exv4w27



 







Exhibit 4.27




SUN MEDIA CORPORATION

10.5% Convertible Obligation (“Cancap”) due July 6, 2020




			
	CDN $37,300,000
	 	July 12, 2005







     FOR VALUE RECEIVED, the undersigned, SUN MEDIA CORPORATION, a company continued and existing
under the Business Corporations Act (British Columbia) (the “Issuer”), hereby promises to pay to
3095531 NOVA SCOTIA COMPANY, a company organized and existing under the Companies Act (Nova
Scotia), or its assigns (in each case, the “Holder”), the sum of 37,300,000 Canadian Dollars (the
“Face Amount”) on July 6, 2020, with interests (“Coupon Payments”) on the unpaid balance thereof at
the rate of 10.5% per annum from the date hereof. The Coupon Payments shall be payable (subject to
Sections 2(b) and 2(c) hereof) semi-annually on June 20 and December 20 of each year (the first
Coupon Payment which shall be of $1,727,552.05 and payable on December 20, 2005, and the last
Coupon Payment which shall be of $263,063.01 and payable on July 6, 2020), until the Face Amount
hereof shall become due and payable.



     This 10.5% Convertible Obligation due July 6, 2020 (together with any security issued upon
transfer or exchange of or in substitution for this Convertible Obligation, in each case, the
“Cancap”) is an obligation of the Issuer. The Holder of the Cancap will be deemed, by its
acceptance of such Cancap, to have agreed to all of the provisions thereof.



     1.   Definitions. The following are definitions which apply to the Cancap:


“Class A Preferred Shares” means 37,300 Class A Preferred Shares of the capital stock of the Holder
issued to and registered in the name of the Issuer;



“Conversion Price” means the fair market value per Share (as defined hereinafter) at the time of a
conversion pursuant to Section 6 hereof, as determined in good faith by the Board of Directors of
the Issuer;



“Share Payment Price” means the fair market value per Share at the time of a share payment pursuant
to Section 2(d) hereof, as determined in good faith by the Board of Directors of the Issuer; and



“Shares” means fully-paid and non-assessable common shares of the capital stock of the Issuer or
its successor, and “Share” means one (1) such share.




     2.   (a)   Cash Payment. Subject to Sections 2(d) and 6(a), payments with respect to the
Cancap shall be made in lawful money of Canada. Payments due and payable on the Cancap shall be
made, without the presentment or surrender of any Cancap, by wire transfer or such other method,
and at such address in Canada (the “Place of Payment”), as shall be specified by the Holder in a
notice given at any time and from time to time to the Issuer.



            (b)   Payment Deferral Option. The Issuer may elect to defer, at any time and from time
to time, Coupon Payments on the Cancap by extending the Coupon
Payment period on the Cancap for a period (each such period, an “Extension period”)

 









 








of up to twelve
(12) consecutive semi-annual periods; provided, however, that no Extension period may extend beyond
July 6, 2020.




          (c)   Automatic Payment Deferral. Notwithstanding any other provisions herein, the
Issuer shall not be required to make any payment becoming due and payable until the Issuer is
reasonably satisfied that it will concurrently receive a corresponding capital or dividend payment
under the Class A Preferred Shares.




          (d)   Share Payment Option. The Issuer may at any time, at its option, elect to satisfy
its obligation to pay deferred semi-annual and the final Coupon Payment amounts under the Cancap
by issuing and delivering to the Holder, for each portion of $1,000 of Coupon Payment owed under
the Cancap, the number of Shares obtained by dividing $1,000 by the Share Payment Price.




     3.   Optional Redemption. The Cancap is redeemable at the option of the Issuer, in
whole at any time or in part from time to time, at a redemption price equal to the then outstanding
Face Amount (or portion thereof called for redemption, as the case may be), together, in each case,
with accrued and unpaid Coupon Payments, if any, to the redemption date.



     In order to effect an optional redemption, the Issuer shall provide to the Holder a notice of
redemption of at least one (1) business day. On and after any redemption date, Coupon Payments
will cease to accrue on the Cancap or portion thereof called for redemption.



     4.   Mandatory Redemption.   (a) The occurrence of any of the following shall constitute a
“Mandatory Redemption Event”:



          (1)   any failure to pay the Face Amount of the Cancap when due and payable (whether at maturity
or a date fixed for redemption or by declaration or otherwise);




          (2)   any failure to pay any Coupon Payment on the Cancap when due and payable, which failure
continues for a period of thirty (30) days;




          (3)   any failure to perform any other obligation under the Cancap, which failure continues for
more than thirty (30) days after receipt by the Issuer of a notice from the Holder describing such
failure in reasonable detail;




          (4)   the Issuer (i) admits in writing its inability to pay its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a petition for relief,
reorganisation or arrangement or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar powers with respect to
it or any substantial part of its assets or (v) takes corporate action for the purpose of the
foregoing; or




          (5)   a court or other governmental authority of competent jurisdiction enters an order (i)
appointing a custodian, receiver, trustee or other officer with similar
powers with respect to the Issuer or any substantial part of its assets, (ii) for relief or




-2-







 








approving a petition for relief, reorganization or any other petition in bankruptcy or for
liquidation of the Issuer or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction or (iii) for the dissolution, winding-up or
liquidation of the Issuer, or any such petition shall be filed against the Issuer and not be
dismissed within ninety (90) days.



(b)   If any Mandatory Redemption Event has occurred and is continuing, the Holder may, by
written notice to the Issuer, declare the Cancap to be immediately due and payable to the Holder.
In any such case, the Cancap will mature, and all amounts payable with respect thereto shall become
immediately due and payable, without presentment, demand, protest or further notice, all of which
are hereby waived.



(c)   At any time after the Cancap has been declared immediately due and payable, the Holder
may, by notice to the Issuer, rescind such declaration and its consequences; provided that
(i) no judgment or decree shall have been entered for the payment of the Cancap by reason of such
declaration, (ii) the Issuer shall have paid all amounts then due and payable (other than by virtue
of such declaration) with respect to the Cancap, and (iii) all non-monetary Mandatory Redemption
Events, if any, shall have been waived by the Holder or shall have been cured.



5.   Ranking.   The obligations of the Issuer under the Cancap shall be subordinated in
right of payment to the prior payment in full of all other existing and future senior indebtedness
of the Issuer. Except as permitted under such senior indebtedness, the holders of all other senior
indebtedness of the Issuer will be entitled to receive payment in full of all amounts due on or in
respect of all other indebtedness of the Issuer before the Holder is entitled to receive or retain
payment of any kind on the Cancap.



6.   Convertibility.   (a)   By giving a notice (a “Conversion Notice”) to the Holder at any
time prior to the close of business on July 5, 2020 or the business day immediately preceding the
date of a redemption, as the case may be, the Issuer may elect to convert all or any part of the
unpaid Face Amount and accrued and unpaid Coupon Payments on the Cancap into Shares at the
Conversion Price, the number of which Shares shall be determined by dividing the amount to be so
converted by the Conversion Price. Until the Issuer converts any unpaid Face Amount and accrued and
unpaid Coupon Payments to Shares, the Holder shall have under this Section 6 none of the rights or
obligations of a shareholder of the Issuer.



(b)   Reserved Shares; Registration, Listing, etc. The Issuer shall reserve (if at any time
its articles limit the number of authorized Shares) and at all times keep available, solely for the
purpose of delivery upon conversion of the Cancap as provided in this Section 6, such number of
Shares as would then be deliverable at the Conversion Price upon the conversion of the Cancap,
which Shares would be upon delivery duly and validly issued and fully paid and non-assessable. If
any such Shares require registration with or approval of any governmental authority under any
applicable law or listing upon any national securities exchange before such shares may be issued
and delivered upon conversion, the Issuer shall use its best efforts to cause such Share to be duly
registered, approved and listed, as the case may be.



(c)   Conversion Procedure. Each Conversion Notice shall specify (a) the unpaid Face Amount
of the Cancap, (b) accrued and unpaid Coupon Payments payable
thereon, (c) the Conversion Price and (d) the number of Shares to be issued and



-3-







 








delivered upon
conversion. The Issuer shall, within ten (10) days of sending any Conversion Notice (or at such
later time as to which the Issuer and the Holder may agree) deliver to the Holder at the Place of
Payment, against surrender of the Cancap owned by the Holder, (i) at the Issuer’s expense
(including any stamp taxes or similar governmental charges), the appropriate number of duly and
validly issued and fully paid and non-assessable Shares and one (1) or more stock certificates
therefor (in such number and registered in such names as the Holder may direct, provided that if
Shares are to be registered in the name of a person other than the Holder, the Holder shall take
all steps necessary to ensure that such registration and any transfer resulting therefrom does not
breach any applicable provision of securities law or stock exchange rule) and (ii) to the extent
of any unpaid Face Amount of the Cancap after giving effect to such conversion (and at the
Issuer’s expense), one (1) Cancap (registered in such name as the Holder may direct) in
substantially the form, and in aggregate face amount equal to the such unpaid Face Amount of, such
surrendered Cancap. Each new Cancap shall be dated the date to which the Coupon Payment shall have
been paid on such surrendered Cancap and future Coupon Payments shall accrue from such date.




7.    Miscellaneous.





	 	(a)	 	Notices. Except as specifically provided elsewhere herein, notices and other
communications required or permitted to be given hereunder will be effective when in
writing and delivered by hand, mail, recognized overnight courier or telecopier, addressed
as follows or to such other addresses as shall be specified by notice :





	 	 	 
	 

	(1)	If to the Issuer:

Sun Media Corporation

333 King Street East

Toronto (Ontario) M5A 3X5


Attention : Mark D’Souza
Vice President and Treasurer


Telecopier Number : (514) 380-1983
	 

	(2)	If to the Holder:

3095531 Nova Scotia Company

2100 — 1801 Hollis Street

Halifax (Nova Scotia) B3J 3N4

Attention : Paul Buron

Executive Vice President and Chief Financial Officer


Telecopier Number : (514) 598-6085







	 	(b)	 	Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec and the laws of Canada applicable
therein.






	 	(c)	 	Successors and Assigns. The respective rights and obligations of the Issuer and
of the Holder hereunder shall be binding upon and inure to the benefit




-4-







 






	 	 	of their respective
successors and assigns, provided that the Holder hereunder may only assign the
totality of the unpaid balance of the Face Amount hereof at the time of an assignment.






	 	 	          Without restricting the foregoing, the Issuer and the Holder acknowledge and agree
that the Cancap shall be binding upon, and be an obligation of, any corporation with which
the Issuer may amalgamate.







	(d)	 	Severability. Any provision of the Cancap that is held invalid, illegal or
unenforceable in any jurisdiction shall not affect the validity, legality or enforceability
of the other provisions of the Cancap in such jurisdiction or any provision of the Cancap
in any other jurisdiction. The Issuer and the Holder shall endeavour in good-faith
negotiations to replace any invalid, illegal or unenforceable provisions with valid, legal
and enforceable provisions, as the case may be, the economic effect of which shall, taken
together with the other provisions of the Cancap, come as close as possible to the economic
effects the parties intended by the Cancap and the transactions contemplated thereby.






	(e)	 	Counterparts. The Cancap and any instrument or other document executed in
connection therewith may be executed in any number of counterparts, each of which shall be
original but all of which together shall constitute one (1) instrument or other document,
as the case may be.






	(f)	 	Loss. In the event the Cancap is misplaced, lost or stolen, the Issuer shall
upon demand, issue and deliver, without cost, to the Holder a new Cancap identical to this
one, as replacement thereof.






	IN WITNESS WHEREOF, each of the undersigned has caused its duly authorized
representative to execute this Agreement as of the date first written above.





Issuer




	 	 	 	 	 
	 	Sun Media Corporation

 	 
	 	By:  	/s/ Mark D’Souza
 	 
	 	 	Name : Mark D’Souza 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 



Holder




	 	 	 	 	 
	 	3095531 Nova Scotia Company

 	 
	 	By:  	/s/ Paul Buron
 	 
	 	 	Name : Paul Buron 	 
	 	 	Title:  	Executive Vice President and Chief Financial Officer 	 
	 




-5-