Document:

exv4w25

 

Exhibit 4.25

SUN MEDIA CORPORATION

10.5% Convertible Obligation (“Cancap”) due December 20, 2022

			
	 	 	 
	CDN $240,000,000
	 	July 27, 2007

     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
QUEBECOR MEDIA INC., a company organized and existing under the Companies Act (Quebec), or its
assigns (in each case, the “Holder”), the sum of 240,000,000 Canadian Dollars (the “Face Amount”)
on December 20, 2022, 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 Section
2 hereof) semi-annually on June 20 and December 20 of each year (the first Coupon Payment which
shall be of $10,080,000.00 and payable on December 20, 2007, and the last Coupon Payment which
shall be of $12,634,520.55 and payable on December 20, 2022), until the Face Amount hereof shall
become due and payable.

     This 10.5% Convertible Obligation due December 20, 2022 (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 :

“Series G Preferred Shares” means 240,000 Cumulative First Preferred Shares, Series G of the
capital stock of the Holder issued to and registered in the name of the Issuer or one of its
subsidiaries;

“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(c), 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 December 20, 2022.

          (c) Automatic Payment Deferral. Notwithstanding any other provisions herein, the
Issuer shall have no obligation to make any payment becoming due and payable hereunder until the
Issuer is reasonably satisfied that it, or one of its subsidiaries, will concurrently receive a
corresponding capital or dividend payment under the Series G 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

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          (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 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 December 19, 2022 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.

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(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 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 : Nancy Rendle

Vice President, Corporate Controller
	 
	 	 	 	Telecopier Number : (905) 305-9632
	 
	 	(2)	 	If to the Holder :

Quebecor Media Inc.

612 St-Jacques Street

Montreal (Quebec) H3C 4M8
	 
	 	 	 	Attention : Jean-François Pruneau

Treasurer
	 
	 	 	 	Telecopier Number : (514) 380-1983

(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.

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(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 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
	 	 	 	Holder
	 
	 	 	 	 	 	 
	 

	 	SUN MEDIA CORPORATION
	 	 	 	QUEBECOR MEDIA INC.
	 
	 	 	 	 	 	 
	Per:

	 	/s/ Louis Morin 	 	Per:	 	/s/ Louis Morin 
	 

	 	 
	 	 	 	 
	 

	 	Name: Louis Morin
	 	 	 	Name : Louis Morin
	 

	 	Title: Vice President
	 	 	 	Title: Vice President and
Chief Financial Officer
	 
	 	 	 	 	 	 
	Per:

	 	/s/ Jean-François Pruneau 	 	Per:	 	/s/ Jean-François Pruneau 
	 

	 	 
	 	 	 	 
	 

	 	Name:Jean-François Pruneau
	 	 	 	Name : Jean-François Pruneau
	 

	 	Title: Treasurer
	 	 	 	Title: Treasurer

- 5 -exv4w28

 

Exhibit 4.28

SUBORDINATED LOAN AGREEMENT

between

SUN MEDIA CORPORATION

(As Borrower)

and

QUEBECOR MEDIA INC.

(As Lender)

Dated as of October 31, 2007

 

 

SUBORDINATED LOAN AGREEMENT dated as of October 31, 2007:

	 	 	 
	BETWEEN:

	 	SUN MEDIA CORPORATION, a company incorporated under
the laws of British Columbia, with its registered office at 612
St-Jacques Street, province of Quebec, H3C 4M8,
	 
	 	 
	 

	 	(the “Borrower”);
	 
	 	 
	AND:

	 	QUEBECOR MEDIA INC., a company incorporated under
the laws of Quebec, with its registered office at 612 St-Jacques
Street, Montreal, province of Quebec, H3C 4M8,
	 
	 	 
	 

	 	(the “Lender”);

               WHEREAS the Borrower has requested that the Lender provide the Borrower with a subordinated
loan in the principal amount of two hundred thirty-seven million five hundred thousand dollars
($237,500,000) and the Lender has agreed to provide such subordinated loan to the Borrower, upon
the terms and subject to the conditions hereinafter set forth;

               THE PARTIES HEREBY AGREE AS FOLLOWS:

	1.	 	INTERPRETATION

	 	1.1	 	Definitions

	 	 	In this Agreement, unless the context otherwise requires, the following terms shall have the
meanings respectively ascribed to them in this Section 1.1:
	 
	 	 	“Agent” means Bank of America, N.A., as administrative Agent under the Credit Agreement.
	 
	 	 	“Agreement” means the present subordinated loan agreement between the Borrower and the
Lender dated as of October 31, 2007 (as same may be amended, restated or otherwise modified
from time to time);
	 
	 	 	“Business Day” means a day, other than a Saturday or a Sunday, on which banks in Montreal,
Quebec and Toronto, Ontario are open for business in such cities;
	 
	 	 	“Cash Interest Option” has the meaning ascribed to that term in Section 2.11.5;
	 
	 	 	“Closing Date” means October 31, 2007, at which time the Subordinated Loan shall be advanced
to the Borrower, in its entirety, by the Lender;
	 
	 	 	“Conversion Date” has the meaning ascribed to that term in Section 2.11.4;

 

 

	 	 	“Conversion
Notice” has the meaning ascribed to that term in Section 2.11.1;
	 
	 	 	“Conversion Price” means the fair market value per Share at the time of a conversion
pursuant to Section 2.11 hereof, as determined in good faith by the Board of Directors of
the Borrower;
	 
	 	 	“Credit Agreement” means the credit agreement dated as of February 7, 2003, as amended from
time to time, among the Borrower (as borrower thereunder), the Agent, as administrative
agent thereunder, and the lenders thereunder.
	 
	 	 	“Default” means any of the events specified in Section 5.1, regardless of whether there
shall have occurred any passage of time or giving of notice or both that would be necessary
in order to constitute such event an Event of Default;
	 
	 	 	“Dollars” and “$” mean the lawful currency of Canada;
	 
	 	 	“Event of Default” has the meaning ascribed to that term in Section 5.1;
	 
	 	 	“Indenture” means the Indenture dated as of February 7, 2003 among the Borrower, the
Subsidiary Guarantors (as such term is defined thereunder), and National City Bank (now U.S.
Bank National Association), as amended from time to time.
	 
	 	 	“Initial Maturity Date” means October 31, 2013;
	 
	 	 	“Interest Installment” means the amount of interest due in respect of each Interest Period
and payable on the Interest Payment Date;
	 
	 	 	“Interest Payment Date” means March 15, June 15, September 15 and December 15 of each year,
provided that the first Interest Payment Date shall be on December 15, 2007 and the last
Interest Payment Date shall be on the Principal Payment Date (to the extent any amounts in
interest then remain unpaid);
	 
	 	 	“Interest Period” means each of the three-month periods ending on March 15, June 15,
September 15 and December 15 of each year; except for the first Interest Period, which shall
begin on October 31, 2007 and end on December 15, 2007, and the last Interest Period which
shall end on the Principal Payment Date.
	 
	 	 	“Loan Documents” means this Agreement and the Promissory Note, all as amended, supplemented,
restated or replaced from time to time;
	 
	 	 	“Maturity Date” means the Initial Maturity Date or any later date agreed upon by the parties
hereto.
	 
	 	 	“Obligations” means:

	 	(i)	 	the prompt payment, as and when due and payable, of all amounts
in principal, interest fees, costs or otherwise now or hereafter owing by the
Borrower to the Lender under, or pursuant to, the Loan Documents; and

 

 

	 	(ii)	 	the strict performance and observance by the Borrower of all
agreements, warranties, representations, covenants and conditions of the
Borrower made under, or pursuant to, the Loan Documents.

“Optional Prepayment Notice” has the meaning ascribed to such term in Section 2.7;

“Person” means any individual, company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or governmental authority;

“Principal Installment” means the payment of principal due on the Principal Payment Date;

“Principal Payment Date” means, in respect of the principal payment due hereunder, at the
latest the Maturity Date, to the extent any amounts in principal of the Subordinated Loan
then remain unpaid;

“Promissory Note” means the promissory note remitted by the Borrower to the Lender pursuant
to Section 2.1 herein or any replacement thereof, each substantially in the form of
Schedule A attached hereto;

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

“Subordinated Loan” has the meaning ascribed to it in Section 2.1.

                    1.2 Headings

The headings of the Articles, Sections, Subsections or Paragraphs herein are inserted for
convenience of reference only and shall not affect the construction or interpretation of
this Agreement.

                    1.3 References

Unless the context otherwise requires or unless otherwise provided, all references to
Articles, Sections, Subsections, Paragraphs and Schedules are to Articles, Sections,
Subsections, Paragraphs and Schedules to, this Agreement. The words “hereto”, “herein”,
“hereof”, “hereunder” and similar expressions mean and refer to this Agreement.

                    1.4 Preamble

Unless the context otherwise requires, the preamble forms an integral part hereof.

                    1.5 Time of Payment and Performance

Except as otherwise provided herein, whenever any payment is stated to be due or any
obligation is stated to be performed on a day which is not a Business Day, such payment
shall be made and such obligation shall be performed on the next

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	 	 	succeeding Business Day,
and such extension of time shall be included in the computation of interest.

	2.	 	THE SUBORDINATED LOAN 

	 	2.1	 	Subordinated Loan

	 	 	Relying on each of the representations and warranties set out in Article 3 and subject to
the terms and conditions herein contained, the Lender agrees to make available, on the
Closing Date, to the Borrower, by way of a single advance, a subordinated loan in the amount
of two hundred thirty-seven million five hundred thousand Dollars ($237,500,000) upon
receipt of the Promissory Note for the amount of such subordinated loan duly executed by the
Borrower in favour of the Lender (the “Subordinated Loan”).

	 	2.2	 	Use of Proceeds of the Subordinated Loan

	 	 	The Borrower shall use all of the proceeds of the Subordinated Loan to repay the outstanding
indebtedness under the Borrower’s term B credit facility under the Credit Agreement as well
as to settle the related derivatives transactions.

	 	2.3	 	Interest

	 	 	The Subordinated Loan shall bear interest on the unpaid principal amount of the Subordinated
Loan from and after the Closing Date to the Borrower until the Subordinated Loan is repaid
in full to the Lender at an annual interest rate equal to 7.00% (the “Interest Rate”). The
interest shall accrue daily and shall be payable in arrears on a quarterly basis in
accordance with Section 2.4.

	 	2.4	 	Payment of Principal and Interest

	 	 	Subject to the terms and conditions of this Agreement, the Borrower shall repay the
Subordinated Loan and accrued interest thereon to the Lender by way of twenty-four (24)
Interest Installments and one Principal Installment, the Interest Installments to become due
and payable on each Interest Payment Date, and the Principal Installment to become due and
payable on the Principal Payment Date. On the Maturity Date, all amounts remaining unpaid
with respect to the Subordinated Loan, including principal, interest and costs shall become
due and payable.

	 	2.5	 	Interest Payment Deferral Option

	 	 	The Borrower may, at its option, elect to defer, at any time and from time to time, any
Interest Installment for a period not to exceed twelve (12) months; provided, however, that
(i) no such deferral shall extend beyond the Maturity Date, and (ii) no Default or Event of
Default shall exist at the time of any such deferral.

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	 	2.6	 	Ranking

	 	 	The Obligations of the Borrower hereunder shall become, upon the occurrence of a Default or
an Event of Default (as such terms are defined in the Credit agreement or the Indenture, as
applicable) which is continuing or if a Default under the Credit Agreement or the Indenture
(as such terms are defined in the Credit agreement or
the Indenture, as applicable) would result from the payment or performance of the
Obligations, subordinated in right of payment to the prior payment in full of all existing
and future indebtedness of the Borrower under or in connection with the Credit Agreement and
the Indenture (and any securities issued under the Indenture). To the extent required by the
terms of any other senior indebtedness of the Borrower, the creditors under such other
senior indebtedness will be entitled, upon the occurrence of a Default or an Event of
Default (as such terms are defined in the Credit agreement or the Indenture, as applicable)
which is continuing or if a Default under the Credit Agreement or the Indenture (as such
terms are defined in the Credit agreement or the Indenture, as applicable) would result from
the payment or performance of the Obligations, to receive payment in full of all amounts due
on or in respect of all other existing and future senior indebtedness of the Borrower before
the Lender is entitled to receive or retain payment of principal hereunder or as permitted
by the terms of such senior indebtedness.

	 	2.7	 	Optional Prepayment

	 	 	The Borrower may, without penalty, provided however that no Default has occurred and is
continuing, no Event of Default has occurred which has not been waived and no Default would
result from such prepayment or payment (as such terms are defined under the Credit Agreement
or the Indenture, as applicable): (i) prepay the Subordinated Loan outstanding with accrued
interest thereon, and/or (ii) pay any interest deferred in accordance with Section 2.5 from
time to time; in each case upon providing the Lender with a one (1) Business Day prior
notice of such prepayment (the “Optional Prepayment Notice”).
	 
	 	 	Any amount prepaid by the Borrower pursuant to this Section 2.7 may not be re-borrowed under
this Agreement and shall constitute a permanent reduction of the Subordinated Loan.

	 	2.8	 	Interest on Overdue Payments

	 	 	In the event that any amount of principal of, or interest on, the Subordinated Loan is not
paid by the Borrower in full when due (whether at stated maturity, by acceleration or
otherwise), the Borrower shall pay, on demand, interest on such unpaid amount, from the date
such amount becomes due until the date such amount is paid in full, at the rate determined
in Section 2.3 plus 2.0%. If any other amount payable by the Borrower under any Loan
Document is not paid in full when due, the Borrower shall pay, on demand, interest on such
unpaid amount from the date such amount becomes due until the date such amount is paid in
full at an annual interest rate determined in Section 2.3 plus 2.0 %.

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	 	2.9	 	Manner of Payment

	 	 	All payments of principal of, and interest on, the Subordinated Loan shall be made by the
Borrower to the Lender, before 3:00 p.m., Montreal time, on the due date thereof in
immediately available funds at the registered office of the Lender located at 612,
St-Jacques Street, Montreal, province of Quebec, H3C 4M8, or at such other place as the
Lender may designate in writing (the “Place of Payment”). Any
payment received after 3:00 p.m., Montreal time, shall be deemed to have been received on
the next succeeding Business Day. If the principal of or interest on the Subordinated Loan,
or any other amount payable by the Borrower under this Agreement, becomes due and payable on
a day that is not a Business Day, the payment date or the maturity date thereof shall be the
next following Business Day.

	 	2.10	 	Application of Payments

	 	2.10.1	 	All payments made by the Borrower pursuant to this Agreement shall be applied
in each instance in the following order:

	 	(1)	 	first, to the amount of interest due
and payable on the Subordinated Loan;
	 
	 	(2)	 	second, to the amount due and payable
as principal of the Subordinated Loan; and
	 
	 	(3)	 	third, to any other amount due and
payable pursuant to the Loan Documents.

	 	2.10.2	 	Following the occurrence of an Event of Default which is continuing or
following the Maturity Date, the Borrower hereby irrevocably waives the right
to direct the application of any and all such payments received from or on
behalf of the Borrower, and the Borrower hereby irrevocably agrees that the
Lender shall have the continuing exclusive right to apply any and all such
payments against the Borrower’s obligations under the Loan Documents as the
Lender may deem advisable.

	 	2.11	 	Convertibility

	 	2.11.1	 	By giving a notice on a Business Day (a “Conversion Notice”) to the other
party hereto at any time prior to the close of business on the Business Day
immediately preceding the Maturity Date, a party hereto may elect to convert
all or any part of the unpaid principal amount of the Subordinated Loan and,
subject to the exercise by the Borrower of the Cash Interest Option, accrued
and unpaid interest thereon into Shares at the Conversion Price, the number of
which Shares shall be determined by dividing the amount to be so converted
(including, subject to the Cash Interest Option, any accrued and unpaid
interest thereon) by the Conversion Price. No fractional Share shall be issued
upon conversion of any portion of the Subordinated 

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	 	 	 	Loan and accrued and unpaid
interest thereon. Any fraction of Share shall be paid in cash by the Borrower
on the Conversion Date as indicated hereinafter.

	 	2.11.2	 	Until the first conversion of any unpaid principal amount of the Subordinated
Loan and accrued and unpaid interest thereon into Shares, the Lender shall have
under this Section 2.11 none of the rights or obligations of a shareholder of
the Borrower. Furthermore, no Conversion Notice may be sent by the Lender to
the Borrower once the Borrower has sent to the Lender an Optional Prepayment
Notice.
	 
	 	2.11.3	 	The Borrower 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 Subordinated Loan as provided in this Section
2.11, such number of Shares as would then be deliverable at the Conversion
Price upon a conversion of the Subordinated Loan and accrued and unpaid
interest thereon, 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 Borrower shall use its best efforts to cause
such Share to be duly registered, approved and listed, as the case may be.
	 
	 	2.11.4	 	Each Conversion Notice shall specify (a) the unpaid principal amount of the
Subordinated Loan to be converted, (b) the amount of accrued and unpaid
interest payable thereon up to and including the Conversion Date (subject to
the exercise by the Borrower of the Cash Interest Option) to be converted, (c)
the Conversion Price, (d) the number of Shares to be issued and delivered upon
conversion and (e) the effective date of the conversion, which shall be no
later than 10 Business Days from and including the date of the Conversion
Notice, and shall not fall after the Maturity Date (the “Conversion Date”).
	 
	 	2.11.5	 	The Borrower shall have the right, at its sole discretion, to elect, upon any
conversion of a portion of the Subordinated Loan into Shares, to prepay in cash
on the Conversion Date all or part of the accrued and unpaid interest on such
portion of the Subordinated Loan then being converted (the “Cash Interest
Option”). Such right of the Borrower shall apply both in the context of a
Borrower or Lender Conversion Notice and shall be exercised at any time before
the Conversion Date. The Borrower shall notify the Lender of its exercise of
the Cash Interest Option in writing prior to the Conversion Date.
	 
	 	2.11.6	 	On the Conversion Date, the Borrower shall deliver to the Lender (or at such
later time as to which the Borrower and the Lender may agree) at the Place of
Payment, against remittal of a receipt for the payment of the amount of
Subordinated Loan and, subject to the 

7

 

	 	exercise by the Borrower of the Cash
Interest Option, accrued and unpaid interest being then converted, at the
Borrower’s expense (including any stamp taxes or similar governmental charges):

	 	2.11.6.1	 	the appropriate number of duly and validly issued and fully paid and
non-assessable Shares represented by one (1) or more stock certificates
(in such number and registered in such names as the Lender may direct,
provided that if Shares are to be registered in the name of a person
other than the Lender, the Lender 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);
	 
	 	2.11.6.2	 	provided that no Default has occurred and is continuing, no Event of
Default has occurred which has not been waived and no Default would
result from such payment of interest (as such terms are defined under
the Credit Agreement or the Indenture, as
applicable), if the Borrower exercises the Cash Interest
Option, a cheque to the order of the Lender or any designee
thereof in an amount representing such portion of the accrued
and unpaid interest on the portion of the Subordinated Loan
being converted that the Borrower elects to pay in cash;
	 
	 	2.11.6.3	 	provided that no Default has occurred and is continuing, no Event of
Default has occurred which has not been waived and no Default (as such
terms are defined under the Credit Agreement or the Indenture, as
applicable) would result from such payment of principal or interest, if
any fractional Share results from the calculation under Section 2.11.1
for any conversion of the Subordinated Loan or any interest thereon so
converted, a cheque to the order of the Lender or any designee thereof
in the amount representing the value of such fractional Share; and
	 
	 	2.11.6.4	 	to the extent of any unpaid principal amount of the Subordinated
Loan after giving effect to such conversion (and at the Borrower’s
expense), one (1) Promissory Note (registered in such name as the Lender
may direct) in substantially the form, and in an aggregate face amount
equal to the unpaid principal amount of the Subordinated Loan
outstanding following all conversions up to and including the Conversion
Date. Each new Promissory Note shall be dated the date immediately
following the Conversion Date and future interest shall accrue from and
including such date.

8

 

	3.	 	REPRESENTATIONS AND WARRANTIES

	 	3.1	 	Representations and Warranties

	 	 	The Borrower represents and warrants to the Lender that:

	 	3.1.1	 	Incorporation and Good Standing. The Borrower is a
company duly incorporated and validly existing under the laws of its
jurisdiction of incorporation and is qualified to carry on its activities in
each jurisdiction in which it carries on its activities.
	 
	 	3.1.2	 	Authorization and Capacity.  The Borrower has the
capacity and authority to enter into the Loan Documents and it has taken all
measures and actions necessary to authorize the Borrower to execute and deliver
the Loan Documents and to perform the obligations resulting from the Loan
Documents. The Borrower also has the power to own its assets and to carry on
the activities it now carries on.
	 
	 	3.1.3	 	No Conflicts or Consents.  Neither the execution and
delivery of the Loan Documents, nor the consummation of any of the transactions
therein contemplated, nor compliance with the terms and provisions thereof,
shall contravene or conflict with any provision of law, statute or regulation
to which the Borrower is
subject or any judgment, license, order or permit applicable to the
Borrower or any agreement or instrument to which the Borrower is a party
or by which the Borrower is bound.
	 
	 	3.1.4	 	No Default.  The Borrower is not in breach of or in
default under, and no event or omission has occurred which, with the giving of
notice or lapse of time or otherwise, might constitute a breach of, or default
under, any material agreement or instrument to which the Borrower is a party or
by which the Borrower is bound.
	 
	 	3.1.5	 	Survival of Representations and Warranties.  All
representations and warranties by the Borrower made in the Loan Documents shall
survive delivery of the Loan Documents and the disbursement of the Subordinated
Loan and any investigation at any time made by or on behalf of the Lender shall
not diminish or otherwise affect the Lender’s right to rely thereon.

	4.	 	COVENANTS

	 	4.1	 	Affirmative Covenants

	 	 	The Borrower covenants and agrees with the Lender as follows:

	 	4.1.1	 	Payment and Performance of Obligations.  The Borrower
shall duly and punctually pay all amounts, comply with all covenants and

9

 

	 	 	 	perform all other Obligations on its part required to be paid, complied with or
performed under the terms of the Loan Documents.

	 	4.1.2	 	Maintenance of Existence.  The Borrower shall preserve
and maintain its existence, licenses, rights, permits and privileges and all
authorizations, consents, approvals, orders, licenses, permits, exemptions from
or registrations or qualifications with any court or governmental authority
that are necessary or materially valuable in the operation of its business.
	 
	 	4.1.3	 	Compliance with Applicable Laws.  The Borrower shall
comply and cause its property and assets to comply with all applicable laws in
all material respects.
	 
	 	4.1.4	 	Certain Notices.  The Borrower shall promptly give
written notice to the Lender of the occurrence of any Default or Event of
Default or of any action, claim, delegation, proceeding or dispute affecting
the Borrower which might have a material adverse effect on it, its property or
its financial condition and the Borrower shall provide to the Lender, from time
to time, with all reasonable information requested by the Lender concerning the
status of any such action, claim, litigation, proceeding or dispute.
	 
	 	4.1.5	 	Further Assurances.  The Borrower shall make, execute
or endorse, and acknowledge and deliver or file all such documents, and take
any and all such other action, as the Lender may, from time to time, deem
reasonably necessary or proper in connection with any of the Loan Documents or
the obligations of the Borrower thereunder.
	 
	 	4.1.6	 	Other Information.  The Borrower shall promptly
furnish to the Lender such other information respecting its operations,
properties, business, condition (financial or otherwise) or prospects, as the
Lender may from time to time reasonably request.

	5.	 	EVENTS OF DEFAULT

	 	5.1	 	Events of Default

	 	 	Each of the following events shall constitute an “Event of Default” under this Agreement:

	 	5.1.1	 	Payment of Principal and Interest.  The Borrower
failing to pay when due and payable the principal of, or, and except as
provided herein, any interest on, the Subordinated Loan, or within five (5)

10

 

	 	 	 	days of such payment becoming due and the payable hereunder, any other payment
required under Loan Documents.

	 	5.1.2	 	Performance of Obligations.  The Borrower committing a
breach of, or defaulting in the due and prompt performance or observance of any
of its Obligations contained in the Loan Documents (other than a payment
obligation as set forth in Subsection 5.1.1) which, if capable of being
remedied or cured, is not remedied or cured within thirty (30) days from the
earlier of (i) the Borrower becoming aware of such breach or default and
(ii) notice in writing having been given by the Lender to the Borrower
specifying such breach or default and requiring the Borrower to remedy or cure
such breach or default or to cause such breach or default to be remedied or
cured.
	 
	 	5.1.3	 	Other Indebtedness.  The Borrower is in default under
its senior indebtedness or any other indebtedness in excess of $25,000,000 and,
in each case, the creditors thereof have accelerated such indebtedness.
	 
	 	5.1.4	 	Insolvency.  The Borrower (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,
reorganization 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.
	 
	 	5.1.5	 	Dissolution, Winding-up, Liquidation.  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 Borrower or any substantial part of its assets, (ii) for
relief or approving a petition for relief, reorganization or any other petition
in bankruptcy or for liquidation of the Borrower 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
Borrower, or any such petition shall be filed against the Borrower and not be
dismissed within ninety (90) days.

	 	5.2	 	Performance by the Lender

	 	 	If the Borrower fails to perform any Obligation contained in any of the Loan Documents, the
Lender may perform or attempt to perform such Obligation on 

11

 

	 	 	behalf of the Borrower. In such
event, the Borrower shall, at the request of the Lender, pay on demand any amount expended
by the Lender in such performance or attempted performance to the Lender, together with
interest thereon at the annual interest rate applicable to the Subordinated Loan from the
date of such expenditure until paid. Notwithstanding the foregoing, the Lender shall not
assume any liability or responsibility for the performance of any Obligation of the Borrower
under any of the Loan Documents or control over the management and affairs of the Borrower.

	 	5.3	 	Remedies Upon Event of Default

	 	 	If an Event of Default shall have occurred and be continuing, the Lender may, in addition to
any other rights or recourse it may have at law or under the Loan Documents, declare the
principal of, and all interest then accrued on, the Subordinated Loan and all other
Obligations of the Borrower to be forthwith due and payable, whereupon the same shall
forthwith become due and payable and/or exercise and enforce any of the Lender’s rights and
remedies under the Loan Documents; provided, however, that for so long as indebtedness,
obligations and liabilities are due and owing by the Borrower under the Credit Agreement,
the Lender shall not and shall not be entitled to enforce its rights hereunder (which
includes, without limitation, petitioning the Borrower into bankruptcy or initiate any
similar proceeding) without the prior consent of the Agent. In the event the Agent enforces
all or any portion of its rights under the Credit Agreement or takes any action in
connection therewith, the Lender acknowledges and agrees that the Agent shall have sole
control of all matters relating to the realization of the Borrower’s properties and assets
until all obligations have been repaid in full and all commitments of the Agent under the
Credit Agreement have been terminated. The
Lender further agrees and undertakes to vote as instructed by the Agent in respect of any
action or proceeding concerning any reorganization or bankruptcy proceedings relating to the
Borrower.

	6.	 	MISCELLANEOUS

	 	6.1	 	Waiver

	 	 	No failure to exercise, and no delay in exercising, on the part of the Lender, any right or
remedy under the Loan Documents shall operate as a waiver thereof. No waiver of any
provision of any Loan Document, nor consent to departure therefrom, shall be effective
unless in writing and no such consent or waiver shall extend beyond the specific instance
and purpose for which given.

	 	6.2	 	Severability

	 	 	If any provision of any Loan Document is held to be illegal, invalid or unenforceable under
present or future laws during the term of this Agreement, such provision shall be fully
severable; such Loan Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document; and the remaining
provisions of such Loan Document shall remain in full 

12

 

	 	 	force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance from such
Loan Document.

	 	6.3	 	Binding Effect and Assignment

	 	 	The Loan Documents shall be binding upon and ensure to the benefit of the Borrower and the
Lender and their respective successors, assigns and legal representatives; provided,
however, that the Borrower shall not, without the prior written consent of the Lender,
assign any rights or obligations thereunder or any interest therein. For greater certainty,
the transfer of the Borrower’s rights and obligations pursuant to the merger or amalgamation
of the Borrower with another Person shall be deemed not to constitute an assignment for the
purposes of this provision. The Lender may sell, assign or transfer all or any portion of
the Lender’s rights and obligations under the Loan Documents to any Person.

	 	6.4	 	Entirety

	 	 	The Loan Documents embody the entire agreement between the parties and supersede all prior
agreements and understandings, if any, relating to the subject matter hereof and thereof.

	 	6.5	 	Indemnity

	 	 	The Borrower shall indemnify and hold harmless the Lender and its representatives (each, an
“Indemnified Person”) from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including, without limitation, counsel’s fees and
disbursements and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or
asserted against or incurred by any Indemnified Person as the result or arising out of
credit having been extended, suspended or terminated under any Loan Document and the
administration of such credit and in connection with or arising out of the transactions
contemplated under any Loan Document and any actions or failures to act in connection
therewith and any legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any Loan Document (collectively, “Indemnified
Liabilities”); provided, that the Borrower shall not be liable for any indemnification to an
Indemnified Person to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense results solely from that Indemnified Person’s gross negligence or
willful misconduct, as finally determined by a court of competent jurisdiction.

	 	6.6	 	Remedies Cumulative

	 	 	The rights and remedies under the Loan Documents are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have.

	 	6.7	 	Term of Agreement

	 	 	The term of this Agreement is until the payment in full of all the obligations of the
Borrower pursuant to the Loan Documents.

13

 

	 	6.8	 	Address for Notice

	 	 	Any notice or other communication required or permitted to be given under the Loan Documents
shall be in writing and, except as otherwise provided herein, shall be personally delivered
or transmitted by telecopier to the party for whom it is intended at the address of such
party set out below or to such other address as such party may designate to the other party
by notice in writing delivered in accordance with this Section 6.8:

	 	(1)	 	If to the Borrower:
	 
	 	 	 	Sun Media Corporation

333 King Street East

Toronto, Ontario

M5A 3X5
	 
	 	 	 	Attention: Executive Vice President and Chief Financial Officer
	 
	 	 	 	Telecopier: (416) 947-3119
	 
	 	(2)	 	If to the Lender:
	 
	 	 	 	Quebecor Media Inc.

612 St-Jacques Street

Montreal, Quebec

H3C 4M8
	 	 	 	Attention: Treasurer
	 
	 	 	 	Telecopier: (514) 380-1983
	 
	 	 	 	With a copy to:
	 
	 	 	 	Quebecor Media Inc.

612 St-Jacques Street

Montreal, Quebec

H3C 4M8
	 
	 	 	 	Attention: Vice-President, Legal Affairs
	 
	 	 	 	Telecopier: (514) 985-8834

	 	 	Any such notice or communication sent as aforesaid shall be deemed to have been received by
the party to whom it is addressed (i) upon receipt, if personally delivered and (ii) if
telecopied before 3:00 p.m. on a Business Day, on that day and if telecopied after 3:00 p.m.
on a Business Day or if telecopied on a day other than a Business Day, on the Business Day
next following the date of transmission; provided, however, that in the event normal courier
service or telecopier service shall be interrupted by strike, force majeure or other cause,
then the party sending the 

14

 

	 	 	notice or communication, shall utilize any other mode of
communication which shall ensure prompt receipt of such notice or communication by the other
party or parties.

	 	6.9	 	Governing Law and Jurisdiction

	 	 	The Loan Documents and all matters arising under the Loan Documents shall be governed by,
and construed in accordance with, the laws in force in the Province of Quebec and the laws
of Canada applicable herein. The parties submit to the exclusive jurisdiction of the courts
of the Province of Quebec any matter arising out of or in connection with the Loan
Documents.

	 	6.10	 	Inconsistent Provisions

	 	 	In the event of any inconsistency between the provisions of this Agreement and the
provisions of the Promissory Note, the provisions of this Agreement shall prevail to the
extent of the inconsistency.

	 	6.11	 	Counterparts

	 	 	This Agreement may be executed in any number of counterparts, all of which taken together
shall constitute one and the same agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart.

	 	6.12	 	Default by Lapse of Time

	 	 	The Borrower shall be put in default to perform its obligations hereunder by the mere lapse
of time for performing such obligations without the necessity of any demand or notice of
default.

	 	6.13	 	Language

	 	 	The Borrower and the Lender confirm that they have requested that this Agreement and all
documents and notices contemplated thereby be drawn up in the English language.
L’Emprunteur et le Prêteur confirment avoir requis que cette convention et tous les
documents et avis qui y sont envisagés soient rédigés en langue anglaise.

[Remainder of page intentionally left blank.

Signature page follows immediately.]

15

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.

	 	 	 	 	 
	 	 	SUN MEDIA CORPORATION
	 
	 	 	 	 
	 

	 	per:	 	/s/ Jean-François Pruneau 
	 

	 	 	 	 
	 

	 	Name:	 	Jean-François Pruneau 
	 

	 	Title:	 	Treasurer 
	 
	 	 	 	 
	 	 	QUEBECOR MEDIA INC.
	 
	 	 	 	 
	 

	 	per:	 	/s/ Louis Morin 
	 

	 	 	 	 
	 

	 	Name:	 	Louis Morin 
	 

	 	Title:	 	Vice President and Chief Financial
Officer 

 

 

SCHEDULE A

PROMISSORY NOTE

               FOR VALUE RECEIVED, Sun Media Corporation, a company duly incorporated under the laws of
British Columbia (including any successor thereto) (the “Borrower”), hereby promises to pay to
Quebecor Media Inc., a company duly incorporated under the laws of Quebec and any successor thereto
(the “Lender”), at the registered office of the Lender located in the City of Montreal, Province of
Quebec, the principal sum of • dollars ($ •) in the lawful currency of Canada, on the
31st day of October, 2013, and pay interest from the date hereof on the said sum or the
amount thereof from time to time remaining unpaid, in the same currency and at the same place, at a
rate calculated and payable in accordance with the terms and conditions of the Agreement (as such
term is defined herein below).

          This promissory note is issued pursuant to Section 2.1 of the Subordinated Loan Agreement
between the Borrower and the Lender dated as of October 31, 2007 (the “Agreement”). Reference is
hereby made to the Agreement, the terms and conditions of which govern this promissory note. In
the event of any conflict or inconsistency between the provisions of the Agreement and those of
this promissory note, the provisions of the said Agreement shall prevail.

          The Borrower hereby waives presentment for payment, notice of non-payment, protest and notice
of protest and other notices of any kind in the enforcement of this promissory note.

          SIGNED this 31st day of October, 2007.

	 	 	 	 	 
	 	 	SUN MEDIA CORPORATION
	 
	 	 	 	 
	 

	 	per:	 	 
	 

	 	 	 	 
	 

	 	Name:
	 

	 	Title:

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