DISTRIBUTION AGREEMENT

Exhibit 10.1

EXECUTION COPY

DISTRIBUTION AGREEMENT

By and Among

TMCT, LLC,

TRIBUNE COMPANY,

CANDLE HOLDINGS CORPORATION,

FORTIFY HOLDINGS CORPORATION,

CHANDLER TRUST NO. 1,

and

CHANDLER TRUST NO.2

September 21, 2006

 

 

DISTRIBUTION AGREEMENT

This Distribution Agreement (the “Agreement”), dated as of September 21, 2006, is by and among TMCT, LLC, a Delaware limited liability company (the “Company”), Tribune Company, a Delaware corporation (“Tribune”), Candle Holdings Corporation, a Delaware corporation (“Candle”), Fortify Holdings Corporation, a Delaware corporation (“Fortify” and, collectively with Tribune and Candle, the “Tribune Members”), Chandler Trust No. 1 (“Trust 1”) and Chandler Trust No. 2 (“Trust 2” and, collectively with Trust 1, the “Trust Members”).  The Tribune Members and the Trust Members are collectively referred to herein as the “Members.”  Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Limited Liability Company Agreement of the Company, dated as of August 8, 1997 (the “Operating Agreement”).

R E C I T A L S

WHEREAS, the Company desires to make a distribution to Tribune (the “Distribution”); and

WHEREAS, concurrently with the Distribution, the Members desire to amend and restate the Operating Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Distribution

1.1          Distribution.  On the Closing Date (as defined below), the Company shall make a distribution to Tribune in respect of the Interest held by Tribune by delivering to Tribune (a) certificates representing 9,719,780 shares of the common stock, $.01 par value per share, of Tribune (the “Common Stock”) and (b) certificates representing 442,596 shares of the Series C Preferred Stock, no par value, of Tribune (the “Preferred Stock).  All such shares shall be distributed, transferred and delivered to Tribune free and clear of any lien (statutory or other), claim, charge, security interest, pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority or other security agreement or preferential arrangement of any kind or nature.  Concurrently with the Distribution, the Members will enter into an Amended and Restated Limited Liability Company Agreement for the Company in the form attached hereto as Exhibit A (the “Amended Operating Agreement”).  Each of the Members acknowledges and agrees that the sole interest of such Member in the Company following the Closing Date shall be the Interest of such Member as provided in, and governed by, the terms of the Amended Operating Agreement.

1.2          Consent to Transactions.  For all purposes of the Operating Agreement, including, without limitation, Section 6.5 of the Operating Agreement, each of the Members hereby agrees and consents to the transactions described in this Agreement,

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including, without limitation, the Distribution.  Each of the Members further agrees to execute and deliver the Amended Operating Agreement in order to carry out the purpose and intent of this Agreement.  Each of the Members (other than Tribune) acknowledges that the Distribution provided for in this Agreement is being made solely to Tribune and hereby waives any right it may have to receive a concurrent distribution in accordance with the provisions of Article IX of the Operating Agreement due to or on account of the Distribution.

1.3          Continuation of Company.  Each of the Members hereby agrees that at all times relevant hereto the Company shall continue and shall not be dissolved or deemed dissolved or terminated due to or on account of the Distribution or any of the transactions herein or any other reason.  Each of the Members agrees that it will not claim or assert in any forum a position which is contrary to the purpose and intent of this Section 1.3.

ARTICLE II

Closing

2.1          Closing Date and Location.  Subject to the provisions of this Agreement, the closing of the transactions contemplated hereby (the “Closing”) shall be held on September 22, 2006 or at such other time on or before September 22, 2006 as may be mutually agreed upon in writing by the parties.  The date of the Closing is sometimes referred to herein as the “Closing Date.”  The Closing shall take place at the Offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, California  90071.

2.2          Deliveries by the Tribune Members.  In addition to, and without limiting any other provision of this Agreement, the Tribune Members agree to deliver or cause to be delivered to the Company and the Trust Members at or prior to the Closing the following:

(a)           Authorizations.  Certified resolutions of the Board of Directors of each of the Tribune Members authorizing the execution, delivery and performance of this Agreement and the transactions contemplated herein; and

(b)           Amended Operating Agreement.  A copy of the Amended Operating Agreement duly executed by each of the Tribune Members.

2.3          Deliveries by the Company  In addition to, and without limiting any other provision of this Agreement, the Company agrees to deliver or cause to be delivered at or prior to the Closing the share certificates to Tribune described in Section 1.1, in the amounts and at the times indicated in Section 1.1, together with any stock or other applicable powers, duly executed on behalf of the Company, as may be necessary to register the transfer of the shares represented by such certificates.

2.4          Deliveries by the Trust Members  In addition to, and without limiting any other provision of this Agreement, the Trust Members agree to deliver or cause to be

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delivered to the Company and the Tribune Members at or prior to the Closing a copy of the Amended Operating Agreement duly executed by each of the Trust Members.

2.5          Conditions Precedent.

(a)           Conditions to Obligations of the Company.  The obligation of the Company to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Company:  (i) the representations and warranties made by the Members herein shall be true and correct in all material respects as of the date hereof and (ii) the Members shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Members hereunder through and including the Closing Date, and shall have obtained all approvals, consents and qualifications necessary to complete the transactions described herein.

(b)           Conditions to Obligations of the Tribune Members.  The obligation of the Tribune Members to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Tribune Members:  (i) the representations and warranties made by the Company and the Trust Members herein shall be true and correct in all material respects as of the date hereof and (ii) the Company and the Trust Members shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company and the Trust Members hereunder through and including the Closing Date, and shall have obtained all approvals, consents and qualifications necessary to complete the transactions described herein.

(c)           Conditions to Obligations of the Trust Members.  The obligation of the Trust Members to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Trust Members:  (i) the representations and warranties made by the Company and the Tribune Members herein shall be true and correct in all material respects as of the date hereof and (ii) the Company and the Tribune Members shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company and the Tribune Members hereunder through and including the Closing Date, and shall have obtained all approvals, consents and qualifications necessary to complete the transactions described herein.

ARTICLE III

Representations And Warranties

3.1          Representations and Warranties of Tribune Members.  Each of the Tribune Members, jointly and severally, represents and warrants to the Company and the Trust Members as follows:

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(a)           Organization and Good Standing.  Each of the Tribune Members is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted.

(b)           Due Authorization.  All corporate action on the part of each of the Tribune Members, its officers, directors and stockholders necessary for the authorization, execution and delivery of, and the performance of all obligations of such Tribune Member under, this Agreement has been taken.  Each of the Tribune Members has duly authorized, executed and delivered this Agreement, and this Agreement is a valid and binding obligation of each of the Tribune Members enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

(c)           No Conflicts.  Neither the execution and delivery of this Agreement or the consummation of any of the transactions contemplated hereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof, by any of the Tribune Members will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under (a) the certificate of incorporation, by-laws or other constitutional documents of such Tribune Member (b) any material agreement, note, instrument, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which such Tribune Member is a party or any of its respective assets or business is subject or by which such Tribune Member is bound, (c) any order, writ, injunction or decree to which such Tribune Member is a party or any of its assets or business is subject or by which such Tribune Member is bound or (d) any applicable laws affecting such Tribune Member or its respective assets or business.

(d)           Consents.  No consent, approval or authorization of, declaration to, or filing or registration with, any governmental or regulatory authority, or any other person, is required to be made or obtained by the Tribune Members or any of their affiliates in connection with the execution, delivery and performance by the Tribune Members of this Agreement and the consummation of the transactions contemplated hereby, other than filings that Tribune may make pursuant to the requirements of the Securities Exchange Act of 1934, as amended.

(e)           Representations of Tribune as Managing Member.

(i)            Financial Statements.  Tribune heretofore has delivered to the Members true and correct copies of (A) the Company’s audited balance sheets dated as of December 31, 2004 and December 31, 2005 and (B) the related statements of the Member’s capital accounts for each of the years ended December 31, 2004 and December 31, 2005 (collectively, the “Financial Statements”).  The Financial Statements (1) have been prepared in all respects in accordance with the terms of the Operating Agreement (except that all Financial Statements have been prepared on a tax basis not in accordance

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with generally accepted accounting principles), (2) are in accordance with the books and records of the Company and (3) fairly present the financial position of the Company as of the respective dates thereof.  The Company keeps books, records and accounts that, in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of assets of the Company.

(ii)           Schedule of Members.  Attached hereto as Exhibit B is a true, complete and accurate copy of the Schedule of Members as of the date hereof as required by the Operating Agreement.

(iii)         Compliance with Operating Agreement.  To the knowledge of Tribune, since January 1, 2005, the Company has been operated in compliance with the Operating Agreement in all material respects.

(iv)          Tax Elections.  No election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), is in effect with respect to the Company.

(f)            Rights Plan.  None of the transactions contemplated hereby, or the direct or indirect acquisition of beneficial ownership of additional securities of Tribune by the Company or the Trust Members as a result of the consummation of the transactions contemplated hereby, shall cause either of the Trust Members or the Company to be an “Acquiring Person” pursuant to that certain Rights Agreement, between Tribune and First Chicago Trust Company of New York, dated as of December 12, 1997 and as amended by Amendment No. 1 on June 12, 2000 and Amendment No. 2 on September 21, 2006 (the “Rights Plan”).

3.2          Representations and Warranties of Trust Members.  Each of the Trust Members, jointly and severally, represents and warrants to the Company and the Tribune Members as follows:

(a)           Due Authorization.  All action on the part of each of the Trust Members and its trustees necessary for the authorization, execution and delivery of, and the performance of all obligations of such Trust Members under, this Agreement has been taken.  Each of the Trust Members has duly authorized, executed and delivered this Agreement, and this Agreement is a valid and binding obligation of each of the Trust Members enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

(b)           No Conflicts.  Neither the execution and delivery of this Agreement or the consummation of any of the transactions contemplated hereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof, by any of the Trust Members will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under (a) the constitutional documents of such Trust Member, (b) any material agreement, note, instrument, mortgage, lease, license, franchise, permit or other authorization, right, restriction or

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obligation to which such Trust Member is a party or any of its respective assets or business is subject or by which such Trust Member is bound, (c) any order, writ, injunction or decree to which such Trust Members is a party or any of its assets or business is subject or by which such Trust Members is bound or (d) any applicable laws affecting such Trust Members or its respective assets or business.

(c)           Consents.  No consent, approval or authorization of, declaration to, or filing or registration with, any governmental or regulatory authority, or any other person, is required to be made or obtained by the Trust Members or any of their affiliates in connection with the execution, delivery and performance by the Trust Members of this Agreement and the consummation of the transactions contemplated hereby.

(d)           Lack of Knowledge of Certain Actions.  To the knowledge of each Trust Member (i) the Company, since January 1, 2005, has been operated in compliance with the Operating Agreement in all material respects and (ii) Tribune has not engaged at any time prior to the date of this Agreement, and is not currently engaged as of the date hereof, in any misconduct in its capacity as Managing Member of the Company.

3.3          Representations and Warranties of the Company.  The Company represents and warrants to the Tribune Members and the Trust Members as follows:

(a)           Organization and Good Standing.  The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted.

(b)           Due Authorization.  All action on the part of the Company, its officers, managers and members necessary for the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Agreement has been taken.  The Company has duly authorized, executed and delivered this Agreement, and this Agreement is a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

(c)           No Conflicts.  Neither the execution and delivery of this Agreement or the consummation of any of the transactions contemplated hereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof, by the Company will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under (a) the certificate of formation or other constitutional documents of the Company, (b) any material agreement, note, instrument, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which the Company is a party or any of its respective assets or business is subject or by which the Company is bound, (c) any order, writ, injunction or decree to which the Company is a party or any of its assets or business is subject or by

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which the Company is bound or (d) any applicable laws affecting the Company or its respective assets or business.

(d)           Consents.  No consent, approval or authorization of, declaration to, or filing or registration with, any governmental or regulatory authority, or any other person, is required to be made or obtained by the Company or any of their affiliates in connection with the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby.

ARTICLE IV

Covenants of the Parties

4.1          Further Assurances.  The parties hereto shall execute and deliver such other documents, certificates, agreements and other writings and shall take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement, including, without limitation, the transfer to the Tribune Members of ownership of the shares as provided in Section 1.1.

4.2          Confidentiality; Public Announcements.  The parties hereto shall use their best efforts to keep this Agreement and the execution and terms hereof confidential, and shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby.  The foregoing obligations of confidentiality do not pertain to the disclosure of information which is available publicly, is required to be disclosed by any court or any party discloses, upon advice of counsel, in order to comply with applicable law or the applicable rules of the New York Stock Exchange.  The parties agree to jointly prepare and to distribute (singly or jointly) a press release disclosing the execution and delivery of this Agreement and the substance of the transactions contemplated hereby.

4.3          Tax Matters.

(a)           Treatment of Distribution.  All payments to Tribune pursuant to this Agreement shall be treated as distributions pursuant to Section 731(a) and Section 732(a) of the Code and the corresponding provisions of any applicable state or local tax laws.

(b)           Allocations.  Each of the Tribune Members’ distributive share of the Company’s income, gain, loss and deduction for the taxable year of the Company that includes the Closing Date shall be determined on the basis of an interim closing of the books of the Company as of the close of business on the Closing Date.  Such items shall be allocated to the Members based on the Operating Agreement in effect prior to the Closing Date.  Furthermore, all cash held back by the Company that is attributable to income earned or accrued prior to the Closing Date shall be distributed to the Members on or before December 14, 2006 in accordance with Article IX of the Operating Agreement as in effect prior to the Closing Date.  For the month of September 2006, ordinary income, rent and dividends from the Properties, Fixed Income Portfolio and

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Equity Portfolio shall be pro-rated based on the number of days before, up to and including the Closing Date and the number of days after the Closing Date.  The parties have tried to reflect all allocations and distributions from the operations of the Company from January 1, 2006 until the Closing Date in the Capital Accounts as described in subsection (d)(ii) below.  To the extent that the ultimate allocations of the Company’s gain, loss, income or deduction for the period January 1, 2006 until and including the Closing result in Capital Account balances immediately prior to the Distribution (having given effect to all such allocations as well as the allocations of unrealized gain or loss as described in subsection (d)(ii) below) that are different than the Capital Account balances agreed to by the parties pursuant to subsection (d)(ii) below, the relevant Members shall contribute cash to the Company or the Company shall distribute cash to the relevant Members to the extent necessary to eliminate such discrepancies.  The parties agree to effect the foregoing promptly once the Company has obtained the information to enable the necessary computations.  The parties shall cooperate in good faith in obtaining the necessary information and making the foregoing determinations.

(c)           Tax Returns.  The parties shall each file all required Federal, state and local income tax returns and related returns and reports in a manner consistent with the foregoing provisions of this Agreement.

(d)           Capital Accounts.  For purposes of determining pre-Distribution and post-Distribution Capital Accounts, as defined in section 4.3 of the Operating Agreement, the parties hereby agree as follows:

(i)            The fair market values of the assets of the Company immediately prior to the Distribution are as follows:

Real Estate		$	175,000,000
Fixed Income Portfolio		$	192,968,411
Equity Portfolio		$	66,769,484
Trust Portfolio		$	53,455,594
Tribune Common Stock		$	387,478,352
Tribune Preferred Stock		$	208,366,195

 

(ii)           The Company shall compute gain and loss with respect to such assets as if such assets were to be sold for their agreed fair market values set forth above.  Any gain or loss shall be allocated to the Members in accordance with Article VIII of the Operating Agreement.  Based on such allocations, the parties agree that the resulting Capital Accounts immediately prior to the Distribution shall be as follows:

Tribune		$	535,631,187
Candle	&n