Exhibit 10.7 -
Mudrick Distressed Opportunity Fund Backstop Commitment Letter
   

 
Execution Version

LEE ENTERPRISES, INCORPORATED
201 N. Harrison St.
Davenport, IA 52801-1939

 

 
December 2, 2011
 
Mudrick Distressed Opportunity Fund Global, LP
c/o Mudrick Capital Management, LP
477 Madison Avenue, 12th Floor
New York, NY  10022

Backstop Commitment Letter

Ladies and Gentlemen:
 
Lee Enterprises, Incorporated (“Lee” or the “Company”) and the Company’s direct
and indirect subsidiaries (collectively, the “Company Parties”, “we” or “us”)
intend to effect a restructuring (as below, collectively, the “Restructuring”)
of the Company Parties’ respective obligations under:
 
(i) the Amended and Restated Credit Agreement, dated as of December 21, 2005 (as
amended, supplemented or otherwise modified from time to time, including,
without limitation, by the Fourth Amendment thereto dated December 2, 2011, the
“Credit Agreement”), among the Company, the lenders party thereto from time to
time, Deutsche Bank Trust Company Americas, as administrative agent (the
“Agent”), Deutsche Bank Securities Inc. (“DBSI”) and Suntrust Capital Markets,
Inc., as joint lead arrangers, DBSI, as book running manager, Suntrust Bank, as
syndication agent, and Bank of America, N.A., The Bank of New York and The Bank
Of Tokyo-Mitsubishi, Ltd., Chicago Branch, as co-documentation agents; and
 
(ii) the Note Agreement dated as of May 1, 2000 (as amended, supplemented or
otherwise modified from time to time, the “Note Agreement”) among St. Louis
Post-Dispatch LLC as borrower and the noteholders party thereto from time to
time,
 
all on the terms as more fully set forth in:
 
(a) the Support Agreement, dated as of August 11, 2011 (including the Term Sheet
referred to therein and attached thereto (the “Lee Term Sheet”), in each case as
amended on the date hereof (such amendment, the “Lee SA Amendment”) and as it
may be further amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the “Lee Support Agreement”) among the
Company Parties and the Consenting Lenders referred to and defined therein, in
the form attached hereto as Exhibit A1; and
 
(b) the Support Agreement, dated as of December 2, 2011 (including the Term
Sheet referred to therein and attached thereto (the “Pulitzer Term Sheet”), in
each case as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the “Pulitzer Support Agreement”; and
together with the Lee Support Agreement, the “Support Agreements” and each
individually a “Support Agreement”), among the Company Parties, Star

            
1  Capitalized terms used herein but not otherwise defined herein shall have the
meanings assigned to such terms in the Lee Support Agreement.

 
 

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Publishing Company and the Consenting Noteholders referred to and defined
therein, in the form attached hereto as Exhibit B.
 
In accordance with the terms of the Support Agreements, such Restructuring will
be effectuated  through a prepackaged plan of reorganization for the Company
Parties dated as of the date hereof (the “Plan”), with the Company Parties
filing voluntary petitions (the date of such filing, the “Petition Date”) for
relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101
et seq. (as amended, the “Bankruptcy Code”) in the United States Bankruptcy
Court for the District of Delaware (the “Bankruptcy Court” and the bankruptcy
cases of the Company Parties, the “Bankruptcy Cases”).
 
In connection therewith, each Consenting Lender will be afforded an opportunity
to convert a pro rata portion of its funded existing loans under the Credit
Agreement (the “Existing Loans”), in an aggregate principal amount of up to
$166,250,000 (but no less than $150,000,000 in aggregate for all Consenting
Lenders (including the Backstop Parties)), into a ratable portion of (i) Second
Lien Term Loans in an aggregate principal amount of up to $175,000,000 (but no
less than $157,500,000 in the aggregate of all Second Lien Term Loans on the
date on which the Plan and all Definitive Documentation has been consummated and
become effective in accordance with the terms thereof (the “Closing Date”),
ratably including original issue discount of up to approximately $8,750,000; and
(ii) duly and validly issued fully paid and non-assessable Lee common stock (the
“New Shares”)2 in an aggregate amount equal to 15% of all issued and outstanding
common shares of Lee at the Closing Date, before giving effect to the
closing.  For purposes of the foregoing, each Consenting Lender’s pro rata
amount of Existing Loans shall be determined as of the date of its execution of
the Lee Support Agreement, based on the amount listed in Schedule 2 to the Lee
Support Agreement, subject to (x) reduction as a result of any sale, assignment
or transfer of Existing Loans by such Consenting Lender thereafter but on or
before the Closing Date to another Consenting Lender, and (y) increase as a
result of any sale, assignment or transfer of Existing Loans by another Lender
under (and as defined in) the Credit Agreement to such Consenting Lender
thereafter but on or before the Closing Date.  The Company acknowledges and
agrees that, as a condition to the obligations of the Backstop Party hereunder,
the Second Lien Term Loans will, when issued, have a minimum aggregate
outstanding principal balance (including original issue discount) of
$157,500,000.
 
Subject to the terms, conditions and limitations set forth in this letter
agreement (including the attached Schedule I and Exhibit A and Exhibit B hereto,
collectively, this “Backstop Commitment Letter”), on the Closing Date, Mudrick
Distressed Opportunity Fund Global, LP (the “Backstop Party” or “you”; and
together with the other Initial Backstop Lenders listed in Schedule I hereto
(collectively, the “Other Backstop Parties”), the “Backstop Parties”)3 hereby
agrees, on a several basis (and not jointly with any Other Backstop Party), to
convert as described immediately below all or a portion of its Existing Loans
and, if necessary, pay Backstop Cash (as defined below) to the Company, in the
aggregate amount set forth opposite “Maximum Backstop Commitment” under its name
in Schedule I hereto (the “Backstop Commitment”).  Further, the Backstop Party
hereby confirms and agrees that, as of the Closing Date, except to the extent of
any commitment hereunder assigned as expressly permitted hereby it will own or
control sufficient Existing Loans such that, after giving effect to the
conversion thereof and the payment of the Backstop Cash (if any), all as
provided herein, it will be able to acquire Backstop Loans and New Shares (as
defined above) in an amount not less than its Backstop Commitment.  The Backstop
Party agrees to fully exercise its right as a Consenting Lender under the Lee
Support Agreement, as described above, to convert its pro rata portion of its
Existing Loans to the extent such Existing Loans constitute

                  

 2   New Shares will be issued pursuant to an exemption under Section 1145 of
the Bankruptcy Code.      3 Each of the undersigned hereto acknowledges that the
Company and each Other Backstop Party (namely (i) Monarch Master Funding Ltd,
(ii) Mutual Quest Fund, (iii) Goldman Sachs Lending Partners and (iv) Blackwell
Partners, LLC) are entering into a separate backstop commitment letter on
substantially the same terms as set forth herein.    

 

 
 

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Claims of a Consenting Lender under the Lee Support Agreement (the outstanding
principal amount of such pro rata portion of Existing Loans, the “Ratable
Conversion Amount”) into a ratable portion of (i) Second Lien Term Loans (the
“Ratable SLT Loans”) and (ii) New Shares (the “Ratable New Shares”). To the
extent that any Consenting Lenders (other than the Backstop Parties) do not
elect to convert their full pro rata portion of Existing Loans into Second Lien
Term Loans and New Shares (such unsubscribed loans and shares, the “Remainder
Loans and Shares”) in accordance with the terms of the Lee Support Agreement, or
the Second Lien Term Loan Facility (such term used herein as defined in the Lee
Term Sheet) is otherwise not fully utilized and subscribed for, the Backstop
Party shall have the obligation to convert an additional portion of its Existing
Loans into and/or pay Backstop Cash to the Company for, its ratable share of the
Remainder Loans and Shares (together with the Ratable SLT Loans and Ratable New
Shares, all as acquired or to be acquired by the Backstop Party, individually or
collectively, the “Backstop Loans and Shares”), so that the Second Lien Term
Loan Facility is fully utilized and subscribed for, subject to and in accordance
with the Backstop Commitment of the Backstop Party and the respective Other
Backstop Commitments (as defined below) of the Other Backstop Parties under the
applicable Other Backstop Commitment Letters (as defined below), in each case as
listed in Schedule I hereto or thereto.

In addition to the conversion of its Existing Loans, in accordance with the
terms of the Lee Support Agreement, the Backstop Party may satisfy its
obligations hereunder and each Other Backstop Party may satisfy its obligations
under the applicable Other Backstop Commitment Letter in respect of the Backstop
Loans and Shares by paying up to $10,000,000 in the aggregate (for all Backstop
Parties) in cash to the Company (the “Backstop Cash”) in consideration for such
Backstop Loans and Shares.  Notwithstanding anything herein to the contrary,
without the consent of the Backstop Party, the sum of the Backstop Party’s
Ratable Conversion Amount, the outstanding principal amount of the additional
portion of its Existing Loans converted by the Backstop Party pursuant to the
final sentence of the immediately preceding paragraph and the Backstop Cash, if
any, paid by the Backstop Party (such sums, collectively, the “Conversion
Amount”) shall not exceed the Backstop Party’s Backstop Commitment.

It is understood and agreed that this Backstop Commitment Letter shall not
constitute or give rise to any obligation on the part of the Backstop Party or
any of its affiliates to provide any financing, except as expressly provided
herein.
 
We agree promptly to prepare and provide to the Backstop Party all information
reasonably requested by any of the Backstop Parties with respect to any of the
Company Parties.  We hereby represent and covenant that (i) all information
contained in the Company’s SEC filings, (ii) all information provided by the
Company to the Agent for posting on the “public” lender group Intralinks site
and (iii) all information (other than information of a general economic nature)
relating to the Restructuring that has been or is hereafter provided to the
Backstop Party in writing by us or any of our legal or financial advisors (all
information described in clauses (i), (ii) and (iii), collectively, the
“Information”) is or will be, when furnished and taken as a whole, complete and
correct in all material respects and does not or will not, when furnished and
taken as a whole, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements are made.  Substantially contemporaneously with the effectiveness of
this Backstop Commitment Letter, the Lee SA Amendment and the Pulitzer Support
Agreement, the Company will make public disclosure of the material terms of the
Restructuring (including as to any modification thereof since September 8,
2011), and in the event that no agreement has been reached in relation to a
restructuring of the Company’s funded debt, the Company will make public
disclosure of such fact if and when the Company reaches such a conclusion (but
in either event, the Company expects to make a public announcement no later than
December 16, 2011).  In connection with the Second Lien Term Loan Facility, the
Backstop Party will be entitled to use and rely upon the Information without
responsibility for independent verification thereof.
 

 
 

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On the basis of the representations and warranties contained herein, but subject
to the conditions set forth herein, on the Closing Date (a) the Company agrees
to, and to cause the applicable Company Parties to, enter into the Definitive
Documentation described under (and as defined in) the Support Agreements (which
Definitive Documentation shall be in the form included as exhibits to the Plan
as of the date hereof, with any subsequent modifications to such Definitive
Documentation being consistent with the terms of the Support Agreements and
reasonably satisfactory to the Company and the Backstop Party) and issue and
deliver the Backstop Loans and Shares to the Backstop Party on the Closing Date,
(b) the Backstop Party agrees (subject to prior or substantially concurrent
receipt of the Backstop Loans and Shares) to convert Existing Loans into, and,
to the extent necessary, pay Backstop Cash for, the Backstop Loans and Shares,
(c) payment of  Backstop Cash, if any, will be made by the Backstop Party to an
account or accounts designated by the Company no later than 11:00 a.m. New York
City time (subject to prior or substantially concurrent receipt of the Backstop
Loans and Shares), (d) delivery of the Backstop Shares will be made by the
Company to the account of the Backstop Party (or to such other accounts as it
may designate) no later than 11:00 a.m. New York City time (subject to prior or
substantially concurrent receipt of the Backstop Cash, if any, described in
preceding clause (c)), (e) the New Shares will be delivered with any and all
issue, stamp, transfer or similar taxes or duties payable in connection with
such delivery duly paid by the Company, and (f) the documents to be delivered by
or on behalf of the parties hereto will be delivered at the offices of Sidley
Austin LLP, One South Dearborn, Chicago, Illinois 60603.
 
The Company hereby agrees to provide to the Backstop Party, by electronic
transmission, no later than three (3) business days in advance of the Closing
Date, a notice and certification by an executive officer of the Company (the
“Conversion Notice”) of (i) the Conversion Amount and (ii) the amount of
Backstop Loans and number of Backstop Shares that the Backstop Party shall
receive on the Closing Date.  In the event the Backstop Party intends to pay to
the Company any Backstop Cash in respect of the Conversion Amount, it hereby
agrees to provide to the Company, within two (2) business days following its
receipt of the Conversion Notice, written notice and confirmation of the amount
of such Backstop Cash (the “Conversion Payment Notice”).
 
As consideration for the commitments of the Backstop Party hereunder and in
consideration for the Backstop Party’s agreement to extend the maturity of those
Existing Loans held by the Backstop Party that are not exchanged for Second Lien
Term Loans (and in lieu of any Consent Fee otherwise payable to the Backstop
Party under the Lee Support Agreement) and on the basis of the representations
and warranties by the Backstop Party herein contained, we agree, jointly and
severally, to pay or cause to be paid to the Backstop Party, nonrefundable cash
fees of 1.00% of the aggregate principal amount of Existing Loans held by the
Backstop Party that are exchanged for Extended Loans, such amount payable on the
Closing Date (the “Backstop Fees”).
 
The obligations of the Backstop Party to convert Existing Loans and, to the
extent applicable, pay Backstop Cash, in the Conversion Amount pursuant to this
Backstop Commitment Letter are subject to: (a) the Backstop Party not having
discovered or otherwise becoming aware of any information not previously
disclosed to or known by the Backstop Party (including pursuant to public
filings by the Company with the U.S. Securities and Exchange Commission (“SEC”)
prior to the date hereof) that it reasonably believes to be adverse and
materially inconsistent with its understanding, based on information provided to
it or its advisors (including pursuant to such public filings) prior to the date
hereof, of the business, operations, assets, properties or financial condition
of the Company and its direct and indirect subsidiaries, taken as a whole; (b)
there not having occurred any event (including, without limitation, newly
initiated litigation), development, change or condition not previously disclosed
to or known to the Backstop Party (including pursuant to public filings by the
Company with the U.S. Securities and Exchange Commission prior to the date
hereof) that has had or could be reasonably expected to have a material adverse
effect on the business, operations, assets, property, or financial condition of
the
 

 
 

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Company and its direct and indirect subsidiaries, taken as a whole, since June
26, 2011 other than those which customarily occur as a result of events leading
up to and following the commencement of a proceeding under chapter 11 of the
Bankruptcy Code; (c) the negotiation, execution and delivery of all Definitive
Documentation (which shall be in full force and effect on the Closing Date,
substantially concurrently with the consummation of the transactions
contemplated by this Backstop Commitment Letter, and no Company Party shall be
in default thereunder and all conditions therein shall have been satisfied in
full or waived in accordance with the terms thereof (it being acknowledged that
the Definitive Documentation for the Second Lien Term Loan Facility will require
the consent of all of the Backstop Parties in respect of any waiver of any
condition thereof prior to the effectiveness thereof)), the terms of which shall
be consistent with the Support Agreements and the Plan and otherwise reasonably
satisfactory to the Backstop Party (including its counsel), and notwithstanding
anything to the contrary in the Lee Support Agreement (including without
limitation Section 7.12 thereof), the Pulitzer Support Agreement or otherwise,
(I) the Definitive Documentation for the Second Lien Term Loan Facility
(including, without limitation, the New Lee Intercreditor Agreement and the New
PD LLC Intercreditor Agreement (each term as defined in the Plan)) shall be in
either (x) the forms included as exhibits to the Plan as of the date hereof,
with only such changes thereto following the date hereof as may be agreed by the
Backstop Party in its sole discretion (or, solely with respect to any changes
the sole purpose of which is to correct scrivener’s errors discovered after the
date hereof that otherwise make the relevant language unintentionally materially
inconsistent with the express terms of the Support Agreements, as may be agreed
by the Backstop Party in its reasonable discretion) or (y) in the case of any
such Definitive Documentation (including, without limitation, any ancillary or
security documents) not included as exhibits to the Plan as of the date hereof
(or any provisions of the Definitive Documentation described in preceding clause
(x) that are expressly noted to be subject to subsequent modifications
(including, without limitation, on the basis of disclosure schedules or similar
information provided by the Company Parties after the date hereof)), in form and
substance reasonably satisfactory to the Company and the Backstop Party and (II)
all other Definitive Documentation shall be consistent with the Support
Agreements and, to the extent included as exhibits to the Plan as of the date
hereof, shall be in the form included in such exhibits to the Plan with only
such changes, following the date hereof, as are in form and substance consistent
with the Support Agreements and reasonably satisfactory to the Company and the
Backstop Party; (d) the Company Parties’ compliance with the terms and
conditions of this Backstop Commitment Letter in all material respects; (e) (I)
the representations and warranties of the Company Parties in this Backstop
Commitment Letter and the Support Agreements shall be true and correct in all
material respects as if made on the Closing Date and there shall have been
delivered to the Backstop Party a certificate to such effect, dated as of the
Closing Date, signed on behalf of the Company Parties by an officer of the
Company, (II) the Backstop Party shall have received the Conversion Notice
certifying as to the (x) Conversion Amount and (y) the amount of Backstop Loans
and number of Backstop Shares, (III) the Effective Date of the Lee Support
Agreement and the Effective Date of (and as defined in) the Pulitzer Support
Agreement shall have occurred and the Backstop Party shall have received, in
U.S. Dollars, (x) timely payment of all of the Backstop Fees, and (y) to the
extent documentation therefor shall have been provided to the Company at least
one Business Day prior to the Closing Date, the Transaction Expenses (as defined
below), and (IV) the absence of (x) the payment of any fees (other than
professional fees and expenses) by any Company Party to, or for the benefit of,
any Lender under (and as defined in) the Credit Agreement (other than the Agent)
in excess of the amounts disclosed to the Backstop Party on or prior to the date
hereof or the amounts expressly set forth in the Support Agreements and (y) any
amendment, modification or waiver to the Credit Agreement or Note Agreement
after the date hereof that is not acceptable to the Backstop Party; (f) the (x)
appointment of an administrative agent and a collateral agent for the Second
Lien Lenders under the Second Lien Term Loan Facility, in each case reasonably
acceptable to the Backstop Parties, (y) execution and delivery by the Company
and such agent(s) of a fee agreement relating to the Second Lien Term Loan
Facility, and (z) payment by or on behalf of the Company of all agency or other
fees of each such agent(s) (in such capacity) due on or prior to the Closing
Date; (g) the Company having delivered to the Backstop Party true and complete
copies of all
 

 
 

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Definitive Documentation (other than any fee letters or engagement letters to
the extent such disclosure is expressly prohibited by the confidentiality
provisions thereof) and all other information reasonably requested by the
Backstop Party which relates, directly or indirectly, to the transactions
contemplated by the Support Agreements; (h) the closing date under the Revolving
Credit Facility shall have occurred and all conditions precedent to the
availability of Revolving Loans thereunder shall have been satisfied and the
full amount thereof shall (to the extent not borrowed or utilized for
outstanding letters of credit thereunder) be available for credit extensions,
and such availability (when aggregated with unrestricted cash on hand of the
Company) shall not on the Closing Date be less than $26.0 million, and
notwithstanding any provision elsewhere to the contrary, the aggregate
commitments under the Revolving Credit Facility shall not be less than $40.0
million; (i) after giving effect to the closing of the Restructuring on the
Closing Date, no default or event of default under the First Lien Credit
Facility, the Second Lien Term Loan Facility or the New PD LLC Notes or any
other material indebtedness of the Company Parties shall have occurred and be
continuing; (j) no judgment, injunction, decree or other order issued by a court
of competent jurisdiction or other competent governmental or regulatory
authority shall prohibit the substantial consummation of the material
transactions contemplated by the Restructuring; (k) concurrently with or
following the commencement of the Bankruptcy Cases, no order shall have been
entered vacating the automatic stay so as to permit a secured party(s) to
enforce its liens against a substantial portion of the Company Parties’ assets;
(l) after giving effect to the closing of the Restructuring on the Closing Date,
there shall be no outstanding indebtedness for borrowed money of the Company or
any of its subsidiaries except the First Lien Credit Facility, the Second Lien
Term Loan Facility, the New PD LLC Notes and other indebtedness to the extent
expressly contemplated and permitted in Annex II to Exhibit A to the Lee Term
Sheet; (m) the Restructuring and all other transactions contemplated by the
Support Agreements and the Plan shall have been consummated or shall be
consummated substantially concurrently with the consummation of the transactions
contemplated by this Backstop Commitment Letter; (n) the Company shall have
awarded to each of Deutsche Bank Securities Inc. and Goldman Sachs Bank USA
Joint Lead Arranger and Joint Book Running Manager titles and roles under the
Second Lien Term Loan Facility, and no other titles shall have been awarded in
connection with the Second Lien Term Loan Facility without the prior consent of
the Backstop Parties; (o) following commencement of the Bankruptcy Cases, (i)
the Company shall have filed the Plan and the Disclosure Statement in forms
agreed prior to the date hereof (and all references herein to such documents
shall be construed as being to such documents in such forms), which forms shall
be reasonably consistent in all material respects with the Support Agreements
and otherwise reasonably satisfactory to the Backstop Party, and (ii) the
Confirmation Order shall have been entered by the Bankruptcy Court and such
order shall not have been appealed within fourteen (14) calendar days following
entry or, if such order is appealed, shall not have been stayed pending appeal,
and there shall not have been entered by any court of competent jurisdiction any
reversal, modification or vacatur, in whole or in part, of the Confirmation
Order; (p) no amendments, consents, waivers or modifications to the Lee Support
Agreement or the Pulitzer Support Agreement shall have been made following the
date hereof without the prior written consent of the Backstop Party; (r) no
amendments, consents, waivers or modifications shall have been made to the Plan
following the date hereof without the prior written consent of the Backstop
Party, except for any non-material modifications that may be approved by the
Bankruptcy Court pursuant to Rule 3019(a) of the Federal Rules of Bankruptcy
Procedure that (i) are consistent with the Support Agreements, (ii) do not
affect in any way the treatment or terms of the Second Lien Term Loans or the
New Shares, and (iii) have no economic impact on the Company Parties and the
reorganized Company Parties; and (s) each of the Conditions to Effectiveness (as
defined below) shall have been satisfied on or prior to the date hereof (all of
the foregoing conditions (a) through (s), collectively, the “Backstop Party
Conditions”).
 
Notwithstanding anything to the contrary herein, the obligations of the Backstop
Party under this Backstop Commitment Letter shall only become effective upon the
satisfaction of each of the following conditions: (a) each of the Company
Parties and the Backstop Party executing and delivering signature
 

 
 

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pages to this Backstop Commitment Letter;  (b) each of the Pulitzer Support
Agreement and the Lee SA Amendment, each in form and substance reasonably
satisfactory to the Backstop Party, having become effective in accordance with
their respective terms and their, together with the Lee Support Agreement as
amended pursuant to the Lee SA Amendment, being in full force and effect; (c) an
amendment to the Credit Agreement in the form attached as Appendix 4 to the Lee
SA Amendment having become effective in accordance with its terms; (d) the Plan
and all Definitive Documentation included as exhibits to the Plan (including,
without limitation, the New First Lien Credit Agreement, the New Second Lien
Term Loan Agreement, the New PD LLC Notes Agreement, the New Pulitzer Guaranty
Agreement, the New Lee Intercreditor Agreement, the New PD LLC Intercreditor
Agreement (each as defined in the Plan), and all collateral and ancillary
documents related thereto) being in form and substance reasonably satisfactory
to the Backstop Party; (e) the Other Backstop Parties having executed the Other
Backstop Commitment Letters and all of the Other Backstop Commitment Letters
being in full force and effect; (f) the Revolver Commitment Letter having been
executed and delivered and being in full force and effect and, notwithstanding
anything to the contrary contained in the Support Agreements or the Lee Term
Sheet, providing for commitments in the aggregate amount of $40,000,000; and (g)
the Backstop Party’s counsel receiving the payment of all reasonable fees and
expenses incurred by such counsel through the date hereof (all of the foregoing
conditions (a) through (g), collectively, the “Conditions to Effectiveness”).
 
We agree, jointly and severally, (a) to indemnify and hold harmless the Backstop
Party and its officers, directors, employees, affiliates, advisors, agents and
controlling persons (the “Indemnified Parties”) from and against any and all
losses, claims, damages and liabilities to which any such Indemnified Party may
become subject to arising out of or in connection with this Backstop Commitment
Letter, the Support Agreements, the Second Lien Term Loan Facility, the use of
any proceeds of Second Lien Term Loans, or any claim, litigation, investigation
or proceeding relating to any of the foregoing (any of the foregoing, a
“Proceeding”), regardless of whether any of such Indemnified Parties is a party
thereto or whether a Proceeding is initiated by or on behalf of a third party or
us or any of our equity holders, affiliates, creditors or any similar person,
and to reimburse each Indemnified Party for any reasonable and documented legal
or other expenses incurred in connection with investigating or defending any of
the foregoing, provided that the foregoing indemnification will not, as to any
Indemnified Party, apply to losses, claims, damages, liabilities or expenses to
the extent they are found by a final, nonappealable judgment of a court of
competent jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party, and (b) to reimburse or pay,
as the case may be, from time to time all reasonable out-of-pocket expenses
incurred by the Backstop Party or its affiliates in connection with the
transactions contemplated by this Backstop Commitment Letter and any related
documentation (collectively, “Transaction Expenses”), including all reasonable
fees and expenses of Milbank, Tweed, Hadley & McCloy LLP, counsel to certain
Backstop Parties, and up to one local counsel in any relevant jurisdiction).  No
Indemnified Party shall be liable for any damages arising from the use by others
of information or other materials obtained through electronic,
telecommunications or other information transmission systems, provided that each
Backstop Party employs the same standard of care to protect the confidentiality
of the Company’s information as it employs to protect its own
information.  Neither the Company nor the Backstop Party shall be liable for any
special, indirect, punitive or consequential damages in connection with its
activities related to this Backstop Commitment Letter or the Second Lien Term
Loan Facility except to the extent such damages would otherwise be subject to
indemnity hereunder.
 
We acknowledge and agree that (a) no fiduciary, advisory or agency relationship
between any of the Company Parties, on the one hand, and the Backstop Party, on
the other hand, is intended to be or has been created in respect of the Second
Lien Term Loan Facility or any of the transactions contemplated by this Backstop
Commitment Letter, irrespective of whether the Backstop Party has advised or is
advising any of the Company Parties on other matters, (b) the Backstop Party, on
the one hand, and the Company Parties, on the other hand, have an arms-length
business relationship that does not directly or indirectly
 

 
 

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give rise to, nor do the Company Parties rely on, any fiduciary or other implied
duty on the part of the Backstop Party, (c) each of the Company Parties is
capable of evaluating and understanding, and we understand and accept, the
terms, risks and conditions of the Second Lien Term Loan Facility and the other
transactions contemplated by this Backstop Commitment Letter, and have sought
independent legal advice from counsel of the Company Parties’ choice with
respect to the foregoing, (d) the Company Parties have been advised that the
Backstop Party is engaged in a broad range of transactions that may involve
interests that differ from the Company Parties’ interests and that the Backstop
Party has no obligation to disclose such interests and transactions to the
Company Parties by virtue of any fiduciary, advisory or agency relationship and
(e) the Company Parties waive, to the fullest extent permitted by law, any
claims any of them may have against the Backstop Party for breach of fiduciary
duty, alleged breach of fiduciary duty or other implied duty and agree that the
Backstop Party shall have no liability (whether direct or indirect) to any of
the Company Parties in respect of such a fiduciary or other implied duty claim
or to any person asserting a fiduciary or other implied duty claim on behalf of
or in right of any of the Company Parties, including their respective
stockholders, employees or creditors.  Additionally, we acknowledge and agree
that the Backstop Party is not advising any of the Company Parties as to any
legal, tax, investment, accounting or regulatory matters in any
jurisdiction.  The Company Parties shall consult with their own advisors
concerning such matters and shall be responsible for making their own
independent investigation and appraisal of the Second Lien Term Loan Facility
and the transactions contemplated hereby, and the Backstop Party shall have no
responsibility or liability to any Company Party with respect thereto.
 
We acknowledge that the Backstop Party and its affiliates may be providing debt
financing, equity capital or other services (including but not limited to
financial advisory services) to other companies in respect of which we may have
conflicting interests regarding the Second Lien Term Loan Facility or the
transactions described herein and otherwise.  None of the Backstop Party or any
of its affiliates will use confidential information obtained from the Company
Parties by virtue of the transactions contemplated by this Backstop Commitment
Letter or their other relationships with the Company Parties in connection with
the performance by the Backstop Party or any of its affiliates of services for
other companies, and the Backstop Party or any of its affiliates will not
furnish any such information to other companies. We also acknowledge that
neither the Backstop Party nor any of its affiliates has any obligation to use
in connection with the Second Lien Term Loan Facility or the transactions
contemplated by this Backstop Commitment Letter, or to furnish to the Company or
its subsidiaries or representatives, confidential information obtained by the
Backstop Party or any of its affiliates from any other company or person.
 
The obligations of the Company to (i) enter into the Definitive Documentation,
including the Second Lien Term Loan Facility, and to issue the New Shares and
(ii) deliver the Backstop Shares to the Backstop Party are subject to the
satisfaction of the following conditions precedent:  (a) no judgment,
injunction, decree or other order issued by a court of competent jurisdiction or
other competent governmental or regulatory authority shall prohibit the
substantial consummation of the material transactions contemplated by the
Restructuring, (b) no action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued in each case by
any federal, state or foreign governmental or regulatory authority that, as of
the Closing Date, prohibits the Company from issuing the New Shares, and no
injunction or order of any federal, state or foreign court shall have been
issued that, as of the Closing Date, prohibits the delivery of the New Shares,
(c) the Effective Date of the Lee Support Agreement and the Effective Date of
(and as defined in) the Pulitzer Support Agreement shall have occurred and no
Termination Date under (and as defined in) either Support Agreement with respect
to the Company Parties shall have occurred which shall have caused the
termination of either Support Agreement in its entirety, (d) the Backstop Party
shall not have breached its express obligation hereunder in respect of its
commitment to convert its Existing Loans (subject to the terms and conditions of
such commitment set forth in this Backstop Commitment Letter) in any material
respect, (e) if applicable, the
 

 
 

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9

Company shall have received the Conversion Payment Notice certifying as to the
amount of Backstop Cash the Backstop Party will pay to the Company in respect of
the Conversion Amount, (f) each Other Backstop Party shall have fulfilled (or
shall substantially concurrently fulfill) its obligation in respect of its
commitment to convert its Existing Loans (each, an “Other Backstop Commitment”)
expressly set forth in (and subject to the terms and conditions of such
commitment set forth in) the separate backstop commitment letter between such
Other Backstop Party and the Company of even date herewith on substantially the
same terms as set forth herein and reasonably acceptable to the Backstop Party
(each, an “Other Backstop Commitment Letter”), (g) the Backstop Party shall have
paid the Backstop Cash, if any, to an account or accounts designated to Backstop
Party by the Company prior to the Closing Date, and (h) following commencement
of the Bankruptcy Cases, the Confirmation Order shall have been entered by the
Bankruptcy Court and such order shall not have been appealed within fourteen
(14) calendar days following entry or, if such order is appealed, shall not have
been stayed pending appeal, and there shall not have been entered by any court
of competent jurisdiction any reversal, modification or vacatur, in whole or in
part, of the Confirmation Order (such conditions set forth in clauses (a), (b),
(c), (f), (g) and (h) of this sentence, the “Specified Lee Conditions”).
 
The Company represents and warrants to the Backstop Party as set forth below, in
each case as of the date hereof and as of the Closing Date (except to the extent
expressly limited to a specified date below):  (a) the Company and each of its
subsidiaries has been duly incorporated and is validly existing as a corporation
in good standing under the laws of their respective jurisdictions of
incorporation, with the requisite power and authority to own its properties and
conduct its business as currently conducted, (b) the Company Parties have the
requisite corporate power and authority to enter into, execute and deliver this
Backstop Commitment Letter and to perform their obligations hereunder, and have
taken, or (in the case of performance only), prior to the Closing Date, will
have taken, all necessary corporate action required for the due authorization,
execution, delivery and performance by them of this Backstop Commitment Letter,
including entry into the Definitive Documentation and issuance of the New
Shares, (c) this Backstop Commitment Letter has been duly and validly executed
and delivered by the Company Parties and constitutes the valid and binding
obligation of the Company Parties, enforceable against the Company Parties in
accordance with its terms, (d) on the Closing Date, the issuance of the New
Shares, including the Backstop Shares, will be duly and validly authorized and,
when the Backstop Shares are issued and delivered against conversion of the
Backstop Parties’ Existing Loans and, if necessary, payment of Backstop Cash in
the Conversion Amount hereunder, will be duly and validly issued, fully paid and
non-assessable.
 
Notwithstanding any investigation at any time made by or on behalf of any party
hereto, all representations and warranties made in this Backstop Commitment
Letter will survive the execution and delivery of this Backstop Commitment
Letter and the closing of the transactions contemplated by this Backstop
Commitment Letter.
 
Neither this Backstop Commitment Letter nor any of the rights, interests or
obligations under this Backstop Commitment Letter will be assigned by either of
the parties (whether by operation of law or otherwise) without the prior written
consent of the other party.  Notwithstanding the previous sentence, this
Backstop Commitment Letter, or any of the Backstop Party’s rights, interests or
obligations hereunder, may be assigned, delegated or transferred, in whole or in
part, by the Backstop Party to (i) any Affiliate (as defined in Rule 12b-2 under
the Exchange Act) of the Backstop Party over which the Backstop Party or any of
its Affiliates exercises investment authority, including, without limitation,
with respect to voting and dispositive rights without the consent of the Company
or (ii) any Consenting Lender approved by the Company (such approval not to be
unreasonably withheld or delayed); provided that any such assignee assumes all
such assigned, delegated and transferred rights, interests and obligations of
that Backstop Party hereunder and agrees in writing to be bound by the terms of
this Backstop Commitment Letter in the same manner as the Backstop Party to the
extent of its rights, interests and obligations so
 

 
 

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10

assigned. Notwithstanding the foregoing or any other provision herein, no such
assignment to an Affiliate will relieve the Backstop Party of its obligations
hereunder if such Affiliate assignee fails to perform such obligations but the
Backstop Party shall have no such obligations in respect of permitted assignees
which are not Affiliates.
 
This Backstop Commitment Letter (including the documents and instruments
referred to in this Backstop Commitment Letter) is not intended to and does not
confer upon any person, other than the parties hereto (and Indemnified Parties)
and their successors and permitted assigns, any rights or remedies under this
Backstop Commitment Letter. This Backstop Commitment Letter may be executed in
any number of counterparts, all of which will be considered one and the same
agreement and will become effective when counterparts have been signed by each
of the parties and delivered to the other party (including via facsimile or
other electronic transmission), it being understood that each party need not
sign the same counterpart.  THIS BACKSTOP COMMITMENT LETTER WILL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF EXCEPT IN RELATION TO MATTERS
CONCERNING THE ISSUANCE OF COMPANY STOCK, IN WHICH CASE THE LAWS OF THE STATE OF
DELAWARE SHALL APPLY.
 
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY
RELATED TO OR ARISING OUT OF THIS BACKSTOP COMMITMENT LETTER OR THE PERFORMANCE
OF SERVICES HEREUNDER.
 
Each of the parties hereto hereby irrevocably and unconditionally (a) submits,
for itself and its property, to the non-exclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof (or, in the event the Bankruptcy
Cases are commenced, the Bankruptcy Court, or any other court having
jurisdiction over the Bankruptcy Cases from time to time), in any action or
proceeding arising out of or relating to this Backstop Commitment Letter or the
transactions contemplated hereby, or for recognition or enforcement of any
judgment, and agrees that all claims in respect of any such action or proceeding
may be heard and determined in New York State or (x) to the extent permitted by
law, in such federal court or (y) if the Bankruptcy Cases are commenced, in the
Bankruptcy Court or any other court having jurisdiction over the Bankruptcy
Cases from time to time), (b) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Backstop Commitment Letter or the transactions contemplated hereby in any
New York State or federal court and (c) waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
 
This Backstop Commitment Letter and its terms and substance and any other
information and work product provided by the Backstop Party or any of its
affiliates, employees, officers, attorneys or other professional advisors in
connection herewith or therewith shall be for the Company Parties’ confidential
use only and shall not be disclosed, directly or indirectly, by any Company
Party to any other person other than to the Company Parties’ controlling
persons, directors, employees, officers, accountants, attorneys and professional
advisors directly involved in the consideration of this matter, provided that
nothing herein shall prevent the Company Parties from disclosing such
information (a) upon the order of any court or administrative agency, (b) upon
demand of any regulatory agency or authority, (c) in the Company’s SEC filings,
to the extent the Company concludes that it is appropriate to make such
disclosure (subject to redaction (to the extent permitted under applicable law)
of all information in Schedule I hereto), (d) to the United States Trustee
either prior to or following the commencement of the Bankruptcy Cases, or (e)
otherwise as required by law. The restrictions contained in the preceding
sentence shall apply both before and after this Backstop Commitment Letter has
been executed by the
 

 
 

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11

Backstop Party.  The Backstop Party agrees, and agrees to cause its respective
affiliates, employees, officers, attorneys and other professional advisors, to
maintain all non-public information regarding the Company Parties as
confidential in accordance with the confidentiality provisions set forth in the
Credit Agreement.
 
The compensation, reimbursement, indemnification, release, confidentiality,
jurisdiction and waiver of jury trial provisions contained herein shall remain
in full force and effect regardless of whether the Closing Date occurs and the
Definitive Documentation is executed and delivered and notwithstanding the
termination of this Backstop Commitment Letter, provided that this Backstop
Commitment Letter shall in all other respects be superseded by the Definitive
Documentation in respect of the Second Lien Term Loan Facility upon the
effectiveness thereof.
 
All notices and other communications in connection with this Backstop Commitment
Letter will be in writing and will be deemed given (and will be deemed to have
been duly given upon receipt) if delivered personally, sent via electronic
facsimile (with confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as will
be specified by like notice): (a) if to the Backstop Party to:  Mudrick
Distressed Opportunity Fund Global, LP, c/o Mudrick Capital Management, LP, 477
Madison Avenue, 12th Floor, New York, NY  10022, Attention: Jason Mudrick, Fax:
(646) 747-9540, with a copy to: Katten Muchin Rosenman LLP, 575 Madison Avenue
/, New York, NY 10022-2585, Attention: Noah S. Heller, Fax: (212) 940-6400; (b)
if to the Company, to: Lee Enterprises, Incorporated, 201 N. Harrison Street,
Suite 600 Davenport, Iowa 52801, Attention: General Counsel, Fax: 563-327-2600,
with copies to: Sidley Austin LLP, One South Dearborn Chicago, Illinois 60603,
Attention: Larry J. Nyhan and Michael L. Gold, Fax: 312-853-7036.

This Backstop Commitment Letter (including the agreements attached as exhibits
to and the documents and instruments referred to in this Backstop Commitment
Letter) constitutes the entire agreement of the parties and supersedes all prior
agreements, arrangements or understandings, whether written or oral, between the
parties with respect to the subject matter of this Backstop Commitment Letter,
except that the parties hereto acknowledge that any confidentiality agreements
heretofore executed among the parties will continue in full force and effect in
accordance with their terms.  Furthermore, this Backstop Commitment Letter may
be amended, modified, superseded, cancelled, renewed or extended, and the terms
and conditions of this Backstop Commitment Letter may be waived, only by a
written instrument signed by each of the parties or, in the case of a waiver, by
the party waiving compliance.  No delay on the part of any party in exercising
any right, power or privilege pursuant to this Backstop Commitment Letter will
operate as a waiver thereof, nor will any waiver on the part of any party of any
right, power or privilege pursuant to this Backstop Commitment Letter, nor will
any single or partial exercise of any right, power or privilege pursuant to this
Backstop Commitment Letter, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege pursuant to this Backstop
Commitment Letter.  The rights and remedies provided pursuant to this Backstop
Commitment Letter are cumulative and are not exclusive of any rights or remedies
which any party otherwise may have at law or in equity.
 
It is acknowledged and agreed by the parties hereto that, any (i) breach by any
Company Party of the terms of this Backstop Commitment Letter, or (ii) breach of
the Backstop Party’s express obligation to exchange its Existing Loans in
accordance with the terms of, and subject to the satisfaction in full of all the
conditions referred to in, this Backstop Commitment Letter may give rise to
irreparable harm for which money damages may not be an adequate remedy, and,
accordingly, in addition to any other remedies, it may be appropriate for the
non-breaching party in such circumstances (but in the case of such breach by the
Backstop Party, only to the extent all other conditions to the Restructuring
have been satisfied in full and it is solely the Backstop Party’s breach that is
preventing or materially delaying the
 

 
 

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12

occurrence of the Closing Date) to enforce the terms of this Backstop Commitment
Letter by a decree of specific performance.
 
The Backstop Party hereby notifies the Company Parties that pursuant to the
requirements of the U.S.A. PATRIOT ACT (Title III of Pub. L. 107 56 (signed into
law October 26, 2001)) (the “Patriot Act”), it may be required to obtain, verify
and record information that identifies the Company Parties, which information
may include the name and address of the Company Parties, and other information
that will allow the Backstop Party to identify the Company Parties in accordance
with the Patriot Act.  This notice is given in accordance with the requirements
of the Patriot Act.
 
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms of this Backstop Commitment Letter by executing and
returning this Backstop Commitment Letter to us not later than 5:00 p.m., New
York City time, on December 2, 2011.  Unless the Backstop Party, in its sole
discretion, agrees to an extension, the commitment of and all other agreements
of the Backstop Party hereunder shall automatically terminate:  (a) in the event
that the Closing Date does not occur on or before March 11, 2012; or (b) upon
(i) automatic termination of either Support Agreement, (ii) termination of the
(x) Lee Support Agreement by the Required Consenting Lenders or the (y) Pulitzer
Support Agreement by the Required Consenting Noteholders (as defined therein),
(iii) the termination by the Company of the Backstop Party as a party to the Lee
Support Agreement pursuant to the final sentence of Section 7.12 thereof, or
(iv) the occurrence of (x) a Termination Date under (and as defined in) the Lee
Support Agreement) or (y) a Termination Date under (and as defined in) the
Pulitzer Support Agreement; or (c) immediately following the Closing Date.  In
addition, the Backstop Party may by written notice to the Company terminate this
Backstop Commitment Letter at any time (i) upon the occurrence and continuance
of a Termination Event (x) under the Lee Support Agreement other than under
subsections 2.1(c)(ii), 2.1(c)(v), 2.1(c)(xi) or 2.1(c)(xii) thereof or (y)
under (and as defined in) the Pulitzer Support Agreement other than under
subsections 2.1(vii), 2.1(x), 2.1(xvi) or 2.1(xvii) thereof, (ii) upon any
Company Party seeking to terminate this Backstop Commitment Letter in reliance
upon the non-satisfaction of any of the Specified Lee Conditions for any purpose
hereunder, (iii) upon the failure, inability or refusal of the Company to
satisfy any of the Backstop Party Conditions, (iv) upon the effectiveness of any
amendment, supplement or other modification of, or waiver or forbearance under,
either Support Agreement (including, without limitation, the Lee Term Sheet or
the Pulitzer Term Sheet) relating to the terms or conditions of the Second Lien
Term Loan Facility (including the New Lee Intercreditor Agreement and the New PD
LLC Intercreditor Agreement (each term as defined in the Plan)), in each case
(a) prior to the effectiveness of the Second Lien Term Loan Facility and (b)
without the prior consent of the Backstop Party, (v) upon any person other than
the Backstop Parties receiving an allocation of Second Lien Term Loans in excess
of such other person’s pro rata portion of the Second Lien Term Loans as
described in the Lee Support Agreement, whether pursuant to any agreement by or
with the Company, pursuant to any court order or otherwise unless such excess
allocation has first been offered to, and declined by, the Backstop Party, (vi)
upon the Backstop Party being advised by the Company that the aggregate
allocation of Second Lien Term Loans to such Backstop Party will be (or
otherwise receiving such an allocation which is) less than such Backstop Party’s
Minimum Allocation set forth on Schedule I hereto, or (vii) upon the failure of
the Company to (i) seek approval by the Bankruptcy Court of this Backstop
Commitment Letter within fifteen calendar days following the Petition Date or
(ii) obtain the Bankruptcy Court’s approval of this Backstop Commitment Letter
on or prior to the effective date of the Plan.  The Company may terminate this
Backstop Commitment Letter if the board of directors of the Company determines
in good faith based on the advice of outside counsel that proceeding with the
transactions contemplated hereby will, or is reasonably likely to, result in a
breach of such board’s fiduciary obligations; provided, that if within 180 days
subsequent to such a decision the board of directors authorizes the Company to
proceed with an alternative transaction that is substantially similar to the
Restructuring but which alternative transaction utilizes institutions other than
each of the Backstop Parties for the junior capital in such Restructuring, then
the Company shall be obligated to pay to each

 
 

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13

Backstop Party that does not provide junior capital in such alternative
transaction a nonrefundable cash fee in an amount equal to 1.50% of such
Backstop Party’s Backstop Commitment hereunder, which nonrefundable cash fee
shall be payable upon closing of the alternative transaction in full and
complete satisfaction of any claim the Backstop Party may have hereunder.

Signature Pages Follow
 

 
 

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Very truly yours,
         
LEE ENTERPRISES, INCORPORATED
for itself and the Company Parties
 
   
[cschmidt.jpg]
     
By:
 
Name:
Carl G. Schmidt
 
Title:
Chief Financial Officer

 
 

 
 

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15

Accepted and agreed to as of the date first
written above by:
 
 
MUDRICK DISTRESSED OPPORTUNITY FUND GLOBAL, LP
 

[murdrick.jpg]

Backstop Commitment Letter

 
 

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15

EXHIBIT A

 (Lee Support Agreement)
 
 
 
See Exhibit 10.1 to Current Report on Form 8-K filed on September 12, 2011 and
Exhibit 10.2 hereto for Exhibit A (Lee Support Agreement).
 
 

 
 

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EXHIBIT B

(Pulitzer Support Agreement)
 
 
See Exhibit 10.1 hereto for Exhibit B (Pulitzer Support Agreement).