Exhibit 10.3 – Franklin Templton/Mutual Quest Fund Backstop Commitment Letter
(See attached Exhibit 10.1 filed to this Form 8-K for Exhibit A to this letter.)
 
Execution Version
 
 
LEE ENTERPRISES, INCORPORATED
201 N. Harrison St.
Davenport, IA 52801-1939

 

 
September 8, 2011
 
Mutual Quest Fund
101 John F. Kennedy Parkway
Short Hills, NJ 07078

Backstop Commitment Letter

Ladies and Gentlemen:
 
Lee Enterprises, Incorporated (“Lee” or the “Company”) and certain of the
Company’s direct and indirect subsidiaries (other than Pulitzer Inc. and its
subsidiaries) (collectively, the “Company Parties”, “we” or “us”) intend to
effect a restructuring (the “Restructuring”) of their obligations under the
Amended and Restated Credit Agreement, dated as of December 21, 2005 (as
amended, supplemented or otherwise modified from time to time, 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, on the
terms as more fully set forth in the Support Agreement, dated as of August 11,
2011 (including the Term Sheet referred to therein and attached thereto, in each
case as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and with the prior written consent of the
Backstop Party, the “Support Agreement”) among the Company Parties and the
Consenting Lenders referred to and defined therein, attached hereto as Exhibit
A.1  In accordance with the terms of the Support Agreement, such Restructuring
will be effectuated through one of two alternatives:  either through an
amendment to the Credit Agreement that is implemented out of court with the
consent of certain lenders or through a prepackaged plan of reorganization, 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 $157,500,00 in aggregate of all Second Lien Term Loans on 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
 
               
1 Capitalized terms used herein but not otherwise defined herein shall have the
meanings assigned to such terms in the Support Agreement.
 
 
 
 

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stock (the “New Shares”)2 in an aggregate amount equal to 15% of all issued and
outstanding common shares at the Closing Date (as defined below), 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 Support Agreement, based on the amount listed in Schedule 2 to
the 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 (as defined below) to another Consenting
Lender, and (y) increase as a result of any sale, assignment or transfer of
Existing Loans by another Lender 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.
 
As used herein, “Closing Date” shall mean either (a) the date on which each of
the transactions contemplated by the Support Agreement, the Term Sheet and the
Definitive Documentation has been consummated, or (b) in the event the Company
Parties commence the Bankruptcy Cases, the date on which the Plan is
substantially consummated.
 
Subject to the terms, conditions and limitations set forth in this letter
agreement (this “Backstop Commitment Letter”), on the Closing Date, Mutual Quest
Fund (the “Backstop Party”, and collectively with each “Other Backstop Party”
listed in Schedule I hereto, 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 a 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, as set forth above, to convert
its pro rata portion of its Existing Loans to the extent such Existing Loans
constitute Claims of a Consenting Lender under the 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 Support
Agreement or the Second Lien Term Loan Facility 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 Other Backstop Commitment (as defined below) of each
Other Backstop Party under the applicable Other Backstop Commitment Letter, in
each case as listed in Schedule I hereto or thereto.
 
 
                

2
New Shares will be issued pursuant to an exemption under Section 4(2)of the
Securities Act and held subject to transfer restrictions applicable to such
securities under the Securities Act of 1933.
3
Each of the undersigned hereto acknowledges that the Company and each Other
Backstop Party, Goldman Sachs Lending Partners and Monarch Master Funding Ltd,
are entering into a separate backstop commitment letter on substantially the
same terms as set forth herein.

 
 
 

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In addition to the conversion of its Existing Loans, in accordance with the
terms of the 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 (as defined below) 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 sum, 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 the Backstop Party with respect to 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 (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 Agreement and the Support
Agreement, the Company will make public disclosure of the material terms of the
Restructuring, 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
September 15, 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.
 
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 enter into the Definitive Documentation 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 Backstop Cash, if any), (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
 
 
 
 

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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 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 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 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, a nonrefundable cash commitment fee of
(i) 0.50% of the positive difference between the aggregate principal amount of
Existing Loans held by the Backstop Party on the Effective Date and such
Backstop Party’s Minimum Allocation, such amount payable on the Effective Date
(the “Effective Date Consent Fee”), (ii) 1.50% of the aggregate principal amount
of Existing Loans held by the Backstop Party that are exchanged for Extended
Loans minus the Effective Date Consent Fee, such amount payable on the Closing
Date (the “Closing Date Consent Fee”), and (iii)  0.50% of such Backstop Party’s
Maximum Backstop Commitment (the “Commitment Fee”); provided, however, that if
the amount of the Effective Date Consent Fee ends up exceeding 1.50% of the
aggregate principal amount of Existing Loans held by the Backstop Party that are
exchanged for Extended Loans, such excess shall be credited against the
Commitment Fee and shall result in a corresponding reduction thereof.  The
Effective Date Consent Fee, the Closing Date Consent Fee and the Commitment Fee
shall be referred to collectively as 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 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 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 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 each Backstop Party in respect of any
waiver of any condition thereof prior to the effectiveness thereof) consistent
with the Support Agreement and otherwise reasonably satisfactory to the Backstop
Party (including its counsel), and notwithstanding anything to the contrary in
the Support Agreement (including without limitation Section 7.12 thereof) or
otherwise, the Definitive Documentation for the Second Lien Term Loan Facility
(including without limitation the intercreditor agreement) shall be in the form
negotiated on or prior to the Effective Date with only such changes thereto
following the Effective Date as may be agreed by the Backstop Party in its sole
 
 
 
 

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discretion; (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 Agreement 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 Support Agreement
shall have occurred and the Backstop Party shall have received, in U.S. Dollars,
(x) timely payment of each 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, and (IV) the
absence of the payment of any fees (other than professional fees and expenses)
by any Company Party to, or for the benefit of, any Lender (other than the
Agent) in excess of the amounts disclosed to the Backstop Party as of the date
hereof; (f) the 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 (the Backstop Party agrees
that it will not object, subject to “Required Lenders” (as defined in the Second
Lien Term Loan credit agreement) having a right to force retirement in the
Definitive Documentation, to the initial appointment of the Agent), and the
payment of all agency or other fees of each such agent (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 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 Agreement; (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; (i) after giving effect to the closing of the Restructuring, no default
or event of default under the First Lien Credit Facility or the Second Lien Term
Loan Facility 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) if the
Company Parties commence a bankruptcy case, 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, 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 Pulitzer
Notes and other indebtedness to the extent expressly contemplated and permitted
in Annex II to Exhibit A to the Support Agreement; (m) the Restructuring and all
other transactions contemplated by the Support Agreement shall have been
consummated or shall be consummated substantially concurrently with the
consummation of the transactions contemplated by this Backstop Commitment
Letter; (n) to the extent reasonably requested by the Backstop Parties, the
Company shall have awarded to the Backstop Parties such titles and roles under
the Second Lien Term Loan Facility as shall have been agreed between the
Backstop Parties and notified to the Company, 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; and (o) in the event the Company Parties
commence the Bankruptcy Cases, (i) the Company shall have filed the Plan and the
Disclosure Statement in forms that are reasonably consistent in all material
respects with the Support Agreement 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
 
 
 
 

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whole or in part, of the Confirmation Order (all of the foregoing conditions,
collectively, the “Backstop Party Conditions”).
 
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 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 for 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 the 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 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
 
 
 
 

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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 Support Agreement shall have occurred and no
Termination Date with respect to the Company shall have occurred which shall
have caused the termination of the 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 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) if the Company commences 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”).
 
 
 
 

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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 has the requisite
corporate power and authority to enter into, execute and deliver this Backstop
Commitment Letter and to perform its obligations hereunder, and has 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 it 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 and constitutes the valid and binding obligation of the Company,
enforceable against the Company 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 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.
 
 
 
 

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9
 
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, (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 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, 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: Mutual Quest
Fund, 101 John F. Kennedy Parkway, Short Hills, NJ 07078, Attention: Bradley
Takahashi, Fax: (973) 912-0646, with a copy to: Milbank, Tweed, Hadley & McCloy
LLP, 1
 
 
 
 

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10
 
Chase Manhattan Plaza, New York, NY 10005, Attention: Matthew Barr, Fax:
212-822-5194, (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 a 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 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 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 you 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, which information may include the name
and address of the Company, and other information that will allow the Backstop
Party to identify the Company 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 September 8, 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 the later of (i) January 6,
2012, or (ii) if the Company Parties commence a bankruptcy case, March 11, 2012,
or (b) upon (i) automatic termination of the Support Agreement, (ii) termination
of the Support Agreement by the Required Consenting Lenders, or (iii) the
termination by the Company of the Backstop Party as a party to the Support
Agreement pursuant to the final sentence of Section 7.12 thereof, or (iv) the
occurrence of the Termination Date (other than to the extent occurring solely as
a result of notice by
 
 
 
 

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11
 
the Backstop Party in respect of a Termination Event under subsections
2.1(c)(i), 2.1(c)(ii), 2.1(c)(xi) or 2.1(c)(xii) of the 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 under
and as defined in the Support Agreement other than under subsections 2.1(c)(i),
2.1(c)(ii), 2.1(c)(v), 2.1(c)(xi) or 2.1(c)(xii) thereof, (ii) upon the Company
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
the Support Agreement (including, without limitation, the Term Sheet) relating
to the terms or conditions of the Second Lien Term Loan Facility or the
intercreditor agreement, 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 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, or (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.  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 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; provided, further, that in the event the Company Parties
commence the Bankruptcy Cases, the Company shall seek approval by the Bankruptcy
Court of this Backstop Commitment Letter within fifteen calendar days following
the Petition Date.

Signature Pages Follow
 
 
 
 
 
 

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12

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

 

Backstop Commitment Letter Signature Page

 
 

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13

 
Accepted and agreed to as of the date first
written above by:
 
 
MUTUAL QUEST FUND
 
[mutual0.jpg]
                                                                                     
         

Backstop Commitment Letter Signature Page

 
 

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EXHIBIT A
 
 
 
 
 
 
 
 
 
 
Backstop Commitment Letter