UPDATE: Zell Gets Veto, Tribune Staffers Have Little Control

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By: E&P Staff and The Associated Press

Three directors representing the Chandler family will depart Tribune Co.’s board as part of a deal announced this week to take the company private, according to a regulatory filing made Thursday.

In addition, the company has set aside a cash bonus pool of $6.5 million for top executives once the deal is complete. Chairman and Chief Executive Officer Dennis FitzSimons chose not to participate in the bonus pool. The company said the bonus pool would take the place of restricted stock units which had been authorized.

The disclosures were made in a filing with the Securities and Exchange Commission late Thursday that provided details of Tribune’s $8.2 billion deal announced Monday.

That deal will take the Chicago-based media company private and convert it to an employee-owned structure called an employee stock ownership plan, which functions something like a profit-sharing system.

Chicago real estate mogul Sam Zell is contributing $315 million in financing to the deal and will become the company’s chairman. He will also gain the right to purchase 40% of the company’s stock later.

In the filing, Tribune said that 38 top executives involved in consummating the deal– except FitzSimons –would share the bonus pool once it is complete. Donald Grenesko, the company’s finance chief, would receive $600,000; Scott Smith, head of the newspaper division, $400,000; and broadcasting division chief John Reardon would get $350,000.

As part of the deal, the three board members representing the Chandler family — the company’s largest shareholder– would depart the board. Tribune purchased Times Mirror Co. from the Chandler family in 2000 for about $6.5 billion.

The New York Times reports Friday:

“The Tribune Company last night disclosed new details of its plan to go private in a complex deal engineered by the real estate tycoon Samuel Zell, including provisions that will give Mr. Zell broad authority over corporate activities.

“The company reported that although Mr. Zell will control only a minority of the board, he will have the right to veto any major transactions. The employees, who will get company shares but who will no longer get 401(k) contributions from Tribune, will have far less control.

“In a filing yesterday with the Securities and Exchange Commission, the company also disclosed that top managers of Tribune, which owns leading newspapers like The Los Angeles Times and The Chicago Tribune, would be given ‘phantom stock’ in the new company.

“The top managers will be allowed to cash in that stock before ordinary employees will be able to withdraw money from the employee stock ownership plan, or ESOP, that is to control the company….

“Employees will be allocated shares from the ESOP each year, the filing said, in proportion to their annual pay. But in most cases they will not be able to cash in any of their stake for at least a decade, and then only if they are retired or are over 55 and have worked for Tribune for at least 10 years.”

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