.6............684.1

Filmed Entertainment
1985................... 320.0............33.7
1986................... 511.7............51.6
1987.................. .875.6............130.6
1988................. 1,149.2............186.3
1989................. 1,587.6............255.5
1990................. 2,250.3............313.0
1991................. 2,593.7............318.1
1992................. 3,115.2............508.3
1993................. 3,673.4............622.2
1994................ .4.793.3............856.1

10. Pursuant to the terms of the 1988 Contract, Katzenberg was entitled to
give one year's advance notice, in September 1993, that the 1988 Contract
would expire as scheduled on September 30, 1994 and would not be renewed
until September 30, 1996. In September 1993, Katzenberg gave Disney such
notice. On September 30, 1994, the term of the 1988 Contract expired and
Katzenberg's employment by Disney ended.

11. Katzenberg has done all things that have been required to be done by him
under the 1988 Contract and he is in no manner or respect in breach thereof.
At the time of Disney's acts of breach and repudiation hereinafter set forth, the
1988 Contract, but for Disney's breach, continued to impose obligations of
performance upon Katzenberg.

12. Disney has committed the following acts of breach and repudiation of the
1988 Contract: Disney has repeatedly claimed that it has no obligation to make
_any_ Post-Termination Payments to Katzenberg, thereby repudiating its said
obligation. Thereafter, despite repeated demand by and on behalf of
Katzenberg, Disney for over a year has refused to acknowledge its contractual
obligation to make such Post- Termination Payments. Additionally, the first of
Disney's fiscal years occurring subsequent to termination of Katzenberg's
employment ended on September 30, 1995; Disney has failed and refused
within three months of that date to make any Post-Termination Payment to
Katzenberg for such fiscal year or to furnish any calculation to Katzenberg of
the amount of any Post-Termination Payment for such fiscal year.
13. As a direct and proximate result of Disney's breach and repudiation of the
1988 Contract, Katzenberg has suffered and will suffer substantial monetary
damage in a sum not presently susceptible to precise calculation. The Profits
expected to be received by Disney with respect to those Products put into
production or acquired for distribution during the term of Katzenberg's
employment have a net present value believed to be well in excess of $12.5
billion. Katzenberg is informed and believes and, on that ground, alleges that
he has suffered monetary damages in a sum which will exceed $250 million. As
a result of Disney's bad faith conduct, Katzenberg has incurred and will incur
substantial attorneys' fees.

SECOND CAUSE OF ACTION (Breach of Contract as to Pre-Termination Payments

-- Against All Defendants)

14. Plaintiff incorporates by reference paragraphs 1 through 13 hereinabove as

though fully set forth herein.

15. Both the 1984 Contract and the 1988 Contract required Disney to provide
Katzenberg with supporting documentation and information enabling him to
verify the accuracy of Disney's calculations or estimations of sums payable to
him with respect to his Incentive Bonus.

16. Despite a reasonable request by Katzenberg for the supporting

documentation and information enabling him to verify the accuracy of Disney's
calculations or estimations in respect of his Incentive Bonus payable to him
prior to termination, Disney has refused to provide any such documentation
and information.

WHEREFORE, plaintiff prays judgment as follows:

1. For damages in the sum of $250 million or such greater sum as shall be found
to have been caused by Disney's breach and repudiation;

2. For prejudgment interest at the highest lawful rate;

3. For plaintiff's attorneys' fees in this action pursuant to Code of Civil

Procedure Section 128.5;

4. For an order requiring defendants to produce supporting documentation and

information necessary to verify the accuracy of any calculations or estimations
of plaintiff's Incentive Bonus; and

5. For costs of suit and such other relief as the court shall deem proper.

DATED: April 9, 1996

By /S/ BERTRAM FIELDS

BERTRAM FIELDS, CHARLES N. SHEPHARD, KEVIN L. JAMES

GREENBERG, GLUSKER, FIELDS, CLAMAN & MACHTINGER

1900 Avenue of the Stars,
Suite 2200 Los Angeles, California 90067-4590
(310) 553-3610

HERBERT M. WACHTELL,
THEODORE N. MIRVIS,
EDWARD A. STELZER

WACHTELL, LIPTON, ROSEN & KATZ

51 West 52nd Street
New York, New York
10171
(212) 403-1000

Attorneys for Plaintiff Jeffrey Katzenberg

Answer of Walt Disney Company to this complaint.