Exhibit 10.12 - Redemption
Agreement
Execution Copy
REDEMPTION
AGREEMENT
This Redemption
Agreement (“Agreement”) is entered into this 18
th
day of February,
2009, by and between St. Louis Post-Dispatch LLC, a Delaware
limited liability company and STL Distribution Services LLC, a
Delaware limited liability company (collectively, the
“Company”); The Herald Publishing Company, LLC, a New
York limited liability company (“Herald”) (as successor
by assignment to all the rights and obligations of The Herald
Company, Inc., a New York corporation (“Herald Inc.”);
Pulitzer Inc., a Delaware corporation (“Pulitzer”); and
Pulitzer Technologies, Inc., a Delaware corporation
(“Pulitzer Technologies”).
R E C I T A L S:
WHEREAS, the Company desires to redeem all of
Herald’s membership interests in the Company (the
“Herald Membership Interest”); and
WHEREAS, Herald desires to sell, transfer, and convey the
Herald Membership Interest, and terminate all agreements relating
to its interest in the ownership and operation of the Company,
including but not limited to all rights and obligations under the
Company’s Operating Agreement dated as of May 1, 2000
(and amended June 1, 2001 (the “Operating
Agreement”), the Joint Venture Agreement by and among
Pulitzer, Pulitzer Technologies and Herald, Inc. dated as of
May 1, 2000 (the “Joint Venture Agreement”) and
the Indemnity Agreement by and between Pulitzer and Herald Inc.
dated as of May 1, 2000 (the “Indemnity
Agreement”), according to the terms and conditions
hereof;
WHEREAS, Pulitzer and Pulitzer Technologies, as the
remaining members of the Company following the closing of the
transactions contemplated herein, consent to the redemption of
Herald’s interest and termination of all agreements relating
to the Herald Membership Interest and Herald’s ownership and
operation of the Company, as provided herein.
NOW THEREFORE,
in consideration of the
Company’s payment of One Dollar ($1.00) to Herald, the mutual
release, covenants and agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each of the parties hereto agrees as
follows:
1. Redemption of Herald
Membership Interest . Upon Closing (described below), as of
that date and without further action by any party hereto
(a) the Company shall be deemed to have redeemed the Herald
Membership Interest, and all of Herald’s rights and
obligations under the Operating Agreement (including, but not
limited to, the Herald Put (as defined in the Operating Agreement))
shall be deemed to have terminated; and (b) upon such
redemption, Herald shall be deemed to have released all rights,
benefits and obligations of ownership of the Herald Membership
Interest, and any other rights or benefits, relating to ownership
or operation of the Company.
2. Termination of Joint
Venture Agreement and Indemnity Agreement . Upon the Closing
Date, all agreements between Herald, on the one hand, and the
Company and Pulitzer and/or Pulitzer Technologies, on the other
hand, hereto relating to the ownership and operation of the
Company, including but not limited to the Joint Venture Agreement
and Indemnity Agreement, shall be deemed automatically terminated,
and be superceded by this Agreement.
3. Consideration .
(a) Grant of Phantom
Interests . The Company grants Herald an uncertificated
economic interest in the Company with a value (determined as set
forth below) equal to ten percent (10%) of the Enterprise
Value (as defined below) of the Company (the “Phantom
Interest”). The Phantom Interest shall not give Herald any
rights as a member of the Company, including without limitation the
right to vote or receive distributions from the Company. The
Phantom Interest shall not be redeemed for cash unless all
obligations under the Bank Credit Facility of Lee Enterprises,
Incorporated, a Delaware corporation (“Lee”) have been
paid in full in cash and all obligations (the “Note
Obligations”) of the Company under the Notes and the
Transaction Documents (as defined in the Note Agreement, as
amended, pursuant to which the Notes were issued) have been paid in
full in cash and any claim in respect thereof shall be junior and
subordinate in all respects to the Note Obligations. If the Company
does not make its payment as required in Lee Common Stock, Herald
shall have a claim for payment of the deficiency. The Phantom
Interest shall only be redeemable as set forth in Sections 3(b) and
3(f) below. Notwithstanding the foregoing, the Company shall
provide Herald a copy of its annual financial statements prepared
by the Company in the ordinary course of business.
(b) Redemption of Phantom
Interest .
(i) Herald shall have the right to
redeem the Phantom Interest at any time after April 28, 2013
and prior to April 28, 2015, upon ninety (90) day prior
written notice to the Company or, upon notice to the Company, at
any earlier time (or any time thereafter) if (A) any long-term
debt of the Company shall be accelerated, (B) the Company
shall seek bankruptcy protection or otherwise be declared
insolvent, (C) the Company shall elect to liquidate or
(D) the Company shall transfer or make any other disposition
of all or any material portion of its assets or engage in any
similar transaction which would have the effect of adversely
affecting the Enterprise Value (the “Herald
Notice”).
(ii) Upon redemption of the Phantom
Interest, the Company shall pay Herald (as provided in
Section 3(f) below) a sum or deliver shares of Lee Common
Stock with a value equal to ten percent (10%) of an amount
equal to: (a) the Enterprise Value of the Company, less
(b) the Adjusted Note Balance, each as defined
below.
2
(c) Enterprise Value .
For purposes hereof, “Enterprise Value” shall mean the
price that could be negotiated and paid in an arm’s-length
transaction, for cash, between a willing seller and a willing
buyer, neither of whom is under pressure or compulsion to complete
the transaction, for the full value of the Company as a going
concern (before deducting for net indebtedness of the Company) on
the date of the Herald Notice. The Company and Herald shall attempt
to agree, in good faith, upon the Enterprise Value upon receipt of
the Herald Notice. If Herald and the Company cannot agree upon the
Enterprise Value within thirty (30) business days, the Company
and Herald shall each engage at their own expense, an independent,
nationally recognized investment banking firm to determine the
Enterprise Value. If the valuation by the two investment banking
firms is within ten percent (10%) of each other, the average
of the two valuations shall be deemed the Enterprise Value. If the
difference in valuation by the two investment banking firms is
greater than ten percent (10%), the two investment banking firms
shall select a third independent and nationally recognized banking
firm, whose determination of the Enterprise Value shall be final
and binding. The cost of the third investment banking firm shall be
paid equally by the Company and Herald.
(d) Adjusted Note
Balance . For purposes hereof, “Adjusted Note
Balance” shall mean the outstanding principal amount of the
Adjustable Rate Senior Notes of the Company due April 28, 2012
(the “Notes”) immediately following the debt
restructuring contemplated herein (i.e. $186,000,000) reduced by
(i) all principal repaid on the Notes through April 28,
2012 or, if the Notes are refinanced prior to such date (the
“Note Refinancing Date”) the principal balance repaid
on or prior to, but not including, any amount repaid on the Note
Refinancing Date and further reduced by (ii) the cumulative
Free Cash Flow of the Company from the Note Refinancing Date to the
date of the Herald Notice (the “Free Cash Flow
Adjustment”).
(e) Free Cash Flow .
Free Cash Flow for any period shall defined as EBITDA minus
(without duplication) (i) interest expense (net of
amortization expense) on the Adjusted Note Balance (whether or not
reflected on the consolidated balance sheet of the Company or
allocated thereto) as reduced periodically by the Free Cash Flow
Adjustment, (ii) taxes paid in cash, and (iii) permitted
capital expenditures (other than with proceeds of debt, equity,
asset sales, or insurance recovery assets).
(f) Payment . Payment
for redemption of the Phantom Interest shall be made to Herald
either, at the option of the Company (i) in cash (subject to
Section 3(a) above) or (ii) in Common Stock of Lee on a
fully diluted basis at the Company’s sole discretion, in each
case within thirty (30) days after the final determination of
the value of the Phantom Interest. If payment is made in Lee Common
Stock, the number of shares delivered shall be determined based on
the average closing price for the 30 trading days immediately
preceding the date of the Herald Notice.
4. Representations and
Warranties .
(a) Herald’s Representation
and Warranties . Herald represents and warrants:
(i) Good Standing .
Herald is a New York limited liability company, duly organized,
validly existing and in good standing under the laws of the State
of New York.
3
(ii) Authority . Herald
has the right, power, legal capacity and authority to enter into
and perform all obligations under this Agreement. No approval,
consent, order or authorization of, or registration filing with, or
notice to, any governmental or public body or authorities or any
other person or party is required to g
