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In re Walt Disney Co. Consolidated Derivative Litigation8/9/2005
grants, (4) Iger's CapCities/ABC employment agreement and (5) Russell's compensation for negotiating the Ovitz deal. The discussion concerning the OEA focused on a term sheet (the actual draft of the OEA was not distributed), from which Russell and Watson outlined the process they had followed back in August and described Crystal's analysis. Russell testified that the topics discussed were historical comparables such as Eisner's and Wells' option grants, and the factors that he, Watson and Crystal had considered in setting the size of the option grants and the termination provisions of the contract.
Watson testified that he provided the committee with the spreadsheet analysis he had performed back in August and discussed his findings. Crystal, however, did not attend the meeting and his work product was not distributed to the Committee. At trial, Crystal testified that he was available via telephone to respond to questions if needed, but no one from the committee in fact called. After Russell's and Watson's presentations, Litvack responded to various questions but the substance of those questions was not recounted in any detail at trial.
Poitier and Lozano testified that they believed they had received sufficient information from Russell's and Watson's presentations to enable them to exercise their judgment in the best interest of the Company. When the discussions concluded, the Committee unanimously voted to approve the terms of the OEA subject to "reasonable further negotiations within the framework of the terms and conditions" described in the OEA.
An executive meeting of Disney's board immediately followed the compensation committee's meeting. In executive session, the board was informed of the reporting structure that Eisner and Ovitz agreed to, but no discussion of the discontent Litvack or Bollenbach expressed at Eisner's home was recounted. Eisner led the discussion regarding Ovitz, and Watson then explained his analysis and both he and Russell responded to questions by the board. Upon resuming the regular session, the board deliberated further, then voted unanimously to elect Ovitz as President.
8. The October 16, 1995 Compensation Committee Meeting
In accordance with the compensation committee's resolution roughly three weeks before, the compensation committee convened again on October 16, 1995, in a special meeting to discuss several issues relating to stock options. After a presentation by Litvack, during which he responded to questions from the members of the committee, the compensation committee unanimously approved amendments to The Walt Disney Company 1990 Stock Incentive Plan, thereafter titled The Walt Disney Company Amended and Restated 1990 Stock Incentive Plan (the "1990 Plan"), and also approved a new plan, known as The Walt Disney Company 1995 Stock Incentive Plan (the "1995 Plan"). Both plans were subject to further approval by the full board of directors and by shareholders.
Following approval of these plans, Litvack reviewed the terms of the proposed OEA with the compensation committee, after which the committee unanimously approved the terms of the OEA and the award of Ovitz's options pursuant to the 1990 Plan. Ovitz's options were priced at market as of the date of the meeting. As a final wrap-up before adjourning, the compensation committee passed a resolution "that all of the actions heretofore taken by the officers of the Corporation in connection with the foregoing resolutions [relating to the OEA] be, and they hereby are, confirmed and ratified."
The amendment to the 1990 Plan (consistent with the provisions of the new 1995 Plan), together with the terms of the Stock Option Agreement, provided t
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