Document:

exv10w2

 

Exhibit 10.2

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

2005 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED

1. Purpose. The purpose of the plan is to facilitate the ability of Clear Channel
Outdoor Holdings, Inc. (the “Company”) and its subsidiaries to attract, motivate and retain
eligible employees, directors and other personnel through the use of equity-based and other
incentive compensation opportunities. Awards made under the plan may take the form of options to
purchase shares of the Company’s Class A common stock, $.01 par value (the “Common Stock”) granted
pursuant to Section 5, director shares issued pursuant to Section 6, stock appreciation rights
granted pursuant to Section 7, restricted stock and deferred stock rights issued or granted
pursuant to Section 8, other types of stock-based awards made pursuant to Section 9, and/or
performance-based awards made pursuant to Section 10.

2. Administration.

     2.1 The Committee. The plan will be administered by the compensation committee of the
Company’s board of directors, except the entire board will have sole authority for granting and
administering awards to non-employee directors.

     2.2 Responsibility and Authority of the Committee. Subject to the provisions of the
plan, the committee, acting in its discretion, will have responsibility and the power and authority
to (a) select the persons to whom awards will be made, (b) prescribe the terms and conditions of
each award and make amendments thereto, (c) construe, interpret and apply the provisions of the
plan and of any agreement or other document evidencing an award made under the plan, and (d) make
any and all determinations and take any and all other actions as it deems necessary or desirable in
order to carry out the terms of the plan. The committee may obtain at the Company’s expense such
advice, guidance and other assistance from outside compensation consultants and other professional
advisers as the committee deems appropriate in connection with the proper administration of the
plan.

     2.3 Delegation of Authority by Committee. Subject to the requirements of applicable
law, the committee may delegate to any person or group or subcommittee of persons (who may, but
need not be members of the committee) such plan-related functions within the scope of its
responsibility, power and authority as it deems appropriate. If the committee wishes to delegate a
particular function to a subcommittee consisting solely of its own members, it may choose to do so
on a de facto basis by limiting the members entitled to vote on matters relating to that function.
Reference herein to the committee with respect to functions delegated to another person, group or
subcommittee will be deemed to refer to such person, group or subcommittee.

     2.4 Committee Actions. A majority of the members of the committee shall constitute a
quorum. The committee may act by the vote of a majority of its members present at a meeting at
which there is a quorum or by unanimous written consent. The decision of the committee as to any
disputed question arising under the plan or an agreement or other document governing an individual
award, including questions of construction, interpretation and administration, shall be final and
conclusive on all persons. The committee shall keep a record of

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its proceedings and acts and shall keep or cause to be kept such books and records as may be
necessary in connection with the proper administration of the plan.

     2.5 Indemnification. The Company shall indemnify and hold harmless each member of the
board of directors of the committee or of any subcommittee appointed by the board of directors or
the committee and any employee of the Company or any of its subsidiaries and affiliates who
provides assistance with the administration of the plan or to whom a plan-related responsibility is
delegated, from and against any loss, cost, liability (including any sum paid in settlement of a
claim with the approval of the board of directors), damage and expense (including reasonable legal
fees and other expenses incident thereto and, to the extent permitted by applicable law,
advancement of such fees and expenses) arising out of or incurred in connection with the plan,
unless and except to the extent attributable to such person’s fraud or willful misconduct.

3. Limitations on Company Stock Awards Under the Plan.

     3.1 Aggregate Share Limitation. Subject to adjustments required or permitted by the
plan, the Company may issue a total of forty-two million (42,000,000) shares of Common Stock under
the plan. For these purposes, the following shares of Common Stock will not be taken into account
and will remain available for issuance under the plan: (a) shares covered by awards that expire or
are canceled, forfeited, settled in cash or otherwise terminated, (b) shares delivered to the
Company and shares withheld by the Company for the payment or satisfaction of purchase price or tax
withholding obligations associated with the exercise or settlement of an award, and (c) shares
covered by stock-based awards assumed by the Company in connection with the acquisition of another
company or business.

     3.2 Individual Employee Limitations. In any calendar year, (a) the total number of
shares that may be covered by awards made to an individual may not exceed 1,000,000 plus the
aggregate amount of such individual’s unused annual share limit as of the close of the preceding
calendar year, (b) the maximum amount of cash that may be payable to an individual pursuant to
performance-based cash awards made under the plan is $5,000,000 plus the aggregate amount of such
individual’s unused annual dollar limit as of the close of the preceding calendar year.

4. Eligibility to Receive Awards. Awards may be granted under the plan to any present
or future director, officer, employee, consultant or adviser of or to the Company or any of its
subsidiaries. For purposes of the plan, a subsidiary is any entity in which the Company has a
direct or indirect ownership interest of at least 50%.

5. Stock Option Awards.

     5.1 General. Stock options granted under the plan will have such vesting and other
terms and conditions as the committee, acting in its discretion in accordance with the plan, may
determine, either at the time the option is granted or, if the holder’s rights are not adversely
affected, at any subsequent time.

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     5.2 Minimum Exercise Price. The exercise price per share of Common Stock covered by an
option granted under the plan may not be less than 100% of the fair market value per share on the
date the option is granted (110% in the case of “incentive stock options” (within the meaning of
Section 422 of the Code) granted to an employee who is a 10% stockholder within the meaning of
Section 422(b)(6) of the Code). For purposes of the plan, unless determined otherwise by the
committee, the fair market value of a share of Common Stock on any date is the closing sale price
per share in consolidated trading of securities listed on the principal national securities
exchange or market on which shares of Common Stock are then traded, as reported by a recognized
reporting service or, if there is no sale on such date, on the first preceding date on which such
shares are traded. Prior to the time of an initial public offering by the Company of Class A shares
of its common stock, the committee may make option or other awards under the plan that become
effective only if and when the public offering is completed, in which case, unless the committee
determines otherwise, the fair market value per share at the effective time of such award(s) will
be deemed to be equal to the initial public offering price.

     5.3 Limitation on Repricing of Options. Except for adjustments made in accordance with
Section 11, the repricing of stock options granted under the plan is prohibited in the absence of
stockholder approval.

     5.4 Maximum Duration. Unless sooner terminated in accordance with its terms, an option
granted under the plan will automatically expire on the tenth anniversary of the date it is granted
or, in the case of an “incentive stock option” granted to an employee who is a 10% stockholder, the
fifth anniversary of the date it is granted.

     5.5 Effect of Termination of Employment or Service. The committee may establish such
exercise and other conditions applicable to an option following the termination of the optionee’s
employment or other service with the Company and its subsidiaries as the committee deems
appropriate on a grant-by-grant basis. For purposes of the plan, an individual’s employment or
service with the Company and its subsidiaries will be deemed to have terminated if such individual
is no longer receiving or entitled to receive compensation for providing services to the Company
and its subsidiaries.

     5.6 Method of Exercise. An outstanding and exercisable option may be exercised by
transmitting to the Secretary of the Company (or other person designated for this purpose by the
committee) a written notice identifying the option that is being exercised and specifying the
number of whole shares to be purchased pursuant to that option, together with payment in full of
the exercise price and the withholding taxes due in connection with the exercise, unless and except
to the extent that other arrangements satisfactory to the Company have been made for such
payment(s). The exercise price may be paid in cash or in any other manner the committee, in its
discretion, may permit, including, without limitation, (a) by the delivery of previously-owned
shares, (b) by a combination of a cash payment and delivery of previously-owned shares, or (c)
pursuant to a cashless exercise program established and made available through a registered
broker-dealer in accordance with applicable law. Any shares transferred to the Company (or withheld
upon exercise) in connection with the exercise of an option shall be valued at fair market value
for purposes of determining the extent to which the exercise price and/or tax withholding
obligation is satisfied by such transfer (or withholding) of shares.

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     5.7 Non-Transferability. No option shall be assignable or transferable except upon the
optionee’s death to a beneficiary designated by the optionee in a manner prescribed or approved for
this purpose by the committee or, if no designated beneficiary shall survive the optionee, pursuant
to the optionee’s will or by the laws of descent and distribution. During an optionee’s lifetime,
options may be exercised only by the optionee or the optionee’s guardian or legal representative.
Notwithstanding the foregoing, the committee may permit the inter vivos transfer of an option
(other than an “incentive stock option”) pursuant to a domestic relations order (within the meaning
of Rule 16a-12 promulgated under the Exchange Act) in settlement of marital property rights, or by
gift to any “family member” (within the meaning of Item A.1.(5) of the General Instructions to Form
S-8 or any successor provision), on such terms and conditions as the committee deems appropriate.

     5.8 Rights as a Stockholder. No shares of Common Stock shall be issued in respect of
the exercise of an option until payment of the exercise price and the applicable tax withholding
obligations have been satisfied or provided for to the satisfaction of the Company, and the holder
of an option shall have no rights as a stockholder with respect to any shares covered by the option
until such shares are duly and validly issued by the Company to or on behalf of such holder.

6. Director Shares.

     6.1 The committee may permit non-employee directors to elect to receive all or part of their
annual retainers in the form of shares (“Director Shares”). Unless the committee determines
otherwise, any such elections may be made during the month a director first becomes a director and
during the last month of each calendar quarter thereafter, and shall remain in effect unless and
until the end of the calendar quarter in which a new election is made (or, if later, the calendar
quarter next following the calendar quarter in which the director first becomes a director). Any
such election shall also indicate the percentage of the retainer to be paid in shares and shall
contain such other information as the committee or the Board may require.

     6.2 The Company shall issue Director Shares on the first trading day of each calendar quarter
to all directors on that trading day except any Director whose retainer is to be paid entirely in
cash. The number of Director Shares issuable to a director on the relevant trading date shall
equal:

[ % multiplied by (R/4) ] divided by P

	 	 	 	 	 	 	 	 	 
	 	 	WHERE:
	 
	 	 	 	 	 	 	 	 
	 

	 	 	%	 	 	=
	 	the percentage of the director’s retainer that is payable in shares;
	 
	 	 	 	 	 	 	 	 
	 

	 	 	R	 	 	=
	 	the director’s retainer for the applicable calendar year; and
	 
	 	 	 	 	 	 	 	 
	 

	 	 	P	 	 	=
	 	the closing price, as quoted on the principal exchange on
which shares are traded, on the date of issuance.

Director Shares shall not include any fractional shares. Fractions shall be rounded to the nearest
whole share.

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7. Stock Appreciation Rights.

     7.1 General. The committee may grant stock appreciation rights (“SARs”), either alone
or in connection with the grant of an option, upon such vesting and other terms and conditions as
the committee, acting in its discretion in accordance with the plan, including, as applicable,
Section 5 (relating to options), may determine, either at the time the SARs are granted or, if the
holder’s rights are not adversely affected, at any subsequent time. Upon exercise, the holder of an
SAR shall be entitled to receive a number of whole shares of Common Stock having a fair market
value equal to the product of X and Y, where—

X = the number of whole shares of Common Stock as to which the SAR is being
exercised, and

Y = the excess of the fair market value per share of Common Stock on the date of
exercise over the fair market value per share of Common Stock on the date the SAR is
granted (or such greater base value as the committee may prescribe at the time the
SAR is granted).

     7.2 Tandem SARs. An SAR granted in tandem with an option shall cover the same shares
covered by the option (or such lesser number of shares as the committee may determine) and, unless
the committee determines otherwise, shall be subject to the same terms and conditions as the
related option. Upon the exercise of an SAR granted in tandem with an option, the option shall be
canceled to the extent of the number of shares as to which the SAR is exercised, and, upon the
exercise of an option granted in tandem with an SAR, the SAR shall be canceled to the extent of the
number of shares as to which the option is exercised.

     7.3 Method of Exercise. An outstanding and exercisable SAR may be exercised by
transmitting to the Secretary of the Company (or other person designated for this purpose by the
committee) a written notice identifying the SAR that is being exercised and specifying the number
of shares as to which the SAR is being exercised, together with payment in full of the withholding
taxes due in connection with the exercise, unless and except to the extent that other arrangements
satisfactory to the Company have been made for such payment. The withholding taxes may be paid in
cash or in any other manner the committee, in its discretion, may permit, including, without
limitation, (a) by the delivery of previously-owned shares of Common Stock, or (b) by a combination
of a cash payment and the delivery of previously-owned shares. The committee may impose such
additional or different conditions for exercise of an SAR as it deems appropriate. No fractional
shares will be issued in connection with the exercise of an SAR.

     7.4 Rights as a Stockholder. No shares of Common Stock shall be issued in respect of
the exercise of an SAR until payment of the applicable tax withholding obligations have been
satisfied or provided for to the satisfaction of the Company, and the holder of an SAR shall have
no rights as a stockholder with respect to any shares issuable upon such exercise until such shares
are duly and validly issued by the Company to or on behalf of such holder.

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8. Restricted Stock and Deferred Stock Awards.

     8.1 General. Under a restricted stock award, shares of Common Stock will be issued by
the Company to the recipient at the time of the award. Under a deferred stock award, the recipient
will be entitled to receive shares of Common Stock in the future. The shares covered by a
restricted stock award and the right to receive shares under a deferred stock award will be subject
to such vesting and other conditions and restrictions as the committee, acting in its discretion in
accordance with the plan, may determine.

     8.2 Minimum Purchase Price. Unless the committee, acting in accordance with applicable
law, determines otherwise, the purchase price payable for shares of Common Stock transferred
pursuant to a restricted or deferred stock award must be at least equal to the par value of the
shares.

     8.3 Issuance of Restricted Stock. Shares of Common Stock issued pursuant to a
restricted stock award may be evidenced by book entries on the Company’s stock transfer records
pending satisfaction of the applicable vesting conditions. If a stock certificate for restricted
shares is issued, the certificate will bear an appropriate legend to reflect the nature of the
conditions and restrictions applicable to the shares. The Company may require that any or all such
stock certificates be held in custody by the Company until the applicable conditions are satisfied
and other restrictions lapse. The committee may establish such other conditions as it deems
appropriate in connection with the issuance of certificates for restricted shares, including,
without limitation, a requirement that the recipient deliver a duly signed stock power, endorsed in
blank, for the shares covered by the award.

     8.4 Stock Certificates for Vested Stock. The recipient of a restricted or deferred
stock award will be entitled to receive a certificate, free and clear of conditions and
restrictions (except as may be imposed in order to comply with applicable law), for shares that
vest in accordance with the award, subject, however, to the payment or satisfaction of applicable
withholding taxes. The delivery of vested shares covered by a deferred stock award may be deferred
if and to the extent provided by the terms of the award, subject, however, to the applicable
deferral requirements of Section 409A of the Code.

     8.5 Rights as a Stockholder. Subject to and except as otherwise provided by the terms
of a restricted stock award, the holder of restricted shares of Common Stock will be entitled to
receive dividends paid on, and exercise voting rights associated with, such shares as if the shares
were fully vested. The holder of a deferred stock award shall no rights as a stockholder with
respect to shares covered by a deferred stock award unless and until the award vests and the shares
are issued; provided, however, that the committee, in its discretion, may provide for the payment
of dividend equivalents on shares covered by a deferred stock award.

     8.6 Nontransferability. Neither a restricted or deferred stock award nor restricted
shares of Common Stock issued pursuant to any such award may be sold, assigned, transferred,
disposed of, pledged or otherwise hypothecated other than to the Company or its designee in
accordance with the terms of the award or of the plan, and any attempt to do so shall be null and
void and, unless the committee determines otherwise, shall result in the immediate forfeiture of
the award or the restricted shares, as the case may be.

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     8.7 Termination of Service Before Vesting; Forfeiture. Unless the committee determines
otherwise, shares of restricted stock and non-vested deferred stock awards will be forfeited upon
the recipient’s termination of employment or other service with the Company and its subsidiaries.
If shares of restricted stock are forfeited, any certificate representing such shares will be
canceled on the books of the Company and the recipient will be entitled to receive from the Company
an amount equal to any cash purchase price previously paid for such shares. If a non-vested
deferred stock award is forfeited, the recipient will have no further right to receive the shares
of Common Stock covered by the non-vested award.

9. Other Equity-Based Awards. The committee may grant dividend equivalent payment
rights, phantom shares, bonus shares and other forms of equity-based awards to eligible persons,
subject to such terms and conditions as it may establish. Awards made pursuant to this Section may
entail the transfer of shares of Common Stock to the recipient or the payment in cash or otherwise
of amounts based on the value of shares of Common Stock and may include, without limitation, awards
designed to comply with or take advantage of applicable tax and/or other laws, provided, that the
terms and conditions of any award that is treated as non-qualified deferred compensation must
satisfy the applicable deferral requirements of Section 409A of the Code.

10. Performance Awards.

     10.1 General. The committee may condition the grant, exercise, vesting or settlement
of equity-based awards under the plan (whether settled in shares of Common Stock or cash or other
property) on the achievement of specified performance goals in accordance with this Section.

     10.2 Objective Performance Goals. A performance goal established in connection with an
award covered by this Section must be (a) objective, so that a third party having knowledge of the
relevant facts could determine whether the goal is met; (b) prescribed in writing by the committee
at a time when the outcome is substantially uncertain, but in no event later than the first to
occur of (1) the 90th day of the applicable performance period, or (2) the date on which
25% of the performance period has elapsed; and (c) based on any one or more of the following
business criteria, applied to an individual, a subsidiary, a business unit or division, the Company
and any one or more of its subsidiaries, or such other operating unit(s) as the committee may
designate (in each case, subject to the conditions of the performance-based compensation exemption
from Section 162(m) of the Code):

	 	(i)	 	earnings per share,
	 
	 	(ii)	 	share price or total shareholder return,
	 
	 	(iii)	 	pre-tax profits,
	 
	 	(iv)	 	net earnings,
	 
	 	(v)	 	return on equity or assets,
	 
	 	(vi)	 	revenues,

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	 	(vii)	 	operating income before depreciation,
amortization and non-cash compensation expense,
	 
	 	(viii)	 	market share or market penetration, or

	 
	 	(ix)	 	any combination of the foregoing.

The applicable performance goals may be expressed in absolute or relative terms, and must include
an objective formula or standard for computing the amount of compensation payable to an employee if
the goal is attained. A formula or standard is objective if a third party having knowledge of the
relevant performance results could calculate the amount to be paid to the employee. The formula or
standard may provide for the payment of a higher or lower amount depending upon whether and the
extent to which a performance goal is attained. The committee may not use its discretion to
increase the amount of compensation payable that would otherwise be due upon attainment of a
performance goal; provided that, subject to the requirements for exemption under Section 162(m) of
the Code, the committee may make appropriate adjustments to an award in order to equitably reflect
changes in accounting rules, corporate transactions (including, without limitation, dispositions
and acquisitions) and other similar types of events or circumstances occurring during the
applicable performance period.

     10.3 Determination of Amount Payable. Following the expiration of the performance
period applicable to an award made under this Section, the committee shall determine whether and
the extent to which the performance goals have been attained and the amount of compensation, if
any, that is payable as a result. The committee must certify in writing prior to payment of the
compensation that the performance goals and any other material terms of the award were in fact
satisfied. Compensation otherwise payable pursuant to a performance-based award made under this
Section will be subject to the individual limitations set forth in Section 3.2.

11. Capital Changes, Reorganization or Sale of the Company.

     11.1 Adjustments Upon Changes in Capitalization. The aggregate number and class of
shares issuable under the plan, the total number and class of shares with respect to which awards
may be granted to any individual in any calendar year, the number and class of shares and the
exercise price per share covered by each outstanding option, the number and class of shares and the
base price per share covered by each outstanding SAR, and the number and class of shares covered by
each outstanding deferred stock award or other-equity-based award, and any per-share base or
purchase price or target market price included in the terms of any such award, and related terms
shall be subject to adjustment in order to equitably reflect the effect on issued shares of Common
Stock resulting from a split-up, spin-off, recapitalization, consolidation of shares or any similar
capital adjustment, and/or to reflect a change in the character or class of shares covered by the
plan and an award.

     11.2 Cash, Stock or Other Property for Stock. Except as otherwise provided in this
Section, in the event of an Exchange Transaction (as defined below), all option holders shall be
permitted to exercise their outstanding options and SARs in whole or in part (whether or not
otherwise exercisable) immediately prior to such Exchange Transaction, and any outstanding

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options and SARs which are not exercised before the Exchange Transaction shall thereupon
terminate. Notwithstanding the preceding sentence, if, as part of an Exchange Transaction, the
stockholders of the Company receive capital stock of another corporation (“Exchange Stock”) in
exchange for their shares of Common Stock (whether or not such Exchange Stock is the sole
consideration), and if the Company’s board of directors, in its sole discretion, so directs, then
all options and SARs for Common Stock that are outstanding at the time of the Exchange Transaction
shall be converted into options or SARs (as the case may be) for shares of Exchange Stock. The
number of shares of Exchange Stock and the exercise price per share under a converted option will
be adjusted such that (a) the ratio of the exercise price per share to the value per share at the
time of the conversion (which value will be equal to the consideration payable for each share of
Common Stock in the Exchange Transaction) is the same as the ratio of the per share exercise price
to the value of per share of Common Stock under the original option; and (b) the aggregate
difference between the value of the shares of Exchange Stock and the exercise price under the
converted option immediately after the Exchange Transaction is the same as the aggregate difference
between the value of the shares of Common Stock and the exercise price under the original option
immediately before the Exchange Transaction. Similar adjustments will be made to the number of
shares of Exchange Stock and the base value per share covered by SARs that are converted. Unless
the Company’s board of directors determines otherwise, the vesting and other terms and conditions
of the converted options and SARs shall be substantially the same as the vesting and corresponding
other terms and conditions of the original options and SARs. The Company’ board of directors,
acting in its discretion, may accelerate vesting of other non-vested awards, and cause cash
settlements and/or other adjustments to be made to any outstanding awards (including, without
limitation, options and SARs) as it deems appropriate in the context of an Exchange Transaction,
taking into account with respect to other awards the manner in which outstanding options and SARs
are being treated.

     11.3 Definition of Exchange Transaction. For purposes of the plan, the term “Exchange
Transaction” means a merger (other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger), consolidation, acquisition or disposition of
property or stock, separation, reorganization (other than a mere reincorporation or the creation of
a holding company), liquidation of the Company or any other similar transaction or event so
designated by the Company’s board of directors in its sole discretion, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange for or in connection
with their shares of Common Stock.

     11.4 Fractional Shares. In the event of any adjustment in the number of shares covered
by any award pursuant to the provisions hereof, any fractional shares resulting from such
adjustment shall be disregarded, and each such award shall cover only the number of full shares
resulting from the adjustment.

     11.5 Determination of Board to be Final. All adjustments under this Section shall be
made by the Company’s board of directors, and its determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.

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12. Termination and Amendment of the Plan. The board of directors of the Company may
terminate the plan at any time or amend the plan at any time and from time to time; provided,
however, that:

          (a) no such action shall impair or adversely alter any awards theretofore granted under the
plan, except with the consent of the recipient or holder, nor shall any such action deprive any
such person of any shares which he or she may have acquired through or as a result of the plan; and

          (b) to the extent necessary under applicable law or the requirements of any stock exchange or
market upon which the shares of Common Stock may then be listed, no amendment shall be effective
unless approved by the stockholders of the Company in accordance with applicable law.

          (c) Limitation of Rights. Nothing contained in the plan or in any award agreement
shall confer upon any recipient of an award any right with respect to the continuation of his or
her employment or other service with the Company or a subsidiary or other affiliate, or interfere
in any way with the right of the Company and its subsidiaries and other affiliates at any time to
terminate such employment or other service or to increase or decrease, or otherwise adjust, the
compensation and/or other terms and conditions of the recipient’s employment or other service.

13. Miscellaneous.

     13.1 Governing Law. The plan and the rights of all persons claiming under the plan
shall be governed by the laws of the State of Delaware, without giving effect to conflicts of laws
principles thereof.

     13.2 Shares Issued Under Plan. Shares of Common Stock available for issuance under the
plan may be authorized and unissued, held by the Company in its treasury or otherwise acquired for
purposes of the plan. No fractional shares of Common Stock will be issued under the plan.

     13.3 Compliance with Law. The Company will not be obligated to issue or deliver shares
of Common Stock pursuant to the plan unless the issuance and delivery of such shares complies with
applicable law, including, without limitation, the Securities Act of 1933, as amended, the Exchange
Act, and the requirements of any stock exchange or market upon which the Common Stock may then be
listed, and shall be further subject to the approval of counsel for the Company with respect to
such compliance.

     13.4 Transfer Orders; Placement of Legends. All certificates for shares of Common
Stock delivered under the plan shall be subject to such stock-transfer orders and other
restrictions as the Company may deem advisable under the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange or market upon which the Common Stock
may then be listed, and any applicable federal or state securities law. The Company may cause a
legend or legends to be placed on any such certificates to make appropriate reference to such
restrictions.

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     13.5 Decisions and Determinations Final. All decisions and determinations made by the
Company’s board of directors pursuant to the provisions hereof and, except to the extent rights or
powers under the plan are reserved specifically to the discretion of the board of directors, all
decisions and determinations of the committee, shall be final, binding and conclusive on all
persons.

     13.6 Withholding of Taxes. As a condition to the exercise and/or settlement of any
award or the lapse of restrictions on any award or shares, or in connection with any other event
that gives rise to a federal or other governmental tax withholding obligation on the part of the
Company or a subsidiary with respect to an award, the Company and/or the subsidiary may (a) deduct
or withhold (or cause to be deducted or withheld) from any payment or distribution otherwise
payable to the award recipient, whether or not such payment or distribution is covered by the plan,
or (b) require the recipient to remit cash (through payroll deduction or otherwise) or make other
arrangements permitted by the Company, in each case in an amount or of a nature sufficient in the
opinion of the Company to satisfy or provide for the satisfaction of such withholding obligation.
If the event giving rise to the withholding obligation involves a transfer of shares of Common
Stock, then, at the sole discretion of the committee, the recipient may satisfy the withholding
obligations associated with such transfer by electing to have the Company withhold shares of Common
Stock or by tendering previously-owned shares of Common Stock, in each case having a fair market
value equal to the amount of tax to be withheld.

     13.7 Disqualifying Disposition. If a person acquires shares of Common Stock pursuant
to the exercise of an incentive stock option and the shares so acquired are sold or otherwise
transferred in a “disqualifying disposition” (within the meaning of Section 424(c) of the Code)
within two-years from the date the option was granted or one year after the option is exercised,
such person shall, within ten days of such disposition, notify the Company thereof, by delivery of
written notice to the Company at its principal executive office.

     13.8 Effective Date. The plan shall become effective on the date it is initially
approved and adopted by the Company’s board of directors. However, no awards may be made pursuant
to the plan after the date preceding the date of the first annual meeting of the Company’s
stockholders occurring after December 31, 2006, unless the Company’s stockholders approve the plan
at such meeting.

14. Term of the Plan. Unless sooner terminated, the plan shall terminate on the tenth
anniversary of the date of its adoption by the Company’s board of directors. The rights of any
person with respect to awards granted under the plan that are outstanding at the time of the
termination of the plan shall not be affected solely by reason of the termination of the plan and
shall continue in accordance with the terms of the awards (as then in effect or thereafter amended)
and the plan.

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EXECUTION COPY

Exhibit 10.36

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 14th
day of December, 2006, to be effective as of December 29, 2006 (the “Effective Date”), by
and between Sun-Times Media Group, Inc., a Delaware corporation (the “Employer”), and James
D. McDonough (the “Executive”).

RECITALS

     The Executive currently serves as Assistant General Counsel to the Employer. Effective as of
the close of business on December 29, 2006, the Employer desires that the Executive continue to
provide services for the benefit of the Employer as its Vice President, General Counsel and
Secretary and the Executive desires to accept such continued employment with the Employer.

     NOW, THEREFORE, in consideration of the above premises and the following mutual covenants and
conditions, the parties agree as follows:

     1. Employment. This Agreement shall not become effective until the Effective Date.
Effective as of the close of business on the Effective Date, the Employer shall employ the
Executive as its Vice President, General Counsel and Secretary and the Executive hereby accepts
such employment on the following terms and conditions.

     2. Duties. The Executive shall work for the Employer in a full-time capacity. From
the Effective Date through the expiration of this Agreement, the Executive shall have the duties,
responsibilities, powers, and authority customarily associated with the positions of Vice
President, General Counsel and Secretary. The Executive shall report to, and follow the direction
of, the President and Chief Executive Officer of the Employer. In addition to, or in lieu of, the
foregoing, the Executive also shall perform such other duties as may be assigned to him from time
to time by the President and Chief Executive Officer. The Executive shall diligently, competently,
and faithfully perform all duties, and shall devote his entire business time, energy, attention,
and skill to the performance of duties for the Employer and will use his best efforts to promote
the interests of the Employer; provided the Executive shall be entitled to devote time to personal
investments and professional activities to the extent such activities do not unduly interfere with
his duties hereunder.

     3. Term of Employment. The initial term of employment hereunder shall commence on the
Effective Date and end on December 31, 2007. The then current term of employment hereunder as of
any time is referred to herein as the “Current Term”. On December 31, 2007, and on each
succeeding December 31, the term of employment shall be renewed for successive
periods of one (1) year, unless the Board of Directors of the Employer (the “Board”)
provides the Executive, or the Executive provides the Board, with written notice to the contrary at
least thirty (30) days prior to the end of the Current Term.

 

 

     4. Compensation.

          A. Salary. As of the Effective Date, the Employer shall pay the Executive an annual
salary of US$275,000 (the “Base Salary”), payable in substantially equal installments in
accordance with the Employer’s payroll policy from time to time in effect. The Executive’s salary
shall be subject to any payroll or other deductions as may be required to be made pursuant to law,
government order, or by agreement with, or consent of, the Executive. The Base Salary is subject
to increase at the discretion of the Board, or a Committee thereof acting under delegated
authority, as appropriate.

          B. Performance Bonus. Beginning with calendar year 2007, during the term of this
Agreement, the Executive shall be eligible for an annual bonus targeted at fifty percent (50%) of
the Executive’s Base Salary (the “Target Bonus”), such bonus, if any, to be paid no later
than the date which is two and one-half (2 1 ¤ 2 ) months following
the end of each calendar year. The bonus shall be based upon an annual calendar year bonus plan,
to be established by the Board prior to or as soon as reasonably practicable after each January 1.
The actual bonus to be paid to Executive shall be determined by the Board, or by a committee
thereof with delegated authority, based upon such criteria as are established by the Board or such
committee and communicated to Executive. The actual bonus to be paid to Executive may exceed or be
lower than the Target Bonus, based upon performance relative to the established criteria.

          C. Long-Term Incentive Plan. Beginning with calendar year 2007, the Executive shall
be eligible to receive an annual award (the “Incentive Award”) under the Employer’s
Long-Term Incentive Plan (the “LTIP”). The terms of any Incentive Award, including those
relating to the vesting and payment thereof, are subject to the terms and conditions of the LTIP,
which is incorporated herein by reference. The actual Incentive Award to be awarded to the
Executive shall be determined by the Board, or by a committee thereof with delegated authority, in
its discretion.

          D. Other Compensation. Executive shall be eligible to participate in any and all
other incentive compensation programs established by Employer in which Employer’s senior executives
participate or with respect to which they are eligible. The Board, or a Committee thereof with
delegated authority, shall determine the amount of any such awards in its sole discretion.

          E. Benefits and Perquisites. Executive shall be eligible to participate in all
benefit plans and programs for which other senior executives of Employer are eligible, and shall be
entitled to such perquisites as are available to other
senior executives of Employer, and such additional perquisites as may be approved by the Board
or the Compensation Committee thereof.

     5. Expenses. The Employer shall reimburse the Executive for expenses in accordance
with the Employer’s policies from time to time in effect.

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     6. Termination. The Executive’s services under this Agreement shall terminate upon
the first to occur of the following events:

          A. At the end of the then Current Term of this Agreement if not renewed in accordance with the
provisions of Paragraph 3 hereof.

          B. Upon the Executive’s date of death or the date the Executive is given written notice from
the Employer that he has been determined to be disabled. For purposes of this Agreement, the
Executive shall be deemed to be “disabled” if the Executive, as a result of illness or incapacity,
shall be unable to perform substantially his required duties for a period of three (3) consecutive
months or for any aggregate period of three (3) months in any six (6) month period.

          C. On the date the Employer provides the Executive with written notice that he is being
terminated for “Cause.” For purposes of this Agreement, “Cause” means that Executive has:
(i) been convicted of (or has pleaded guilty or no contest to) a felony, or (ii) engaged in conduct
that constitutes willful gross neglect or willful gross misconduct with respect to his employment
duties; provided, no act or omission on Executive’s part shall be considered “willful” if conducted
in good faith and with a reasonable belief that his conduct was in the best interests of Employer.
Notwithstanding the foregoing, the Employer may not terminate Executive’s employment for Cause
under clause (ii) of this Paragraph 6C unless Executive is given at least thirty (30) days to cure
any such conduct (if capable of cure), and only after Executive has received a certified copy of a
resolution of the Board terminating his employment for Cause and stating specifically the conduct
that the Board believes satisfies the definition of Cause.

          D. On the date the Executive terminates his employment for any reason, provided that the
Executive shall give the Employer thirty (30) days written notice prior to such date of his
intention to terminate this Agreement.

          E. On the date the Employer terminates the Executive’s employment for any reason other than in
the event of Executive’s death or disability or for Cause, provided that the Employer shall give
the Executive thirty (30) days written notice prior to such date of its intention to terminate this
Agreement.

     7. Compensation upon Termination.

          A. If the Executive’s services are terminated pursuant to Paragraph 6B, 6C or (except as
provided in Paragraph 7C) 6D, or the Executive elects to terminate this Agreement at the end of its
then Current Term pursuant to Paragraph 6A, the Executive shall be entitled to his salary and
health and welfare benefits through his final date of active employment, plus any accrued but
unused vacation pay. The Executive shall also be entitled to any benefits mandated under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) or required under the
terms of any death, insurance, or retirement plan, program, or agreement, or any other plan or
arrangement, provided by the Employer and to which the Executive is a party or in which

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the
Executive is a participant, including, but not limited to, any short-term or long-term disability
plan or program, if applicable. All payments and benefits described in this Paragraph 7A are
referred to herein as “Accrued Obligations.”

          B. If the Executive’s services are terminated pursuant to Paragraph 6E, or the Employer elects
to terminate this Agreement at the end of its then Current Term pursuant to Paragraph 6A, in either
case (x) prior to and not in connection with a Change in Control (as defined herein) or (y)
following the twenty-four (24) month period following the occurrence of any such Change in Control,
Executive shall receive (except as otherwise provided in Paragraph 7E) (i) a lump sum equal to (a)
one times the sum of the final Base Salary plus Target Bonus plus (b) a pro-rata annual bonus for
the year in which termination of employment occurs, determined by multiplying the Target Bonus by a
fraction, the numerator of which is the number of days elapsed in the calendar year in which
termination of employment occurs through the date of termination of Executive’s services under this
Agreement (such date, the “Final Date”), and the denominator of which is 365 (the
“Pro-Rata Bonus”) plus (c) any bonus that was earned by Executive under Paragraph 4B with
respect to a prior calendar year but not paid as of the Final Date, (ii) continuation for a period
ending one year from the Final Date (the “Continuation Period”) of medical, dental, vision
and life insurance benefits provided to Executive immediately prior to termination of employment,
subject to the Company’s continuation of such benefits for its employees and to Executive’s payment
of the cost of such benefits to the same extent that active employees of the Company are required
to pay for such benefits from time to time, provided that such continuation coverage shall end
earlier upon Executive’s becoming eligible for comparable coverage under another employer’s benefit
plans and (iii) the Accrued Obligations. For purposes of COBRA, the date of Executive’s
“qualifying event” arising out of such termination of employment shall be the date of termination
of employment. Upon termination of the Executive’s services under this Agreement pursuant to this
Paragraph 7B (except as otherwise provided in Paragraph 7E), (i) all unvested cash Incentive Awards
shall become immediately vested and payable (if applicable) as and to the extent provided in the
LTIP, and (ii)(a) all unvested equity-based awards under the LTIP or otherwise that would have
vested under the original vesting schedule for such awards at any time during the Continuation
Period shall become immediately fully vested and payable (if applicable) and (b) all other unvested
equity-based awards under the LTIP or otherwise shall
immediately terminate. Employer’s obligations to pay the amounts and furnish the benefits as
provided in this Paragraph 7B shall be conditioned upon receipt by Employer of Executive’s written
waiver and release of the Employer from all claims related to the Executive’s employment and
termination of employment, including without limitation for additional severance payments and
benefits and otherwise, which has become irrevocable and effective in accordance with its terms
(the “Release”). All payments described in this Paragraph 7B shall be made to Executive in
a single lump sum on the later of (A) the date on which the Release becomes irrevocable and
effective in accordance with its terms and (B) ten (10) business days following the date of
termination of the Executive’s services under this Agreement.

          C. In the event of a Change in Control, and the subsequent termination, within twenty-four
(24) months after the Change in Control, of Executive’s

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services under this Agreement by Employer
without Cause (including pursuant to the Employer’s election to terminate this Agreement at the end
of the then Current Term pursuant to Paragraph 6A) or by Executive for Good Reason, the Executive
shall receive (except as otherwise provided in Paragraph 7E) (i) a lump sum amount equal to (a) the
Pro-Rata Bonus, plus (b) Executive’s final Base Salary multiplied by two (2), plus (c) Executive’s
Target Bonus multiplied by two (2), plus (d) any bonus that was earned by Executive under Paragraph
4B with respect to a prior calendar year but not paid as of the Final Date; (ii) continuation for a
period ending two years from the Final Date of medical, dental, vision and life insurance benefits
provided to Executive immediately prior to termination of employment, subject to the Company’s
continuation of such benefit plans for its employees and to Executive’s payment of the cost of such
benefits to the same extent that active employees of the Company are required to pay for such
benefits from time to time, provided that such continuation coverage shall end earlier upon
Executive’s becoming eligible for comparable coverage under another employer’s benefit plans; and
(iii) the Accrued Obligations. For purposes of COBRA, the date of Executive’s “qualifying event”
arising out of such termination of employment shall be the date of termination of employment. In
addition, upon a Change in Control, all unvested Incentive Awards shall become immediately vested
and payable (if applicable) as and to the extent provided in the LTIP, and all other unvested
equity-based awards and grants previously made to Executive under the LTIP or otherwise shall
become immediately fully vested and payable (if applicable). All payments described in this
Paragraph 7C shall be made to Executive in a single lump sum on a date that is not later than ten
(10) business days following the date of termination of Executive’s services under this Agreement.

          For purposes of this Agreement, “Good Reason” for termination of Executive’s
employment by Executive shall exist if a Change of Control has occurred and, at any time during the
twenty-four (24) months thereafter, any of the following has also occurred: (i) Executive’s title,
authority, or principal duties are materially reduced, materially diminished or eliminated; (ii)
Executive’s Base Salary is reduced or Executive’s benefits are diminished (except in connection
with reduction of base salaries or benefits, as the case may be, on substantially an Employer-wide
basis, so long as Executive’s reduction is not less favorable on a percentage basis than the
reductions applicable to other members of senior management of the Employer; or (iii) Executive’s
principal place of employment is relocated to a location that results in an increase in Executive’s
one-way commute of more than thirty-five (35) road miles from the prior commuting distance.

          For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred
upon:

               (1) the acquisition after the date of this Agreement by any “person” (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (excluding for this purpose, (i) the Employer or any subsidiary of
the Employer or (ii) any employee benefit plan of the Employer or of any subsidiary of the
Employer or any person or entity organized, appointed or established by the Employer for or
pursuant to the terms

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of any such plan which acquires after the date of this Agreement
beneficial ownership of voting securities of the Employer, or (iii) RSM Richter Inc.
(“Richter”), in its capacity (but solely in its capacity) as (x) interim receiver,
receiver and manager of the assets, undertakings and properties of Ravelston Corporation
Limited (“RCL”) and Ravelston Management Inc. (“RMI”) pursuant to the
Receivership Order of the Ontario Superior Court of Justice dated April 20, 2005, and (y)
monitor of RCL and RMI pursuant to the CCAA Initial Order of the Ontario Superior Court of
Justice dated April 20, 2005 (Richter, in its capacities as interim receiver, receiver,
manager and monitor pursuant to the foregoing orders of the Ontario Superior Court of
Justice, is referred to as the “Receiver”), and any Person which as of April 20,
2005 was a direct or indirect subsidiary of RCL or RMI (a “Ravelston Subsidiary”);
provided, that each such Ravelston Subsidiary shall only be deemed to be covered by this
clause (iii) for so long as (A) it is and remains a Ravelston Subsidiary, (B) Richter
remains Receiver, and (C) Richter, in its capacity as Receiver, beneficially owns no more
voting securities of Employer than were beneficially owned by RCL and RMI on April 20,
2005) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Employer representing more than fifty percent (50%) of
the combined voting power of the Employer’s then outstanding securities; provided, however,
that no Change in Control will be deemed to have occurred as a result of a change in
ownership percentage resulting solely from an acquisition of securities by the Employer; or

          (2) the members of the Board as of the Effective Date (collectively, “Incumbent
Directors”) and any new directors whose election by the Board or nomination by the
Board for election by the Employer’s stockholders was approved by a vote of a least
two-thirds ( 2 ¤ 3 ) of the directors then still in office
who either are Incumbent Directors or whose election or nomination for election was
previously so approved (such new directors being referred to as “Successor Incumbent
Directors”) ceasing for any reason to constitute at least a majority of the Board; or

          (3) the adoption, enactment or effectiveness of any action (including, without
limitation, by resolution or by amendment to the
Employer’s charter or bylaws) that materially limits or diminishes the power or
authority of the Employer’s board of directors or any committee thereof, if such action has
not been approved by a vote of a least two-thirds ( 2 ¤ 3 )
of the directors then still in office who either are Incumbent Directors or Successor
Incumbent Directors; or

          (4) the consummation of a reorganization, merger or consolidation, or sale or other
disposition of all or substantially all of the assets of the Employer (a “Business
Combination”), in each case, unless, following such Business Combination, all or
substantially all of the individuals and entities who were the beneficial owners of
outstanding voting securities of the Employer immediately prior to such Business
Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the
combined voting power of the

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then outstanding voting securities entitled to vote generally
in the election of directors of the entity resulting from such Business Combination
(including, without limitation, an entity which, as a result of such transaction, owns the
Employer, or all or substantially all of the Employer’s assets, either directly or through
one or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the outstanding voting securities of the
Employer; or

               (5) the shareholder approval of a complete liquidation or dissolution of the Employer.

          D. Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any Payment would be subject to the Excise Tax, then the
amounts and benefits payable to the Executive under this Agreement or otherwise shall be reduced so
that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, but only
if the effect of such reduction would be to place Executive in a better after-tax economic position
than Executive would have been in had no such reduction been effected. The reduction of the
amounts payable hereunder, if applicable, shall be made by first reducing the cash severance
payments under Paragraph 7C or 7B, as applicable, unless an alternative method of reduction is
elected by the Executive, and in any event shall be made in such a manner as to maximize the Value
of all Payments actually made to the Executive. All determinations required to be made under this
Paragraph 7D, including the assumptions to be utilized in arriving at such determination, shall be
made by the Employer’s auditor in effect immediately prior to a Change of Control or such other
nationally recognized certified public accounting firm as may be designated by the Employer (the
“Accounting Firm”). In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change in Control, the Employer may
appoint another nationally recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm hereunder). The Accounting
Firm shall provide detailed supporting calculations both to the Employer and the Executive within
15 business days of the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Employer. All fees and expenses of the Accounting Firm shall be
borne solely by the
Employer. Any determination by the Accounting Firm shall be final and binding upon the
Employer and the Executive.

          For purposes of this Paragraph 7D, the following terms shall have the following meanings:

(a) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect to such excise
tax.

(b) “Parachute Value” of a Payment shall mean the present value as of the
date of the change of control for purposes of Section 280G of the Code of the
portion of such Payment that constitutes a “parachute payment” under

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Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.

(c) “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the
benefit of the Executive, whether paid or payable pursuant to this Agreement or
otherwise.

(d) “Safe Harbor Amount” means 2.99 times the Executive’s “base amount,”
within the meaning of Section 280G(b)(3) of the Code.

(e) “Value” of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of the
Code, as deter-mined by the Accounting Firm using the discount rate required by
Section 280G(d)(4) of the Code.

          E. Notwithstanding the foregoing, the Employer may elect to terminate this Agreement at the
end of its then Current Term pursuant to Paragraph 6A but not terminate Executive’s employment with
the Employer. If the Employer so elects, and if the Employer has Comparable Severance Policies (as
defined below) in effect as of the date on which this Agreement is so terminated, then the
Executive shall not be entitled to receive the payments and benefits described in Paragraph 7B or
7C. For purposes of this Agreement, “Comparable Severance Policies” means one or more
policies, programs or arrangements that have been approved by the Board (or its Compensation
Committee) which would entitle the Executive to receive (in the absence of an employment agreement)
upon a subsequent termination of employment by the Employer under circumstances described in
Paragraph 6E, payments and benefits that are substantially identical to and no less favorable than
those described in Paragraph 7B or 7C, as applicable. Following the termination of this Agreement
pursuant to the Employer’s election under this Paragraph 7E, the Employer agrees that any
subsequent modification of the Comparable Severance Policies shall not be effective as to the
Executive if such modifications would result in the Executive receiving payments and benefits (upon
a subsequent termination of employment by the Employer under
circumstances described in Paragraph 6E) that are less favorable than those described in
Paragraph 7B or 7C, as applicable.

          8. Confidential Information. Executive acknowledges that the Confidential Information
(as defined herein) obtained by him concerning the business and affairs of the Employer and its
affiliates and its and their predecessors during the course of his performance of services for, or
employment with, any of the foregoing persons (whether or not compensated for such services) are
the property of the Employer and its affiliates. Therefore, Executive agrees that he will not at
any time (whether during

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or after his employment period) disclose to any unauthorized person or,
directly or indirectly, use for his own account, any Confidential Information without the Board’s
consent. Executive agrees to deliver to the Employer at the termination of his employment, or at
any other time the Employer may request in writing (whether during or after his employment period),
all memoranda, notes, plans, records, reports and other documents, regardless of the format or
media (and copies thereof), relating to the business of the Employer and its affiliates and its and
their predecessors which he may then possess or have under his control and which contain
Confidential Information. As used herein, “Confidential Information” means information or
materials of a confidential or proprietary nature and includes, but is not limited to, (a) matters
of a technical nature, such as trade secrets, methods, data and know-how, inventions, designs,
machines, computer programs or printouts, and documentation and similar items or research projects,
and (b) matters of a business nature, such as information about past, present, or future company
performance, correspondence, notes, reports, files, financial information, sales figures and
projections, budgets, marketing plans, price lists, strategies, and lists of actual or potential
customers, partners, or investors. Notwithstanding the foregoing, Confidential Information shall
not include information that is generally ascertainable from public or published information or
trade sources.

     9. Noncompetition and Nonsolicitation; Remedies.

          A. The Executive covenants and agrees that, during the Executive’s employment with the
Employer and for the period of one (1) year after the effective date of the Executive’s termination
of employment for whatever reason (the “Restricted Term”), he will not (a) be employed in
an executive or managerial capacity by, or (b) provide whether as an employee, independent
contractor, consultant, or otherwise, any services of an executive or managerial nature or any
services similar to those provided by the Executive to the Employer during the Executive’s
employment with the Employer to, any company or entity engaged in the production or sale of
newspapers or news magazines in any market which is served by the Employer or which the Employer is
actively preparing to serve at the time of the Executive’s termination of employment. The
Executive acknowledges that the restrictions contained in this Paragraph 9A are necessary to
protect the Employer’s legitimate interests in its Confidential Information and customer
relationships.

          B. The Executive covenants and agrees that during the Executive’s employment with the Employer
and the Restricted Term, other than in the proper performance of the Executive’s duties while
employed by the Employer, the Executive will not employ, retain, solicit, attempt to solicit,
knowingly assist in the employment or retention of, or seek to influence or induce to leave the
Employer’s employment or service any individual who is employed or retained as an independent
contractor by the Employer at such time or who was employed or retained as an independent
contractor by the Employer at any time during the three (3) month period prior to the Executive’s
date of termination. The Executive acknowledges that the restrictions contained in this Paragraph
9B are necessary to protect the Employer’s legitimate interests in its Confidential Information,
customer relationships, and employee relationships.

          C. The Executive acknowledges and agrees that any breach or threatened breach by the Executive
of Paragraphs 8 and 9 of this Agreement will cause irreparable harm and continuing damages to the
Employer and that the remedy at law for

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any such breach or threatened breach will be inadequate.
Accordingly, in addition to any other remedies that may be available to the Employer at law or in
equity in such event, the Employer shall be entitled to seek and obtain, from any court of
competent jurisdiction, an injunction or injunctions, without bond or other security and without
having to show that money damages will be inadequate or impossible to determine and without proving
special damages or irreparable injury, enjoining and restricting the breach or threatened breach.
If the Employer succeeds in securing any such relief, the Executive will pay all of the costs and
expenses, including reasonable attorneys’ fees, that the Employer incurs in obtaining such relief.

     10. Notices. Any and all notices required in connection with this Agreement shall be
deemed adequately given only if in writing and (a) personally delivered, or sent by first class,
registered, or certified mail, postage prepaid, return receipt requested or by recognized overnight
courier, (b) sent by facsimile, provided a hard copy is mailed on that date to the party for whom
such notices are intended, or (c) sent by other means at least as fast and reliable as first class
mail. A written notice shall be deemed to have been given to the recipient party on the earlier of
(i) the date it shall be delivered to the address required by this Agreement; (ii) the date
delivery shall have been refused at the address required by this Agreement; (iii) with respect to
notices sent by mail or overnight courier, the date as of which the Postal Service or overnight
courier, as the case may be, shall have indicated such notice to be undeliverable at the address
required by this Agreement; or (iv) with respect to a facsimile, the date on which the facsimile is
sent and receipt of which is confirmed. Any and all notices referred to in this Agreement, or which
either party desires to give to the other, shall be addressed to the Executive at 2300 West
Armitage Avenue, No. 7, Chicago, IL 60647, or to its principal office in the case of the Employer.
The Executive and the Employer may change the applicable addresses for notice by providing to the
other at least five (5) days advance written notice thereof in accordance with the foregoing
provisions of this Paragraph 10.

     11. Waiver of Breach. A waiver by the Employer of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver or estoppel of any
subsequent breach by the Executive. No waiver shall be valid unless in writing and signed by an
authorized officer of the Employer.

     12. Assignment. The Executive acknowledges that the services to be rendered by him are
unique and personal. Accordingly, the Executive may not assign any of his rights or delegate any
of his duties or obligations under this Agreement. The rights and obligations of the Employer
under this Agreement shall inure to the benefit and shall be binding upon the successors and
assigns of the Employer. Employer covenants and agrees that it will secure the assumption by or
the agreement of any successor or assignee of this Agreement to the terms hereof.

     13. Entire Agreement; Amendment. This Agreement sets forth the entire and final
agreement and understanding of the parties and contains all of the agreements made between the
parties with respect to the subject matter hereof. This

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Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto, with respect to the subject
matter hereof. No change or modification of this Agreement shall be valid unless in writing and
signed by the Employer and the Executive.

     14. Severability. If any provision of this Agreement shall be found invalid or
unenforceable for any reason, in whole or in part, then such provision shall be deemed modified,
restricted, or reformulated to the extent and in the manner necessary to render the same valid and
enforceable, or shall be deemed excised from this Agreement, as the case may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by law, as if such
provision had been originally incorporated herein as so modified, restricted, or reformulated or as
if such provision had not been originally incorporated herein, as the case may be. The parties
further agree to seek a lawful substitute for any provision found to be unlawful; provided, that,
if the parties are unable to agree upon a lawful substitute, the parties desire and request that a
court or other authority called upon to decide the enforceability of this Agreement modify those
restrictions in this Agreement that, once modified, will result in an agreement that is enforceable
to the maximum extent permitted by the law in existence at the time of the requested enforcement.

     15. Headings. The headings in this Agreement are inserted for convenience only and
are not to be considered a construction of the provisions hereof.

     16. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be considered an original, but which when taken together, shall constitute one
agreement.

     17. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Illinois, without reference to its conflict of law provisions.

     18. Litigation Expenses. In the event Executive brings an action seeking to enforce
his rights under this Agreement, the Employer will pay, on a regular and current basis, all of
Executive’s reasonable legal fees and expenses incurred in connection with such action. Executive
will be obligated to return all amounts so advanced only in the event of a final judgment or
arbitration determination denying in full Executive’s requested relief.

     19. Indemnification. During and after the term hereof, Executive shall be entitled to
indemnification by Employer from and against any loss, cost or expense incurred by Executive in
connection with any threatened, pending or completed action, suit or proceeding, by reason of the
fact that Executive is or was a director, officer or employee of Employer to the fullest extent
permitted under applicable law. Executive shall be entitled to advancement of expenses to the
fullest extent permitted under applicable law, subject to an undertaking by Executive to repay such
amounts if it is ultimately determined that Executive was not entitled to such advance or to any
such indemnification.

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     20. Certain Waivers. The Executive hereby waives and disclaims any claim that the
appointment of Richter as (i) interim receiver, receiver and manager of the assets, undertakings
and properties of RCL and RMI pursuant to the Receivership Order of the Ontario Superior Court of
Justice dated April 20, 2005, and (ii) monitor of RCL and RMI pursuant to the CCAA Initial Order of
the Ontario Superior Court of Justice dated April 20, 2005, constitutes a Change in Control for
purposes of this Agreement. The Executive covenants and agrees that he will not bring, assert or
maintain any claim that the appointment of Richter as receiver and monitor or RCL and RMI as
described above constitutes a Change in Control for purposes of this Agreement.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the parties have set their signatures on the date first written above.

	 	 	 	 	 
	 	 	SUN-TIMES MEDIA GROUP, INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Cyrus F. Freidheim, Jr.
	 

	 	 	 	 
	 

	 	 	 	Its: President and Chief Executive Officer
	 
	 	 	 	 
	 	 	JAMES D. MCDONOUGH
	 
	 	 	 	 
	 

	 	 	 	/s/ James D. McDonough
	 

	 	 	 	 

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