10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File No. 1-14164

SUN-TIMES MEDIA GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	95-3518892 (I.R.S. Employer Identification No.)
350 North Orleans Street, 10-S Chicago, Illinois (Address of principal executive offices)	60654 (Zip Code)

Registrant’s telephone number, including area code

(312) 321-2299

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 31, 2008
Class A Common Stock par value $.01 per share	82,209,875 shares

TABLE OF CONTENTS

INDEX

SUN-TIMES MEDIA GROUP, INC.

			Page
PART I FINANCIAL INFORMATION
	Item 1	Condensed Consolidated Financial Statements (Unaudited)		4
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
	Item 3	Quantitative and Qualitative Disclosures about Market Risk		33
	Item 4	Controls and Procedures		34
PART II OTHER INFORMATION
	Item 1	Legal Proceedings		34
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		35
	Item 3	Defaults Upon Senior Securities		35
	Item 4	Submission of Matters to a Vote of Security Holders		36
	Item 5	Other Information		36
	Item 6	Exhibits		36
Signatures				37
Exhibits
Registration Rights Agreement
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 as amended and the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. These statements relate to future events or the Company’s future financial performance with respect to its financial condition, results of operations, business plans and strategies, operating efficiencies, competitive positions, growth opportunities, plans and objectives of management, capital expenditures, growth and other matters. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or the newspaper industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions and such expectations may prove to be incorrect. Some of the things that could cause the Company’s actual results to differ substantially from its current expectations are:

•  the resolution of certain United States and foreign tax matters;

•  changes in the preferences of readers and advertisers, particularly in response to the growth of Internet-based media;

•  actions of competitors, including price changes and the introduction of competitive service offerings;

•  changes in prevailing economic conditions, particularly as they affect Chicago, Illinois and its metropolitan area;

•  the impact of insolvency filings of The Ravelston Corporation Limited and Ravelston Management, Inc. and certain related entities;

•  adverse developments in pending litigation involving the Company and its affiliates, and current and former directors and officers;

•  actions arising from continuing investigations by the Securities and Exchange Commission (“SEC”) and other government agencies in the United States and Canada principally of matters identified by a special committee of independent directors (the “Special Committee”) formed on June 17, 2003 to investigate related party transactions and other payments made to certain executives of the Company and Hollinger Inc. and other affiliates in connection with the sale of certain of the Company’s assets and other transactions (the Company previously filed the full text of the Special Committee report on such investigation with the SEC);

•  the effects of recent and future outsourcing efforts;

•  the effects of changing costs or availability of raw materials, primarily newsprint;

•  changes in laws or regulations, including changes that affect the way business entities are taxed;

•  changes in accounting principles or in the way such principles are applied; and

•  other matters identified in Item 1A “— Risk Factors” in the Company’s 2007 Annual Report on Form 10-K (the “2007 10-K”).

The Company operates in a continually changing business environment, and new risks emerge from time to time. Management cannot predict such new risks, nor can it assess either the impact, if any, of such risks on the Company’s businesses or the extent to which any risk or combination of risks may cause actual results to differ materially from those projected in any forward-looking statements. In light of these risks, uncertainties and assumptions, it should be kept in mind that future events or conditions described in any forward-looking statement made in this Quarterly Report on Form 10-Q might not occur. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of any document incorporated by reference, the date of that document, and the Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities law. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption “Risk Factors” in the Company’s 2007 10-K.

3

PART I. FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2008 and 2007

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(Unaudited)
	(In thousands, except per share data)
Operating revenue:
Advertising	$	62,728		$	73,198		$	123,866		$	143,189
Circulation		18,845			19,720			37,162			39,724
Job printing		787			1,167			1,727			2,194
Other		611			659			1,220			1,354
Total operating revenue		82,971			94,744			163,975			186,461
Operating costs and expenses:
Cost of sales:
Wages and benefits		23,766			26,640			48,546			53,302
Newsprint and ink		11,820			13,190			21,955			26,913
Other		18,057			20,619			36,143			40,052
Total cost of sales		53,643			60,449			106,644			120,267
Selling, general and administrative:
Sales and marketing		17,594			17,683			34,143			32,996
Other operating costs		16,248			14,493			33,348			28,880
Corporate expenses		9,629			50,070			18,086			65,608
Indemnification, investigation and litigation costs, net of recoveries		3,444			25,118			8,920			(2,501	)
Total selling, general and administrative		46,915			107,364			94,497			124,983
Depreciation		5,337			4,608			10,437			10,558
Amortization		1,089			2,962			2,178			5,613
Total operating costs and expenses		106,984			175,383			213,756			261,421
Operating loss		(24,013	)		(80,639	)		(49,781	)		(74,960	)
Other income (expense):
Interest expense		(63	)		(165	)		(185	)		(323	)
Interest and dividend income		874			3,375			2,371			13,689
Other income (expense), net		(1,088	)		(6,941	)		3,049			(7,445	)
Total other income (expense)		(277	)		(3,731	)		5,235			5,921
Loss before income taxes		(24,290	)		(84,370	)		(44,546	)		(69,039	)
Income tax expense (benefit)		13,461			(612,350	)		29,048			(592,196	)
Net income (loss)	$	(37,751	)	$	527,980		$	(73,594	)	$	523,157
Net income (loss) per share:
Net income (loss) per share — basic	$	(0.46	)	$	6.57		$	(0.91	)	$	6.51
Net income (loss) per share — diluted	$	(0.46	)	$	6.56		$	(0.91	)	$	6.50
Weighted average shares outstanding:
Basic		81,312			80,351			81,108			80,334
Diluted		81,312			80,518			81,108			80,504

See accompanying notes to condensed consolidated financial statements.

4

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three and Six Months Ended June 30, 2008 and 2007

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(Unaudited)
	(In thousands)
Net income (loss)	$	(37,751	)	$	527,980		$	(73,594	)	$	523,157
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustment		1,047			(5,899	)		(3,334	)		(10,414	)
Unrealized gain (loss) on securities available for sale		(100	)		8			(279	)		132
Pension adjustment		(114	)		(1,992	)		672			(2,312	)
Comprehensive income (loss)	$	(36,918	)	$	520,097		$	(76,535	)	$	510,563

See accompanying notes to condensed consolidated financial statements.

5

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2008 and December 31, 2007

	June 30,			December 31,
	2008			2007
	(Unaudited)
	(In thousands,
	except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	115,452		$	142,533
Accounts receivable, net of allowance for doubtful accounts of $11,621 in 2008 and $12,276 in 2007		62,849			73,031
Inventories		7,700			7,937
Escrow deposits and restricted cash		34,719			35,641
Recoverable income taxes		11,508			16,509
Other current assets		13,261			7,034
Total current assets		245,489			282,685
Investments		19,671			42,249
Property, plant and equipment, net of accumulated depreciation of $108,930 in 2008 and $146,170 in 2007		154,337			163,355
Intangible assets, net of accumulated amortization of $49,823 in 2008 and $47,645 in 2007		86,056			88,235
Goodwill		124,301			124,301
Prepaid pension benefit		90,321			89,512
Other assets		1,064			1,249
Total assets	$	721,239		$	791,586
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt	$	19		$	35
Accounts payable and accrued expenses		96,344			112,621
Amounts due to related parties		10,383			8,852
Income taxes payable and other tax liabilities		565			1,027
Deferred revenue		9,891			10,060
Total current liabilities		117,202			132,595
Long-term debt, less current installments		—			3
Deferred income tax liabilities		60,033			58,343
Other tax liabilities		622,615			597,206
Other liabilities		70,928			78,448
Total liabilities		870,778			866,595
Stockholders’ equity (deficit):
Class A common stock, $0.01 par value. Authorized 250,000,000 shares; 104,497,022 and 81,927,124 shares issued and outstanding, respectively, at June 30, 2008 and 88,008,022 and 65,308,636 shares issued and outstanding, respectively, at December 31, 2007		1,045			880
Class B common stock, $0.01 par value. Authorized 50,000,000 shares; 0 shares issued and outstanding at June 30, 2008 and 14,990,000 shares issued and outstanding at December 31, 2007		—			150
Additional paid-in capital		502,422			501,138
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustments		544			3,878
Unrealized gain (loss) on marketable securities		(138	)		141
Pension adjustment		(29,046	)		(29,718	)
Accumulated deficit		(399,626	)		(325,451	)
		75,201			151,018
Class A common stock in treasury, at cost — 22,569,898 shares at June 30, 2008 and 22,699,386 shares at December 31, 2007		(224,740	)		(226,027	)
Total stockholders’ equity (deficit)		(149,539	)		(75,009	)
Total liabilities and stockholders’ equity (deficit)	$	721,239		$	791,586

See accompanying notes to condensed consolidated financial statements.

6

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Six Months Ended June 30, 2008

						Accumulated
	Common		Additional			Other
	Stock		Paid-In			Comprehensive			Accumulated			Treasury
	Class A & B		Capital			Income (Loss)			Deficit			Stock			Total
	(Unaudited)
	(In thousands)
Balance at December 31, 2007	$	1,030	$	501,138		$	(25,699	)	$	(325,451	)	$	(226,027	)	$	(75,009	)
Stock-based compensation		—		1,345			—			—			—			1,345
Issuance of treasury stock in respect of deferred stock units		—		(736	)		—			(581	)		1,287			(30	)
Class A common stock issued		15		675			—			—			—			690
Foreign currency translation adjustments		—		—			(3,334	)		—			—			(3,334	)
Change in unrealized gain (loss) on securities		—		—			(279	)		—			—			(279	)
Pension adjustment		—		—			672			—			—			672
Net loss		—		—			—			(73,594	)		—			(73,594	)
Balance at June 30, 2008	$	1,045	$	502,422		$	(28,640	)	$	(399,626	)	$	(224,740	)	$	(149,539	)

See accompanying notes to condensed consolidated financial statements.

7

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2008 and 2007

	Six Months Ended
	June 30,
	2008			2007
	(Unaudited)
	(In thousands)
Cash Flows From Operating Activities:
Net income (loss)	$	(73,594	)	$	523,157
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		12,614			16,171
Deferred income taxes		27,372			(33,879	)
Collection of proceeds from directors and officers insurance settlement		—			50,000
Loss on sale of newspaper operations		—			13,603
Reduction of tax liability		—			(586,686	)
Bad debt expense related to loan and amounts due from affiliates		1,732			33,685
Other changes in working capital accounts, net		(9,924	)		1,855
Other		2,013			(272	)
Cash provided by (used in) operating activities		(39,787	)		17,634
Cash Flows From Investing Activities:
Purchase of property, plant and equipment		(8,756	)		(2,902	)
Proceeds from sale of property, plant and equipment		69			2,066
Investments, intangibles and other non-current assets		(140	)		(3,586	)
Collection of notes receivable pursuant to settlement with a former officer		—			8,460
Proceeds from sale of investments and other assets		21,888			2,047
Cash provided by investing activities		13,061			6,085
Cash Flows From Financing Activities:
Repayment of debt		(19	)		(929	)
Escrow deposits and restricted cash		224			(5,821	)
Other		(30	)		2,359
Cash used in financing activities		175			(4,391	)
Effect of exchange rate changes on cash		(530	)		6,420
Net increase (decrease) in cash and cash equivalents		(27,081	)		25,748
Cash and cash equivalents at beginning of period		142,533			186,318
Cash and cash equivalents at end of period	$	115,452		$	212,066

See accompanying notes to condensed consolidated financial statements.

8

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 — Unaudited Financial Statements

The accompanying condensed consolidated financial statements of Sun-Times Media Group, Inc. and subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in comprehensive annual financial statements presented in accordance with GAAP have been condensed or omitted pursuant to Securities and Exchange Commission (“SEC”) rules and regulations.

Management believes that the accompanying condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial condition, results of operations, stockholders’ equity, comprehensive income and cash flows for the periods presented. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s 2007 Annual Report on Form 10-K (the “2007 10-K”).

The preparation of the Company’s condensed consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to matters that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include bad debts, investments, goodwill, intangible assets, income taxes, pensions and other post-retirement benefits, contingencies and litigation. The Company bases its estimates on historical experience, observance of trends in particular matters, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Information from these sources form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions or conditions.

During 2008, the Company wrote off property, plant and equipment that was largely fully depreciated and that the Company determined were no longer in use due to completed and pending location closures and consolidations and certain assets sold or otherwise disposed of in prior years. These fixed assets were largely comprised of machinery and equipment, including printing equipment and computer hardware and software. The Condensed Consolidated Balance Sheet classification “Property, plant and equipment, net” was reduced by approximately $47.9 million and accumulated depreciation was reduced by $45.7 million. The Company recognized additional losses on disposal or write-down of assets amounting to $1.7 million and $2.2 million for the three and six month periods ending June 30, 2008, respectively, related to these write-offs. See Note 6. The Company has $6.6 million of assets held for sale largely related to under utilized facilities at June 30, 2008, which are included in “Other current assets” on the Condensed Consolidated Balance Sheet.

Note 2 — Principles of Presentation and Consolidation

The Company operates principally in the business of publishing, printing and distributing newspapers. The Company’s publications include the Chicago Sun-Times, Post Tribune, SouthtownStar and other city and suburban newspapers in the Chicago metropolitan area. The Company’s business is organized and managed within a single operating segment.

The condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Certain amounts in the 2007 financial statements have been reclassified to conform with the current year presentation.

9

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Note 3 — Reorganization Activities

In December 2007, the Company announced that its Board of Directors adopted a plan to reduce annual operating costs by $50 million. The plan, which has largely been implemented during the first half of 2008, includes expected savings previously announced in connection with the Company’s distribution agreement with Chicago Tribune Company and the consolidation of two of the Company’s suburban newspapers in 2007. In addition, the Company outsourced certain functions in 2008, resulting in cost savings and a reduction in full-time staffing levels. Costs directly associated with the 2008 outsourcing efforts and additional headcount reductions include involuntary termination benefits in respect of approximately 60 full-time employees amounting to approximately $0.8 million and $2.4 million recognized in the three and six month periods ended June 30, 2008, respectively, which are included in “Other operating costs” in the Condensed Consolidated Statement of Operations. These estimated costs have been recognized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 112, “Employers’ Accounting for Postemployment Benefits,” for the involuntary, or base, portion of termination benefits under the Company’s established termination plan and practices.

Termination benefits that were recognized in the fourth quarter of 2007 and the first six months of 2008 are largely expected to be paid by December 31, 2008 and relate to terminations of approximately 260 full-time employees and the continuation of certain benefit coverage under the Company’s termination plan and practices. The reorganization accrual is included in “Accounts payable and accrued expenses” in the Condensed Consolidated Balance Sheet at June 30, 2008.

The following table summarizes the termination benefits recorded and reconciles such charges to accrued expenses at June 30, 2008 (in thousands):

Charges for workforce reductions	$	6,352
Additional reorganization activity		2,373
Cash payments		(7,210	)
Accrued expenses	$	1,515

Note 4 — Investments and Fair Value

Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of this statement did not have a material impact on the Company’s results of operations or financial condition.

The Company also adopted Financial Accounting Standards Board (“FASB”) Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157,” which defers for one year the effective date of SFAS No. 157 for non-financial assets and liabilities measured at fair value on a nonrecurring basis. The purpose of this deferral is to allow the FASB and constituents additional time to consider the effect of various implementation issues that have arisen, or may arise, for the application of SFAS No. 157. The assets and liabilities included in the Condensed Consolidated Balance Sheet for which the adoption of SFAS No. 157 has been deferred include long-lived assets, such as goodwill and intangible assets.

10

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

SFAS No. 157 describes three levels of inputs used to measure and categorize fair value. The following is a brief description of those three levels:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs may reflect management’s own assumptions about the assumptions a market participant would use in valuing the asset or liability.

When available, the Company uses quoted market prices to determine fair value and classify such items in Level 1. When necessary, Level 2 valuations are performed based on quoted market prices for similar instruments in active markets and/or model-derived valuations with inputs that are observable in active markets. Level 3 valuations are undertaken in the absence of reliable Level 1 or Level 2 information.

The following table presents certain information for the Company’s non-pension financial assets and liabilities that are measured at fair value on a recurring basis at June 30, 2008 (in thousands):

	Total		Level 1		Level 2		Level 3
Assets:
Investment in Canadian commercial paper, net	$	15,000	$	—	$	—	$	15,000
Investment in other securities		3,171		2,932		—		239
Liabilities:		—		—		—		—

Investments in Canadian commercial paper and investments in other securities are included in “Investments” on the Company’s Condensed Consolidated Balance Sheets.

The following table reflects the activity for the major classes of the Company’s assets and liabilities measured at fair value using level 3 inputs (in thousands):

				Canadian
				Commercial			Other
	Total			Paper			Securities
Balance as of December 31, 2007	$	37,259		$	36,000		$	1,259
Realized gains/(losses) included in earnings(a)		710			1,108			(398	)
Unrealized gains/(losses), net(b)		(1,100	)		(1,100	)		—
Purchases, (sales), issuances and settlements, net		(21,622	)		(21,000	)		(622	)
Foreign exchange		(8	)		(8	)		—
Balance as of June 30, 2008	$	15,239		$	15,000		$	239

(a)	Realized gains and losses on securities are recorded as “Other income (expense), net” in the Condensed Consolidated Statement of Operations.
(b)	Declines in values determined to be other than temporary on available-for-sale securities are recorded in “Other income (expense), net” in the Condensed Consolidated Statement of Operations.

On August 21, 2007, $25.0 million of the Company’s investments in Canadian asset-backed commercial paper (“Canadian CP”) held through a Canadian subsidiary matured but were not redeemed and on August 24, 2007, $23.0 million of similar investments matured but were not redeemed. As of March 31, 2008, the Company held $48.2 million of Canadian CP, including accrued interest through original maturity. The Canadian CP held by the

11

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Company was issued by two special purpose entities sponsored by non-bank entities. The Canadian CP was not redeemed at maturity due to the combination of a collapse in demand for Canadian CP and the refusal of the back-up lenders to fund the redemption on the grounds that these events did not constitute events that would trigger a redemption obligation. On May 9, 2008, the Company sold $28.0 million of its Canadian CP investments that were issued by one of the special purpose entities and at June 30, 2008, the Company held $20.2 million of Canadian CP, including accrued interest. Due to uncertainties in the timing as to when these investments will be sold or otherwise liquidated, the Canadian CP is classified as a noncurrent asset included in “Investments” on the Condensed Consolidated Balance Sheets at June 30, 2008 and December 31, 2007.

A largely Canadian investor committee is leading efforts to restructure the Canadian CP that remains unredeemed. On December 23, 2007, the investor committee announced that an agreement in principle had been reached to restructure the Canadian CP, subject to the approval of the investors and various other parties. Under the agreement in principle, the Canadian CP will be exchanged for medium term notes, backed by the assets underlying the Canadian CP, having a maturity that will generally match the maturity of the underlying assets. The agreement in principle calls for $11.1 million of the Company’s medium term notes to be backed by a pool of assets that are generally similar to those backing the notes now held by the Company and which were originally held by a number of special purpose entities, while the remaining $9.1 million of the Company’s medium term notes would be backed by assets held by the specific special purpose entity that originally issued the Canadian CP. The agreement in principle was finalized and the investor committee filed a proposed restructuring plan (the “Plan”) under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) with the Ontario Superior Court of Justice (the “Court”) on March 17, 2008. The implementation of the Plan is subject to a number of conditions, including execution of definitive legal documentation, completion of due diligence, receipt of internal approvals by dealer bank asset providers and participating banks, receipt of the requisite approvals of holders of the Canadian CP and final sanction by the Court. A variety of consents and other approvals will be necessary or desirable in connection with the Plan, including certain government and regulatory approvals. The Plan was approved by the holders of the Canadian CP on April 25, 2008, and sanctioned by the Court on June 5, 2008. Some of the objecting Canadian CP investors have appealed the matter to the Ontario Court of Appeal. The Company cannot predict the ultimate approval, timing and implementation of the Plan, but expects its investments will be converted into medium term notes. However, it is possible that the Plan will fail and the Company or the special purpose entities may be forced to liquidate assets into a distressed market resulting in a significant realized loss for the Company.

The Canadian CP has not traded in an active market since mid-August 2007 and there are currently no market quotations available. On March 19, 2008, Dominion Bond Rating Service withdrew its ratings of the Canadian CP. The Company has estimated the fair value of the Canadian CP assuming the Plan is approved. The Company has employed a valuation model to estimate the fair value for the $11.1 million of Canadian CP that will be exchanged for medium term notes backed by the pool of assets. The valuation model used by the Company to estimate the fair value for this portion of the Canadian CP incorporates discounted cash flows, the best available information regarding market conditions and other factors that a market participant would consider for such investments. The fair value of the $9.1 million of Canadian CP that may be exchanged for medium term notes backed by assets held by specific special purpose entities was estimated through the use of a model relying on market data and inputs derived from securities similar to those the Company expects it would receive. This model was also used during prior periods to estimate the fair value of the $28.0 million of Canadian CP that the Company sold on May 9, 2008.

During 2007, the Company’s valuation resulted in an impairment charge and reduction of $12.2 million to the estimated fair value of the Canadian CP. The Company’s valuation at June 30, 2008 resulted in an additional impairment charge of approximately $1.1 million, which was offset by a gain on sale of a similar amount related to the Canadian CP sold on May 9, 2008 for $21.0 million. The assumptions used in determining the estimated fair value reflect the terms of the December 23, 2007 agreement in principle described above. The Company’s valuation assumes that the replacement notes will bear interest rates similar to short-term instruments and that such rates would otherwise be commensurate with the nature of the underlying assets and their associated cash flows.

12

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Assumptions have also been made as to the amount of restructuring costs that the Company will bear. Continuing uncertainties regarding the value of the assets which underlie the Canadian CP, the amount and timing of cash flows, the yield of any replacement notes, whether an active market will develop for the Canadian CP or any replacement notes and other outcomes of the restructuring process could give rise to a further change in the value of the Company’s investment which could materially impact the Company’s financial condition and results of operations.

Note 5 — Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common stock equivalents outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) after assumed conversion of dilutive securities by the sum of the weighted average number of common shares outstanding plus all additional common shares that would have been outstanding if potentially dilutive common shares had been issued. In certain periods, diluted earnings (loss) per share is the same as basic net earnings (loss) per share because dilutive securities are not used in the calculation if to do so would have been anti- dilutive or if potentially dilutive securities are not dilutive based on the Company’s stock price during the period. The number of potentially dilutive securities comprised of shares issuable in respect of stock options and deferred stock units at June 30, 2008 and 2007, was approximately 2.4 million and 0.8 million, respectively.

The following tables reconcile the numerator and denominator for the calculation of basic and diluted loss per share for the three and six month periods ended June 30, 2008 and 2007:

	Three Months Ended June 30, 2008
	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Net loss	$	(37,751	)		81,312	$	(0.46	)
Effect of dilutive securities		—			—		—
Diluted EPS
Net loss	$	(37,751	)		81,312	$	(0.46	)

	Three Months Ended June 30, 2007
	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Net income	$	527,980		80,351	$	6.57
Effect of dilutive securities		—		167		—
Diluted EPS
Net income	$	527,980		80,518	$	6.56

13

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

	Six Months Ended June 30, 2008
	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Net loss	$	(73,594	)		81,108	$	(0.91	)
Effect of dilutive securities		—			—		—
Diluted EPS
Net loss	$	(73,594	)		81,108	$	(0.91	)

	Six Months Ended June 30, 2007
	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Net income	$	523,157		80,334	$	6.51
Effect of dilutive securities		—		170		—
Diluted EPS
Net income	$	523,157		80,504	$	6.50

Note 6 — Other Operating Costs and Corporate Expenses

Items Included in “Other Operating Costs”

Included in “Other operating costs” are the following amounts that the Company believes may make meaningful comparison of results between periods difficult based on their nature, magnitude and infrequency.

	Three Months					Six Months
	Ended June 30,					Ended June 30,
	2008			2007		2008			2007
	(In thousands)
Reorganization costs (See Note 3)	$	741		$	—	$	2,373		$	(7	)
Severance expense		100			135		44			234
Printing press removal related to plant closure		—			—		—			351
Reduction of reserve for contract disputes		—			—		—			(550	)
Loss on disposal or write-down of assets (See Note 1)		1,807			—		2,210			—
Restitution and settlement costs — circulation matters		(316	)		—		(316	)		—

14

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Items Included in “Corporate Expenses”

Included in “Corporate expenses” are the following amounts that the Company believes may make meaningful comparison of results between periods difficult based on their nature, magnitude and infrequency.

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2008		2007		2008		2007
	(In thousands)
Loss on sale of newspaper operations(a)	$	—	$	8,638	$	—	$	13,603
Bad debt expense related to loan with affiliate(b)		—		33,685		—		33,685
Severance expense (reduction)		—		104		—		(116	)
Legal settlements		50		—		50		262
Settlement of claims with Hollinger Inc.(c)		2,490		—		2,490		—

(a)	Represents an adjustment in estimated net proceeds related to a sale in prior years.
(b)	Represents bad debt expense related to a loan to a subsidiary of Hollinger Inc. (“Hollinger”).
(c)	Represents effect of settlement and complete release of claims between the Company and Hollinger including $1,725 for write-off of amounts due from related parties and $765 related to additional common stock issued (including legal fees). See Note 11.

Note 7 — Other Income (Expense), Net

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2008			2007			2008			2007
	(In thousands)
Equity in losses of affiliates	$	(102	)	$	(80	)	$	(147	)	$	(102	)
Gain on sale of investments (See Note 4)		1,108			1,019			1,108			1,019
Foreign currency gains (losses), net		(1,023	)		(7,923	)		3,408			(8,433	)
Write-down of investment (See Note 4)		(1,100	)		—			(1,100	)		—
Other		29			43			(220	)		71
	$	(1,088	)	$	(6,941	)	$	3,049		$	(7,445	)

Note 8 — Income Taxes

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial position or results of operations. As part of its adoption, the Company performed an item by item evaluation and considered the state of its ongoing audits by, and discussions with, various taxing authorities. Although the Company has made significant progress in resolving or settling certain tax issues as described below, the remaining items under the caption “Other tax liabilities” in the accompanying Condensed Consolidated Balance Sheet at June 30, 2008 have not sufficiently advanced to the degree or with the level of finality that would cause the Company to significantly adjust its accruals for income tax liabilities under the “more likely than not” criteria pursuant to FIN 48.

FIN 48 addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial

15

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

In January 2008, the Company received an examination report from the Internal Revenue Service (the “IRS”) setting forth proposed adjustments to the Company’s U.S. income tax returns from 1996 through 2003. The Company has disputed certain of the proposed adjustments. The process for resolving disputes between the Company and the IRS is likely to entail various administrative and judicial proceedings, the timing and duration of which involve substantial uncertainties. As the disputes are resolved, it is possible that the Company will record adjustments to its financial statements that could be material to its financial position and results of operations and it may be required to make material cash payments. The timing and amounts of any payments the Company may be required to make are uncertain, but the Company does not anticipate that it will make any material cash payments to settle any of the disputed items during the next 12 months. In addition, the Company does not expect a material change to its financial position or results of operations in the next 12 months as a result of the receipt of the examination report.

Accrued interest and penalties at June 30, 2008 were $255.2 million and are included in “Other tax liabilities” in the Condensed Consolidated Balance Sheet.

The Company’s ability to realize its deferred tax assets is generally dependent on the generation of taxable income during the future periods in which the temporary differences are deductible and the net operating losses can be offset against taxable income. The Company experienced pre-tax losses in 2007, 2006 and 2005. Based on accounting guidelines that provide that cumulative losses in recent years provide significant evidence that a company should not recognize tax benefits that depend on the generation of taxable income from future operations, the Company increased the valuation allowance for U.S. deferred tax assets in 2007. The Company continues to record a valuation allowance for any additional deferred tax assets generated. If the Company were to determine that it would be able to realize deferred tax assets in the future in excess of the net recorded amount, the resulting adjustment to deferred tax assets would increase net earnings in the period such a determination was made.

Income tax expense was $13.5 million and a benefit of $612.4 million for the three months ended June 30, 2008 and 2007, respectively. Income tax expense was $29.0 million and a benefit of $592.2 million for the six months ended June 30, 2008 and 2007, respectively. The Company’s income tax expense varies substantially from the U.S. Federal statutory rate primarily due to changes in the valuation allowance related to deferred tax assets mentioned above and provisions or reductions related to contingent liabilities, including interest the Company may be required to pay in various tax jurisdictions. As stated above, the Company records a valuation allowance for additional deferred tax assets generated including the deferred tax asset attributable to the tax benefits related to accrued interest on contingent tax liabilities. The provision for gross interest included in income tax expense amounted to $12.4 million and $16.4 million for the three months ended June 30, 2008 and 2007, respectively, and $24.2 million and $41.0 million for the six months ended June 30, 2008 and 2007, respectively. Provisions for interest, net of related tax benefits, amounted to $8.0 million and $12.2 million for the three months ended June 30, 2008 and 2007, respectively, and $15.8 million and $32.2 million for the six months ended June 30, 2008 and 2007, respectively. In addition, the Company recorded a tax benefit of $4.1 million for the three and six months ended June 30, 2007 resulting from the reversal of certain contingent tax liabilities which were no longer deemed necessary as the relevant statute of limitations had lapsed.

The Company has recorded accruals to cover certain unresolved tax issues (both U.S. and foreign). Such contingent liabilities relate to additional taxes and interest the Company may be required to pay in various tax jurisdictions. During the course of examinations by various taxing authorities, adjustments or proposed adjustments may be asserted. The Company evaluates such items on a case by case basis and adjusts the accrual for contingent liabilities as deemed necessary. As part of its assessment of its U.S. income tax reserve, the Company considered the adjustments proposed by the IRS in its examination report received in the first quarter of 2008 and recognized approximately $3.0 million of additional contingent liabilities largely related to changes in estimated interest in respect of those liabilities for the six months ended June 30, 2008.

16

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

A substantial portion of the accruals to cover contingent liabilities for income taxes at June 30, 2008 relate to the Company’s operations in the United States. Strategies have been and may be implemented that may also defer and/or reduce these taxes but the effects of these strategies have not been reflected in the condensed consolidated financial statements.

The Company files income tax returns in federal, state and foreign jurisdictions. The Company has been notified that the IRS will examine its 2004-2006 federal tax returns.

Note 9 — Disputes, Investigations and Legal Proceedings with Former Executive Officers and Directors

The Company is involved in a series of disputes, investigations and legal proceedings relating to transactions between the Company and certain former executive officers and directors of the Company and their affiliates.

The potential impact of these disputes, investigations and legal proceedings on the Company’s financial condition and results of operations cannot currently be estimated. Costs incurred as a result of the investigation by a special committee of independent directors (the “Special Committee”) and related litigation and criminal proceedings involving Conrad M. Black (“Black”) and others are reflected in “Indemnification, investigation and litigation costs, net of recoveries” in the Condensed Consolidated Statements of Operations.

On March 18, 2007, the Company announced settlements, negotiated and approved by the Special Committee, with former President and Chief Operating Officer, F. David Radler (“Radler”), (including his wholly-owned company, North American Newspapers Ltd. f/k/a F.D. Radler Ltd.) and the publishing companies Horizon Publishing Company (“Horizon”) and Bradford Publishing Company (“Bradford”). During 2007, the Company received $63.4 million in cash to settle the following: (i) claims by the Company against Radler, Horizon and Bradford, (ii) potential additional claims against Radler related to the Special Committee’s findings regarding incorrectly dated stock options and (iii) amounts due from Horizon and Bradford. The Company recorded $47.7 million of the settlement, as a recovery, within “Indemnification, investigation and litigation costs, net of recoveries” and $7.2 million in “Interest and dividend income” in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2007. The remaining $8.5 million represents the collection of certain notes receivable.

In June 2008, in connection with the settlement of disputes with Hollinger, the Company received $2.0 million in recoveries of legal fees that had been incurred in connection with Hollinger’s CCAA proceedings. See Note 11.

Indemnification, investigation and litigation costs, net of recoveries primarily consist of legal and other professional fees and amounts recovered through actions of the Special Committee as summarized in the following table.

	Three Months						Six Months
	Ended June 30,						Ended June 30,						Since Inception through
	2008			2007			2008			2007			June 30, 2008(5)
	(In thousands)
Special Committee investigation costs(1)	$	886		$	2,442		$	2,310		$	3,961		$	65,990
Litigation costs(2)		278			(128	)		571			1,093			29,049
Indemnification fees and costs(3)		4,280			22,804			8,039			40,163			117,753
Recoveries(4)		(2,000	)		—			(2,000	)		(47,718	)		(129,568	)
	$	3,444		$	25,118		$	8,920		$	(2,501	)	$	83,224

(1)	Costs and expenses arising from the Special Committee’s work. These amounts include the fees and costs of the Special Committee’s members, counsel, advisors and experts, including costs to support the prosecution of certain indemnified parties.
(2)	Largely represents legal and other professional fees to defend the Company in litigation that has arisen as a result of the issues the Special Committee has investigated, including costs to defend the counterclaims of

17

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

	Hollinger and Black in Hollinger International Inc. v. Conrad M. Black, Hollinger Inc., and 504468 N.B. Inc. described in the Company’s previous filings.
(3)	Represents amounts the Company has been required to advance in fees and costs to indemnified parties, including former officers and directors and their affiliates and associates, who are defendants in the litigation largely brought by the Company or in the criminal proceedings.
(4)	Represents recoveries including $2.0 million related to the revised settlement with Hollinger for legal fees incurred in connection with Hollinger’s CCAA proceedings, $47.7 million related to a 2007 settlement with Radler described above, $47.5 million in a settlement with certain of the Company’s directors and officers insurance carriers in 2006, $30.3 million in a settlement with Torys LLP in 2005 and $2.1 million in recoveries of indemnification payments from Black in 2005. Excludes settlements with former directors and officers, pursuant to a restitution agreement reached in November 2003, of $1.7 million and $31.5 million recognized in 2004 and 2003, respectively, which were recorded in “Other income (expense), net,” and interest related to various recoveries and settlements of $15.8 million which was recorded in “Interest and dividend income.” Total recoveries, including interest, aggregate $178.6 million. In addition, the Radler settlement resulted in the collection of $8.5 million of notes receivable.
(5)	The Special Committee was formed on June 17, 2003. These amounts represent the cumulative indemnification, investigation and litigation costs and recoveries.

Note 10 — Pension and Post-retirement Benefits

(a)   Components of Net Periodic Benefit Cost

	Three Months Ended June 30,
	2008			2007			2008			2007
	Pension Benefits						Other Benefits
	(In thousands)
Service cost	$	319		$	355		$	3		$	3
Interest cost		4,806			4,534			293			270
Expected return on plan assets		(6,444	)		(6,460	)		—			—
Amortization of transition obligation		28			28			—			—
Amortization of prior service cost		38			47			—			—
Amortization of net (gain) loss		248			661			(486	)		(326	)
Net periodic cost (income)	$	(1,005	)	$	(835	)	$	(190	)	$	(53	)

	Six Months Ended June 30,
	2008			2007			2008			2007
	Pension Benefits						Other Benefits
	(In thousands)
Service cost	$	639		$	706		$	6		$	5
Interest cost		9,643			8,870			587			523
Expected return on plan assets		(12,920	)		(12,595	)		—			—
Settlement loss		303			—			—			—
Amortization of transition obligation		56			56			—			—
Amortization of prior service cost		76			91			—			—
Amortization of net (gain) loss		505			1,289			(975	)		(632	)
Net periodic cost (income)	$	(1,698	)	$	(1,583	)	$	(382	)	$	(104	)

18

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

(b)   Employer Contributions

Defined Benefit Plans

For the six months ended June 30, 2008, an aggregate of $5.4 million of contributions have been made to the domestic and foreign defined benefit plans, all in cash. The Company contributed $7.2 million to fund its defined benefit pension plans in 2007 and expects to contribute $8.7 million in 2008.

Defined Contribution Plans

For the six months ended June 30, 2008, $1.3 million of contributions have been made to the Company’s domestic defined contribution benefit plans, all in cash, with no further contributions expected in 2008. The Company contributed $2.2 million to its domestic defined contribution plans in 2007.

Post-Retirement Plans

For the six months ended June 30, 2008, $0.9 million of contributions have been made to the Company’s post-retirement plans, all in cash. The Company contributed $2.1 million to fund its post-retirement plans in 2007 and expects to contribute $2.4 million in 2008.

Note 11 — Actions of the Controlling Stockholder

On August 1, 2007, the Company announced that it received notice from the Company’s controlling stockholder, Hollinger, that certain corporate actions with respect to the Company had been taken by written consent adopted by Hollinger and its affiliate, 4322525 Canada Inc., which collectively held a majority in voting interest in the Company. These corporate actions, taken on July 31, 2007, included amending the Company’s By-Laws to increase the size of the Company’s Board of Directors, removing certain directors of the Company and appointing William E. Aziz, Brent D. Baird, Albrecht W.A. Bellstedt, Peter J. Dey, Edward C. Hannah and G. Wesley Voorheis as directors of the Company, which resulted in a change in control of the Company. In August 2007, Hollinger sought protection from creditors in Canada under the CCAA.

On March 25, 2008, the Company announced that it had agreed to the terms of a settlement (the “Settlement”) that resolved the various disputes and litigation between the Company and Hollinger. At the time of the Settlement, Hollinger was the owner of all of the outstanding shares of the Company’s Class B Common Stock, which had ten votes per share, and 782,923 shares of Class A Common Stock, which has one vote per share. These holdings represented 19.6% of the outstanding equity of the Company and 70.0% of the voting power of the Company’s outstanding common stock at the time of the original settlement.

On March 24 and 25, 2008, respectively, the Special Committee and the Company’s full Board of Directors approved the Settlement. The Settlement was also approved by the Hollinger Board of Directors.

On May 14, 2008, the Company announced it had agreed to revised terms of the Settlement (the “Revised Settlement”). The Revised Settlement was approved by the Company’s full Board of Directors and the Hollinger Board of Directors. The Company amended its Shareholder Rights Plan to ensure that the execution and delivery of the Company’s agreement to the Revised Settlement and the consummation of the Revised Settlement did not cause the Rights to become exercisable or otherwise trigger the provisions of the Shareholder Rights Plan. On May 26, 2008, the Revised Settlement was approved in Ontario, Canada, under the CCAA.

The Revised Settlement included a complete release of claims between the parties and the elimination of the voting control by Hollinger of the Company through conversion on a one-for-one basis of the shares of Class B Common Stock to shares of Class A Common Stock. The Revised Settlement also required the Company to deliver 1.499 million additional shares of Class A Common Stock to Hollinger. The terms of the Revised Settlement were carried out at a closing on June 18, 2008. The Company agreed to grant a demand registration right with respect to the shares of Class A Common Stock that result from the conversion of the shares of Class B Common Stock, as well as with respect to the additional 1.499 million shares of Class A Common Stock issued to Hollinger pursuant to the

19

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Revised Settlement. The Company recorded $0.8 million in expense (including fees) related to the issuance of the 1.499 million shares of Class A Common Stock and $1.7 million related to the write-off of a receivable from Hollinger and subsidiaries. In addition, the Company has written-off a fully reserved loan of $33.7 million due from a subsidiary of Hollinger. See Note 6.

Under the Revised Settlement, all shares of Class A Common Stock issued to Hollinger will be voted by the indenture trustees for certain notes issued by Hollinger, but such trustees together will only be able to vote shares of common stock not exceeding 19.999% of the outstanding common stock of the Company at any given time.

Pursuant to a stipulation and agreement of settlement of U.S. and Canadian class actions against the Company and Hollinger and an insurance settlement agreement dated June 27, 2007, up to $24.5 million (plus interest, less fees and expenses) will be paid to the Company, Hollinger and/or other claimants under their directors’ and officers’ insurance policies (the “Insurance Settlement Proceeds”). Payment of the Insurance Settlement Proceeds is subject to the approval of various United States and Canadian courts. Under the terms of the Revised Settlement, Hollinger and the Company will cooperate to maximize the recoverable portion of the Insurance Settlement Proceeds payable to them collectively (as opposed to other claimants) and they have agreed that the Company will receive 85% and Hollinger will receive 15% of the amounts to be received collectively by Hollinger and the Company (as opposed to amounts received by other claimants) from such proceeds. Also, the collective recoveries, if any, of Hollinger and the Company on account of their claims against Hollinger’s controlling parent company, Ravelston Corporation Limited, which is in insolvency proceedings in Ontario, Canada, will be divided equally between Hollinger and the Company.

The Revised Settlement provided that the Company would be reimbursed by Hollinger for up to $2.0 million of the Company’s legal fees that were incurred in connection with Hollinger’s CCAA proceedings. The Company received payment of $2.0 million in June 2008. See Note 9.

Pursuant to the Revised Settlement, on June 23, 2008, the Company announced that the six directors of the Company appointed by Hollinger on July 31, 2007 resigned from the Board of Directors. Thereafter, Peter J. Dey and Robert B. Poile were elected as directors. The two events had the effect of reducing the size of the Board of Directors from eleven to seven.

Under the terms of the Revised Settlement, certain of the Company’s claims against Hollinger are allowed as unsecured claims, in agreed amounts (“Allowed Claims”). The Company’s total recovery in respect of the Allowed Claims is capped at $15.0 million. After the Company receives the first $7.5 million in respect of the Allowed Claims, 50% of any further recovery received by the Company in respect of the Allowed Claims (subject to the $15.0 million cap) will be assigned to Hollinger. Under the terms of the Revised Settlement, the amounts so assigned are intended to be available to fund litigation claims of Hollinger against third parties. All of the Company’s claims against Hollinger other than the Allowed Claims are released as part of the general mutual release that, among other things, discontinues any and all pending litigation between the Company and Hollinger, including all of the litigation pending in the Northern District of Illinois.

Note 12 — Commitments and Contingencies

The Company becomes involved from time to time in various claims and lawsuits incidental to the ordinary course of business, including such matters as libel, defamation and privacy actions. In addition, the Company is involved from time to time in various governmental and administrative proceedings with respect to employee terminations and other labor matters, environmental compliance, tax and other matters. Management believes that the outcome of any such pending claims or proceedings incidental to the ordinary course of business will not have a material adverse effect on the Company taken as a whole.

As described in Note 9, the Company is also subject to numerous disputes, investigations and legal proceedings with former executive officers and certain current and former directors. For a detailed description of these legal proceedings, see “Item 3 — Legal Proceedings” in the Company’s 2007 10-K.

20

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited) — (Continued)

Primarily in connection with the Company’s insurance programs, letters of credit are required to support certain projected workers’ compensation obligations and reimbursement of claims paid by a third party claims administrator. At June 30, 2008, letters of credit in the amount of $11.5 million were outstanding and largely collateralized by restricted cash.

Settlement with Hollinger Entities

On March 25, 2008, the Company entered into the Settlement with Hollinger, 4322525 Canada Inc. and Sugra Limited (collectively, the “Hollinger Entities”) that provides for the resolution of all outstanding matters between the Hollinger Entities and the Company. See Note 11.

On May 14, 2008, the Company announced it had agreed to revised terms of the Settlement. The Revised Settlement received court approval on May 26, 2008 and the transactions required by the Revised Settlement took place at a closing on June 18, 2008.

United States Securities and Exchange Commission v. Conrad M. Black et al.

As previously reported, on November 15, 2004, the SEC filed an action in the United States District Court for the Northern District of Illinois against Black, Radler and Hollinger seeking injunctive, monetary and other equitable relief. In the action, the SEC alleges that the three defendants violated federal securities laws by engaging in a fraudulent and deceptive scheme to divert cash and assets from the Company and to conceal their self-dealing from the Company’s public stockholders from at least 1999 through at least 2003. The SEC also alleged that Black, Radler and Hollinger were liable for the Company’s violations of certain federal securities laws during at least this period. As previously disclosed, on March 16, 2007, the SEC settled with Radler with regard to this action.

On March 25, 2008, the SEC announced that it settled with Hollinger with regard to this action. The final judgment orders Hollinger to pay a total of approximately $21.3 million in disgorgement and permanently enjoins Hollinger from violations of certain U.S. federal securities laws. The $21.3 million paid by Hollinger to the Company in satisfaction of the judgment against Hollinger in the action entitled Hollinger International, Inc. v. Black, et al., will be credited dollar-for-dollar toward the disgorgement ordered in this action. As a result, the Company will receive no additional amounts from Hollinger.

CanWest Arbitration

As previously reported, on December 19, 2003, CanWest Global Communications Corp (“CanWest”) commenced notices of arbitration against the Company and others with respect to disputes arising from CanWest’s purchase of certain newspaper assets from the Company in 2000. CanWest and the Company have competing claims relating to this transaction. CanWest claims the Company and certain of its direct subsidiaries owe CanWest approximately Cdn.$84.0 million. The Company is contesting this claim, and has asserted a claim against CanWest in the aggregate amount of approximately Cdn.$80.5 million. On February 6, 2006, approximately $17.5 million of the proceeds from the sale of the Company’s remaining newspaper operations in Canada was placed in escrow, to be held up to seven years, pending a final award, judgment or settlement in respect of the arbitration (“CanWest Arbitration”). The arbitration hearings have been completed and a decision from the arbitrator is expected in the first quarter of 2009.

Black v. Breeden, et al.

As previously reported, six defamation actions have been brought by Black in the Ontario Superior Court of Justice against Richard C. Breeden, Gordon A. Paris, Graham W. Savage, and Raymond Seitz and others. The defendants named in the six defamation actions have indemnity claims against the Company for all reasonable costs and expenses they incur in connection with these actions, including judgments, fines and settlement amounts. In addition, the Company is required to advance legal and other fees that the defendants may incur in relation to the defense of those actions. In July 2008, each of the defendants in the six actions brought a motion to set aside service ex juris and to have the actions stayed on forum non conveniens grounds. Black has yet to file a response to such motion. The motion is scheduled to be heard in late September 2008.

21

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

Item 2 — Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

OVERVIEW

The advertising revenue of the Sun-Times Media Group, Inc. (the “Company”) experiences seasonality with the first quarter typically being the lowest. The Company’s revenue is primarily derived from the sale of advertising within the Company’s publications and also includes internet-related revenue. Advertising revenue accounted for 76% of the Company’s consolidated revenue for the six months ended June 30, 2008. Advertising revenue is comprised of three primary sub-groups: retail, national and classified. Advertising revenue is subject to changes in the economy on both a national and local level and in individual business sectors. Advertising revenue is recognized upon publication of the advertisement.

Revenue generated from the circulation of the Company’s publications represented 23% of the Company’s consolidated revenue for the six months ended June 30, 2008. This includes sales of publications to individuals on a single copy or subscription basis and to sales outlets, which then re-sell the publications. The Company recognizes circulation revenue from subscriptions on a straight-line basis over the subscription term and single-copy sales at the time of distribution. The Company also generates revenue from job printing and other activities which are recognized upon delivery.

Significant expenses for the Company are editorial, production and distribution costs and newsprint and ink. Editorial, production and distribution compensation expense, which includes benefits, was 30% of the Company’s total operating revenue for the six months ended June 30, 2008. Compensation costs are recognized as employment services are rendered. Newsprint and ink costs represented 13% of the Company’s total operating revenue for the six months ended June 30, 2008. Newsprint prices are subject to fluctuation as newsprint is a commodity. Newsprint costs are recognized upon consumption. Collectively, these costs directly related to producing and distributing the product are presented as cost of sales in the Company’s Condensed Consolidated Statements of Operations. Corporate expenses, representing all costs incurred for U.S. and Canadian administrative activities at the Corporate level including audit, tax, legal and professional fees, directors and officers insurance premiums, stock-based compensation, corporate wages and benefits and other public company costs, represented 11% of total operating revenue for the six months ended June 30, 2008.

RECENT BUSINESS DEVELOPMENTS

Significant Developments in 2008

On August 1, 2007, the Company announced that it received notice from the Company’s controlling stockholder, Hollinger, that certain corporate actions with respect to the Company had been taken by written consent adopted by Hollinger and its affiliate, 4322525 Canada Inc., which collectively held a majority in voting interest in the Company. These corporate actions, taken on July 31, 2007, included amending the Company’s By-Laws to increase the size of the Company’s Board of Directors, removing certain directors of the Company and appointing William E. Aziz, Brent D. Baird, Albrecht W.A. Bellstedt, Peter J. Dey, Edward C. Hannah and G. Wesley Voorheis as directors of the Company, which resulted in a change in control of the Company. In August 2007, Hollinger sought protection from creditors in Canada under the CCAA.

On March 25, 2008, the Company announced that it had agreed to the terms of a settlement (the “Settlement”) that resolved the various disputes and litigation between the Company and Hollinger. At the time of the Settlement, Hollinger was the owner of all of the outstanding shares of the Company’s Class B Common Stock, which had ten votes per share, and 782,923 shares of Class A Common Stock, which has one vote per share. These holdings represented 19.6% of the outstanding equity of the Company and 70.0% of the voting power of the Company’s outstanding common stock at the time of the original settlement.

On March 24 and 25, 2008, respectively, the Special Committee and the Company’s full Board of Directors approved the Settlement. The Settlement was also approved by the Hollinger Board of Directors.

22

On May 14, 2008, the Company announced it had agreed to revised terms of the Settlement (the “Revised Settlement”). The Revised Settlement was approved by the Company’s full Board of Directors and the Hollinger Board of Directors. The Company amended its Shareholder Rights Plan to ensure that the execution and delivery of the Company’s agreement to the Revised Settlement and the consummation of the Revised Settlement did not cause the Rights to become exercisable or otherwise trigger the provisions of the Shareholder Rights Plan. On May 26, 2008, the Revised Settlement was approved in Ontario, Canada, under the CCAA.

The Revised Settlement included a complete release of claims between the parties and the elimination of the voting control by Hollinger of the Company through conversion on a one-for-one basis of the shares of Class B Common Stock to shares of Class A Common Stock. The Revised Settlement also required the Company to deliver 1.499 million additional shares of Class A Common Stock to Hollinger. The terms of the Revised Settlement were carried out at a closing on June 18, 2008. The Company agreed to grant a demand registration right with respect to the shares of Class A Common Stock that result from the conversion of the shares of Class B Common Stock, as well as with respect to the additional 1.499 million shares of Class A Common Stock issued to Hollinger pursuant to the Revised Settlement. The Company recorded $0.8 million in expense (including fees) related to the issuance of the 1.499 million shares of Class A Common Stock and $1.7 million related to the write-off of a receivable from Hollinger and subsidiaries. In addition, the Company has written-off a fully reserved loan of $33.7 million due from a subsidiary of Hollinger. See Note 6 to the condensed consolidated financial statements.

Under the Revised Settlement, all shares of Class A Common Stock issued to Hollinger will be voted by the indenture trustees for certain notes issued by Hollinger, but such trustees together will only be able to vote shares of common stock not exceeding 19.999% of the outstanding common stock of the Company at any given time.

Pursuant to a stipulation and agreement of settlement of U.S. and Canadian class actions against the Company and Hollinger and an insurance settlement agreement dated June 27, 2007, up to $24.5 million (plus interest, less fees and expenses) will be paid to the Company, Hollinger and/or other claimants under their directors’ and officers’ insurance policies (the “Insurance Settlement Proceeds”). Payment of the Insurance Settlement Proceeds is subject to the approval of various United States and Canadian courts. Under the terms of the Revised Settlement, Hollinger and the Company will cooperate to maximize the recoverable portion of the Insurance Settlement Proceeds payable to them collectively (as opposed to other claimants) and they have agreed that the Company will receive 85% and Hollinger will receive 15% of the amounts to be received collectively by Hollinger and the Company (as opposed to amounts received by other claimants) from such proceeds. Also, the collective recoveries, if any, of Hollinger and the Company on account of their claims against Hollinger’s controlling parent company, Ravelston Corporation Limited, which is in insolvency proceedings in Ontario, Canada, will be divided equally between Hollinger and the Company.

The Revised Settlement provided that the Company would be reimbursed by Hollinger for up to $2.0 million of the Company’s legal fees that were incurred in connection with Hollinger’s CCAA proceedings. The Company received payment of $2.0 million in June 2008. See Note 9 to the condensed consolidated financial statements.

Pursuant to the Revised Settlement, on June 23, 2008 the Company announced that the six directors of the Company appointed by Hollinger on July 31, 2007 resigned from the Board of Directors. Thereafter, Peter J. Dey and Robert B. Poile were elected as directors. The two events had the effect of reducing the size of the Board of Directors from eleven to seven.

Under the terms of the Revised Settlement, certain of the Company’s claims against Hollinger are allowed as unsecured claims, in agreed amounts (“Allowed Claims”). The Company’s total recovery in respect of the Allowed Claims is capped at $15.0 million. After the Company receives the first $7.5 million in respect of the Allowed Claims, 50% of any further recovery received by the Company in respect of the Allowed Claims (subject to the $15.0 million cap) will be assigned to Hollinger. Under the terms of the Revised Settlement, the amounts so assigned are intended to be available to fund litigation claims of Hollinger against third parties. All of the Company’s claims against Hollinger other than the Allowed Claims are released as part of the general mutual release that, among other things, discontinues any and all pending litigation between the Company and Hollinger, including all of the litigation pending in the Northern District of Illinois.

23

On March 26, 2008, the Company was notified by NYSE Regulation, Inc. (“NYSE Regulation”) that it was not in compliance with the New York Stock Exchange’s (“NYSE”) continued listing standard related to maintaining a 30-day average closing price for the Company’s Class A Common Stock of at or above $1.00 per share. On April 4, 2008, the Company was notified by NYSE Regulation that it was not in compliance with the NYSE’s continued listing standards, because over a consecutive 30-day trading period its total market capitalization was less than $75 million and the Company’s most recently reported shareholders’ equity was below $75 million.

On May 7, 2008, the Company announced it notified NYSE Regulation that the Company did not intend to attempt to cure the non-compliance with the NYSE’s continued listing standards relating to average closing share price and average market capitalization. On May 8, 2008, the Company was formally notified by NYSE Regulation that it determined that trading of the Class A Common Stock would be suspended prior to the market opening on May 14, 2008 and that the stock would be delisted from the NYSE. The Company moved trading of the Class A Common Stock to the Over-The-Counter Bulletin Board under the symbol SUTM.OB.

On February 19, 2008, the Company announced it entered into an agreement with Affinity Express, Inc. to handle the majority of the Company’s non-classified print and online advertising production. This agreement is expected to save approximately $3.0 million annually and resulted in a reduction of approximately 50 full-time advertising production and related staff positions.

On February 4, 2008, the Company announced that its Board of Directors had begun an evaluation of the Company’s strategic alternatives to enhance shareholder value. These alternatives may include, but are not limited to, joint ventures or strategic partnerships with third parties, and/or the sale of the Company or any or all of its assets. The Company subsequently announced that it had retained Lazard Frères & Co. LLC in connection therewith. There can be no assurances that the evaluation process will result in any specific transactions, and subject to legal requirements, the Company does not intend to disclose developments arising from the strategic evaluation process unless the Company enters into a definitive agreement for a transaction approved by its Board of Directors.

In January 2008, the Company received an examination report from the Internal Revenue Service (the “IRS”) setting forth proposed adjustments to the Company’s U.S. income tax returns from 1996 through 2003. The Company plans to dispute certain of the proposed adjustments. The process for resolving disputes between the Company and the IRS is likely to entail various administrative and judicial proceedings, the timing and duration of which involve substantial uncertainties. As the disputes are resolved, it is possible that the Company will record adjustments to its financial statements that could be material to its financial position and results of operations and it may be required to make material cash payments. The timing and amounts of any payments the Company may be required to make are uncertain, but the Company does not anticipate that it will make any material cash payments to settle any of the disputed items during the next 12 months. See Note 8 to the condensed consolidated financial statements.

Based on information accumulated by a third party from data submitted by Chicago area newspaper organizations, newspaper print advertising declined 15% for the six months ended June 30, 2008 for the greater Chicago market versus the comparable period in 2007. Advertising revenue for the Company declined 13% for the six months ended June 30, 2008, compared to the same period in 2007.

Critical Accounting Policies and Estimates

For a discussion of the Company’s critical accounting policies and estimates, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 10-K”).

CONSOLIDATED RESULTS OF OPERATIONS

General

Net income (loss)

Net loss in the second quarter of 2008 amounted to $37.8 million, or $0.46 per basic share, compared to net income of $528.0 million in the second quarter of 2007, or $6.57 per basic share. The increase in net loss of $565.8 million was largely due to an increase in income tax expense of $625.9 million, reflecting a 2007 settlement

24

of certain tax issues with the Canada Revenue Agency (“CRA”) totaling $586.7 million and lower revenues of $11.7 million. These amounts were partially offset by the impact of a bad debt expense in 2007 of $33.7 million related to a loan with an affiliate of Hollinger, a decrease in cost of sales of $6.8 million, lower indemnification, investigation and litigation costs, net, of $21.7 million, an improvement in other income (expense), net, of $5.8 million and lower depreciation and amortization expense of $1.2 million.

Net loss for the six months ended June 30, 2008 amounted to $73.6 million, or $0.91 per basic share, compared to net income of $523.2 million for the same period in 2007, or $6.51 per basic share. The increase in net loss of $596.8 million was largely due an increase in income tax expense of $621.2 million reflecting the 2007 settlement of certain tax issues with the CRA totaling $586.7 million, a 2007 settlement with a former officer (of which $47.7 million was recorded as a reduction of indemnification, investigation and litigation costs, net, and of which $7.2 million was recorded as interest income) and lower revenue of $22.5 million. These amounts were partially offset by lower bad debt expense of $33.7 million as mentioned above, a decrease in cost of sales of $13.7 million, lower indemnification, investigation and litigation costs, net, of $36.3 million (excluding the 2007 settlement of $47.7 million), an improvement in other income (expense) of $10.4 million and lower depreciation and amortization expense of $3.6 million.

Operating Revenue and Operating Loss — Overview

Operating revenue and operating loss in the second quarter of 2008 were $83.0 million and $24.0 million, respectively, compared with operating revenue of $94.7 million and an operating loss of $80.6 million in the second quarter of 2007. The decrease in operating revenue of $11.7 million compared to the second quarter of 2007 is largely a reflection of a decrease in advertising revenue of $10.5 million and circulation revenue of $0.9 million. The $56.6 million decrease in operating loss in 2008 is primarily due to lower cost of sales of $6.8 million, lower corporate expenses of $40.5 million, including the 2007 bad debt expense of $33.7 million related to a loan with an affiliate of Hollinger, lower indemnification, investigation and litigation costs, net, of $21.7 million and lower depreciation and amortization expense of $1.2 million. These items were partially offset by the lower revenue of $11.7 million and higher other operating costs of $1.7 million.

For the six months ended June 30, 2008, operating revenue and operating loss were $164.0 million and $49.8 million, respectively, compared with operating revenue of $186.5 million and an operating loss of $75.0 million in 2007. The decrease in operating revenue of $22.5 million compared to 2007 is largely a reflection of a decrease in advertising revenue of $19.3 million and circulation revenue of $2.5 million. The $25.2 million decrease in operating loss in 2008 is primarily due to lower cost of sales of $13.7 million, lower corporate expenses of $47.5 million, including the 2007 bad debt expense of $33.7 million mentioned above, lower indemnification, investigation and litigation costs, net, of $36.3 million (excluding the 2007 settlement of $47.7 million) and lower depreciation and amortization expense of $3.6 million. These items were partially offset by lower revenue of $22.5 million, the 2007 settlement of $47.7 million, higher sales and marketing costs of $1.1 million and increased other operating costs of $4.4 million.

Operating Revenue

Total operating revenue

Total operating revenue was $83.0 million in the second quarter of 2008 compared to $94.7 million for the same period in 2007, a decrease of $11.7 million, or 12%.

For the six months ended June 30, 2008, total operating revenue was $164.0 million compared to $186.5 million for the same period in 2007, a decrease of $22.5 million or 12%.

Advertising revenue

Advertising revenue was $62.7 million in the second quarter 2008 compared with $73.2 million in the second quarter of 2007, a decrease of $10.5 million or 14%. The decrease was largely a result of lower retail advertising revenue of $4.6 million, lower classified advertising revenue of $4.6 million and lower national advertising revenue of $1.4 million, slightly offset by higher internet advertising revenue of $0.1 million.

25

For the six months ended June 30, 2008, advertising revenue was $123.9 million compared with $143.2 million for the same period in 2007, a decrease of $19.3 million, or 13%. The decrease was largely a result of lower retail advertising revenue of $8.9 million, lower classified advertising revenue of $8.2 million and lower national advertising revenue of $2.6 million, slightly offset by higher internet advertising revenue of $0.4 million.

Circulation revenue

Circulation revenue was $18.8 million in the second quarter of 2008 compared with $19.7 million in the second quarter of 2007, a decrease of $0.9 million. The decline in circulation revenue was largely attributable to declines in volume, both in home delivery and single copy categories.

For the six months ended June 30, 2008, circulation revenue was $37.2 million compared with $39.7 million in for the same period in 2007, a decrease of $2.5 million. The decline in circulation revenue was largely attributable to declines in volume, both in home delivery and single copy categories.

Operating Costs and Expenses

Total operating costs and expenses

Total operating costs and expenses in the second quarter of 2008 were $107.0 million, compared with $175.4 million in the second quarter of 2007, a decrease of $68.4 million. This decrease is largely the result of lower corporate expenses of $40.5 million, including lower bad debt expense as mentioned above of $33.7 million, a decrease in indemnification, investigation and litigation costs, net of $21.7 million, lower cost of sales of $6.8 million and lower depreciation and amortization of $1.2 million. These decreases were partially offset by higher other operating costs of $1.7 million.

For the six months ended June 30, 2008, total operating costs and expenses were $213.8 million, compared with $261.4 million for the comparable period in 2007, a decrease of $47.6 million. This decrease is largely the result of lower corporate expenses of $47.5 million, including lower bad debt expense as mentioned above of $33.7 million, lower cost of sales of $13.7 million and lower depreciation and amortization of $3.6 million. These decreases were partially offset by higher indemnification, investigation and litigation costs of $11.4 million, reflecting the impact of the $47.7 million settlement in 2007, higher sales and marketing costs of $1.1 million and higher other operating costs of $4.4 million.

Total cost of sales

Cost of sales, which includes newsprint and ink, as well as distribution, editorial and production costs was $53.6 million for the second quarter of 2008, compared with $60.4 million for the same period in 2007, a decrease of $6.8 million. Wages and benefits were $23.8 million in the second quarter of 2008 and $26.6 million in the second quarter of 2007, a decrease of $2.8 million. The decrease in wages and benefits largely reflects the impact of lower headcount related to the Company’s reorganization activities. Newsprint and ink expense was $11.8 million for the second quarter of 2008, compared with $13.2 million for the same period in 2007, a decrease of $1.4 million or 11%. Total newsprint consumption in the second quarter of 2008 decreased 20% compared with the same period in 2007, reflecting lower volume and reductions in the size of the Company’s newspapers. The average cost per metric ton of newsprint in the second quarter of 2008 was 11% higher than the second quarter of 2007. Other costs of sales were $18.1 million in the second quarter of 2008 compared to $20.6 million in the second quarter of 2007, a decrease of $2.5 million largely due to lower distribution costs of $1.6 million and lower property and facilities costs of $0.4 million, both of which are largely due to outsourcing the distribution activities late in the third quarter of 2007 and lower production costs of $0.8 million.

For the six months ended June 30, 2008, cost of sales was $106.6 million compared with $120.3 million for the same period in 2007, a decrease of $13.7 million. Wages and benefits were $48.5 million for the six months ended June 30, 2008 and $53.3 million for the six months ended June 30, 2007, a decrease of $4.8 million. The decrease in wages and benefits reflects the impact of lower headcount related to the Company’s reorganization activities. Newsprint and ink expense was $22.0 million for the six months ended June 30, 2008, compared with $26.9 million for the same period in 2007, a decrease of $4.9 million or 18%. Total newsprint consumption for the six months

26

ended June 30, 2008 decreased 21% compared with the same period in 2007, reflecting lower volume and reductions in the size of the Company’s newspapers. The average cost per metric ton of newsprint for the six months ended June 30, 2008 was 3% higher than the same period in 2007. Other costs of sales were $36.1 million for the six months ended June 30, 2008 compared to $40.1 million for the comparable period in 2007, a decrease of $4.0 million largely due to lower distribution costs of $1.8 million and lower property and facilities costs of $0.9 million, both of which are largely due to outsourcing the distribution activities late in the third quarter of 2007 and lower production costs of $1.5 million.

Total selling, general and administrative

Included in selling, general and administrative costs are sales and marketing expenses, other operating costs including administrative support functions, such as information technology (“IT”), finance and human resources, and corporate expenses and indemnification, investigation and litigation costs, net.

Total selling, general and administrative costs were $46.9 million in the second quarter of 2008 compared with $107.4 million for the same period in 2007, a decrease of $60.5 million. The decrease was largely due to lower corporate expenses of $40.5 million, reflecting the previously mentioned bad debt expense in 2007 of $33.7 million and lower indemnification, investigation and litigation costs, net, of $21.7 million. These costs were partially offset by higher other operating costs of $1.7 million.

For the six months ended June 30, 2008, total selling, general and administrative costs were $94.5 million compared with $125.0 million for the same period in 2007, a decrease of $30.5 million. The decrease was largely due to lower corporate expenses of $47.5 million, reflecting the previously mentioned bad debt expense of $33.7 million. These costs were partially offset by higher indemnification, investigation and litigation costs, net, of $11.4 million, including the above mentioned settlement of $47.7 million, higher sales and marketing costs of $1.1 million and higher other operating costs of $4.4 million.

Sales and marketing

Sales and marketing costs were $17.6 million in the second quarter of 2008, compared with $17.7 million in the second quarter of 2007, a decrease of $0.1 million. The decrease includes largely offsetting effects related to lower marketing and promotion expense of $1.2 million, resulting from the re-launch of the Chicago Sun-Times in 2007 and direct response advertising costs expensed in 2008, but capitalized (and amortized) in 2007 of $1.4 million.

For the six months ended June 30, 2008, sales and marketing costs were $34.1 million compared with $33.0 million for the same period in 2007, an increase of $1.1 million. This increase is largely due to direct response advertising costs expensed in 2008, but capitalized in 2007 of $3.2 million, partially offset by lower marketing and promotion expenses of $1.4 million, resulting from the re-launch of the Chicago Sun-Times in 2007, lower professional fees of $0.3 million and lower volume driven postage expense of $0.2 million.

Other operating costs

Other operating costs consist largely of accounting and finance, IT, human resources, administrative property and facilities costs and other general and administrative costs supporting the newspaper operations.

Other operating costs were $16.2 million in the second quarter of 2008 compared with $14.5 million for the same period in 2007, an increase of $1.7 million. This increase is largely due to the disposal or write-off of property, plant and equipment of $1.8 million and higher severance related reorganization costs of $0.8 million, partially offset by lower professional fees of $0.4 million and lower telecommunication costs of $0.3 million.

For the six months ended June 30, 2008, other operating costs were $33.3 million compared with $28.9 million for the same period in 2007, an increase of $4.4 million. This increase is largely due to the disposal or write-off of property, plant and equipment totaling $2.2 million, severance related reorganization costs of $2.4 million and increased workers compensation costs of $0.8 million, primarily due to changes in estimates related to prior year claims. These costs were partially offset by lower professional fees of $0.5 million and lower telecommunication costs of $0.5 million.

27

Corporate expenses

Corporate expenses in the second quarter of 2008 were $9.6 million compared with $50.1 million in the second quarter of 2007, a decrease of $40.5 million. The decrease is largely due to 2007 adjustments including the bad debt expense of $33.7 million related to a loan with an affiliate of Hollinger, as well as an adjustment to gains on prior years’ sales of newspaper operations of $8.6 million. Other improvements include lower insurance costs, primarily directors and officers coverage, of $0.6 million and lower professional fees of $0.6 million. These positive impacts were partially offset by expenses of $0.4 million related to the Company’s strategic alternative process and $2.5 million related to the Revised Settlement with Hollinger. See Note 11 to the condensed consolidated financial statements.

For the six months ended June 30, 2008, corporate expenses were $18.1 million compared with $65.6 million for the six months ended June 30, 2007, a decrease of $47.5 million. The decrease is largely due to 2007 adjustments including bad debt expense of $33.7 million related to a loan with an affiliate of Hollinger, as well as an adjustment to gains on prior year’s sales of newspaper operations of $13.6 million. Other improvements include lower insurance costs, primarily directors and officers coverage, of $1.3 million and lower non-legal professional fees of $2.2 million. These positive impacts were partially offset by expenses related to the Company’s strategic alternative process of $0.4 million, higher stock-based compensation expense of $0.6 million, higher legal fees related to litigation and arbitration activities of $0.3 million, and $2.5 million related to the Revised Settlement with Hollinger. See Note 11 to the condensed consolidated financial statements.

Indemnification, investigation and litigation costs, net of recoveries

Indemnification, investigation and litigation costs, net of recoveries in the second quarter of 2008 were $3.4 million compared with $25.1 million in the second quarter of 2007, a decrease of $21.7 million. Indemnification costs decreased $18.5 million to $4.3 million in the second quarter of 2008 from $22.8 million in the second quarter of 2007 as the criminal proceedings against certain former officers concluded in July 2007 and Special Committee investigation costs decreased $1.5 million. In the three months ended June 30, 2008, the Company received $2.0 million in recoveries for legal fees that had been incurred in connection with the Hollinger CCAA proceedings. See Note 9 to the condensed consolidated financial statements.

For the six months ended June 30, 2008, indemnification, investigation and litigation costs, net of recoveries were $8.9 million compared with a net recovery of $2.5 million in the same period in 2007, an increase in net expense of $11.4 million. The Company recorded a recovery of $2.0 million of legal fees in connection with the Hollinger CCAA proceedings in 2008 and a recovery of $47.7 million resulting from a settlement with a former officer in 2007. Indemnification costs decreased $32.2 million to $8.0 million for the six months ended June 30, 2008 from $40.2 million in the same period in 2007 as the criminal proceedings against certain former officers concluded in July 2007 and Special Committee investigation costs decreased $1.7 million. See Note 9 to the condensed consolidated financial statements.

Depreciation and amortization

Depreciation and amortization expense in the second quarter of 2008 was $6.4 million compared with $7.6 million in 2007, a decrease of $1.2 million. In the second quarter of 2007, amortization expense included $1.9 million related to capitalized direct response advertising costs. As indicated by recent declines in circulation and related advertising revenue, the benefit period of direct response advertising costs can best be described as indeterminate and are expensed as incurred in 2008 in “Sales and marketing” expenses in the Condensed Consolidated Statement of Operations.

For the six months ended June 30, 2008, depreciation and amortization expense was $12.6 million compared with $16.2 million for the same period in 2007, a decrease of $3.6 million. In the first six months of 2007, the Company recorded additional depreciation expense of $1.0 million related to the printing facility in Gary, Indiana, which was closed in March 2007. In addition, for the six months ended June 30, 2007, amortization expense included $3.4 million related to capitalized direct response advertising costs, which, as previously mentioned, are expensed as incurred in 2008.

28

Operating loss

As a result of the items noted above, operating results improved by $56.6 million to an operating loss of $24.0 million in the second quarter of 2008 compared with $80.6 million operating loss for the same period in 2007. For the six months ended June 30, 2008, operating loss was $49.8 million compared with a $75.0 million operating loss for the same period in 2007, a decrease of $25.2 million.

Interest and Dividend Income

Interest and dividend income in the three months ended June 30, 2008 amounted to $0.9 million compared to $3.4 million for the same period in 2007, a decrease of $2.5 million, largely due to lower interest income earned as a result of lower average invested cash balances, including the effect of Canadian asset-backed commercial paper (“Canadian CP”). For the six months ended June 30, 2008, interest and dividend income amounted to $2.4 million compared to $13.7 million in 2007, a decrease of $11.3 million, largely due to $7.2 million of interest received on the settlement with a former officer in the first quarter of 2007 and lower average invested cash balances, including the effect of Canadian CP.

Other Income (expense), net

Other income (expense), net in the second quarter of 2008 was an expense of $1.1 million compared to an expense of $6.9 million for the same period in 2007. The $5.8 million improvement was largely due to a decrease in foreign exchange losses of $6.9 million, partially offset by a gain on sale of investments in 2007 of $1.0 million. See Note 4 to the condensed consolidated financial statements. The improvement in foreign exchange largely relates to the impact on U.S. denominated cash and cash equivalents held by a subsidiary in Canada and certain intercompany loans payable to a subsidiary in Canada in U.S. dollars, both reflecting smaller U.S. dollar exchange rate changes compared to the three months ended June 30, 2007. See Note 7 to the condensed consolidated financial statements.

For the six months ended June 30, 2008, other income (expense), net was income of $3.0 million compared to an expense of $7.4 million for the same period in 2007. The $10.4 million improvement was largely due to an improvement in foreign exchange effects of $11.8 million to a gain of $3.4 million, partially offset by a gain on sale of investments in 2007 of $1.0 million. See Note 4 to the condensed consolidated financial statements. The improvement in foreign exchange largely relates to the impact on U.S. denominated cash and cash equivalents held by a subsidiary in Canada and certain intercompany loans payable to a subsidiary in Canada in U.S. dollars, both resulting from an improved U.S. dollar exchange rate change in 2008 compared to the same six months ended June 30, 2007. See Note 7 to the condensed consolidated financial statements.

Income Taxes

Income taxes were an expense of $13.5 million in the second quarter of 2008 compared to a benefit of $612.4 million in the second quarter of 2007. The benefit in 2007 primarily represents the impact of the settlement of certain tax issues with the CRA, which resulted in the reversal of tax liabilities of $586.7 million in the second quarter of 2007. Generally, the Company’s income tax expense varies substantially from the U.S. Federal statutory rate primarily due to changes in the valuation allowance related to deferred tax assets and provisions or reductions related to contingent liabilities, including interest the Company may be required to pay in various tax jurisdictions. Provisions for additional interest on contingent liabilities, net of related tax benefits, amounted to $8.0 million in the second quarter of 2008 and $12.2 million for the second quarter of 2007. See Note 8 to the condensed consolidated financial statements.

For the first six months of 2008, income taxes were an expense of $29.0 million compared to a benefit of $592.2 million for the first six months of 2007. The 2007 benefit primarily represents the impact of the settlement of certain tax issues with the CRA, which resulted in the reversal of tax liabilities of $586.7 million in the second quarter of 2007. Generally, the Company’s income tax expense varies substantially from the U.S. Federal statutory rate primarily due to changes in the valuation allowance related to deferred tax assets and provisions or reductions related to contingent liabilities, including interest the Company may be required to pay in various tax jurisdictions. Provisions for additional interest on contingent liabilities, net of related tax benefits, amounted to $15.8 million in the first six months ended June 30, 2008 and $32.2 million for the same period in 2007. The Company also

29

recognized approximately $3.0 million of additional contingent tax liabilities largely related to changes in estimated interest in respect of those liabilities. See Note 8 to the condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents

Cash and cash equivalents amounted to $115.5 million at June 30, 2008 as compared to $142.5 million at December 31, 2007, a decrease of $27.0 million. This decrease in cash was primarily the result of the net cash outflows to support operations, including severance, indemnification, investigation and litigation costs, as well as purchases of fixed assets.

Investments

Investments include $15.0 million in Canadian CP, net of a $5.2 million impairment write-down. The Canadian CP was issued by a special purpose entity and sponsored by a non-bank entity.

A largely Canadian investor committee is leading efforts to restructure the Canadian CP that remains unredeemed. On December 23, 2007, the investor committee announced that an agreement in principle had been reached to restructure the Canadian CP, subject to the approval of the investors and various other parties. Under the agreement in principle, the Canadian CP will be exchanged for medium term notes, backed by the assets underlying the Canadian CP, having a maturity that will generally match the maturity of the underlying assets. The agreement in principle calls for $11.1 million of the Company’s medium term notes to be backed by a pool of assets that are generally similar to those backing the notes now held by the Company and which were originally held by a number of special purpose entities, while the remaining $9.1 million of the Company’s medium term notes would be backed by assets held by the specific special purpose entity that originally issued the Canadian CP. The agreement in principle was finalized and the investor committee filed a proposed restructuring plan (the “Plan”) under the CCAA with the Ontario Superior Court of Justice (the “Court”) on March 17, 2008. The implementation of the Plan is subject to a number of conditions, including execution of definitive legal documentation, completion of due diligence, receipt of internal approvals by dealer bank asset providers and participating banks, receipt of the requisite approvals of holders of the Canadian CP and final sanction by the Court. A variety of consents and other approvals will be necessary or desirable in connection with the Plan, including certain government and regulatory approvals. The Plan was approved by the holders of the Canadian CP on April 25, 2008, and sanctioned by the Court on June 5, 2008. Some of the objecting Canadian CP investors have taken the matter to the Ontario Court of Appeal. The Company cannot predict the ultimate approval, timing and implementation of the Plan, but expects its investments will be converted into medium term notes. However, it is possible that the Plan will fail and the Company or the special purpose entities may be forced to liquidate assets into a distressed market resulting in a significant realized loss for the Company.

Corporate Structure

Sun-Times Media Group, Inc. is a holding company and its assets consist primarily of investments in its subsidiaries and affiliated companies. As a result, the Company’s ability to meet its future financial obligations is dependent upon the availability of cash flows from its subsidiaries through dividends, intercompany advances and other payments. Similarly, the Company’s ability to pay any future dividends on its common stock may be limited as a result of its dependence upon the distribution of earnings of its subsidiaries and affiliated companies. The Company’s subsidiaries and affiliated companies are under no obligation to pay dividends and may be subject to or become subject to statutory restrictions and restrictions in debt agreements that limit their ability to pay dividends or repatriate funds to the United States. The Company’s right to participate in the distribution of assets of any subsidiary or affiliated company upon its liquidation or reorganization, if such an event were to occur, would be subject to the prior claims of the creditors of such subsidiary or affiliated company, including trade creditors, except to the extent that the Company may itself be a creditor with recognized claims against such subsidiary or affiliated company.

30

Factors That Are Expected to Affect Liquidity in the Future

Potential Cash Outlays Related to Accruals for Income Tax Contingent Liabilities

The Company has the following income tax liabilities recorded in its Condensed Consolidated Balance Sheet:

	June 30,
	2008
	(In thousands)
Income taxes payable	$	565
Deferred income tax liabilities		60,033
Other tax liabilities		622,615
	$	683,213

The Company has recorded accruals to cover contingent liabilities related to additional taxes, interest and penalties it may be required to pay in various tax jurisdictions. Such accruals are included in “Other tax liabilities” listed above.

Significant cash outflows are expected to occur in the future regarding the income tax contingent liabilities. Efforts to resolve or settle certain tax issues are ongoing and may place substantial demands on the Company’s cash, cash equivalents, investments and other resources to fund any such resolution or settlement. The timing and amounts of any payments the Company may be required to make are uncertain, but the Company does not anticipate that it will make any material cash payments to settle any of the disputed items during the next 12 months. See Note 8 to the condensed consolidated financial statements.

Potential Cash Outflows Related to Operations

The Company’s cash flow is expected to continue to be cyclical, reflecting changes in economic conditions. The Company is dependent upon the Sun-Times News Group for operating cash flow. That cash flow in turn is dependent to a significant extent on the Sun-Times News Group’s ability to sell advertising in its Chicago area market. Advertising revenue for the Sun-Times News Group declined 13% during the first six months of 2008 as compared to the same period in 2007. Based on the Company’s assessment of market conditions in the Chicago area and the potential of these negative trends continuing, the Company has considered and may continue to consider a range of options to address the resulting significant shortfall in performance and cash flow and has suspended its dividend payments since the fourth quarter of 2006. The Company has $6.6 million of assets held for sale largely related to under utilized facilities at June 30, 2008, which are included in “Other current assets” on the Condensed Consolidated Balance Sheet.

The Company does not currently have a credit facility in place. The recent decline in revenue and operating performance in the Sun-Times News Group may have a detrimental impact on the amount of debt and/or terms available to the Company in bank and bond markets. Moreover, the operating performance of the Company is resulting in the use of cash to fund operations.

The Company is currently involved in several legal actions as both plaintiff and defendant and is funding significant amounts under indemnification agreements to certain former officers and directors. The actions are in various stages and it is not yet possible to determine their ultimate outcome. At this time, the Company cannot estimate the impact these actions and the related legal fees and indemnification obligations may have on its future cash requirements. However, such requirements may be significant and may exceed amounts that may be recovered through insurance claims or otherwise.

Other

The Company expects that its liquid assets at June 30, 2008 are sufficient to support its operations and meet its obligations into 2009. However, the Company is currently reviewing potential sources of additional liquidity, which may include the sale of certain assets. See “Significant Developments in 2008.”

31

Cash Flows

Cash flows used in operating activities were $39.8 million for the first six months of 2008, a $57.4 million decrease compared with $17.6 million provided by operating activities for the same period in 2007. The decrease is primarily the result of the non-recurring collection of insurance proceeds in 2007 of $50.0 million. The comparison of operating cash flows between years is affected by several key factors including largely offsetting effects of recoveries from a former officer in 2007 and non-cash effects of deferred taxes. The net loss from operations has increased by $596.8 million to $73.6 million in the six months ended June 30, 2008 from net income of $523.2 million for the same period in 2007. The $596.8 million increase in net loss includes a non-cash income tax benefit of $586.7 million, resulting from the settlement of tax issues with the CRA in 2007.

Cash flows provided by investing activities for the first six months of 2008 were $13.1 million compared to $6.1 million for the same period in 2007. The increase of $7.0 million in cash flows provided by investing activities is primarily the result of the sale of Canadian CP of $21.0 million, partially offset by an increase in purchases of property, plant and equipment of $5.9 million and collection of notes receivable in 2007 of $8.5 million related to a settlement with a former officer.

Capital Expenditures

The Company does not have material commitments to acquire capital assets and expects its cash on hand and future cash flow provided by its operating subsidiaries to be sufficient to fund its recurring capital expenditures.

Commercial Commitments and Contractual Obligations

Letters of credit are required primarily in connection with the Company’s insurance programs and to support certain projected workers’ compensation obligations and reimbursement of claims paid by a third party claims administrator. At June 30, 2008, letters of credit in the amount of $11.5 million were outstanding and largely collateralized by restricted cash.

Set out below is a summary of the amounts due and committed under contractual cash obligations at June 30, 2008 (unless otherwise noted):

			Due in		Due Between		Due Between		Due Over
	Total		1 Year or Less		1 and 3 Years		3 and 5 Years		5 Years
	(In thousands)
Operating leases(1)	$	50,316	$	5,560	$	8,695	$	7,664	$	28,397
Purchase obligations(2)		27,300		9,100		18,200		—		—
Long-term debt		19		19		—		—		—
Total contractual cash obligations(3)	$	77,635	$	14,679	$	26,895	$	7,664	$	28,397

(1)	Commitments as of December 31, 2007.
(2)	Pursuant to a ten-year distribution agreement, which is terminable upon three years’ notice. Amounts shown represent base fixed fee component of distribution agreement for three years ($9,100 per year).
(3)	Refer to “Potential Cash Outlays Related to Accruals for Income Tax Contingent Liabilities” for a discussion of Financial Accounting Standards Board (“FASB”) Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” tax liabilities. Such amounts are excluded from this table.

In addition to amounts committed under contractual cash obligations, the Company has also assumed certain contingent obligations by way of guarantees and indemnities in relation to the conduct of its business and disposition of businesses. The Company is also involved in various matters in litigation. For more information on the Company’s litigation and contingent obligations, see Notes 9 and 12 to the Company’s condensed consolidated financial statements.

32

Recent Accounting Pronouncements

In September 2006, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 introduces a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. SFAS No. 157 for financial assets and liabilities is effective for fiscal years beginning after November 15, 2007, and the Company has adopted the standard for those assets and liabilities as of January 1, 2008 and the impact of adoption was immaterial.

On February 12, 2008, the FASB issued Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FAS No. 157-2”), which delayed the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The Company is evaluating the provisions of FAS No. 157-2 to be applied to the nonfinancial assets and nonfinancial liabilities and to determine what impact its adoption on January 1, 2009 will have on the results of its financial position and results of operations.

Effective January 1, 2008, the Company adopted SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Company did not elect to adopt the fair value option for financial instruments on the adoption date.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

Newsprint.  Newsprint expense amounted to $20.8 million in the first six months of 2008 and $25.7 million during the same period in 2007. Management believes that newsprint prices may continue to show significant price variation in the future. Suppliers implemented a newsprint price decrease of approximately $25 per metric ton in August 2007 and increases of approximately $150 per metric ton between December 2007 and June 2008. The Company takes steps to ensure that it has sufficient supply of newsprint and has mitigated cost increases by adjusting pagination and page sizes and printing and distribution practices. Based on levels of usage during the six months ended June 30, 2008, a change in the price of newsprint of $50 per metric ton would have increased or decreased net loss for the six months ended June 30, 2008 by $1.0 million. The average price per metric ton of newsprint was approximately $650 for the six months ended June 30, 2008 versus approximately $630 for the same period in 2007.

Labor Relations.  As of June 30, 2008, 39% of the Company’s employees are covered by collective bargaining agreements. Contracts covering 25% of union employees will expire or are being negotiated during the next twelve months. There have been no strikes or work stoppages at any of the Company’s newspapers in the past 5 years.

Inflation.  During the past three years, inflation has not had a material effect on the Company’s newspaper businesses.

Interest Rates.  At June 30, 2008, the Company has no debt that is subject to interest calculated at floating rates and a change in interest rates would not have a material effect on the Company’s results of operations.

Foreign Exchange Rates.  A portion of the Company’s results are generated outside of the United States in currencies other than the United States dollar (primarily the Canadian dollar). As a result, the Company’s operations are subject to changes in foreign exchange rates and changes in the value of the United States dollar against other currencies would affect the Company’s net earnings. Based on earnings for the six months ended June 30, 2008, a $0.05 change in the Canadian dollar exchange rate would affect the Company’s reported net loss for the six months ended June 30, 2008 by $0.1 million.

Reference should be made to “Risk Factors” in the Company’s 2007 10-K for a discussion on the potential impact changes in foreign exchange rates may have related to taxes that may be paid to foreign jurisdictions. As a result of the settlement with the Canada Revenue Agency, the foreign exchange risk related to taxes has been substantially reduced.

33

Item 4.   Controls and Procedures

(a) Disclosure Controls and Procedures.  The Company maintains a system of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls are also designed to reasonably assure that such information is accumulated and communicated to management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Disclosure controls include components of internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.

As reported in the 2007 10-K, as of December 31, 2007, the Company’s management identified material weaknesses in its internal control over financial reporting relating to 1) ineffective controls related to the recognition of advertising revenue, and 2) ineffective controls relating to the accounting for uncertain tax positions and foreign deferred income taxes. Largely as a result of material weaknesses in these areas, management concluded in the Company’s 2007 10-K that the Company’s disclosure controls and procedures were ineffective as of December 31, 2007.

During 2008, the Company has taken and will continue to take actions to remediate the material weaknesses discussed above and it is continuing to assess additional controls that may be required to remediate these weaknesses. The Company’s management, under the supervision of and with the participation of the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2008, pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). As part of its evaluation, management has evaluated whether the control deficiencies related to the reported material weaknesses in internal control over financial reporting continue to exist. As of June 30, 2008, the Company has not completed implementation and testing of the changes in controls and procedures that it believes are necessary to conclude that the material weaknesses have been remediated. Therefore, the Company’s management has concluded that it cannot assert that the control deficiencies relating to the reported material weaknesses have been effectively remediated. As a result, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures were ineffective as of June 30, 2008.

Procedures were undertaken so that management could conclude that reasonable assurance exists regarding the reliability of financial reporting and the preparation of the condensed consolidated financial statements contained in this filing. Accordingly, management believes that the condensed consolidated financial statements included in this Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented.

(b) Changes in Internal Control Over Financial Reporting.  During 2008, there were no changes in the Company’s internal control over financial reporting that materially affect, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

The following is a discussion of developments in the legal proceedings the Company has reported in its 2007 10-K. For a detailed discussion of these legal proceedings see “Item 3 — Legal Proceedings” in the Company’s 2007 10-K.

Settlement with Hollinger Entities

On March 25, 2008, the Company entered into the Settlement with Hollinger, 4322525 Canada Inc. and Sugra Limited (collectively, the “Hollinger Entities”) that provides for the resolution of all outstanding matters between the Hollinger Entities and the Company. See “Item 2 — Management’s Discussion and Analysis of Financial

34

Condition and Results of Operations — Recent Business Developments — Significant Developments in 2008” for a more detailed discussion of the terms of the Revised Settlement.

On May 14, 2008, the Company announced it had agreed to revised terms of the Settlement. The Revised Settlement received court approval on May 26, 2008 and the transactions required by the Revised Settlement took place at a closing on June 18, 2008.

United States Securities and Exchange Commission v. Conrad M. Black et al.

As previously reported, on November 15, 2004, the SEC filed an action in the United States District Court for the Northern District of Illinois against Conrad M. Black (“Black”), F. David Radler (“Radler”) and Hollinger seeking injunctive, monetary and other equitable relief. In the action, the SEC alleges that the three defendants violated federal securities laws by engaging in a fraudulent and deceptive scheme to divert cash and assets from the Company and to conceal their self-dealing from the Company’s public stockholders from at least 1999 through at least 2003. The SEC also alleged that Black, Radler and Hollinger were liable for the Company’s violations of certain federal securities laws during at least this period. As previously disclosed, on March 16, 2007, the SEC settled with Radler with regard to this action.

On March 25, 2008, the SEC announced that it settled with Hollinger with regard to this action. The final judgment orders Hollinger to pay a total of approximately $21.3 million in disgorgement and permanently enjoins Hollinger from violations of certain U.S. federal securities laws. The $21.3 million paid by Hollinger to the Company in satisfaction of the judgment against Hollinger in the action entitled Hollinger International, Inc. v. Black, et al., will be credited dollar-for-dollar toward the disgorgement ordered in this action. As a result, the Company will receive no additional amounts from Hollinger.

CanWest Arbitration

As previously reported, on December 19, 2003, CanWest Global Communications Corp (“CanWest”) commenced notices of arbitration against the Company and others with respect to disputes arising from CanWest’s purchase of certain newspaper assets from the Company in 2000. CanWest and the Company have competing claims relating to this transaction. CanWest claims the Company and certain of its direct subsidiaries owe CanWest approximately Cdn.$84.0 million. The Company is contesting this claim, and has asserted a claim against CanWest in the aggregate amount of approximately Cdn.$80.5 million. On February 6, 2006, approximately $17.5 million of the proceeds from the sale of the Company’s remaining newspaper operations in Canada was placed in escrow, to be held up to seven years, pending a final award, judgment or settlement in respect of the arbitration (“CanWest Arbitration”). The arbitration hearings have been completed and a decision from the arbitrator is expected in the first quarter of 2009.

Black v. Breeden, et al.

As previously reported, six defamation actions have been brought by Black in the Ontario Superior Court of Justice against Richard C. Breeden, Gordon A. Paris, Graham W. Savage, and Raymond Seitz and others. The defendants named in the six defamation actions have indemnity claims against the Company for all reasonable costs and expenses they incur in connection with these actions, including judgments, fines and settlement amounts. In addition, the Company is required to advance legal and other fees that the defendants may incur in relation to the defense of those actions. In July 2008, each of the defendants in the six actions brought a motion to set aside service ex juris and to have the actions stayed on forum non conveniens grounds. Black has yet to file a response to such motion. The motion is scheduled to be heard in late September 2008.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.   Defaults Upon Senior Securities

None.

35

Item 4.   Submission of Matters to a Vote of Security Holders

The Company held its 2008 Annual Meeting of Stockholders on June 17, 2008, in Chicago IL. Of the 80,428,124 shares of common stock entitled to vote at the meeting, 50,173,885 shares of Class A Common Stock (one vote per share) and 14,990,000 shares of Class B Common Stock (10 votes per share) were represented at the meeting in person or by proxy, constituting a quorum. The voting results were as follows:

1) The stockholders elected the following Directors to serve until the Company’s 2009 Annual Meeting of Stockholders and until their successors are duly elected and qualified. The votes were as follows:

	Votes in		Votes
Name of Director	Favor		Withheld
William E. Aziz		198,925,323		1,148,562
Brent D. Baird		198,641,433		1,432,452
Albrecht W.A. Bellstedt		198,990,106		1,083,779
Herbert A. Denton		198,530,770		1,543,115
Peter J. Dey		198,972,837		1,101,048
Cyrus F. Freidheim, Jr.		198,508,891		1,564,994
Edward C. Hannah		198,836,154		1,237,731
Gordon A. Paris		198,912,111		1,161,774
Graham W. Savage		198,552,882		1,521,003
Raymond G.H. Seitz		198,927,568		1,146,317
G. Wesley Voorheis		198,882,402		1,191,483

Pursuant to the Revised Settlement, on June 23, 2008, the Company announced that the six directors of the Company appointed by Hollinger on July 31, 2007 resigned from the Board of Directors. Thereafter, Peter J. Dey and Robert B. Poile were elected as directors. The two events had the effect of reducing the size of the Board of Directors from eleven to seven.

Item 5.   Other Information

None.

Item 6.   Exhibits

3	.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008).
4	.1	Amendment No. 4 to Rights Agreement, dated as of May 14, 2008, between the Company and the Rights Agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated May 14, 2008).
4	.2	Registration Rights Agreement, dated June 17, 2008, among the Company and the stockholders named therein.
10	.1	Revised Settlement Agreement Term Sheet
31	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14
31	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14
32	.1	Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
32	.2	Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SUN-TIMES MEDIA GROUP, INC.
Registrant

By:  /s/  Cyrus F. Freidheim, Jr.

Cyrus F. Freidheim, Jr.

President and Chief Executive Officer

Date: August 8, 2008

By:  /s/  William G. Barker III

William G. Barker III

Senior Vice President and Chief Financial Officer

Date: August 8, 2008

37

EX-4.2

Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

by and among

Sun-Times Media Group, Inc.

and the STOCKHOLDERS named herein

Dated: June 17, 2008

REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT, dated as of June 17, 2008, by and among Sun-Times Media Group, Inc. (the “Company”), Hollinger Inc., 4322525 Canada Inc. and the stockholders that are party to this Agreement from time to time, as set forth on the signature page hereto.

          WHEREAS, the parties hereto desire to provide for, among other things, the grant of registration rights with respect to the Registrable Securities (as hereinafter defined).

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

          1. (a) Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

          “Affiliate” means, with respect to a Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to a Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

          “Agreement” means this Registration Rights Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof.

          “Approved Underwriter” has the meaning set forth in Section 3(f) of this Agreement.

          “Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined in Rule 405 promulgated under the Securities Act that becomes effective upon filing thereof pursuant to General Instructions I.D. of Form S-3.

          “Board of Directors” means the Board of Directors of the Company.

          “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York or Illinois are authorized or required by law or executive order to remain closed.

          “Commission” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.

          “Common Stock” means (i) the Class A Common Stock, par value $0.001 per share, of the Company, (ii) any other common stock of the Company, (iii) any

securities of the Company or any successor or assign of the Company into which such stock described in clauses (i) and (ii) is reclassified or reconstituted or into which such stock is converted or otherwise exchanged in connection with a combination of shares, recapitalization, merger, sale of assets, consolidation or other reorganization or otherwise or (iv) any securities received as a dividend or distribution in respect of the securities described in clauses (i), (ii), and (iii) above.

          “Company” has the meaning set forth in the preamble to this Agreement.

          “Company Underwriter” has the meaning set forth in Section 4(a) of this Agreement.

          “Demand Registration” has the meaning set forth in Section 3(a) of this Agreement.

          “Designated Stockholder” means Hollinger Inc., 4322525 Canada Inc., and the assignees of each of the foregoing as permitted by Section 2(d) of this Agreement.

          “Designated Stockholders’ Counsel” has the meaning set forth in Section 8(a)(i) of this Agreement.

          “Disclosure Package” means, with respect to any offering of securities, (i) the preliminary Prospectus, (ii) each Free Writing Prospectus and (iii) all other information, in each case, that is deemed, under Rule 159 promulgated under the Securities Act, to have been conveyed to purchasers of securities at the time of sale of such securities (including, without limitation, a contract of sale).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.

          “FINRA” means the Financial Industry Regulatory Authority or any successor agency thereto.

          “Free Writing Prospectus” means any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.

          “Hedging Counterparty” means a broker-dealer registered under Section 15(b) of the Exchange Act or an Affiliate thereof.

          “Hedging Transaction” means any transaction involving a security linked to the Registrable Securities or any security that would be deemed to be a “derivative security” (as defined in Rule 16a-1(c) promulgated under the Exchange Act) with respect to the Registrable Securities or transaction (even if not a security) which would (were it a security) be considered such a derivative security, or which transfers some or all of the economic risk of ownership of the Registrable Securities, including, without limitation, any forward contract, equity swap, put or call, put or call equivalent position, collar, non-recourse loan, sale of exchangeable security or similar transaction. For the avoidance of doubt, the following transactions shall be deemed to be Hedging Transactions:

2

          (a) transactions by a Designated Stockholder in which a Hedging Counterparty engages in short sales of Registrable Securities pursuant to a Prospectus and may use Registrable Securities to close out its short position;

          (b) transactions pursuant to which a Designated Stockholder sells short Registrable Securities pursuant to a Prospectus and delivers Registrable Securities to close out its short position; and

          (c) transactions by a Designated Stockholder in which the Designated Stockholder delivers, in a transaction exempt from registration under the Securities Act, Registrable Securities to the Hedging Counterparty who will then publicly resell or otherwise transfer such Registrable Securities pursuant to a Prospectus or an exemption from registration under the Securities Act.

          “Incidental Registration” has the meaning set forth in Section 4(a) of this Agreement.

          “Indemnified Party” has the meaning set forth in Section 9(c) of this Agreement.

          “Indemnifying Party” has the meaning set forth in Section 9(c) of this Agreement.

          “Indentures” means (a) the indenture of Hollinger Inc., dated as of March 10, 2003 (as amended), pursuant to which Delaware Trust Company, National Association acts as trustee and (b) the indenture of Hollinger Inc., dated as of September 30, 2004, pursuant to which HSBC Bank USA, National Association acts as trustee.

          “Indenture Trustees” means Delaware Trust Company, National Association and HSBC Bank USA, National Association, in their respective capacities as trustees under the Indentures and collateral agents under the related agreements, and their successors.

          “Initiating Holders” means the 25% Designated Stockholders.

          “Inspector” has the meaning set forth in Section 8(a)(viii) of this Agreement.

          “Liability” has the meaning set forth in Section 9(a) of this Agreement.

          “Majority Initiating Holders” means Initiating Holders holding at least a majority of the Registrable Securities held by all of the Initiating Holders.

          “Majority S-3 Initiating Holders” means S-3 Initiating Holders holding at least a majority of the Registrable Securities held by all of the S-3 Initiating Holders.

          “Permitted Assignee” means, with respect to any Person, to the extent applicable, (i) such Person’s parents, spouse, siblings, children (including stepchildren

3

and adopted children), children’s spouses, grandchildren or grandchildren’s spouses thereof (“Family Members”), (ii) a corporation, partnership or limited liability company, a majority of the beneficial interests of which shall be held by such Person, such Person’s Affiliates and/or such Person’s Family Members, (iii) a trust, the beneficiaries of which are such Person and/or such Person’s Family Members, (iv) such Person’s heirs, executors, administrators, estate or a trust under such Person’s will, (v) an entity described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, that is established by such Person, (vi) any Affiliate of such Person, (vii) any Person to whom such Person has pledged the Registrable Securities as collateral to secure outstanding indebtedness or (viii) any other transferee to whom such Person transfers Registrable Securities if upon such transfer, such transferee would beneficially own 5% or more of the outstanding Common Stock.

          “Permitted Withdrawal” has the meaning set forth in Section 3(g) of this Agreement.

          “Person” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

          “Pledgee” has the meaning set forth in Section 2(d)(i).

          “Prospectus” means the prospectus related to any Registration Statement (including, without limitation, a prospectus or prospectus supplement that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance on Rule 415, 430A or 430B (or any successor rules or regulations) under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference in such prospectus.

          “Records” has the meaning set forth in Section 8(a)(viii) of this Agreement.

          “Registrable Securities” means, subject to Section 2(b) and Section 2(d)(i), any and all shares of Common Stock issued to Designated Stockholders upon conversion of the Company’s Class B Common Stock or as “Additional Shares” pursuant to the Settlement.

          “Registration Expenses” has the meaning set forth in Section 8(d) of this Agreement.

          “Registration Statement” means a registration statement filed pursuant to the Securities Act.

          “S-3 Initiating Holders” has the meaning set forth in Section 5(a) of this Agreement.

4

          “S-3 Participating Stockholders” has the meaning set forth in Section 5(a) of this Agreement.

          “S-3 Registration” has the meaning set forth in Section 5(a) of this Agreement.

          “Seasoned Issuer” means an issuer eligible to use Form S-3 or F-3 for a primary offering in reliance on General Instruction I.B.1 to those Forms.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

          “Settlement” means that certain Multi-Party Settlement Term Sheet, dated May 14, 2008, and approved by the Ontario Superior Court of Justice (Commercial List) in an Order (Approval of Multi-Party Settlement and Cost Reduction/Asset Enhancement Program) entered May 27, 2008.

          “underwritten offering” of securities means a public offering of such securities registered under the Securities Act in which an underwriter, placement agent or other intermediary participates in the distribution of such securities, including, without limitation, a Hedging Transaction in which a Hedging Counterparty participates.

          “Valid Business Reason” has the meaning set forth in Section 3(a) of this Agreement.

          “Well-Known Seasoned Issuer” means a “well-known seasoned issuer” as defined in Rule 405 of the General Rules and Regulations promulgated under the Securities Act and which (a) is a “well-known seasoned issuer” under paragraph (1)(i)(A) of such definition or (b) is a “well-known seasoned issuer” under paragraph (1)(i)(B) of such definition and is also eligible to register a primary offering of its securities relying on General Instruction I.B.1 of Form S-3 or Form F-3 under the Securities Act.

          “25% Designated Stockholders” means the Designated Stockholders holding more than twenty-five percent (25%) of the Registrable Securities held by all Designated Stockholders.

               (b) Interpretation. Unless otherwise noted:

                    (i) All references to laws, rules, regulations and forms in this Agreement shall be deemed to be references to such laws, rules, regulations and forms, as amended from time to time or, to the extent replaced, the comparable successor thereto in effect at the time.

                    (ii) All references to agencies, self-regulatory organizations or governmental entities in this Agreement shall be deemed to be references to the comparable successor thereto.

5

                    (iii) All references to agreements and other contractual instruments shall be deemed to be references to such agreements or other instruments as they may be amended from time to time.

          2. General; Securities Subject to this Agreement.

               (a) Grant of Rights. The Company hereby grants registration rights to the Designated Stockholders upon the terms and conditions set forth in this Agreement.

               (b) Registrable Securities. For the purposes of this Agreement, Registrable Securities held by any Designated Stockholder will cease to be Registrable Securities, when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) the entire amount of the Registrable Securities held by any Designated Stockholder may be sold in a single sale, in the opinion of counsel reasonably satisfactory to the Company and such Designated Stockholder (which may be counsel to the Company or the Designated Stockholder), without any limitation as to volume pursuant to Rule 144 (or any successor rule or regulation) under the Securities Act or (iii) the Registrable Securities have ceased to be outstanding.

               (c) Holders of Registrable Securities. A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities.

               (d) Transfer of Registration Rights.

                    (i) Each Designated Stockholder may transfer or pledge Registrable Securities with the associated registration rights under this Agreement (including transfers occurring by operation of law or by reason of intestacy) to a Permitted Assignee or a pledgee (“Pledgee”) only if (1) such Permitted Assignee or Pledgee agrees in writing to be bound as a Designated Stockholder by the provisions of this Agreement, with such agreement substantially in the form of Annex A hereto, and (2) immediately following such transfer or pledge, the further disposition of such Registrable Securities by such Permitted Assignee or Pledgee would be restricted under the Securities Act and the entire amount of all such Registrable Securities could not be sold in a single sale, in the opinion of counsel reasonably satisfactory to the Company and such Designated Stockholder (which may be counsel to the Company or the Designated Stockholder), without any limitation as to volume pursuant to Rule 144 (or any successor rule or regulation) under the Securities Act; provided that (A) the parties expressly acknowledge that the initial Designated Stockholders have pledged the Exchanged Shares and the Additional Shares (as each such term is defined in the Settlement) in favor of the Indenture Trustees in accordance with the terms of the corresponding Indentures and

6

related agreements, and that the Indenture Trustees are Pledgees for purposes of this Agreement, and (B) neither Indenture Trustee shall be required to execute the agreement in the form of Annex A hereto until the date(s) either such Indenture Trustee shall determine in connection with the exercise of such Indenture Trustee’s rights and powers under the Indentures and related agreements. Upon any transfer of Registrable Securities other than as set forth in this Section 2(d), such securities shall no longer constitute Registrable Securities.

                       (ii) If a Designated Stockholder assigns its rights under this Agreement in connection with the transfer of less than all of its Registrable Securities, the Designated Stockholder shall retain its rights under this Agreement with respect to its remaining Registrable Securities. If a Designated Stockholder assigns its rights under this Agreement in connection with the transfer of all of its Registrable Securities, such Designated Stockholder shall have no further rights or obligations under this Agreement, except under Section 8 hereof in respect of offerings in which it participated.

          3. Demand Registration.

               (a) Request for Demand Registration. At any time, and from time to time, the Initiating Holders may make a written request to the Company to register, and the Company shall register, under the Securities Act, in accordance with the terms of this Agreement (a “Demand Registration”), the number of Registrable Securities stated in such request; provided, however, that the Company shall not be obligated to effect (i) more than two such Demand Registrations or (ii) any such Demand Registration within ninety (90) days after the effective date of any other Registration Statement of the Company (other than a Registration Statement on Form S-4 or S-8 or any successor form thereto). For purposes of this Section 3(a), two (2) or more Registration Statements filed in response to one (1) demand shall be counted as one (1) Demand Registration. In addition, if the Company’s Board of Directors determine in good faith that any registration of Registrable Securities should not be made or continued because it would materially and adversely affect any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company or would involve initial or continuing disclosure obligations that would not be in the best interests of the Company (a “Valid Business Reason”), (x) the Company may postpone filing a Registration Statement (but not the preparation of the Registration Statement) relating to a Demand Registration until such Valid Business Reason no longer exists and (y) in case a Registration Statement has been filed relating to a Demand Registration, the Company may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists; provided, however, that in no event shall the postponement of the filing of any Registration Statement or the postponement of the amending or supplementing of any previously filed Registration Statement exceed an aggregate of 180 days in any 365-day period; provided, further, that if any single postponement shall extend beyond ninety (90) consecutive days, the Board of Directors of the Company shall make a confirmatory determination that a Valid Business Reason continues to exist on or prior to such ninetieth (90th) day. The Company shall give written notice to all Designated Stockholders of its determination to postpone the filing of

7

a Registration Statement or to postpone the amending or supplementing thereof and of the fact that the Valid Business Reason for such postponement no longer exists, in each case, promptly after the occurrence thereof. Each request for a Demand Registration by the Initiating Holders shall state the amount of the Registrable Securities proposed to be sold and the intended method of disposition thereof.

               (b) Incidental or “Piggy-Back” Rights with Respect to a Demand Registration. Any Designated Stockholder which has not requested a registration under Section 3(a) may, pursuant to this Section 3(b), offer its Registrable Securities under any Demand Registration. The Company shall (i) as promptly as practicable, but in no event later than five (5) days after the receipt of a request for a Demand Registration from the Initiating Holders, give written notice thereof to all of the Designated Stockholders (other than Initiating Holders which have requested a registration under Section 3(a)), which notice shall specify the number of Registrable Securities subject to the request for Demand Registration, the names and notice information of the Initiating Holders and the intended method of disposition of such Registrable Securities, and (ii) subject to Section 3(e), include in the Registration Statement filed pursuant to the Demand Registration all of the Registrable Securities held by such Designated Stockholders from whom the Company has received a written request for inclusion therein within ten (10) days of the date on which the Company sent the written notice referred to in clause (i) above. Each such request by such Designated Stockholders shall specify the number of Registrable Securities proposed to be registered. The failure of any Designated Stockholder to respond within such 10-day period referred to in clause (ii) above shall be deemed to be a waiver of such Designated Stockholder’s rights under this Section 3(b) with respect to such Demand Registration. Any Designated Stockholder may waive its rights under this Section 3(b) prior to the expiration of such 10-day period by giving written notice to the Company.

               (c) Effective Demand Registration. Subject to Section 3(a), the Company shall use its commercially reasonable efforts to cause any such Demand Registration to become effective as promptly as practicable but in no event later than the later of (i) one hundred and twenty (120) days after it receives a request under Section 3(a) hereof and (ii) ninety (90) days after the effective date of any other Registration Statement of the Company (other than a Registration Statement on Form S-4 or S-8 or any successor form thereto) that had been filed but not yet declared effective at the time such Demand Registration was made, and to remain continuously effective for the lesser of (i) the period during which all Registrable Securities registered in the Demand Registration are sold or (ii) two hundred and seventy (270) days following the date on which the Registration Statement is declared effective; provided in the case of clause (ii) that such period shall be extended by the total number of days that such period is interrupted by a postponement pursuant to Section 3(a)). A registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Initiating Holders and such interference is not thereafter eliminated, or (y) the conditions specified in the underwriting agreement, if any, entered into in

8

connection with such Demand Registration are not satisfied or waived, other than by reason of a failure by the Initiating Holders.

               (d) Expenses. Except as provided in Section 3(g) and 8(d), the Company shall pay all Registration Expenses in connection with a Demand Registration, whether or not such Demand Registration becomes effective.

               (e) Underwriting Procedures. If the Company or the Majority Initiating Holders so elect, the Company shall use its commercially reasonable efforts to cause the offering made pursuant to such Demand Registration to be in the form of a firm commitment underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(f). In connection with any Demand Registration under this Section 3 involving an underwritten offering, none of the Registrable Securities held by any Designated Stockholder making a request for inclusion of such Registrable Securities pursuant to Section 3(a) or 3(b) hereof shall be included in such underwritten offering unless such Designated Stockholder accepts the terms of the offering as agreed upon by the Company, the Majority Initiating Holders and the Approved Underwriter, and then only in such quantity as set forth in this Section 3(e). If the Approved Underwriter advises the Company that the aggregate amount of such Registrable Securities requested to be included in such offering is sufficiently large to have a material adverse effect on the distribution of sales price of the Registrable Securities in such offering, then the Company shall include in such Demand Registration, to the extent of the amount that the Approved Underwriter believes may be sold without causing such material adverse effect, (i) first, such number of Registrable Securities of the Designated Stockholders participating in the offering under Section 3(a) or 3(b), which Registrable Securities shall be allocated pro rata among such Designated Stockholders participating in the offering, based on the number of Registrable Securities held by each such Designated Stockholder, (ii) second, if all of the Registrable Securities referenced in clause (i) have been included, any other securities of the Company requested by holders thereof to be included in such registration, pro rata among such other holders on the basis of the number of securities that each such holder requested to be included in such registration, except to the extent any such holders have agreed to grant priority with regard to participation in such registration to any of the other holders, and (iii) third, if all of the Registrable Securities referenced in clause (i) and (ii) have been included, any securities offered by the Company for its own account.

               (f) Selection of Underwriters. If any Demand Registration or S-3 Registration, as the case may be, of Registrable Securities is in the form of an underwritten offering, the Company shall select and obtain one or more investment banking firms of national reputation to act as the managing underwriter or underwriters of the offering; provided, however, that such firm shall, in any case, also be approved by the Majority Initiating Holders or Majority S-3 Initiating Holders, as the case may be, such approval not to be unreasonably delayed or withheld. Notwithstanding the foregoing, if any S-3 Registration of Registrable Securities is in the form of a Hedging Transaction, the Majority S-3 Initiating Holders shall select and obtain an investment banking firm of national reputation to act as the managing underwriter (or the equivalent

9

position) of the Hedging Transaction; provided, however, that such firm shall, in any case, also be approved by the Company, such approval not to be unreasonably delayed or withheld. An investment banking firm or firms selected pursuant to this Section 3(f) shall be referred to as the “Approved Underwriter” in this Agreement.

               (g) Withdrawal. The Majority Initiating Holders shall be entitled to withdraw or revoke a request for a Demand Registration without the prior written consent of the Company if (i) such withdrawal or revocation is as a result of facts or circumstances arising after the date on which a request for a Demand Registration was made and the Initiating Holders reasonably determine that participation in such registration would have a material adverse effect on the Initiating Holders or (ii) the Initiating Holders agree to pay all fees and expenses incurred by the Company in connection with such withdrawn registration (each, a “Permitted Withdrawal”). If a Permitted Withdrawal occurs under clauses (i) above, the related Demand Registration shall be counted as a Demand Registration for purposes of Section 3(a), and if a Permitted Withdrawal occurs under clause (ii) above, the related Demand Registration shall not be counted as a Demand Registration for purposes of Section 3(a). Any Permitted Withdrawal shall constitute and effect an automatic withdrawal by all other Initiating Holders and any other Designated Stockholder participating in such Demand Registration pursuant to the provisions of Section 3(b).

          4. Incidental or “Piggy-Back” Registration.

               (a) Request for Incidental or “Piggy-Back” Registration. At any time and from time to time, if the Company proposes to file a Registration Statement with respect to an offering of Common Stock by the Company for its own account (other than a Registration Statement on Form S-4 or S-8 or any successor form thereto) or for the account of any stockholder of the Company other than Designated Stockholders pursuant to Sections 3 and 5 hereof, then the Company shall give written notice of such proposed filing to each of the Designated Stockholders at least twenty (20) days before the anticipated filing date, which notice shall describe the proposed registration and distribution and offer such Designated Stockholders the opportunity to register the number of Registrable Securities that each such Designated Stockholder may request (an “Incidental Registration”). The Company shall use its commercially reasonable efforts (within twenty (20) days after the notice provided for in the preceding sentence) to cause the managing underwriter or underwriters in the case of a proposed underwritten offering (the “Company Underwriter”) to permit each Designated Stockholder who has requested in writing to participate in the Incidental Registration pursuant to this Section 4(a) to include the number of such Designated Stockholder’s Registrable Securities indicated by such Designated Stockholder in such offering on the same terms and conditions as the Common Stock of the Company or the account of such other stockholder, as the case may be, included therein. Prior to the effective date of the Registration Statement with respect to which such Incidental Registration has been requested, immediately upon determination of the price at which such Registrable Securities are to be sold, if such price is below the price which any Designated Stockholder who requested to participate in the Incidental Registration finds acceptable, such Designated Stockholder shall then have the right, by written notice to the Company, to withdraw its request to have its

10

Registrable Securities included in such Registration Statement. Any withdrawal of the Registration Statement by the Company for any reason shall constitute and effect an automatic withdrawal of any Incidental Registration with respect to such Designated Stockholder so withdrawing. In connection with any Incidental Registration under this Section 4(a) involving an underwritten offering, the Company shall not be required to include any Registrable Securities in such underwritten offering unless the Designated Stockholders thereof accept the terms of the underwritten offering as agreed upon between the Company, such other stockholders, if any, and the Company Underwriter, and then only in such quantity as set forth below in this Section 4(a). If the Company Underwriter determines that the registration of all or part of the securities that have been requested to be included would materially adversely affect the distribution or sales price of the securities in such offering, then the Company shall be required to include in such Incidental Registration, to the extent of the amount that the Company Underwriter believes may be sold without causing such material adverse effect, (i) first, all of the shares of Common Stock to be offered for the account of the Company, in the case of a Company initiated Incidental Registration, or the stockholders who have requested such Incidental Registration, in the case of a stockholder initiated Incidental Registration, (ii) second, if all of the Registrable Securities referenced in clause (i) have been included, any Registrable Securities and any other shares of Common Stock requested by holders thereof (including the Designated Stockholders) to be included in such registration, pro rata among the Designated Stockholders and such other holders on the basis of the number of securities that each such holder requested to be included in such Incidental Registration, except to the extent any such other holders have agreed to grant priority with regard to participation in such registration to any of the other holders, and (iii) third, if all of the Registrable Securities referenced in clause (i) and (ii) have been included, all of the shares of Common Stock to be offered for the account of the Company, in the case of a stockholder initiated Incidental Registration.

               (b) Expenses. Except as provided in Section 8(d), the Company shall bear all Registration Expenses in connection with any Incidental Registration pursuant to this Section 4, whether or not such Incidental Registration becomes effective.

          5. Form S-3 Registration.

               (a) Request for a Form S-3 Registration. Upon the Company becoming eligible for use of Form S-3 or any successor form thereto under the Securities Act in connection with a secondary public offering of its equity securities, in lieu of a Demand Registration, in the event that the Company shall receive from the 25% Designated Stockholders (collectively, the “S-3 Initiating Holders”) a written request that the Company register under the Securities Act on Form S-3 or any successor form then in effect (an “S-3 Registration”) the sale of all or a portion of the Registrable Securities owned by such S-3 Initiating Holders (which S-3 Registration may be a shelf registration pursuant to Rule 415 promulgated under the Securities Act (or any successor rule or regulation)), the Company shall give written notice of such request to all of the other Designated Stockholders (other than S-3 Initiating Holders which have requested an S-3 Registration under this Section 5(a)) as promptly as practicable but in no event later than

11

ten (10) days before the anticipated filing date of such Form S-3, which notice shall describe the proposed registration, the intended method of disposition of such Registrable Securities and any other information that at the time would be appropriate to include in such notice, and offer such other Designated Stockholders the opportunity to register the number of Registrable Securities as each such Designated Stockholder may request in writing to the Company, given within ten (10) days of the date on which the Company sent the written notice of such registration. Each request for an S-3 Registration by the S-3 Initiating Holders shall state the amount of the Registrable Securities proposed to be sold and the intended method of disposition thereof. With respect to each S-3 Registration, the Company shall, subject to Section 5(b), (i) include in such offering the Registrable Securities of the S-3 Initiating Holders and the Designated Stockholders who have requested in writing to participate in such registration on the same terms and conditions as the Registrable Securities of the S-3 Initiating Holders included therein (collectively, the “S-3 Participating Stockholders”) and (ii) use its commercially reasonable efforts to cause such registration pursuant to this Section 5(a) to become and remain effective as soon as practicable, but in no event later than ninety (90) days after it receives a request therefor and not earlier than 90 days after the effective date of any other Registration Statement of the Company (other than a Registration Statement on Form S-4 or S-8 or any successor form thereto) that had been filed with the Commission but not yet declared effective at the time such registration was requested. Notwithstanding the foregoing, immediately upon determination of the price at which such Registrable Securities are to be sold in a S-3 Registration that is a firm commitment underwritten offering, if such price is below the price which any S-3 Participating Stockholder finds acceptable, such S-3 Participating Stockholder shall then have the right, by written notice to the Company, to withdraw its Registrable Securities from being included in such offering; provided, that such a withdrawal by the Majority S-3 Initiating Holders shall constitute and effect an automatic withdrawal by all other S-3 Participating Stockholders. If the Majority S-3 Initiating Holders request, and if the Company is a Well-Known Seasoned Issuer, the Company shall cause such S-3 Registration to be made pursuant to an Automatic Shelf Registration Statement and may omit the names of the S-3 Participating Stockholders and the amount of the Registrable Securities to be offered thereunder.

               (b) Form S-3 Underwriting Procedures. If the Majority S-3 Initiating Holders so elect, the Company shall use its commercially reasonable efforts to cause such S-3 Registration pursuant to this Section 5 to be in the form of a firm commitment underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(f). In connection with any S-3 Registration under Section 5(a) involving an underwritten offering, the Company shall not be required to include any Registrable Securities in such underwritten offering unless the Designated Stockholders thereof accept the terms of the underwritten offering as agreed upon between the Company, the Approved Underwriter and the Majority S-3 Initiating Holders, and then only in such quantity as set forth in this Section 4(b). If the Approved Underwriter advises the Company that the registration of all or part of the Registrable Securities which the S-3 Initiating Holders and the other Designated Stockholders have requested to be included would materially adversely affect the distribution or sales price of the Registrable

12

Securities in such public offering, then the Company shall include in such underwritten offering, to the extent of the amount that the Approved Underwriter believes may be sold without causing such material adverse effect, (i) first, such number of Registrable Securities of the Designated Stockholders participating in the offering under Section 5(a), which Registrable Securities shall be allocated pro rata among such Designated Stockholders participating in the offering, based on the number of Registrable Securities held by each such Designated Stockholder, (ii) second, if all of the Registrable Securities referenced in clause (i) above have been included, any other securities of the Company requested by holders thereof to be included in such registration, pro rata among such other holders on the basis of the number of securities that each such holder requested to be included in such registration, except to the extent any such holders have agreed under the Existing Agreement to grant priority with regard to participation in such registration to any of the other holders, and (iii) third, if all of the Registrable Securities in clause (i) and (ii) have been included, securities offered by the Company for its own account.

               (c) Limitations on Form S-3 Registrations. If the Board of Directors of the Company determines in good faith that a Valid Business Reason exists, (x) the Company may postpone filing a Registration Statement relating to an S-3 Registration (but not the preparation of the Registration Statement) until such Valid Business Reason no longer exists and (y) in case a Registration Statement has been filed relating to a S-3 Registration, the Company may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists; provided, however, that in no event shall the postponement of the filing of any Registration Statement relating to an S-3 Registration or the postponement of the amending or supplementing of any previously filed Registration Statement relating to an S-3 Registration exceed an aggregate of 180 days in any 365-day period; provided, further, that if any single postponement shall extend beyond ninety (90) consecutive days, the Board of Directors of the Company shall make a confirmatory determination that a Valid Business Reason continues to exist on or prior to such ninetieth (90th) day. The Company shall give written notice to all Designated Stockholders of its determination to postpone the filing of a Registration Statement relating to an S-3 Registration or to postpone the amending or supplementing thereof and of the fact that the Valid Business Reason for such postponement or delay no longer exists, in each case, promptly after the occurrence thereof. In addition, the Company shall not be required to effect any registration pursuant to Section 5(a), (i) within ninety (90) days after the effective date of any other Registration Statement of the Company (other than a Registration Statement on Form S-4 or S-8 or any successor form thereto) or (ii) if Form S-3 is not available for such offering by the S-3 Initiating Holders.

               (d) Expenses. Except as provided in Section 8(d), the Company shall bear all Registration Expenses in connection with any S-3 Registration pursuant to this Section 5, whether or not such S-3 Registration becomes effective.

               (e) Automatic Shelf Registration Statement. After the Registration Statement with respect to a S-3 Registration that is an Automatic Shelf Registration Statement becomes effective, upon written request by the S-3 Initiating Holders, the Company shall, as promptly as practicable after receiving such request,

13

(i) file with the Commission a prospectus supplement naming the S-3 Participating Stockholders as selling stockholders and the amount of Registrable Securities to be offered and to include, to the extent not included or incorporated by reference in the Registration Statement, any other information omitted from the Prospectus used in connection with such Registration Statement as permitted by Rule 430B promulgated under the Securities Act (including the plan of distribution) and (ii) to pay any necessary filing fees within the time period required.

          6. Hedging Transactions.

               (a) In any S-3 Registration, the S-3 Initiating Holders may elect to disclose their intention to engage in Hedging Transactions. The Company agrees that, in connection with any proposed Hedging Transaction, if, in the reasonable judgment of Designated Stockholders’ Counsel (after good-faith consultation with counsel to the Company), it is necessary or desirable to register under the Securities Act such Hedging Transaction or sales or transfers (whether short or long) of Registrable Securities in connection therewith, then the Company shall use its commercially reasonable efforts to take such actions (which may include, among other things, the filing of a prospectus supplement or post-effective amendment to a Registration Statement to include additional or changed information that is material or is otherwise required to be disclosed, including, without limitation, a description of such Hedging Transaction, the name of the Hedging Counterparty, identification of the Hedging Counterparty or its Affiliates as underwriters or potential underwriters, if applicable, or any change to the plan of distribution) as may reasonably be required to register such Hedging Transaction or sales or transfers of Registrable Securities in connection therewith under the Securities Act in a manner consistent with the rights and obligations of the Company hereunder with respect to the registration of Registrable Securities. Any information regarding the Hedging Transaction included in a Registration Statement, Prospectus or Free Writing Prospectus pursuant to this Section 6(a) shall, for purposes of Section 9, be deemed to be information provided by the Designated Stockholder that is party to such Hedging Transaction and is selling Registrable Securities pursuant to such Registration Statement for purposes of Section 9.

               (b) The selection of any Hedging Counterparty shall not be subject to Section 3(f), but the Hedging Counterparty shall be selected by the Designated Stockholders holding a majority of the Registrable Securities subject to the Hedging Transaction that are proposed to be included in such Registration Statement.

               (c) If in connection with a Hedging Transaction, a Hedging Counterparty or any Affiliate thereof is (or may be considered) an underwriter or selling stockholder, then it shall be required to provide customary indemnities to the Company regarding the plan of distribution and like matters.

               (d) The Company further agrees to include, under the caption “Plan of Distribution” (or the equivalent caption), in each Registration Statement and any related Prospectus (to the extent such inclusion is permitted under applicable Commission regulations and is consistent with comments received from the Commission

14

during any Commission review of the Registration Statement), language substantially in the form of Annex B hereto and to include in each Prospectus supplement filed in connection with any proposed Hedging Transaction language mutually agreed upon by the Company, the relevant Designated Stockholder and the Hedging Counterparty describing such Hedging Transaction.

          7. Holdback Agreements.

               (a) Restrictions on Public Sale by Designated Stockholders.

                    (i) To the extent requested by the Approved Underwriter or the Company Underwriter, as the case may be, in the case of an underwritten offering, each Designated Stockholder, agrees (x) not to effect any public sale or distribution of any Registrable Securities or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 (or any successor rule or regulation) promulgated under the Securities Act, or offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or enter into any hedging or similar transaction with the same economic effect as a sale of any Registrable Securities and (y) except as otherwise consented to by the Company, not to make any request for a Demand Registration or S-3 Registration under this Agreement, in each case, during the period beginning on the effective date of any Registration Statement relating to a registration in which Designated Stockholders of Registrable Securities are participating and ending on the ninetieth (90^th) day following the actual effective date of such Registration Statement (except as part of such registration); provided, however, that any waiver or exception from these provisions with respect to a Designated Stockholder by the Company, any Approved Underwriter or any Company Underwriter shall automatically apply to all Designated Stockholders.

                    (ii) The Designated Stockholders hereby agree that they shall act in good faith with respect to the restrictions set forth in Section 7(a) and shall take no action or omit to take any action with the intention of circumventing or evading the restrictions applicable to them under this 7(a).

               (b) Restrictions on Public Sale by the Company. Unless the Company shall have received the prior written consent of the Designated Stockholders holding at least a majority of the Registrable Securities, the Company agrees not to (i) effect any public sale or distribution of any of its securities, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to registrations on Form S-4 or S-8 or any successor form thereto), (ii) file any Registration Statements relating to the registration of securities for the Company’s account (except pursuant to registrations on Form S-4 or S-8 or any successor form thereto), or (iii) make any public announcements related to clause (i) or (ii), in each case, during the period beginning on the effective date of any Registration Statement relating to a registration in which the Designated Stockholders of Registrable Securities are participating and ending on the earlier of (X) the date on which all Registrable Securities registered on such Registration Statement are sold and (Y) sixty (60) days after the actual effective date of such Registration Statement (except as part of such registration); provided in the case of clause

15

(Y) that such period shall be extended by the total number of days that such period is interrupted by a postponement pursuant to Section 3(a) or Section 5(c), as applicable.

          8. Registration Procedures.

               (a) Obligations of the Company. Whenever registration of Registrable Securities has been requested or required pursuant to Section 3, Section 4 or Section 5, the Company shall use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as promptly as practicable, and in connection with any such request, the Company shall:

                    (i) as promptly as practicable, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and cause such Registration Statement to become effective; provided, however, that (x) before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including, without limitation, any documents incorporated by reference therein), or before using any Free Writing Prospectus, the Company shall provide one firm of legal counsel selected by the Designated Stockholders holding a majority of the Registrable Securities being registered in such registration (“Designated Stockholders’ Counsel”) and any other Inspector with an opportunity to review and comment on such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto) and each Free Writing Prospectus to be filed with the Commission, subject to such documents being under the Company’s control (it being understood that the Company shall not file a Registration Statement, any Prospectus, any Free Writing Prospectus or any amendments or supplements thereto to which the Designated Stockholders’ Counsel shall reasonably object in good faith), and (y) the Company shall notify the Designated Stockholders’ Counsel and each seller of Registrable Securities pursuant to such Registration Statement of any stop order issued or threatened by the Commission, including any stop order suspending the effectiveness of a Registration Statement covering any Registrable Securities, and, subject to Sections 3(a) and 5(c), take all reasonable actions to avoid the issuance of, or, if issued, obtain the withdrawal of (A) any such stop order suspending the effectiveness of a Registration Statement or (B) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as practicable, including, without limitation, the filing of any amendments and supplements to such Registration Statement and the Prospectus used in connection therewith;

                    (ii) as promptly as practicable, prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to respond to comments received by the Company from the Commission with respect to the Registration Statement and to keep such Registration Statement effective for the lesser of (x)  the time period provided for in Section 3(c), (y) the period after which the entire amount of all such Registrable Securities registered under such Registration Statement could not be

16

sold in a single sale, in the opinion of counsel reasonably satisfactory to the Company and such Designated Stockholder, without any limitation as to volume pursuant to Rule 144 (or any successor rule or regulation) under the Securities Act (or, in the case of an S-3 Registration, three years from the effective date of the Registration Statement if such Registration Statement is filed pursuant to Rule 415 promulgated under the Securities Act (or any successor rule or regulation)) and (z) such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold or otherwise cease to be Registrable Securities (or, if such Registration Statement is an Automatic Shelf Registration Statement, if shorter, on the third anniversary of the date of filing of such Automatic Shelf Registration Statement); and (B) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement;

                    (iii) as promptly as practicable, furnish to each seller of Registrable Securities such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the Prospectus included in such Registration Statement (including each preliminary Prospectus), any Prospectus filed under Rule 424 under the Securities Act and any Free Writing Prospectus as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;

                    (iv) as promptly as practicable, register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as any seller of Registrable Securities may reasonably request, and to continue such registration or qualification in effect in such jurisdiction for as long as permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 8(a)(iv), (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction;

                    (v) as promptly as practicable following its actual knowledge thereof, notify each seller of Registrable Securities: (A) when a Prospectus, any Prospectus supplement, any Free Writing Prospectus, a Registration Statement or a post-effective amendment to a Registration Statement has been filed with the Commission, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (B) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement, related Prospectus or Free Writing Prospectus or for additional information; (C) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Company shall provide true

17

and complete copies thereof and all written responses thereto to the Designated Stockholders’ Counsel); (D) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; and (E) of the existence of any fact or happening of any event of which the Company has knowledge which makes any statement of a material fact in such Registration Statement, related Prospectus or Free Writing Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue or which would require the making of any changes in the Registration Statement, Prospectus or Free Writing Prospectus in order that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of such Prospectus or Free Writing Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

                    (vi) as promptly as practicable, upon the occurrence of any event contemplated by Section 8(a)(v)(E) or, subject to Sections 3(a) and 5(c), the existence of a Valid Business Reason, as promptly as practicable, prepare a supplement or amendment to such Registration Statement, related Prospectus or Free Writing Prospectus and furnish to each seller of Registrable Securities a reasonable number of copies of such supplement to or an amendment of such Registration Statement, Prospectus or Free Writing Prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of such Prospectus or Free Writing Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

                    (vii) enter into and perform customary agreements (including an underwriting agreement in customary form with the Approved Underwriter or Company Underwriter, if any, selected as provided in Section 3, Section 4 or Section 5, as the case may be) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities and shall provide all reasonable cooperation, including causing its appropriate officers to attend and participate in “road shows” and other information meetings organized by the Approved Underwriter or Company Underwriter, if applicable, and causing counsel to the Company to deliver customary legal opinions in connection with any such underwriting agreements;

                    (viii) make available at reasonable times for inspection by any, managing underwriter or broker/dealer participating in any disposition of such Registrable Securities pursuant to a Registration Statement, any attorney retained by any such managing underwriter or broker/dealer and Designated Stockholders’ Counsel

18

(each, an “Inspector” and collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s and its subsidiaries’ officers, directors and employees, and the Company’s independent registered public accounting firm, to make themselves reasonably available to discuss the business of the Company and to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the Company shall so request) unless (x) the disclosure of such Records is necessary, in the Company’s reasonable judgment, to avoid or correct a misstatement or omission in the Registration Statement, (y) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after exhaustion of all appeals therefrom or (z) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made generally available to the public. Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. In the event that the Company is unsuccessful in preventing the disclosure of such Records, such seller agrees that it shall furnish only portion of those Records which it is advised by counsel is legally required and shall exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to those Records;

                    (ix) if such sale is pursuant to an underwritten offering, obtain a “cold comfort” letter dated the effective date of the Registration Statement and the date of the closing under the underwriting agreement from the Company’s independent registered public accounting firm in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing underwriter reasonably requests;

                    (x) furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the Registration Statement with respect to such securities becomes effective, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as the underwriters, if any, and such seller may reasonably request and are customarily included in such opinions;

                    (xi) comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the Registration Statement, an earnings statement covering a period of twelve (12) months

19

beginning after the effective date of the Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

                    (xii) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided that the applicable listing requirements are satisfied and it being understood that the Company shall not be required to list any class of securities on an exchange if the class is not then currently listed;

                    (xiii) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

                    (xiv) use its commercially reasonable efforts to cause the Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities, as may be reasonably necessary by virtue of the business and operations of the Company to enable the seller or sellers of Registrable Securities to consummate the disposition of such Registrable Securities; and

                    (xv) take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby and reasonably cooperate with the holders of such Registrable Securities to facilitate the disposition of such Registrable Securities pursuant thereto;

                    (xvi) as promptly as practicable and within the deadlines specified by the Securities Act, make all required filings of all Prospectuses and Free Writing Prospectuses with the Commission;

                    (xvii) as promptly as practicable and within the deadlines specified by the Securities Act, make all required filing fee payments in respect of any Registration Statement or Prospectus used under this Agreement (and any offering covered thereby); and

                    (xviii) keep the Designated Stockholder’s Counsel advised with respect to the progress of any registration statement hereunder and any material related issues.

               (b) Seller Requirements. In connection with any offering under any Registration Statement under this Agreement, each Designated Stockholder (i) shall promptly furnish to the Company in writing (including email correspondence) such information with respect to such Designated Stockholder and the intended method of disposition of its Registrable Securities as the Company may reasonably request or as may be required by law for use in connection with any related Registration Statement or Prospectus (or amendment or supplement thereto) and all information required to be disclosed in order to make the information previously furnished to the Company by such Designated Stockholder not contain a material misstatement of fact or necessary to cause such Registration Statement or Prospectus (or amendment or supplement thereto) not to

20

omit a material fact with respect to such Designated Stockholder necessary in order to make the statements therein not misleading; (ii) shall comply with the Securities Act and the Exchange Act and all applicable state securities laws and comply with all applicable regulations in connection with the registration and the disposition of the Registrable Securities; and (iii) shall not use any Free Writing Prospectus without the prior written consent of the Company. If any seller of Registrable Securities fails to provide such information required to be included in such Registration Statement by applicable securities laws or otherwise reasonably necessary in connection with the disposition of such Registrable Securities in a timely manner after written request therefor, the Company may exclude such seller’s Registrable Securities from a registration under Sections 3, 4 or 5 hereof.

               (c) Notice to Discontinue. Each Designated Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 8(a)(v)(D) or, subject to Section 3(a) and 5(c), the existence of Valid Business Reason, such Designated Stockholder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Designated Stockholder’s receipt of the copies of the supplemented or amended Prospectus or Free Writing Prospectus contemplated by Section 8(a)(vi) (or if no supplemental or amended prospectus or Free Writing Prospectus is required, upon confirmation from the Company that use of the Prospectus or Free Writing Prospectus is once again permitted) and, if so directed by the Company, such Designated Stockholder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Designated Stockholder’s possession, of the Prospectus or Free Writing Prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 8(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 8(a)(v)(D) to and including the date when sellers of such Registrable Securities under such Registration Statement shall have received the copies of the supplemented or amended Prospectus or Free Writing Prospectus contemplated by and meeting the requirements of Section 8(a)(v).

               (d) Registration Expenses. The Company shall pay all expenses arising from or incident to its performance of, or compliance with, this Agreement, including, without limitation, (i) Commission, stock exchange and FINRA registration and filing fees, (ii) all fees and expenses incurred in complying with state securities or “blue sky” laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with “blue sky” qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and expenses of counsel to the Company and of its independent registered public accounting firm and any other accounting fees, charges and expenses incurred by the Company (including, without limitation, any expenses arising from any “cold comfort” letters or any special audits incident to or required by any registration or qualification) and (v) any liability insurance

21

or other premiums for insurance obtained in connection with any Demand Registration or piggy-back registration thereon, Incidental Registration or S-3 Registration pursuant to the terms of this Agreement, regardless of whether such Registration Statement is declared effective. All of the expenses described in the preceding sentence of this Section 8(d) are referred to herein as “Registration Expenses.” The Designated Stockholders shall (A) bear (x) the expense of any broker’s commission or underwriter’s discount or commission relating to registration and sale of such Designated Stockholders’ Registrable Securities and (y) the fees and expenses of their own counsel and (B) reimburse the Company for the first $55,000 of Registration Expenses incurred by the Company, pro rata according to each Designated Stockholder’s participation in the registered offering giving rise to such Registration Expenses.

          9. Indemnification; Contribution.

               (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Designated Stockholder, its partners, directors, officers, Affiliates, stockholders, members, employees, trustees and agents and each Person who controls (within the meaning of Section 15 of the Securities Act) such Designated Stockholder and the partners, directors, officers, Affiliates, stockholders, members, employees, trustees and agents of such controlling Person, from and against any and all losses, claims, damages, liabilities and expenses, or any action or proceeding, whether commenced or threatened, in respect thereof (including reasonable costs of investigation and reasonable attorneys’ fees and expenses) (each, a “Liability” and collectively, “Liabilities”), arising out of or based upon (i) any untrue, or allegedly untrue, statement of a material fact contained in the Disclosure Package, the Registration Statement, the Prospectus, any Free Writing Prospectus or in any amendment or supplement thereto; (ii) the omission or alleged omission to state in the Disclosure Package, the Registration Statement, the Prospectus, any Free Writing Prospectus or in any amendment or supplement thereto any material fact required to be stated therein or necessary to make the statements therein not misleading under the circumstances such statements were made and (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such Registration Statement; provided, however, that the Company shall not be held liable in any such case to the extent that any such Liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission contained in such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto in reliance upon and in strict conformity with information concerning such Designated Stockholder furnished in writing to the Company by or on behalf of such Designated Stockholder expressly for use in such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto, including, without limitation, the information furnished to the Company pursuant to Section 8(b). The Company shall also provide customary indemnities to any underwriters, selling brokers, dealer managers and similar securities industry professionals participating in any distribution pursuant hereto, including their officers, directors and employees and each Person who controls such underwriters (within the

22

meaning of Section 15 of the Securities Act) to the same extent as provided above with respect to the indemnification of the Designated Stockholders of Registrable Securities.

               (b) Indemnification by Designated Stockholders. In connection with any offering in which a Designated Stockholder is participating pursuant to Section 3, 4 or 5, such Designated Stockholder agrees severally to indemnify and hold harmless the Company, the other Designated Stockholders, any underwriter retained by the Company and each Person who controls the Company, the other Designated Stockholders or such underwriter (within the meaning of Section 15 of the Securities Act) to the same extent as the indemnity from the Company to the Designated Stockholders (including indemnification of their respective partners, directors, officers, members, employees and trustees) set forth in Section 9(a)(i), (ii) and (iii) above, but only to the extent that Liabilities arise out of or are based upon a statement or alleged statement or an omission or alleged omission that was made in reliance upon and in strict conformity with information with respect to such Designated Stockholder furnished in writing to the Company by or on behalf of such Designated Stockholder expressly for use in such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto, including, without limitation, the information furnished to the Company pursuant to Section 8(b); provided, however, that the total amount to be indemnified by such Designated Stockholder pursuant to this Section 9(b) shall be limited to the net proceeds received by such Designated Stockholder in the offering to which such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto relates.

               (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification or contribution hereunder (the “Indemnified Party”) agrees to give prompt written notice to the indemnifying party (the “Indemnifying Party”) after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, however, that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any Liability that it may have to the Indemnified Party hereunder (except to the extent that the Indemnifying Party is materially prejudiced or otherwise forfeits substantive rights or defenses by reason of such failure). If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. Each Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to promptly assume the defense of such action and to employ counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and such parties have been advised by such counsel that either (x) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under

23

applicable standards of professional conduct or (y) there may be one or more legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. In any of such cases, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all Indemnified Parties and all such expenses shall be reimbursed as incurred. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the consent of such Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is a party and indemnity has been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such proceeding. Notwithstanding the foregoing, if at any time an Indemnified Party shall have requested the Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by this Section 9, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without the Indemnifying Party’s written consent if (i) such settlement is entered into more than thirty (30) Business Days after receipt by the Indemnifying Party of the aforesaid request and (ii) the Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request or contested the reasonableness of such fees and expenses prior to the date of such settlement.

               (d) Contribution. If the indemnification provided for in this Section 9 from the Indemnifying Party is unavailable to an Indemnified Party hereunder or insufficient to hold harmless an Indemnified Party in respect of any Liabilities referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Liabilities, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 9(a), 9(b) and 9(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding; provided, that the total amount to be contributed by any Designated Stockholder shall be limited to the amount by which the net proceeds (after deducting the underwriters’ discounts and commissions) received by such Designated Stockholder in the offering exceed the amount of any damages that the Designated Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

24

          The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

          10. Rule 144. The Company covenants that it shall use its commercially reasonable efforts to take such action as may be required from time to time (including, without limitation, make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 under the Securities Act) to enable such Designated Stockholder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (ii) any similar rules or regulations hereafter adopted by the Commission. The Company shall, upon the request of any Designated Stockholder, deliver to such Designated Stockholder a written statement as to whether it has complied with such requirements.

          11. Miscellaneous.

               (a) Stock Splits, etc. The provisions of this Agreement shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Designated Stockholders on terms substantially the same as this Agreement as a condition of any such transaction.

               (b) No Inconsistent Agreements. The Company hereby represents and warrants that it has not previously entered into any agreement granting registration rights to any Person with respect to any securities of the Company. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Designated Stockholders in this Agreement or grant any additional registration rights to any Person or with respect to any securities that are not Registrable Securities which rights are inconsistent with the rights granted in this Agreement.

               (c) Remedies. The Designated Stockholders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate.

               (d) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented,

25

and waivers or consents to departures from the provisions hereof may not be given unless consented to in writing by the Company and the Designated Stockholders holding at least a majority of the Registrable Securities; provided, however, that no amendment, modification, supplement, waiver or consent to depart from the provisions hereof shall be effective if such amendment, modification, supplement, waiver or consent to depart from the provisions hereof materially and adversely affects the substantive rights or obligations of one Designated Stockholder, or group of Designated Stockholders, without a similar and proportionate effect on the substantive rights or obligations of all Designated Stockholders, unless each such disproportionately affected Designated Stockholder consents in writing thereto.

               (e) Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be made by registered or certified first-class mail, return receipt requested, telecopy, electronic transmission, courier service or personal delivery:

                    (i)      If to the Company:

Sun-Times Media Group, Inc.
350 N. Orleans St.
Chicago, Il 60654
Telecopy:
Attention: General Counsel

with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Judith R. Thoyer

                    (ii)      If to any Designated Stockholder, at its address as it appears in the books and records of the Company; provided that if Hollinger Inc. and/or 4322525 Canada Inc. is a Designated Stockholder, then a copy of any communication shall also be sent to the Indenture Trustees at the following addresses:

Delaware Trust Company, National Association
c/o Wachovia Bank, National Association
123 S. Broad Street, 9^th Floor
Philadelphia, PA 19109
Attention: Ms. Mary M. McCracken

HSBC Bank USA, National Association
Corporate Trust & Loan Agency
452 Fifth Avenue
New York, NY 10018
Attention: Ms. Sandra E. Horwitz

26

          All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied, or electronically transmitted. Any party may by notice given in accordance with this Section 11(e) designate another address or Person for receipt of notices hereunder.

               (f) Permitted Assignees; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the permitted assignees of the parties hereto as provided in Section 2(d). Except as provided in Section 9, no Person other than the parties hereto and their permitted assignees is intended to be a beneficiary of this Agreement.

               (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

               (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

               (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.

               (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired.

               (k) Rules of Construction. Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement. Terms defined in the singular have a comparable meaning when used in the plural, and vice versa.

               (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, representations, warranties or undertakings with respect to the subject matter contained herein, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter.

27

               (m) Further Assurances. Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

               (n) Other Agreements. Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company imposed by, any other agreement or applicable law.

[Remainder of page intentionally left blank]

28

          IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Registration Rights Agreement on the date first written above.

Sun-Times Media Group, Inc.
By:
	Name:
	Title:

Hollinger Inc.
By:
	Name:
	Title:

4322525 Canada Inc.
By:
	Name:
	Title:

Annex A

[Name and Address of Transferee/Pledgee]

                    
 [Address]

[Name and Address of Transferor/Pledgor]

                    , 200__

Ladies and Gentlemen:

          Reference is made to the Registration Rights Agreement, dated as of June 17, 2008 (the “Registration Rights Agreement”), by and among Sun-Times Media Group, Inc., Hollinger Inc., 4322525 Canada Inc., and certain additional stockholders referred to therein. All capitalized terms used herein but not otherwise defined shall have the meanings given to them in the Registration Rights Agreement.

          In connection with the [transfer][pledge] by [Name of Transferor/Pledgor] of Registrable Securities with associated registration rights under the Registration Rights Agreement to [Name of Transferee/Pledgee] as [transferee (the “Transferee”)][pledgee (the “Pledgee”)], the [Transferee][Pledgee] hereby agrees to be bound as a Designated Stockholder by the provisions of the Registration Rights Agreement as provided under Section 2(d)(i) thereto.

          [For transfers from Hollinger Inc. and 4322525 Canada Inc. to the Indenture Trustees] [Further reference is made to the Indentures. Hollinger Inc. and 4322525 Canada Inc. hereby acknowledge and agree to fund any amounts that the Indenture Trustees shall be obligated to pay as a Designated Stockholder under the Registration Rights Agreement (including without limitation those amounts set forth in Sections 8(d) and 9(b)); provided that Hollinger Inc. and 4322525 Canada Inc., collectively, shall only be obligated to fund up to $55,000 less any amounts paid or to be paid by them to the Company pursuant to Section 8(d)(B). In addition, Hollinger Inc. and 4322525 Canada Inc. hereby acknowledge that by agreeing to be bound by the Registration Rights Agreement as a Designated Stockholder, the Indenture Trustees do not waive or surrender any of its rights under the applicable Indenture (and related security agreement), including the right to be compensated, reimbursed and indemnified in accordance with the terms of the applicable Indenture by Hollinger Inc., any of the guarantors and/or the holders of the notes issued under such Indenture (and related security agreement).]

          This consent shall be governed by New York law.

Yours sincerely, [Name of Transferee/Pledgee]
By:
	Name:
	Title:

2

Annex B

Plan of Distribution

                    A selling stockholder may also enter into hedging and/or monetization transactions. For example, a selling stockholder may:

• enter into transactions with a broker-dealer or affiliate of a broker-dealer or other third party in connection with which that other party will become a selling stockholder and engage in short sales of our common stock under this prospectus, in which case the other party may use shares of our common stock received from the selling stockholder to close out any short position;

• sell short our common stock under this prospectus and use shares of our common stock held by the selling stockholder to close out any short position;

• enter into options, forwards or other transactions that require the selling stockholder to deliver, in a transaction exempt from registration under the Securities Act, shares of our common stock to a broker-dealer or an affiliate of a broker-dealer or other third party who may then become a selling stockholder and publicly resell or otherwise transfer shares of our common stock under this prospectus;

• enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by the selling stockholder or borrowed from the selling stockholder or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from the selling stockholder in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement (or a post effective amendment).

EX-10.1

EXHIBIT 10.1

EXECUTION COPY

Multi-Party Settlement Term Sheet

The Applicants seek Court Approval, as described herein, of the following terms of agreement among the Applicants, Sun-Times Media Group, Inc. (“STMG”) and Davidson Kempner Capital Management LLC and its affiliates listed in Schedule “A” hereto (collectively, “DK”).

A. STMG

1.	Upon Court Approval, the Court shall authorize and direct Hollinger, 432, STMG and any other necessary parties to forthwith take the steps necessary to convert Hollinger’s and 432’s existing Class B shares into an equal number of Class A shares (the “Conversion”), subject to and prior to the steps described in paragraphs 2 and 3 hereof.
2.	If STMG’s stockholders are required to approve (the “Stockholder Approval”) the issuance of the Additional Shares (as defined below), then, upon Court Approval, the Court shall authorize Hollinger, and Hollinger shall approve the issuance of the Additional Shares, pursuant to a stockholder written consent (the “Consent”).
3.	If Stockholder Approval is required, as soon as possible after the Consent Effective Date (as defined below), Hollinger and STMG shall effect the Conversion pursuant to the Restated Certificate of Incorporation of STMG. The Consent shall be effective after all actions required by the Securities Exchange Act of 1934, as amended (the “1934 Act”), have been taken and the issuance of the Additional Shares is permitted by the 1934 Act (the “Consent Effective Date”). If no Stockholder Approval is required, Hollinger and STMG shall effect the Conversion pursuant to the Restated Certificate of Incorporation of STMG as soon as possible after Court Approval.
4.	Forthwith after the later of (i) Court Approval and (ii), if Stockholder Approval is required, the Consent Effective Date, STMG will issue to Hollinger (or as it may direct) 1,499,000 additional Class A shares (the “Additional Shares”). The number of Additional Shares represents 10% of the number of Hollinger’s and 432’s existing Class B shares.
5.	All transactions will comply with all applicable laws and regulations and rules of applicable stock exchanges.
6.	Upon the later of (i) Court Approval and (ii) immediately after the next annual meeting scheduled for June 17, 2008, the six directors appointed by Hollinger to the Board of STMG (Wes Voorheis (“Voorheis”), William Aziz (“Aziz”), Edward Hannah, Peter Dey (“Dey”), Brent Baird (“Baird”) and Albrecht Bellstedt (“Bellstedt”)) will submit their resignations from the board of STMG. Upon submitting their resignations, each resigning director will receive: (a) a written confirmation from STMG that any existing STMG indemnity will remain in place and that such resigning director will be covered by the STMG directors and officers insurance policy in effect from time to time on the same

	terms as may be applicable to any other current STMG directors; and (b) reimbursement by STMG of all reasonable legal fees incurred by the independent directors (Dey, Baird and Bellstedt) in respect of their tenure as directors of STMG. Upon payment of such fees by STMG, Hollinger will reimburse STMG for all amounts paid in respect of such legal fees, except for US$75,000.
7.	Upon Court Approval, Hollinger will pay to STMG the reasonable fees and costs, including legal fees, of STMG incurred in connection with the CCAA proceedings of the Applicants, from August 1, 2007 up to and including the date of Court Approval. However, the total amounts payable to STMG by Hollinger under this paragraph shall be subject to a cap of US$2 million in the aggregate.
8.	STMG and Hollinger will cooperate to maximize the recoverable portion of the class action insurance settlement proceeds payable to them and such proceeds shall be allocated so that STMG receives 85% of such proceeds, and Hollinger receives 15% of such proceeds.
9.	Hollinger and STMG agree to divide their respective recoveries from the insolvency proceeding of Ravelston equally as between them.
10.	The following claims of STMG shall be allowed as unsecured claims against the Applicants (the “STMG Allowed Claims”) in the amounts indicated below, subject to confirmation of the calculations of the quantum of such claims by the Monitor:

(a)	a claim in respect of the promissory note executed by 4322525 Canada Inc. (“432”) in the amount of US $40,545,974;
(b)	all claims for contribution and indemnity STMG has or may assert against Hollinger in the amount of US$28,663,588; and
(c)	a claim for the aircraft lease settlement in the amount of CDN$1,281,941.

11.

Other than the STMG Allowed Claims, all other claims of STMG and its subsidiaries against the Applicants or any of their other subsidiaries, and all claims of the Applicants and their subsidiaries against STMG and its subsidiaries, shall be released upon Court Approval. The Applicants agree, in connection with their release of STMG, that they will not seek contribution, indemnification, reimbursement or any other form of claims over from Torys LLP or any of its predecessor or successor partnerships, F. David Radler or North American Newspapers Ltd. for any consideration paid or payable by any of the Applicants to STMG under this Term Sheet. For greater certainty, nothing contained in this paragraph shall limit or otherwise compromise in any manner, the Applicants’ right to pursue or continue to pursue those named parties for any claims whatsoever, save and except only in respect of consideration paid or payable by the Applicants to STMG under this Term Sheet.

12.

The total recoveries of STMG under the STMG Allowed Claims shall be capped at a maximum of US$15 million (the “STMG Cap”). After receipt of the STMG Cap, the

- 2 -

	balance of the STMG Allowed Claims will be assigned to the Applicants for the benefit of the Applicants’ other general unsecured creditors.
13.	Upon STMG receiving distributions in the aggregate amount of US$7.5 million in respect of the STMG Allowed Claims (after giving effect to any valid and effective subordination regarding distributions under the 432 promissory note referred to in paragraph 10(a) above, if any), fifty percent (50%) of all distributions thereafter payable to STMG in respect of the STMG Allowed Claims shall be assigned to the Applicants.
14.	Prior to any agreement in respect of the terms contained herein, STMG will ensure that nothing herein or in any plan of arrangement (the “Plan”) of the Applicants, if any, giving effect to the terms hereof or in the implementation of any such Plan will:

(a)	cause the Rights (as defined in the STMG rights plan) to become exercisable;
(b)	cause any Person (as defined in the STMG rights plan) to become an Acquiring Person (as defined in the STMG rights plan); or
(c)	trigger the application of the STMG rights plan.

15.	STMG will continue with its independent examination of all strategic alternatives available to STMG.
16.	Subject to the terms of any existing court orders or agreements pursuant to which the Applicants may be restricted, the Applicants will support the making of an order providing STMG with equal rights in respect of the Applicants’ Mareva injunction against Conrad Black and Barbara Amiel Black. STMG shall be permitted to reserve its right as to whether to seek such an order.

B. DK

17. (a) Forthwith after Court Approval, the Class A shares of STMG resulting from the Conversion (the “Exchanged Shares”), plus the Additional Shares, being 10% of the number of Hollinger’s and 432’s existing Class B shares, when issued shall be voted by the indenture trustees for the benefit of and at the direction of noteholders in the manner contemplated by the indentures up to that number of shares that is equal to or less than 19,999% of the aggregate number of STMG Class A shares then outstanding rounded down to the nearest whole share. The indenture trustees, for the benefit of the noteholders, may thereupon exercise all voting or other rights associated with the Exchanged Shares and the Additional Shares when issued subject to the limitation referred to in the immediately preceding sentence and subject to the rights and at the direction of the noteholders in the manner contemplated by the indentures (provided that any shares of the Applicants shall not be voted other than in favour of the election of the directors described in Schedule “C” hereto and other resolutions proposed by STMG at the next annual meeting of shareholders scheduled to occur on or about June 17, 2008 and thereafter without restriction) and may dispose of or otherwise realize upon such shares in any commercially reasonable manner and subject to the applicable law and as directed by the noteholders in a manner contemplated by the indentures (provided that

- 3 -

any such disposition or realization shall not be considered part of any Plan for the purposes of paragraph 14 hereof). The Applicants shall provide proxies and do such acts and things as will facilitate such rights.

(b) The Conversion and the issuance of the Additional Shares shall be subject to a registration rights agreement, to be negotiated among DK, the Applicants and STMG, all acting reasonably (the “Registration Rights Agreement”) forthwith after Court Approval. In all events, such Registration Rights Agreement shall include a provision with respect to payment of fees connected with any such registration, and shall include a provision permitting STMG to postpone the filing of a registration statement or its efforts to cause such registration statement to become effective if at the time the right to delay is exercised by STMG it shall determine in good faith that such offering would interfere with any acquisition, financing or other transaction that STMG is actively pursuing and is material to STMG or would involve initial or continuing disclosure obligations that would not be in the best interests of STMG.

(c) Upon being paid in full, all principal, interest and costs and other amounts, payable under the indentures), the indenture trustees will remit any remaining shares and any surplus proceeds to Hollinger and 432.

18. (a) Subject only to a reasonable reserve for (i) administrative costs (including any applicable legal fees, advisor fees and any other costs secured by the Administration Charge and also including a reserve to pay the reasonable costs, fees and expenses in respect of DK’s post-Court Approval role as described herein) and (ii) disputed claims, such reserves to be determined by the CRO (as defined in the STMG Term Sheet) and the Monitor, both acting reasonably (and subject to their right to seek directions from the Court), and in consultation with DK and STMG, and subject to the segregated funds described below, all other cash and realizable proceeds of the Applicants (including the 15% share of the insurance settlement proceeds referred to herein) and the non-applicant subsidiaries of the Applicants (other than STMG and its subsidiaries) shall be distributed as efficiently as reasonably possible to the creditors who have proved claims in accordance with the claims process for each of the Applicants. Distributions will be determined and made on a non-consolidated basis giving effect to inter-company claims but including only 50% of a claim by 432 against Hollinger in the amount of approximately CDN$342.5 million and subject to the following payments in the priority specified below:

(i) firstly, to pay a transaction fee to DK in consideration of its agreement to the terms hereof of CDNS1.5 million;

(ii) secondly, to pay the reasonable legal fees and disbursements of the indenture trustees up to and including Court Approval; and

(iii) thirdly, to pay the reasonable legal fees and disbursements of DK up to and including Court Approval;

- 4 -

provided that the total amount available to fund items (i) through (iii) hereof shall not exceed CDN$4,500,000. The priority payments described herein will not affect the timing or amount of the payment to STMG described in paragraph 7 herein.

(b) The Applicants will acknowledge claims owing by 432 and also by Hollinger to the indenture trustees in the full amount of the principal, interest and costs owing under the two debentures dated March 10, 2003 and September 30, 2004, the amount of which is estimated to be US$103,235,062 as of December 31, 2007. These claims will continue to accrue interest (unless and until the Applicants become bankrupt) in accordance with the debentures at the contractual rate until paid in full. The claims will be reduced only by distributions received by the indenture trustees from the estates of the Applicants and by amounts actually received from or in respect of the Exchanged Shares and the Additional Shares.

(c) The Monitor and the CRO, with periodic reports as requested (acting reasonably) and at least monthly to DK and STMG, will work to resolve and determine all disputed claims as efficiently as reasonably possible. The Monitor and the CRO will seek the input of DK and STMG before allowing any claims against the Applicants (other than the claims of STMG and the indenture trustees acknowledged herein). The Monitor and the CRO, in consultation with DK and STMG, will provide estimates of the net recovery to creditors based on the “waterfall” analysis of the Monitor and the information now known regarding the claims of all creditors (including the claims of STMG allowed under the STMG Term Sheet), such estimate to be updated after the claims bar dates for the Applicants and for the non-applicant subsidiaries as described herein.

(d) STMG will acknowledge that its claim against 432 in respect of the 432 loan is subordinated to and in favour of the claims of the indenture trustee for and in respect of only the senior bonds against 432.

19. DK agrees to:

(a)	withdraw its motion seeking the bankruptcies of the Applicants; and
(b)	support Court approval in the Applicants’ CCAA proceeding (“Court Approval”) consisting of: (i) approval of this agreement and (ii) approval of the other relief sought by the Applicants in their Notice of Motion dated April 10, 2008 to the extent not inconsistent with the terms described herein.

C. General Conditions

20. A standard CCAA claims process shall be implemented immediately for all claims against the Applicants, except claims against the Applicants by their subsidiaries (other than STMG and its subsidiaries).

- 5 -

21.	A subsequent claims process shall be implemented in respect of the non-Applicant subsidiaries of the Applicants to ensure that all creditors of those subsidiaries are identified prior to the asset consolidation herein contemplated.
22.	The Applicants, in consultation with the Monitor, shall prepare a plan to accumulate at Hollinger, on a tax-effective basis, all assets of the non-Applicant subsidiaries of the Applicants (other than STMG and its subsidiaries) after payment of all claims of creditors of such subsidiaries.
23.	The Applicants agree to work with the Monitor, in consultation with DK and STMG (and subject to the right of all parties to seek directions from the Court), to realize upon any assets of the Applicants and the non-applicant subsidiaries (other than the cash, the Exchanged Shares, the Additional Shares and the Litigation Assets described herein) with a view to distributing net proceeds thereof as efficiently as reasonably possible and to provide the necessary proxies. In particular, the Applicants will consider making such distributions pursuant to periodic Court orders in the CCAA proceedings as opposed to incurring the costs associated with formalizing and approving a Plan.
24.	The form and content of any Plan, if necessary or advisable to implement the terms hereof, as it relates to STMG shall be satisfactory to STMG, acting reasonably and, as it relates to DK and the indenture trustees, shall be satisfactory to DK, acting reasonably.
25.	All steps and transactions described herein that are to occur upon Court Approval are intended to take place simultaneously, and the parties shall co-operate with each other to coordinate the timing of the effectiveness of such steps and transactions.
26.	The information contained in Schedules “B” and “C” hereof is confidential and commercially sensitive. The parties agree to seek an order sealing Schedule “B”, pending further order of the Court, and Schedule “C”, until such time as the information contained therein is disclosed by STMG, and agree that Schedules “B” and “C” will be redacted from any publicly disclosed materials.

D. Corporate Governance

27.	Aziz, or an entity controlled by him, shall be appointed forthwith by the Court Approval order as the chief restructuring officer (the “CRO”) of the Applicants and an officer of the Court in consideration of a monthly salary of $65,000, payable in advance, plus GST as applicable and reimbursement of reasonable expenses. Such engagement shall be on a month-to-month basis and may be terminated by Aziz upon 30 days’ prior written notice.
28.	The CRO shall be responsible, among other things, for developing and implementing the asset consolidation and repatriation plan and assisting the Monitor with the claims process.
29.	The board of directors of Hollinger shall be reduced as soon as possible to a maximum of three persons.

- 6 -

30.	Upon Court Approval, Hollinger and Voorheis will agree to suspend payment of all monthly work fees payable under Hollinger’s consulting agreement with Voorheis or any entity controlled by him and Voorheis shall resign as an officer and director of the Applicants or any subsidiary.
31.	In accordance with the engagement letter between Hollinger and BMO Nesbitt Burns Inc. (“BMO”), dated June 15, 2007, payment of all monthly work fees payable to BMO ceased in February 2008.

E. Litigation Assets

32.	As part of the Court Approval order, justice John D. Ground shall be appointed as an officer of the Court to perform the role of litigation trustee (the “Litigation Trustee”) of all claims and causes of action in favour of the Applicants (the “Litigation Assets”) on such terms as may be agreed between the Applicants and justice Ground and subject to approval by the Court.
33.	The Litigation Trustee will supervise, control and administer all aspects of the Litigation Assets of the Applicants, in consultation with the Applicants and subject to monitoring by the Monitor and supervision by the Court.
34.	The Litigation Trustee may, if he considers it necessary or advisable, retain the services of Voorheis or an entity controlled by him on an hourly basis to provide assistance or advice in respect of the Litigation Assets.
35.	The Litigation Trustee will be responsible for administering the Litigation Assets efficiently and in a cost-effective manner with a view to maximizing the net return, after costs, from the Litigation Assets to the Applicants and their creditors and other stakeholders and shall provide periodic reports to the Advisory Committee (as defined herein) and such other reports as may be requested by any member of the Advisory Committee, acting reasonably.
36.	An advisory committee shall be established to provide advice and direction to the Litigation Trustee (the “Advisory Committee”) comprised of one nominee of DK, one representative of the Applicants (other than Wes Voorheis) and the Litigation Trustee. The Litigation Trustee shall act in accordance with any majority decision of the Advisory Committee. For greater certainty, in the event of any disagreement as between the representative of DK and the representative of the Applicants, the Litigation Trustee shall have a deciding vote.
37.	The nominee of DK to the Advisory Committee shall not receive any remuneration for so acting other than as specified below. The representative of the Applicants shall be a senior Canadian litigation counsel and shall be paid at his or her usual hourly rate by the Applicants. At the option of DK, its nominee may receive compensation on an equivalent basis to that of the representative of the Applicants. All members of the Advisory Committee shall be indemnified in respect of any claims made against them in such capacity excepting only claims arising from their wilful misconduct or gross negligence.

- 7 -

38.	The Litigation Trustee will supervise and administer the Litigation Assets on a day-to day basis, including giving direction to counsel. The Litigation Trustee will seek such direction from the Advisory Committee as he deems necessary or appropriate, but, in particular, the Litigation Trustee will seek direction from the Advisory Committee with respect to litigation strategy, financing (if any) for the Litigation Assets, whether to accept or make any settlement offer and the use of proceeds of any settlement.
39.	The amount described in Schedule “B” hereto shall be segregated from the general cash assets of the Applicants and used exclusively for the purpose of funding the administration of the Litigation Assets. Payment of any amount payable to Mr. Wes Voorheis shall be made as contemplated in Schedule “B”.
40.	The Litigation Trustee will be responsible for administering the Litigation Assets efficiently and in a cost effective manner with a view to maximizing the net return, after costs, from the Litigation Assets to the Applicants and their creditors and other stakeholders.
41.	Representatives of DK and Hollinger will hold all information received by them as members of the Advisory Committee in strict confidence pursuant to a form of confidentiality agreement acceptable to Hollinger, the Litigation Trustee and such representatives, all acting reasonably.
42.	DK or Hollinger may apply to Court at any time to seek such changes to the provisions of the order appointing the Litigation Trustee as either of them may deem necessary or appropriate.

Subject to Court Approval being obtained to the terms hereof, pursuant to an Order in form and content satisfactory to the parties, for consideration received, each of the undersigned agrees to the above as evidenced by their respective signatures as of this 14^th day of May, 2008. This agreement may be signed in counterparts and delivered by electronic transmission.

HOLLINGER INC., SUGRA LIMITED and

4322525 CANADA INC.

Per:	/s/ illegible
(I have authority to bind each of the corporations)

- 8 -

SUN TIMES MEDIA GROUP, INC.
Per:	/s/ illegible
Per:	/s/ illegible
(I/We have authority to bind the corporation)
DAVIDSON KEMPNER CAPITAL MANAGEMENT LLC on its own behalf and on behalf of the affiliates listed in Schedule “A” hereto (collectively, “DK”)
Per:
Per:
(I/We have authority to bind the entities collectively referred to as “DK”)

- 9 -

SUN TIMES MEDIA GROUP, INC.
Per:
Per:
(I/We have authority to bind the corporation)
DAVIDSON KEMPNER CAPITAL MANAGEMENT LLC on its own behalf and on behalf of the affiliates listed in Schedule “A” hereto (collectively, “DK”)
Per:	/s/ illegible
Per:
(I/We have authority to bind the entities collectively referred to as “DK”)

- 9 -

Schedule “A”

MH Davidson Co.

Davidson Kempner International Limited

Davidson Kempner Institutional Partners

Davidson Kempner Partners

- 10 -

EX-31.1

Exhibit 31.1

Certification Pursuant To
Rule 13a-14(a) of the Securities Exchange Act of 1934

I, Cyrus F. Freidheim, Jr., certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Sun-Times Media Group, Inc. (the “registrant”);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

/s/ CYRUS F. FREIDHEIM, JR.
Name:	Cyrus F. Freidheim, Jr.
Title:	President and Chief Executive Officer

Date: August 8, 2008

EX-31.2

Exhibit 31.2

Certification Pursuant To
Rule 13a-14(a) of the Securities Exchange Act of 1934

I, William G. Barker III, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Sun-Times Media Group, Inc. (the “registrant”);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

/s/ WILLIAM G. BARKER III
Name:	William G. Barker III
Title:	Vice President and Chief Financial Officer

Date: August 8, 2008

EX-32.1

Exhibit 32.1

Sun-Times Media Group, Inc.

Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

     In connection with the quarterly report of Sun-Times Media Group, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cyrus F. Freidheim, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ CYRUS F. FREIDHEIM, JR.
Name:	Cyrus F. Freidheim, Jr.
Title:	President and Chief Executive Officer

Date: August 8, 2008

A signed original of this written statement required by Section 906 has been provided to Sun-Times Media Group, Inc. and will be retained by Sun-Times Media Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Sun-Times Media Group, Inc.

Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

     In connection with the quarterly report of Sun-Times Media Group, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William G. Barker III, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ WILLIAM G. BARKER III
Name:	William G. Barker III
Title:	Vice President and Chief Financial Officer

Date: August 8, 2008

A signed original of this written statement required by Section 906 has been provided to Sun-Times Media Group, Inc. and will be retained by Sun-Times Media Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.