Exhibit 10.64

 

Confidential Materials omitted and filed separately with the Securities and
Exchange.  Asterisks denote omissions.

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT is entered into on December 18, 2007  by and
between

 

[**], a citizen of the Russian Federation, bearing passport number [**] issued
by OVD of Sovetskiy district, Novosibirsk on July 12, 2002, code of subdivision
542-009, with his registered address at [**], and Mr. [**], a citizen of the
Russian Federation, bearing passport number [**] issued by Subdivision of
Yuzhnoportovyi district, Moscow on December 11, 2007, code of subdivision
770-113, with his registered address at [**], and Mr. [**], a citizen of the
Russian Federation, bearing passport number [**] issued by Passports and visas
issuing department of the Supreme Department of Internal Affairs, Moscow on
December 18, 2006, code of subdivision 771-001, with his registered address at
[**], and Mr. [**], a citizen of the Russian Federation, bearing passport number
[**] issued by Traktorozavodskim RUVD, Chelyabinsk on June 4, 2001, code of
subdivision 742-047, with his registered address at [**] (each, a “Seller” and
collectively, the “Sellers”), from one side, and CJSC “CTC NETWORK”, a company
organised and existing under the laws of the Russian Federation, having its
registered office at 3rd Khoroshevskaya str., 12, 123298, Moscow, Russia (“CTC
Network”), and CTC Media, Inc., a Delaware corporation with its registered
office at 2711 Centerville Road, Suite 400, Wilmington, Delaware (“CTC Media”),
on the other side.  CTC Network and CTC Media are hereinafter collectively
referred to as the “Purchaser”.

 

WITHNESSETH:

 

WHEREAS, Mr. [**], Mr. [**], Mr. [**] and Mr. [**], are the founders and
participants of Costafilm Limited Local Corporation, a limited liability company
incorporated under the laws of the Russian Federation, registered by
Interdistrict Tax Inspection No. 46, Moscow on August 28, 2007, registration
number 1077759492304, having its registered office at Radio str., 14 — 1,
105005, Moscow, Russia (the “Company”). The charter capital of the Company is
divided into four participatory shares. Each of the Sellers owns one
participatory share in the Company. The participatory share of Mr. [**] amounts
to RUR 6 000 and represents 60%, the participatory share of Mr. [**] amounts to
RUR 1250 and represents 12.5%, the participatory share of Mr. [**] amounts to
RUR 1500 and represents 15% and  the participatory share of Mr. [**] amounts to
RUR 1250 and represents 12.5% of the charter capital of the Company.

 

WHEREAS, the Purchaser is willing to acquire from the Sellers and the Sellers
are willing to sell to the Purchaser their participatory shares in the Company
subject to the terms and conditions hereinafter set forth:

 

NOW, THEREFORE, the party hereto agrees as follows:

 

1.             DEFINITIONS

 

As used in this Agreement, unless expressly otherwise stated or evident in the
context, the following terms shall have the following meanings and the singular
(where

 

1

--------------------------------------------------------------------------------

 

appropriate) shall include the plural and vice versa.  Any references to
appendices or sub-headings shall mean the appendices and sub-headings of this
Agreement:

 

1.1

 

“Accounts”

 

shall mean the profit and loss statement and balance sheet of the Company
including the notes thereto as at October 31, 2007, together with the
accompanying management’s report, prepared in accordance with all applicable
Russian accounting rules and regulations, attached hereto as Appendix A.

 

 

 

 

 

1.2

 

“Accounts Date”

 

shall mean the date of the balance sheet of the Accounts.

 

 

 

 

 

1.3

 

“Agreement”

 

shall mean this Share Purchase Agreement and the Appendices hereto.

 

 

 

 

 

1.4

 

“Company”

 

shall have the meaning set out in the recitals of this Agreement.

 

 

 

 

 

1.5

 

“Completion”

 

shall mean discharge of the Purchaser’s obligations to purchase, and respective
Sellers’ obligations to sell, the Shares.

 

 

 

 

 

1.6

 

“Completion Accounts”

 

shall mean the financial statements of the Company as at December 31, 2007
prepared in accordance with all applicable Russian accounting rules and
regulations.

 

 

 

 

 

1.7

 

“Completion Date”

 

shall mean January 25, 2008 or such later date as shall be mutually agreed
between the Purchaser and the Seller Representative.

 

 

 

 

 

1.8

 

“Confidential Information”

 

shall have the meaning set out in Article 10.4.

 

 

 

 

 

1.9

 

“CTC Network”

 

shall have the meaning set out in the introductory paragraph of this Agreement.

 

 

 

 

 

1.10

 

“CTC Media”

 

shall have the meaning set out in the introductory paragraph of this Agreement.

 

 

 

 

 

1.11

 

“Damages”

 

shall have the meaning set out in Article 9.

 

 

 

 

 

1.12

 

“Defaulted Amount”

 

shall have the meaning set out in Article 3.5(a)(i).

 

 

 

 

 

1.13

 

“Disability”

 

shall mean, with respect to any Seller, the inability of the such Seller, due to
a physical or mental disability for a period of ninety days (whether or not
consecutive) during any three hundred sixty day period, to perform the services
contemplated under his contract of employment with the Company.

 

 

 

 

 

1.14

 

“EBIT”

 

shall mean the earnings before interest expenses and interest income, and profit
tax provision or benefit for the Company as per audited annual accounts prepared
in accordance with US GAAP, excluding the amortisation of any purchase price

 

2

--------------------------------------------------------------------------------

 

 

 

 

 

adjustments related to intangible assets “pushed down” into the Company’s
accounts by the Group.

 

 

 

 

 

1.15

 

“Financial Year”

 

shall mean the period between 1 January to 31 December.

 

 

 

 

 

1.16

 

“Group”

 

shall mean CTC Media, Inc., a Delaware corporation, and each of its
subsidiaries.

 

 

 

 

 

1.17

 

“Key Performance Indicators”

 

shall mean the meaning set out in Article 3.5(a)(iii).

 

 

 

 

 

1.18

 

“Multiple Defaulting Sellers”

 

shall have the meaning set out in Article 3.5(a)(ii).

 

 

 

 

 

1.19

 

“Ordinary Course of Business”

 

shall mean the ordinary course of business of Company and prior to its
incorporation, the Predecessor, consistent with past customs and business
practices and always in accordance with good and sound business practice.

 

 

 

 

 

1.20

 

“Other Channel Revenue Objective”

 

shall have the meaning set out in Article 3.5(a)(iii)a.

 

 

 

 

 

1.21

 

“Party”

 

shall mean the Sellers and the Purchaser, as the context may require, and
“Parties” shall be construed accordingly.

 

 

 

 

 

1.22

 

“Performance Report”

 

shall mean, with respect to any Financial Year, a report prepared by the
Purchaser no later than 45 days following the end of such year, setting out the
extent to which the Key Performance Indicators for such year have been achieved
and, to the extent any Key Performance Indicators have not been achieved and/or
there has been adjustment to the relevant Earn Out Payment pursuant to
Article 3.5(a)(i), 3.5(a)(ii), 3.5(b), 7.6 or 9, showing the calculation of the
deductions from such Earn Out Payment.

 

 

 

 

 

1.23

 

“Predecessor”

 

shall mean Kinoconstanta LLC.

 

 

 

 

 

1.24

 

“Production Business”

 

shall mean the business of creating, developing and/or producing programming,
films or pilots for television broadcasting.

 

 

 

 

 

1.25

 

“Purchaser”

 

shall have the meaning set out in the introductory paragraph of this Agreement.

 

 

 

 

 

1.26

 

“Purchase Price”

 

shall have the meaning set out in Article 3.2.

 

 

 

 

 

1.27

 

“Relevant Audience Share”

 

shall mean the average audience share attained on the CTC Network TV channel by
the original run of any TV Product as further specified in Article 3.5(a)(iii)e.

 

 

 

 

 

1.28

 

“Ruble Equivalent”

 

shall mean, with respect to any US dollar amount, such US dollar amount
multiplied by the Russian ruble to US dollar

 

3

--------------------------------------------------------------------------------

 

 

 

 

 

exchange rate established by the Central Bank of Russia on the date of this
Agreement.

 

 

 

 

 

1.29

 

“RUR”

 

shall mean Russian rubles.

 

 

 

 

 

1.30

 

“SEC”

 

shall mean the US Securities and Exchange Commission.

 

 

 

 

 

1.31

 

“Seller Bank Account”

 

shall mean, with respect to each Seller, the bank account set out under such
Seller’s name below:

 

[**]

 

 

 

 

 

1.32

 

“Seller Representative”

 

shall mean MR. [**].

 

 

 

 

 

1.33

 

“Sellers”

 

shall have the meaning set out in the introductory paragraph of this Agreement.

 

 

 

 

 

1.34

 

“Shares”

 

shall mean a participatory share amounting to RUR 6 000 (60% of the charter
capital of the Company), which belongs to MR. [**], a participatory share
amounting to RUR 1250 (12.5% of the charter capital of the Company), which
belongs to MR. [**], a participatory share amounting to RUR 1500 (15% of the
charter capital of the Company), which belongs to MR. [**], and a participatory
share amounting to RUR 1250 (12.5 % of the charter capital of the Company),
which belongs to MR. [**].

 

 

 

 

 

1.35

 

“Single Defaulting Seller”

 

shall have the meaning set out in Article 3.5(a)(i).

 

 

 

 

 

1.36

 

“Taxes”

 

shall mean all income tax, value-added tax, transfer tax, excise tax, property
tax, stamp duty and any other taxes and similar charges, (including, without
limitation, social security charges) imposed by any authority, including all
penalties and interest.

 

 

 

 

 

1.37

 

“Termination Without Cause”

 

shall mean any termination of a Seller’s employment contract by the Company for
a reason other than circumstances which entitle the Company to terminate such
Seller’s employment on the grounds of such Seller’s misconduct and/or dishonesty
and/or gross negligence and/or any other ground stated expressly in the contract
of employment between the Company and such Seller which permits the Company to
terminate such Seller’s contract of employment without notice.

 

 

 

 

 

1.38

 

“TV Product”

 

shall mean any television series, sitcom, show or made for TV movie.

 

 

 

 

 

1.39

 

“Warranties”

 

shall have the meaning set out in Article 7.

 

 

 

 

 

1.40

 

“Working Capital”

 

shall be equal to current assets less deferred expenses that are not related to
the production of TV Products listed in Appendix

 

4

--------------------------------------------------------------------------------

 

 

 

 

 

E hereto less current liabilities of the Company as presented in the Completion
Accounts.

 

 

 

 

 

1.41

 

“2008 Earn Out Payment”

 

shall have the meaning set out in Article 3.5(b)(i).

 

 

 

 

 

1.42

 

“2009 Earn Out Payment”

 

shall have the meaning set out in Article 3.5(b)(ii).

 

 

 

 

 

1.43

 

“2010 Earn Out Payment”

 

shall have the meaning set out in Article 3.5(b)(iii).

 

2.             SUBJECT OF THE TRANSACTION

 

Subject to the terms and conditions herein set forth each Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from each Seller, the
Shares in the Company.  As between CTC Network and CTC Media, the Purchaser
shall purchase Shares pro rata from each of the Sellers as follows:

 

 

 

Percentage of
charter capital
in the
Company
acquired from
Mr. [**]

 

Percentage of
charter capital
in the
Company
acquired from
Mr. [**]

 

Percentage of
charter capital
in the
Company
acquired from
Mr. [**]

 

Percentage of
charter capital
in the
Company
acquired from
Mr. [**]

 

Resulting
overall
percentage
in the
Company

 

CTC Network

 

59.40

%

12.375

%

14.85

%

12.375

%

99.00

%

CTC Media

 

0.60

%

0.125

%

0.15

%

0.125

%

1.00

%

 

Notwithstanding any other provision of this Agreement to the contrary, in no
event shall the Purchaser be obligated to purchase any Share unless it is able
to purchase all of the Shares.

 

3.             AGGREGATE CONSIDERATION; PURCHASE PRICE; EARN OUT PAYMENTS AND
ADJUSTMENTS

 

3.1           AGGREGATE CONSIDERATION

 

The total consideration payable by the Purchasers to the Seller in connection
with the transactions contemplated by this Agreement shall be the sum of the
Purchase Price, the Earn Out Payments actually paid and the Defaulted Amount (if
any).

 

3.2           PURCHASE PRICE

 

The purchase price for the Shares shall be the Ruble Equivalent of US$11,000,000
(eleven million) less the sum of (i) the amount of any indebtedness of the
Company as set out in the Completion Accounts and (ii) if Working Capital as
presented in the

 

5

--------------------------------------------------------------------------------

 

Completion Accounts is negative, the amount by which current liabilities of the
Company exceeds current assets less deferred expenses of the Company that are
not related to the production of TV Products listed in Appendix E hereto, in
each case, as presented in the Completion Accounts (the result of such
calculation being hereinafter referred to as the “Purchase Price”). Promptly
following Completion, the Purchase Price shall be paid to the Sellers pro rata
based on their respective ownership levels in the Company immediately prior to
Completion.

 

3.3           EARN OUT PAYMENTS

 

In addition to the Purchase Price, the Purchaser shall pay to the Sellers the
2008 Earn Out Payment, the 2009 Earn Out Payment and the 2010 Earn Out Payment
(collectively, the “Earn Out Payments”), which payments shall be calculated in
accordance with Article 3.5(b).   Each Earn Out Payment shall be made by the
Purchaser, subject to the adjustments provided herein, to the Sellers pro rata
based on their respective ownership levels in the Company immediately prior to
Completion.

 

The Earn Out Payments shall be paid as follows:

 

(A)           THE PURCHASER WILL PAY THE 2008 EARN OUT PAYMENT, WHICH SHALL BE
EQUAL TO THE RUBLE EQUIVALENT OF US$ 11,000,000 (ELEVEN MILLION) LESS THE
DEDUCTIONS AND ADJUSTMENTS SET OUT IN ARTICLE 3.5(B)(I), WITHIN 10 WORKING DAYS
FROM THE DATE OF FILING OF CTC MEDIA’S 2008 ANNUAL REPORT ON FORM 10-K WITH THE
SEC, BUT NOT LATER THAN MARCH 31, 2009, PROVIDED THAT A PERFORMANCE REPORT FOR
2008 HAS BEEN SIGNED BY THE PURCHASER AND THE SELLER REPRESENTATIVE. IF THE
PURCHASER FAILS TO SIGN THE PERFORMANCE REPORT WITHOUT STATING A REASON FOR SUCH
FAILURE BY MARCH 20, 2009 THEN SUCH PERFORMANCE REPORT SHALL BE DEEMED SIGNED BY
THE PURCHASER;

 

(B)           THE PURCHASER WILL PAY THE 2009 EARN OUT PAYMENT, WHICH SHALL BE
EQUAL TO THE RUBLE EQUIVALENT OF US$ 9,000,000 (NINE MILLION) LESS THE
DEDUCTIONS AND ADJUSTMENTS SET OUT IN ARTICLE 3.5(B)(II), WITHIN 10 WORKING DAYS
FROM THE DATE OF FILING OF CTC MEDIA’S 2009 ANNUAL REPORT ON FORM 10-K WITH THE
SEC, BUT NOT LATER THAN MARCH 31, 2010, PROVIDED THAT A PERFORMANCE REPORT FOR
2009 HAS BEEN SIGNED BY THE PURCHASER AND THE SELLER REPRESENTATIVE. IF THE
PURCHASER FAILS TO SIGN THE PERFORMANCE REPORT WITHOUT STATING A REASON FOR SUCH
FAILURE BY MARCH 20, 2010 THEN SUCH PERFORMANCE REPORT SHALL BE DEEMED SIGNED BY
THE PURCHASER; AND

 

(C)           THE PURCHASER WILL PAY THE 2010 EARN OUT PAYMENT, WHICH SHALL BE
EQUAL TO THE RUBLE EQUIVALENT OF US$ 9,000,000 (NINE MILLION) LESS THE
DEDUCTIONS AND ADJUSTMENTS SET OUT IN ARTICLE 3.5(B)(III), WITHIN 10 WORKING
DAYS FROM THE DATE OF FILING OF CTC MEDIA’S 2010 ANNUAL REPORT ON FORM 10-K WITH
THE SEC, BUT NOT LATER THAN MARCH 31, 2011, PROVIDED THAT A PERFORMANCE REPORT
FOR 2010 HAS BEEN SIGNED BY THE PURCHASER AND THE SELLER REPRESENTATIVE. IF THE
PURCHASER FAILS TO SIGN THE PERFORMANCE REPORT WITHOUT STATING A REASON FOR SUCH
FAILURE BY MARCH 20, 2011 THEN SUCH PERFORMANCE REPORT SHALL BE DEEMED SIGNED BY
THE PURCHASER;

 

PROVIDED, HOWEVER, IF AT ANY TIME BEFORE THE PAYMENT OF THE 2010 EARN OUT
PAYMENT IN 2011, CTC MEDIA IS NO LONGER REQUIRED TO FILE AN ANNUAL REPORT (ON

 

6

--------------------------------------------------------------------------------

 

FORM 10-K OR ANY SUCCESSOR FORM) WITH THE SEC, ANY REMAINING EARN OUT PAYMENT
SHALL BE MADE ON OR AROUND MARCH 31 OF THE RELEVANT YEAR.

 

3.4           PAYMENT OF PURCHASE PRICE AND EARN OUT PAYMENTS

 

The Purchase Price and each Earn Out Payment shall be paid in RUR in immediately
available funds to the Seller Bank Accounts and shall be paid by the Purchaser
to the Sellers net of any Taxes that the Purchaser is required to pay on behalf
of the Sellers in connection with the sale and purchase of the Shares.  Each
Party’s obligations relating to payment of Taxes shall be determined in
accordance with  applicable tax legislation.

 

3.5           PURCHASE PRICE AND EARN OUT PAYMENT ADJUSTMENTS

 

(A)           THE PURCHASE PRICE AND EARN OUT PAYMENTS ARE SUBJECT TO THE
FOLLOWING CONDITIONS SUBSEQUENT:

 

(I)            EACH OF THE SELLERS SHALL BE CONTINUOUS FULL-TIME EMPLOYEES OF
THE COMPANY SERVING AS MANAGERS LOCATED IN MOSCOW, RUSSIA FROM THE COMPLETION
DATE UP TO AND INCLUDING 31 DECEMBER 2010.  IF ANY ONE SELLER (A “SINGLE
DEFAULTING SELLER”) (A) FAILS FOR ANY REASON (INCLUDING WITHOUT LIMITATION,
DISABILITY) TO CONTINUE TO BE SO EMPLOYED BY THE COMPANY OTHER THAN AS A RESULT
OF A TERMINATION WITHOUT CAUSE OR DEATH OR (B) BREACHES OF ANY OF HIS
OBLIGATIONS SET OUT IN ARTICLE 10 HEREOF (NON-COMPETITION; NON-SOLICITATION AND
CONFIDENTIALITY COMMITMENT) (I) ON OR BEFORE 31 DECEMBER 2009, THEN THE SELLERS
SHALL BE JOINTLY AND SEVERALLY OBLIGATED TO REPAY TO THE PURCHASER ANY PORTION
OF THE PURCHASE PRICE AND/OR EARN OUT PAYMENTS PREVIOUSLY PAID TO THE SINGLE
DEFAULTING SELLER OR (II) AFTER 31 DECEMBER 2009 BUT ON OR BEFORE 31
DECEMBER 2010 THEN THE SELLERS SHALL BE JOINTLY AND SEVERALLY OBLIGATED TO REPAY
TO THE PURCHASER THE EARN OUT PAYMENTS PREVIOUSLY PAID TO THE SINGLE DEFAULTING
SELLER (OTHER THAN HIS PORTION OF THE PURCHASE PRICE) AND, IN BOTH CASES SET OUT
IN SUBCLAUSES (I) AND (II), ANY AND ALL FUTURE EARN OUT PAYMENTS SHALL BE
REDUCED BY AN AMOUNT EQUAL TO THE SINGLE DEFAULTING SELLER’S PERCENTAGE INTEREST
IN THE COMPANY IMMEDIATELY PRIOR TO COMPLETION (SUCH AMOUNT REPAID BY THE
SELLERS ON BEHALF OF THE SINGLE DEFAULTING SELLER AND THE AMOUNT BY WHICH FUTURE
EARN OUT PAYMENTS ARE REDUCED, HEREINAFTER COLLECTIVELY REFERRED TO AS THE
“DEFAULTED AMOUNT”). IN THE EVENT OF A SINGLE DEFAULTING SELLER, THE PURCHASER
SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO RETAIN A MANAGER TO REPLACE THE
SINGLE DEFAULTING SELLER BUT, FOR THE AVOIDANCE OF DOUBT, SUCH REPLACEMENT
MANAGER SHALL NOT BE ENTITLED TO ANY PORTION OF THE PURCHASE PRICE, ANY EARN OUT
PAYMENT OR ANY OTHER OF THE RIGHTS AFFORDED A SELLER UNDER THIS AGREEMENT. IF
NOTWITHSTANDING THE OCCURRENCE OF A SINGLE DEFAULTING SELLER, (I) THE COMPANY
SHALL HAVE FULLY ACHIEVED EACH OF THE KEY PERFORMANCE INDICATORS SET OUT IN
ARTICLE 3.5(A)(III) FOR EACH OF THE 2008, 2009 AND 2010 FINANCIAL YEARS AND
(II) EACH OF THE SELLERS OTHER THAN THE SINGLE DEFAULTING SELLER SHALL HAVE
REMAINED AS A FULL-TIME EMPLOYEE OF THE COMPANY THROUGH AND INCLUDING 31
DECEMBER 2010 AND SHALL NOT HAVE VIOLATED OR BE IN VIOLATION OF HIS OBLIGATIONS
SET OUT IN ARTICLE 10 HEREOF (NON-

 

7

--------------------------------------------------------------------------------

 

COMPETITION; NON-SOLICITATION AND CONFIDENTIALITY COMMITMENT), THE PURCHASER
SHALL, ON THE DATE THAT THE 2010 EARN OUT PAYMENT IS MADE, ALSO PAY TO THE
SELLERS (OTHER THAN THE SINGLE DEFAULTING SELLER) THE DEFAULTED AMOUNT LESS THE
SUM OF (I) ANY UNCOLLECTIBLE ACCOUNTS RECEIVABLE OR LOANS AS PROVIDED IN
ARTICLE 7.6, (II) ANY UNPAID DAMAGES AS PROVIDED IN ARTICLE 9 AND (III) THE
AMOUNT OF ANY TAXES PAID BY THE PURCHASER ON AMOUNTS REPAID BY THE SELLERS TO
THE PURCHASER UNDER THIS ARTICLE 3.5(A)(I) AS A RESULT OF THE OCCURRENCE OF A
SINGLE DEFAULTING SELLER, IN EACH CASE, TO THE EXTENT THAT SUCH AMOUNTS WERE NOT
ALREADY DEDUCTED FROM AN EARN OUT PAYMENT.  SUCH AMOUNT SHALL BE PAID PRO RATA
TO SUCH SELLERS BASED ON THEIR RESPECTIVE OWNERSHIP INTERESTS IN THE COMPANY
IMMEDIATELY PRIOR TO COMPLETION.

 

(II)           IF TWO OR MORE SELLERS (“MULTIPLE DEFAULTING SELLERS”) (A) FAIL
FOR ANY REASON AT ANY TIME (INCLUDING WITHOUT LIMITATION, DISABILITY) TO BE
CONTINUOUS FULL-TIME EMPLOYEES OF THE COMPANY SERVING AS MANAGERS LOCATED IN
MOSCOW, RUSSIA FROM THE COMPLETION DATE UP TO AND INCLUDING 31 DECEMBER 2010
OTHER THAN AS A RESULT OF A TERMINATION WITHOUT CAUSE OR DEATH OR (B) BREACH ANY
OF THEIR RESPECTIVE OBLIGATIONS SET OUT IN ARTICLE 10 HEREOF ON OR BEFORE 31
DECEMBER 2010  (NON-COMPETITION; NON-SOLICITATION AND CONFIDENTIALITY
COMMITMENT), THE PURCHASER CAN ELECT, IN ITS SOLE DISCRETION, EITHER OF THE
FOLLOWING:  (I) TO TERMINATE THIS AGREEMENT IN WHICH CASE THE SELLERS SHALL BE
JOINTLY AND SEVERALLY LIABLE TO REPAY THE PURCHASER ALL THE PURCHASE PRICE AND
ANY AND ALL EARN OUT PAYMENTS PREVIOUSLY PAID BY THE PURCHASER TO THE SELLERS
AND THE PURCHASER SHALL BE OBLIGATED TO TRANSFER THE SHARES BACK TO THE SELLERS
(OR THEIR HEIRS) ACCORDING TO THEIR PERCENTAGE HOLDINGS IMMEDIATELY PRIOR TO
COMPLETION UPON SUCH REPAYMENT IN FULL, WITHOUT BENEFIT OF ANY WARRANTIES OTHER
THAN A WARRANTY THAT THE PURCHASER HAS NOT PLEDGED THE SHARES OR (II) TO
CONTINUE WITH THE AGREEMENT PROVIDED THAT ANY AND ALL FUTURE EARN OUT PAYMENTS
SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE MULTIPLE DEFAULTING SELLERS’
AGGREGATE PERCENTAGE INTEREST IN THE COMPANY IMMEDIATELY PRIOR TO COMPLETION AND
PROVIDED FURTHER THAT IF THE FAILURE TO BE SO EMPLOYED OR THE BREACH OF
ARTICLE 10 BY ANY ONE OF THE MULTIPLE DEFAULTING SELLERS OCCURS (X) ON OR BEFORE
31 DECEMBER 2009 THE SELLERS SHALL BE JOINTLY AND SEVERALLY OBLIGATED TO REPAY
TO THE PURCHASER THAT PORTION OF THE PURCHASE PRICE AND ANY AND ALL EARN OUT
PAYMENTS PREVIOUSLY PAID BY THE PURCHASER TO THE MULTIPLE DEFAULTING SELLERS OR
(Y) AFTER 31 DECEMBER 2009 BUT ON OR BEFORE 31 DECEMBER 2010 THEN THE SELLERS
SHALL BE JOINTLY AND SEVERALLY OBLIGATED TO REPAY TO THE PURCHASER ANY AND ALL
EARN OUT PAYMENTS PREVIOUSLY PAID BY THE PURCHASER TO THE MULTIPLE DEFAULTING
SELLERS. THE SELLERS’ OBLIGATIONS IN ARTICLE 10 SHALL SURVIVE ANY TERMINATION OF
THIS AGREEMENT PURSUANT TO THIS ARTICLE 3.5(A)(II).

 

(III)          THE COMPANY SHALL ACHIEVE IN EACH OF THE 2008, 2009 AND 2010
FINANCIAL YEARS THE FOLLOWING (THE “KEY PERFORMANCE INDICATORS”):

 

A.             NUMBER OF FREE-TO-AIR (FTA) HOURS:

 

8

--------------------------------------------------------------------------------

 

The Company shall produce and sell no less than 350 FTA hours of TV Product in
the 2008 Financial Year, provided that CTC Network places orders for such number
of hours itself and/or ensures such orders are placed by other TV channels.

 

In each of the 2009 and 2010 Financial Years, the Company shall (i) produce and
sell not less than 250 FTA hours of TV Product to CTC Network provided that CTC
Network places orders for at least such number of hours and (ii) either
(A) produce and sell a further 100 FTA hours of TV Product to TV channels other
than CTC Network or (B) achieve revenues (the “Other Channel Revenue Objective”)
from the production and sale of TV Product to TV channels other than CTC Network
equal to at least 40% of the total revenues derived by the Company from the
production and sale of TV Product to CTC Network during such Financial Year at
an EBIT margin of at least 14%.

 

Prior to producing any TV Product for any TV channel other than CTC Network, the
Company must obtain the consent of CTC Network.  CTC Network shall be given
priority by the Company when producing and distributing TV Product.  In
addition, CTC Network’s orders for TV Product will have priority over orders
from other TV channels.

 

From the Completion Date until 31 December 2010, if CTC Network acquires the
format rights for any TV Product, CTC Network shall inform the Company of the
acquisition of such rights and provide the Company with the opportunity to
negotiate with it to produce the related TV Product; provided that such
opportunity to negotiate with CTC Network shall not in any manner affect CTC
Network’s right to (i) negotiate with any other affiliated and/or third party
producers for the production of the related TV Product and/or (ii) elect, in its
sole discretion, to contract with any such producer for the production of such
TV Product.

 

B.             EBIT MARGIN: THE COMPANY SHALL ACHIEVE ON A STAND-ALONE BASIS AN
EBIT MARGIN OF NO LESS THAN 14% AND THE PARTIES ACKNOWLEDGE AND AGREE THAT,
NOTWITHSTANDING THE DEFINITION OF “RUBLE EQUIVALENT” SET OUT IN ARTICLE 1
HERETO, EBIT SHALL BE DETERMINED USING EXCHANGE RATES DEEMED APPROPRIATE BY US
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.

 

C.             VALUE OF A MULTIPLIER EV/EBIT: THE COMPANY SHALL ACHIEVE AN
EV/EBIT RATIO OF NO MORE THAN:

 

x6.3 in 2008

 

9

--------------------------------------------------------------------------------

 

x5.4 in 2009

x4.9 in 2010

 

where EV=the Ruble Equivalent of US$ 40 million.

 

D.             PRICING OF PROGRAMMING: THE AVERAGE PRICE OF TV PRODUCT SOLD TO
CTC NETWORK IN 2008 SHALL BE AS FOLLOWS:

 

·             the Ruble Equivalent of US$ 130,000 for approximately 48 minutes
of a standard TV series, without VAT;

 

·             the Ruble Equivalent of US$ 90,000 for approximately  24 minutes
of a sitcom, without VAT; and

 

·             the Ruble Equivalent of US$ 60,000 for approximately 48 minutes of
any TV series produced for children or teenagers, without VAT;

 

provided, that such prices shall include a transfer by the Company to CTC
Network and/or CTC Media of all intellectual property rights available under
applicable law relating to such  TV Product for worldwide broadcast,
distribution and/or other use of such TV Product in any format.

 

In the 2009 and 2010 Financial Years, the average price of TV Product produced
by the Company and sold to CTC Network shall be adjusted by the forecasted
average growth of the Russian TV ad market in 2009 vs 2008 and 2010 vs. 2009,
respectively, based on the last projection of the Russian Association of
Communication Agencies (AKAR) or, in the absence of AKAR, Video International
published or made available on or around 1st October of the preceding year,
expressed as a percentage and multiplied by the coefficient x 0.75

 

The pricing for shows or made for TV movie produced and sold by the Company to
CTC Network shall be mutually agreed by the Purchaser and the Seller
Representative on a project-by-project basis before such TV Product’s initial
launch.

 

E.             RELEVANT AUDIENCE SHARE FOR STANDARD TELEVISION SITCOMS AND
SERIES PRODUCED AND SOLD BY THE COMPANY TO CTC NETWORK SHALL BE NO LESS THAN 10%
(BASED ON THE MEASURING OF TNS GALLUP MEDIA RUSSIA/ALL 4+ AUDIENCE FOR SUCH TV
PRODUCT IN THE 7 – 11 P.M. TIMESLOT) OR NO LESS THAN 12% (BASED ON THE MEASURING
OF TNS GALLUP MEDIA RUSSIA/ALL 6-54 AUDIENCE FOR SUCH TV PRODUCT IN THE 7 –
11 P.M. TIMESLOT.

 

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RELEVANT AUDIENCE SHARE FOR TELEVISION SITCOMS AND SERIES FOR CHILDREN AND/OR
TEENAGERS PRODUCED AND SOLD BY THE COMPANY TO CTC NETWORK SHALL BE NO LESS THAN
10% (BASED ON THE MEASURING OF TNS GALLUP MEDIA RUSSIA/ALL 4+ AUDIENCE FOR SUCH
TV PRODUCT IN THE 4 – 7 P.M. TIMESLOT) OR NO LESS THAN 12% (BASED ON THE
MEASURING OF TNS GALLUP MEDIA RUSSIA/ALL 6-54 AUDIENCE FOR SUCH TV PRODUCT IN
THE 4 – 7 P.M. TIMESLOT.

 

RELEVANT AUDIENCE SHARE FOR SHOWS OR MADE FOR TV MOVIES PRODUCED AND SOLD BY THE
COMPANY TO CTC NETWORK SHALL BE NO LESS THAN THE AUDIENCE SHARE THRESHOLD
MUTUALLY AGREED BY THE PURCHASER AND THE SELLER REPRESENTATIVE ON A
PROJECT-BY-PROJECT BASIS BEFORE SUCH TV PRODUCT’S INITIAL LAUNCH.

 

If the number of episodes of any TV Product originally run in the 2008 or 2009
Financial Year is 20 or more, the Relevant Audience Share for such Financial
Year shall be measured by reference to the actual number of consecutive episodes
originally run in such Financial Year and, if such Relevant Audience Share is
below that set out above, any related deduction to the Earn Out Payment (as
provided in Article 3.5(b)) shall be taken in such Financial Year.  If the
number of episodes of any TV Product originally run in the 2008 or 2009
Financial Year is less than 20 and further episodes of such TV Product shall be
run in the next succeeding Financial Year, the average audience share for such
TV Product for such Financial Year shall not be used to determine whether or not
the Relevant Audience Share has been achieved for such Financial Year but the
average audience share for such episodes shall be aggregated with the episodes
originally run in the next succeeding Financial Year to determine the Relevant
Audience Share and, if such Relevant Audience Share is below that set out above,
any related deduction to the Earn Out Payment (as provided in Article 3.5(b))
shall be taken in such next succeeding Financial Year rather than in the
Financial Year in episodes of such TV Product were originally run.  If the TV
Product is originally run only in the 2010 Financial Year or the number of
episodes of such TV Product originally run in the 2008 or 2009 Financial Year
shall be less than 20 and no further episodes shall be originally run in the
next succeeding Financial Year, the Relevant Audience Share shall be measured by
reference to the actual number of consecutive episodes of originally run in such
Financial Year and, if such Relevant Audience Share is below that set out above,
any related deduction to the Earn Out Payment (as provided in Article 3.5(b))
shall be taken in such Financial Year.

 

IN THE SOLE DISCRETION OF THE MANAGEMENT OF CTC NETWORK, TV PRODUCT THAT IS NOT
ACHIEVING THE LEVELS SET OUT FOR THE RELEVANT AUDIENCE SHARE CAN BE REMOVED FROM
BROADCASTING AHEAD OF

 

11

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SCHEDULE OR MOVED INTO TIMESLOTS OUTSIDE OF THE ORIGINALLY DESIGNATED TIMESLOTS.

 

(B)           THE EARN OUT PAYMENTS SHALL BE CALCULATED AS FOLLOWS:

 

(I)            CALCULATION OF 2008 EARN OUT PAYMENT

 

The “2008 Earn Out Payment” shall be equal to the Ruble Equivalent of US$
11,000,000 (eleven million) less the sum of (1) the amount, if any, of the 2008
Deduction 1, (2) the amount, if any, of the 2008 Deduction 2, (3) the amount of
any adjustments for any Single Defaulting Seller or Multiple Defaulting Sellers
as set out in Articles 3.5(a)(i) and/or 3.5(a)(ii) (including, without
limitation, any amounts that that are due to be repaid to the Purchaser pursuant
to such Articles but remain unpaid as of the date of the 2008 Earn Out Payment),
(4) any uncollectible accounts receivable or loans as provided in Article 7.6
and (5) any unpaid Damages as provided in Article 9; provided, however, that the
2008 Earn Out Payment can never be adjusted below 0.

 

Calculation of 2008 Deduction 1

 

If in the 2008 Financial Year, either (x) production hours sold by the Company
is less than 350 FTA hours of TV Product in cases where CTC Network ordered or
caused other TV channels to order 350 or more hours and/or (y) the Relevant
Audience Share for such Financial Year was below that set forth in
Article 3.5(a)(iii)e, 2008 Deduction 1 shall be calculated in accordance with
the formula set out immediately below. Otherwise, 2008 Deduction 1 shall be 0.

 

2008 Deduction 1 = P x (1 - X/Z), where

 

P = US$ 11 million;

 

X = the number of FTA hours of TV Product actually produced and sold by the
Company in the 2008 Financial Year (but not greater than 350) less the aggregate
number of FTA hours of TV Product produced and sold in the 2008 Financial Year
for any TV Product where the Relevant Audience Share for such TV Product during
the course of such Financial Year was less than that stipulated by
Article 3.5(a)(iii)e; and

 

Z = the lesser of (i) the number of FTA hours of TV Product actually ordered for
production by CTC Network or other TV channels in the 2008 Financial Year and
(ii) 350 FTA hours.

 

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Calculation of 2008 Deduction 2

 

If in the 2008 Financial Year, the Company’s EBIT margin is less than 14%, 2008
Deduction 2 shall be calculated in accordance with the formula set out
immediately below. Otherwise, 2008 Deduction 2 shall be 0.

 

2008 Deduction 2 = (S x 14% - Y) x 6.3 x 27.5%, where

 

S = net sales revenue (without VAT) in 2008

 

Y = actual EBIT in 2008

 

(II)           CALCULATION OF 2009 EARN OUT PAYMENT

 

The “2009 Earn Out Payment” shall be equal to the Ruble Equivalent of US$
9,000,000 (nine million) less the sum of (1) the amount, if any, of the 2009
Deduction 1, (2) the amount, if any, of the 2009 Deduction 2, (3) the amount of
any adjustments for any Single Defaulting Seller or Multiple Defaulting Sellers
as set out in Articles 3.5(a)(i) and/or 3.5(a)(ii) (including, without
limitation, any amounts that that are due to be repaid to the Purchaser pursuant
to such Articles but remain unpaid as of the date of the 2009 Earn Out Payment),
(4) any uncollectible accounts receivable or loans as provided in Article 7.6,
(5) any unpaid Damages as provided in Article 9 and (6) the amount of any
deductions that would have been made to the 2008 Earn Out Payment but for the
fact that the amount of such deduction would have put the 2008 Earn Out Payment
below 0; provided, however, that the 2009 Earn Out Payment can never be adjusted
below 0.

 

Calculation of 2009 Deduction 1

 

If in the 2009 Financial Year, any of (x) the number of FTA hours of TV Product
produced by the Company and sold to CTC Network is less than the number of FTA
hours of TV Product ordered by CTC Network during such Financial Year  (provided
such number of FTA hours ordered by CTC Network does not exceed 250 FTA hours),
(y) the Other Channel Revenue Objective is not achieved in such Financial Year
and the number of FTA hours of TV Product produced by the Company and sold to TV
channels other than CTC Network in such Financial Year is less than 100 and/or
(z) the Relevant Audience Share for such Financial Year was below that set forth
in Article 3.5(a)(iii)e, 2009 Deduction 1 shall be calculated in accordance with
the formula set out immediately below. Otherwise, 2009 Deduction 1 shall be 0.

 

2009 Deduction 1 = P x (1 - X/Z), where

 

P = US$ 9 million;

 

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X = the sum of (1) number of FTA hours of TV Product actually produced by the
Company and sold to CTC Network in the 2009 Financial Year (but not more than
250 FTA hours) and (2) if the Other Channel Revenue Objective was achieved in
the 2009 Financial Year, 100 FTA hours, or, otherwise, the number of FTA hours
of TV Product actually produced by the Company and sold to TV channels other
than the CTC Network in the 2009 Financial Year (but not more than 100 FTA
hours) less (3) the aggregate number of FTA hours produced and sold in the 2009
Financial Year for any TV Product where the Relevant Audience Share for such TV
Product during the course of such Financial Year was less than that stipulated
by Article 3.5(a)(iii)e; and

 

Z = the sum of (1) the lesser of the number of FTA hours of TV Product actually
ordered by CTC Network for production by the Company in the 2009 Financial Year
and 250 FTA hours and (2) 100 FTA hours.

 

Calculation of 2009 Deduction 2

 

If in the 2009 Financial Year, the Company’s EBIT margin is less than 14%, 2009
Deduction 2 shall be calculated in accordance with the formula set out
immediately below. Otherwise, 2009 Deduction 2 shall be 0.

 

2009 Deduction 2 = (S x 14% - Y) x 5.4 x 22.5%, where

 

S = net sales revenue (without VAT) in 2009

 

Y = actual EBIT in 2009

 

(III)          CALCULATION OF 2010 EARN OUT PAYMENT

 

The “2010 Earn Out Payment” shall be equal to the Ruble Equivalent of US$
9,000,000 (nine million) less the sum of (1) the amount, if any, of the 2010
Deduction 1, (2) the amount, if any, of the 2010 Deduction 2, (3) the amount of
any adjustments for any Single Defaulting Seller or Multiple Defaulting Sellers
as set out in Articles 3.5(a)(i) and/or 3.5(a)(ii) (including, without
limitation, any amounts that that are due to be repaid to the Purchaser pursuant
to such Articles but remain unpaid as of the date of the 2010 Earn Out Payment),
(4) any uncollectible accounts receivable or loans as provided in Article 7.6,
(5) any unpaid Damages as provided in Article 9 and (6) the amount of any
deductions that would have been made to the 2009 Earn Out Payment  but for the
fact that the amount of such deduction would have put the 2009 Earn Out Payment
below 0; provided, however, that the 2010 Earn Out Payment can never be adjusted
below 0.

 

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Calculation of 2010 Deduction 1

 

If in the 2010 Financial Year, any of (x) the number of FTA hours of TV Product
produced by the Company and sold to CTC Network is less than the number of FTA
hours of TV Product ordered by CTC Network during such Financial Year  (provided
such number of FTA hours ordered by CTC Network does not exceed 250 FTA hours),
(y) the Other Channel Revenue Objective is not achieved for such Financial Year
and the number of FTA hours of TV Product produced by the Company and sold to TV
channels other than CTC Network in such Financial Year is less than 100 and/or
(z) the Relevant Audience Share for such Financial Year was below that set forth
in Article 3.5.(a)(iii)e, 2010 Deduction 1 shall be calculated in accordance
with the formula set out immediately below. Otherwise, 2010 Deduction 1 shall be
0.

 

2010 Deduction 1 = P x (1 - X/Z), where

 

P = US$ 9 million;

 

X = the sum of (1) number of FTA hours of TV Product actually produced by the
Company and sold to CTC Network in the 2010 Financial Year (but not more than
250 FTA hours) and (2) if the Other Channel Revenue Objective was achieved in
the 2010 Financial Year, 100 FTA hours, or, otherwise, the number of FTA hours
of TV Product actually produced by the Company and sold to TV channels other
than the CTC Network in the 2010 Financial Year (but not more than 100 FTA
hours) less (3) the aggregate number of FTA hours produced and sold in the 2010
Financial Year for any TV Product where the Relevant Audience Share for such TV
Product during the course of such Financial Year was less than that stipulated
by Article 3.5(a)(iii)e; and

 

Z = the sum of (1) the lesser of the number of FTA hours of TV Product actually
ordered by CTC Network for production by the Company in the 2010 Financial Year
and 250 FTA hours and (2) 100 FTA hours.

 

Calculation of 2010 Deduction 2

 

If in the 2010 Financial Year, the Company’s EBIT margin is less than 14%, 2010
Deduction 2 shall be calculated in accordance with the formula set out
immediately below. Otherwise, 2010 Deduction 2 shall be 0.

 

2010 Deduction 2 = (S x 14% - Y) x 4.9 x 22.5%, where

 

S = net sales revenue (without VAT) in 2010

 

Y = actual EBIT in 2010

 

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4.             DUE DILIGENCE

 

The Parties agree that, before Completion, the Purchaser shall have the right to
examine any and all documents (whether or not attached as appendices hereto) of
the Company for the purposes of verifying the statutory accounts and the
representations, warranties and assurances of the Sellers contained in this
Agreement.

 

In this respect, the Sellers will provide access during regular business hours
for the representatives of the Purchaser to the documents mentioned in the due
diligence check-list approved by the Purchaser, and to any other documents which
may be additionally requested in the course of the due diligence. The Sellers
shall bear the responsibility for providing the representatives of the Purchaser
with true, complete and current copies of the documents listed in the due
diligence information request lists or additionally requested.

 

4A.          RETENTION OF PERSONNEL

 

THE SELLERS SHALL CAUSE THE FOLLOWING PERSONNEL OF THE COMPANY TO REMAIN AT
THEIR POSITIONS WITH THE COMPANY AS AT THE DATE OF SIGNING OF THIS AGREEMENT
UNTIL 31 DECEMBER 2010, OR IN CASE OF THEIR LEAVING THE COMPANY, THE SELLERS
SHALL RETAIN, ON BEHALF OF THE COMPANY, OTHER RELEVANT PROFESSIONAL INDIVIDUALS
TO REPLACE SUCH PERSONS, WHICH INDIVIDUALS SHALL BE ACCEPTABLE TO THE PURCHASER:

 

Artemiy Loginov - Creative producer
Ilya Polezhaykin - Creative producer

Dmitry Permyakov - Creative producer
Anton Kolbasov - Creative producer
Alexander Zhigalkin - Creative producer
Victoria Wilson - Head of editors group
Alla Kurakina - Executive producer
Tatiana Davtyan - Executive producer
Ivan Permin - Director of post-production

 

5.             TRANSFER OF TITLE

 

The full and unrestricted ownership and title to the Shares shall pass from the
Sellers to the Purchaser on the Completion Date at Completion simultaneously
with the fulfilment of the Completion procedure set forth in Article 6 of this
Agreement.

 

6.             COMPLETION

 

6.1           COMPLETION

 

Completion shall take place on the Completion Date starting at 10.00 a.m. at the
offices of the Purchaser or as soon thereafter as practicable when all the
conditions for Completion set forth in this Article 6 of this Agreement have
been fulfilled.

 

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6.2           Conditions precedent for Completion by the Purchaser

 

The obligation of the Purchaser to consummate the transaction contemplated under
this Agreement shall be subject to the fulfilment, on or before the Completion
Date, of each of the following conditions (to the extent not waived by the
Purchaser which waiver shall be in the sole discretion of the Purchaser) and all
of which that require documentation shall be in the form and substance
satisfactory to the Purchaser and its legal counsel in their reasonable
judgement:

 

(A)           NEW INFORMATION

 

The Purchaser shall not have become aware of any new information between the
date hereof and the Completion Date, which in the Purchaser’s reasonable opinion
would have an adverse effect on the Company or its business.

 

(B)           WARRANTIES TRUE AND SELLERS’ CERTIFICATE

 

The representations, warranties and assurances given by the Sellers in Article 7
of this Agreement shall be true and correct on the date hereof and as of the
Completion Date and each Seller shall deliver a certificate dated as of the
Completion Date certifying to the same and to the fact that the Sellers have
complied with all covenants, obligations and conditions of this Agreement
required to be performed or completed as of Completion. Template of the
compliance certificate is attached hereto as Appendix J.

 

(C)           AUTHORITY APPROVALS

 

The Purchaser, the Sellers and/or the Company, as the case may be, shall have
obtained all necessary authorisations, approvals and consents from all relevant
authorities required for the lawful and valid consummation of the transaction
contemplated hereunder.

 

(D)           CORPORATE ACTION

 

All corporate actions necessary for the lawful and valid consummation of the
transactions contemplated hereby shall have been duly taken by the Sellers and,
as applicable, by the Company and shall be in full force and effect. The Sellers
shall have obtained proper waivers of pre-emptive rights from each other and the
Company for the sale of the Shares.  Copies of documents evidencing such
corporate actions and waivers shall have been delivered to the Purchaser.

 

(E)           SPOUSAL CONSENTS

 

Each of the Sellers shall have obtained a properly notarised spousal consent (if
applicable) to consummate all transactions contemplated under this Agreement and
copies of such spousal consents shall have been delivered to the Purchaser.

 

(F)            DUE DILIGENCE

 

The Sellers have fulfilled their obligations set forth in Article 4 of this
Agreement.

 

(G)           EMPLOYMENT AGREEMENTS

 

EACH OF THE SELLERS SHALL HAVE EXECUTED AND DELIVERED AN EMPLOYMENT AGREEMENT
WITH THE COMPANY THAT SHALL BE EFFECTIVE FROM THE COMPLETION DATE AND SHALL RUN
UNTIL 31

 

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DECEMBER 2010.  SUCH AGREEMENTS SHALL BE IN FORM AND SUBSTANCE ACCEPTABLE TO THE
PURCHASER AND SHALL PROVIDE FOR A MONTHLY SALARY OF RUR 248,000 PAYABLE IN RUR,
WHICH MONTHLY SALARY SHALL BE SUBJECT TO ANNUAL ADJUSTMENT BASED ON OFFICIAL
INFLATION RATE IN THE RUSSIAN FEDERATION. IN ADDITION, EACH OF THE SELLERS SHALL
BE ENTITLED TO PERFORMANCE BONUSES BASED ON THE RESULTS OF THE COMPANY IN ANY
FINANCIAL YEAR, THE AMOUNTS AND CONDITIONS OF SUCH PERFORMANCE BONUSES SHALL BE
ESTABLISHED NO LATER THAT MARCH 31 OF SUCH FINANCIAL YEAR.

 

(H)           ACCOUNTS AND COMPLETION ACCOUNTS

 

The Sellers shall have delivered to the Purchaser copies of  the Accounts and
the Completion Accounts.

 

6.3           CONDITIONS PRECEDENT FOR COMPLETION BY THE SELLERS

 

The obligations for the Sellers to close hereunder shall be subject to the
satisfaction, on or before the Completion Date, of each of the following
conditions (to the extent not waived by the Seller Representative) and all of
which that require documentation shall be in form and substance satisfactory to
the Seller Representative and the Sellers’ legal counsel in their reasonable
judgement.

 

(A)           WARRANTIES TRUE

 

The representations, warranties and assurances given by the Purchaser in
Article 8 of this Agreement shall be true and correct on and as of the
Completion Date.

 

(B)           CORPORATE ACTION

 

All corporate action necessary for the lawful and valid consummation of the
transactions contemplated hereby shall have been duly taken by the Purchaser and
shall be in full force and effect.

 

6.4           DELIVERIES AT COMPLETION

 

                At Completion:

 

(A)           THE SELLERS SELL, TRANSFER AND CONVEY TO THE PURCHASER THE SHARES
IN THE COMPANY BY WAY OF PRESENTING PROPERLY REGISTERED AMENDMENTS TO THE
CONSTITUTIONAL DOCUMENTS OF THE COMPANY LISTING THE PURCHASER AS VALID OWNERS OF
THE SHARES IN THE PERCENTAGES SET OUT IN ARTICLE 2 ABOVE;

 

(B)           PROMPTLY FOLLOWING CONFIRMATION OF SATISFACTION OF SUB-ARTICLE
(A) ABOVE, THE PURCHASER SHALL PAY TO THE SELLERS THE PURCHASE PRICE ON A PRO
RATA BASIS BY REFERENCE TO THEIR RESPECTIVE PERCENTAGE OWNERSHIP LEVELS IN THE
COMPANY IMMEDIATELY PRIOR TO COMPLETION; AND

 

(C)           ANY OTHER DOCUMENT, CONDITION, AMOUNT OR MATTER HEREIN CALLED FOR
TO BE PRODUCED, DELIVERED, RELEASED, PAID OR FULFILLED AT COMPLETION AS A
CONDITION PRECEDENT TO COMPLETION SHALL BE SO PRODUCED, DELIVERED, RELEASED,
PAID AND FULFILLED.

 

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6.5           BEST EFFORTS; TERMINATION

 

The Parties shall use their respective best efforts to cause all necessary
action to be taken such that all the conditions precedent for Completion shall
be fulfilled as promptly as practicable and all deliveries are made in timely
and proper fashion.  If Completion does not take place by February 29, 2008 the
Purchaser, on the one hand, or the Seller Representative, on the other hand, may
terminate this Agreement without prejudice to any remedies available to the
Parties hereunder or under the law. If any of the Parties of this Agreement
evades the consummation of the transactions contemplated hereunder without
essential reason, the other Party shall have the right to apply to a court with
a demand to compel the purchase of Shares to be concluded. The Party which has
unjustifiably evaded the consummation of the transactions contemplated hereunder
shall compensate the other Parties for the losses caused thereby.

 

7.             REPRESENTATIONS, WARRANTIES, ASSURANCES AND UNDERTAKINGS OF THE
SELLERS

 

The Sellers hereby, jointly and severally, represent to the Purchaser that the
statements contained in this Article 7 are true and correct.  The Sellers
acknowledge that the Purchaser is entering into this Agreement in reliance upon
the representations, warranties and assurances (the “Warranties”) given by the
Sellers to the Purchaser in this Article 7 being true and correct both on the
date of signing of this Agreement as well as at the Completion Date.

 

The liability of the Sellers under, and the rights and remedies of the Purchaser
in respect of, the Warranties shall be joint and several and shall not be
affected by any knowledge of the Purchaser as a result of the Purchaser’s
examination of the Company or otherwise.

 

7.1           RECORDS AND DOCUMENTATION

 

(A)           TRUE, COMPLETE AND CURRENT COPIES OF THE CHARTER, FOUNDATION
AGREEMENT AND REGISTRATION CERTIFICATES OF THE COMPANY ARE ATTACHED HERETO AS
APPENDIX B.

 

(B)           THE COMPANY HAS NOT FAILED TO TIMELY FILE ITS ANNUAL REPORTS OR
ANY OTHER DOCUMENTS WITH THE RELEVANT AUTHORITIES, AS REQUIRED.

 

(C)           THE STATUTORY BOOKS, REGISTERS AND RECORDS OF THE COMPANY ARE
ACCURATE AND HAVE BEEN MAINTAINED CONSISTENT WITH GOOD BUSINESS PRACTICE AND ARE
IN THE POSSESSION OF THE COMPANY.

 

7.2           TITLE AND AUTHORITY TO TRANSFER THE SHARES; CAPITALISATION

 

(A)           THE SELLERS HAVE FULL POWER, CAPACITY AND AUTHORITY TO SELL AND
TRANSFER THE SHARES, EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ALL OTHER
UNDERTAKINGS SET FORTH IN THIS AGREEMENT. THE SHARES ARE FREELY TRANSFERABLE TO
THE PURCHASER AND ARE FREE AND CLEAR OF ALL LIENS, ENCUMBRANCES AND RESTRICTIONS
ON THE ABILITY TO VOTE THE SHARES.  THE SHARE OWNED BY MR. [**] REPRESENTS 60%,
THE SHARE OWNED BY MR. [**] REPRESENTS 12.5%, THE SHARE OWNED BY MR. [**]
REPRESENTS 15% AND THE SHARE OWNED BY MR. [**] REPRESENTS 12.5 %, IN EACH CASE,
OF THE CHARTER CAPITAL OF THE COMPANY. THE SHARES ARE FULLY PAID.

 

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THERE ARE NO OUTSTANDING OBLIGATIONS, WARRANTS, OPTIONS, PRE-EMPTIVE RIGHTS OR
OTHER AGREEMENTS TO WHICH ANY OF THE SELLERS OR THE COMPANY IS A PARTY OR
OTHERWISE BOUND, PROVIDING FOR THE PURCHASE, REPURCHASE, REDEMPTION OR OTHER
ACQUISITION OF THE SHARES, EXCEPT FOR THIS AGREEMENT.

 

(B)           THE COMPANY DOES NOT OWN ANY INTEREST, DIRECTLY OR INDIRECTLY, IN
ANY CORPORATION, PARTNERSHIP OR OTHER LEGAL ENTITY AND DOES NOT HAVE ANY BRANCH
OFFICE.

 

(C)           ASSUMING ALL FILINGS, REGISTRATIONS, APPROVALS, NOTIFICATIONS ETC
REQUIRED BY APPLICABLE LAWS ARE DULY MADE, THE EXECUTION AND DELIVERY OF THIS
AGREEMENT BY THE SELLERS AND THE COMPLETION OF THE TRANSACTIONS CONTEMPLATED
HEREBY:

 

(I)            WILL NOT VIOLATE ANY PROVISION OF THE CHARTER OR FOUNDATION
AGREEMENT OF THE COMPANY;

 

(II)           WILL NOT VIOLATE ANY STATUTE, RULE, REGULATION, ORDER, AWARD,
JUDGEMENT, INJUNCTION OR DECREE OF ANY PUBLIC BODY OR AUTHORITY BY WHICH THE
SELLERS OR THE COMPANY OR ANY OF THEIR PROPERTIES OR ASSETS IS BOUND;

 

(III)          WILL NOT RESULT IN A VIOLATION OR BREACH OF, OR CONSTITUTE A
DEFAULT UNDER, ANY LICENSE, FRANCHISE, PERMIT, INDENTURE, AGREEMENT OR OTHER
INSTRUMENT TO WHICH THE SELLERS OR THE COMPANY IS A PARTY, OR BY WHICH THE
SELLERS OR THE COMPANY OR ANY OF THEIR PROPERTIES OR ASSETS IS BOUND.

 

7.3           THE ACCOUNTS

 

The Accounts are, and the Completion Accounts will be, complete and correct in
all respects and truly and correctly reflect the results of the operation, the
financial condition and the assets and liabilities of the Company as at the
relevant dates and have been prepared in conformity with appropriate accounting
principles, book-keeping legislation and tax legislation, consistently applied
by the Company.  Without limiting the generality of the foregoing, all cash
transactions undertaken by the Company have been properly recorded in the
Accounts and will be properly recorded in the Completion Accounts.

 

7.4           ASSETS AND PROPERTIES

 

(A)           APPENDIX C LISTS ALL THE PROPERTY AND TANGIBLE AND INTANGIBLE
ASSETS OWNED OR LEASED BY THE COMPANY, INCLUDING, WITHOUT LIMITATION, ALL
PROGRAMMING AND FILM RIGHTS, OWNED REAL PROPERTY (IF ANY) AND LEASES TO REAL
PROPERTY.

 

(B)           THE COMPANY HAS EXCLUSIVE TITLE TO ALL THE REAL PROPERTY AND OTHER
ASSETS RECORDED IN THE ACCOUNTS EXCEPT FOR SUCH ASSETS THAT HAVE BEEN SOLD AT
ORDINARY MARKET TERMS IN THE ORDINARY COURSE OF THE BUSINESS AFTER THE ACCOUNTS
DATE.  NONE OF THE ASSETS ARE SUBJECT TO ANY LIENS, MORTGAGES, CHARGES OR OTHER
ENCUMBRANCES.

 

(C)           THE COMPANY OWNS OR LEASES, AND WILL FOLLOWING THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREUNDER, CONTINUE TO OWN OR LEASE ALL THE ASSETS

 

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AND RIGHTS, AND PRODUCE ALL SERVICES REQUIRED TO CONDUCT ITS BUSINESS AS
CURRENTLY CONDUCTED ON A STAND ALONE BASIS.

 

7.5           INTELLECTUAL PROPERTY

 

(A)           APPENDIX D LISTS ALL INTELLECTUAL PROPERTY OWNED OR USED BY THE
COMPANY IN THE OPERATION OF ITS BUSINESS.  THE COMPANY OWNS ALL INTELLECTUAL
PROPERTY NECESSARY TO MANUFACTURE PRODUCTS PRESENTLY MANUFACTURED AND PRODUCE
THE SERVICES PRESENTLY PRODUCED, AND TO DISTRIBUTE AND SELL SUCH PRODUCTS AND
SERVICES IN ANY COUNTRY WHERE BUSINESS PRESENTLY IS CONDUCTED.

 

(B)           THE INTELLECTUAL PROPERTY LISTED IN APPENDIX D COMPRISES ALL SUCH
RIGHTS NECESSARY TO PERMIT THE OPERATION OF THE COMPANY’S BUSINESS AS NOW BEING
CONDUCTED.  NONE OF THE INTELLECTUAL PROPERTY IS SUBJECT TO ANY OUTSTANDING
ORDER, JUDGEMENT, LIEN, ENCUMBRANCE OR ATTACHMENT.

 

(C)           THE ACTIVITIES OF THE COMPANY (OR OF ANY LICENSEE UNDER ANY
LICENCE GRANTED BY THE COMPANY) DO NOT INFRINGE AND ARE NOT LIKELY TO INFRINGE
INTENTIONALLY ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY AND NO CLAIM
HAS BEEN MADE AGAINST THE COMPANY OR ANY SUCH LICENSEE IN RESPECT OF SUCH
INFRINGEMENT.

 

7.6           ACCOUNTS RECEIVABLE AND LOANS GIVEN

 

All of the receivables of the Company and loans given are good and fully
collectible within three months from the date when they become due and payable
at the amounts recorded in the Completion Accounts together with interest
thereon. In case the amount of such receivables of the Company or loans as per
the Completion Accounts are not collected within such three months period from
the date each such receivable or loan is due and payable, then a corresponding
deduction shall be made to the Earn Out Payments. Upon such adjustment of an
Earn Out Payment in accordance with this Article 7.6, the Purchaser shall cause
such non-collected receivables paid for to be transferred to the Sellers.

 

7.7           PRICING OF CONTRACTS

 

All the tenders and contracts binding the Company have been priced as required
by good and sound business practice, allowing for a reasonable profit.

 

7.8           COMPLIANCE

 

(A)           ALL AUTHORISATIONS AND APPROVALS, IN ACCORDANCE WITH THE
LEGISLATION OF THE COMPANY’S LOCATION, NECESSARY FOR THE DUE CONDUCT OF ITS
BUSINESS IN ITS JURISDICTION(S) OF OPERATION HAVE BEEN DULY OBTAINED AND ARE IN
FULL FORCE AND EFFECT.  THE ENTRY INTO AND THE CONSUMMATION OF THIS AGREEMENT
WILL NOT CAUSE ANY TERMINATION, REVOCATION, SUSPENSION OR MODIFICATION THEREOF,
NOR HAS THERE BEEN ANY VIOLATION OF ANY SUCH AUTHORISATIONS OR APPROVALS OF ANY
TERMS THEREOF.

 

(B)           THE COMPANY HAS BEEN AND IS IN FULL COMPLIANCE WITH ALL LAWS AND
REGULATIONS, IN ACCORDANCE WITH THE LEGISLATION OF THE COMPANY’S LOCATION, IN
ITS JURISDICTION APPLICABLE TO IT, INCLUDING TERMS AND CONDITIONS SET IN ANY
AUTHORISATIONS AND APPROVALS, AND WITH THE REQUIREMENTS OF ALL APPLICABLE
AGENCIES AND AUTHORITIES,

 

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AND THE COMPANY HAS OBTAINED ALL APPLICABLE AUTHORISATIONS AND APPROVALS WHICH
ARE REQUIRED UNDER ALL OF SUCH LAWS.

 

7.9           CONTRACTS AND COMMITMENTS

 

(A)           THE COMPANY IS NOT PARTY TO OR BOUND BY:

 

(I)            ANY OTHER MATERIAL AGREEMENT THAN THOSE LISTED IN APPENDIX E;

 

(II)           ANY CONSULTANCY AGREEMENT, CONTRACT, UNDERSTANDING OR
RELATIONSHIP WITH ANY OFFICER, EMPLOYEE OR INDIVIDUAL OR ANY SUCH AGREEMENT,
CONTRACT, UNDERSTANDING OR RELATIONSHIP THAT CONTAINS ANY SEVERANCE OR
TERMINATION PAY LIABILITIES;

 

(III)          ANY LOAN OR CREDIT ARRANGEMENT OR GUARANTEE OTHER THAN SHOWN IN
THE ACCOUNTS OR LISTED IN APPENDIX F;

 

(IV)          ANY AGREEMENT OR CONTRACT OTHERWISE OUTSIDE THE ORDINARY COURSE OF
BUSINESS; OR

 

(V)           ANY AGREEMENT WHICH IS EXPECTED TO RESULT IN A LOSS TO THE COMPANY
ON COMPLETION OR PERFORMANCE OR CANNOT BE FULFILLED OR PERFORMED BY THE COMPANY
ON TIME AND WITHOUT UNDUE OR UNUSUAL EXPENDITURE OF MONEY.

 

(B)           ALL AGREEMENTS OR CONTRACTS TO WHICH THE COMPANY IS PARTY ARE
VALID, BINDING AND ENFORCEABLE IN ACCORDANCE WITH THEIR RESPECTIVE TERMS. THE
COMPANY IS NOT IN DEFAULT IN ANY MATERIAL RESPECT IN THE PERFORMANCE OF ANY OF
THE OBLIGATIONS UNDER ANY AGREEMENT OR CONTRACT AND NO EVENT HAS OCCURRED WHICH
(WHETHER WITH OR WITHOUT NOTICE, LAPSE OF TIME OR BOTH) WOULD CONSTITUTE A
DEFAULT THEREUNDER BY THE COMPANY.

 

(C)           NEITHER OF THE SELLERS NOR ANY PERSON CONNECTED WITH THEM, AS OF
THE SIGNING HEREOF OR ON THE COMPLETION DATE, HAVE ANY OUTSTANDING PERSONAL
CLAIMS AGAINST THE COMPANY, EXCEPT FOR OUTSTANDING SALARY PAYMENTS AND BUSINESS
TRAVEL EXPENSES WHICH DO NOT IN THE AGGREGATE EXCEED RUR 300,000.  OTHER THAN AS
SET OUT IN APPENDIX G, THE COMPANY IS NOT PARTY TO ANY CONTRACT OR ARRANGEMENT
IN WHICH THE SELLERS ARE INTERESTED, DIRECTLY OR INDIRECTLY, NOR HAS THERE BEEN
ANY SUCH CONTRACT OR ARRANGEMENT AT ANY TIME DURING THE FIVE YEARS UP TO THE
DATE OF THIS AGREEMENT.

 

(D)           THE COMPANY IS NOT PARTY TO, NOR HAVE ITS PROFITS OR FINANCIAL
POSITION FOR ANY ACCOUNTING PERIOD BEEN AFFECTED BY, ANY CONTRACT OR ARRANGEMENT
WHICH IS NOT OF AN ENTIRELY ARM’S LENGTH NATURE.

 

(E)           OTHER THAN AS SET OUT IN APPENDIX H, NONE OF THE SELLERS NOR ANY
PERSON CONNECTED WITH THEM IS A PARTY TO ANY OUTSTANDING AGREEMENT OR
ARRANGEMENT FOR THE PROVISION OF FINANCE, GOODS, SERVICES OR OTHER FACILITIES TO
OR BY THE COMPANY OR IN ANY WAY RELATING TO THE COMPANY OR ITS AFFAIRS.

 

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7.10         LABOUR CONTRACTS AND PENSION AGREEMENTS

 

(A)           ACCURATE, COMPLETE AND UPDATED SUMMARIES OF THE ESSENTIAL
EMPLOYMENT PROVISIONS OF THE EMPLOYEES OF THE COMPANY ARE SHOWN IN APPENDIX I.

 

(B)           THE COMPANY IS NOT ENGAGED IN ANY SALARY OR OTHER CONTRACTS OR
COMMITMENTS OTHER THAN NORMALLY ENGAGED WITH, AND COMPLETE RESERVES HAVE BEEN
MADE IN THE ACCOUNTS AND SHALL BE MADE IN DUE COURSE IN THE COMPLETION ACCOUNTS,
FOR THE TOTAL AMOUNT OF ALL PRESENT AND FUTURE LIABILITIES RELATING TO
EMPLOYMENT OR PENSION AGREEMENTS THAT SHALL BE PAID.

 

7.11         LITIGATION AND CLAIMS

 

The Company has not been given notice of any litigation or the initiation of any
arbitration proceedings, neither is there any litigation, arbitration or other
legal proceedings in any court of law, arbitral tribunal or with any
administrative body or other authority pending or threatened against the Company
or initiated by the Company against a third party.

 

7.12         ORDINARY COURSE OF BUSINESS

 

(A)           DURING THE PERIOD FROM SIGNATURE HEREOF AND UNTIL COMPLETION, THE
SELLERS WILL ENSURE THAT THE COMPANY DOES NOT TAKE ANY ACTION OR MEASURE WHICH
IS OUTSIDE THE ORDINARY COURSE OF BUSINESS, UNLESS SUCH ACTION OR MEASURE IS
DIRECTLY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREIN OR HAS BEEN APPROVED BY
THE PURCHASER.

 

(B)           SINCE THE ACCOUNTS DATE THERE HAS NOT BEEN, NOR WILL THERE FROM
THE DATE HEREOF UNTIL THE COMPLETION DATE BE:

 

(I)            ANY ADVERSE DEVIATION BY OR WITHIN THE COMPANY FROM THE ORDINARY
COURSE OF THE DAY TO DAY BUSINESS CARRIED ON BY THE COMPANY IN ACCORDANCE WITH
GOOD AND SOUND BUSINESS PRACTICE;

 

(II)           ANY ADVERSE CHANGE IN THE FINANCIAL CONDITIONS, ASSETS,
LIABILITIES OR PROSPECTS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION, ANY
INCURRENCE OF INDEBTEDNESS BY THE COMPANY OR THE ISSUANCE OF ANY GUARANTEE OF
INDEBTEDNESS OF ANOTHER;

 

(III)          ANY ADVERSE CHANGE IN THE RELATIONSHIP WITH THE CUSTOMERS,
SUPPLIERS OR EMPLOYEES OF THE COMPANY OR THE AUTHORITIES CONTROLLING THE
ACTIVITIES OF THE COMPANY,

 

(IV)          ANY AGREEMENT OR TRANSACTION FOR THE SALE OR ACQUISITION OF ANY
ESSENTIAL ASSETS BY THE COMPANY, EXCEPT IN THE ORDINARY COURSE OF BUSINESS;

 

(V)           ANY CHANGE IN THE ACCOUNTING SYSTEMS, POLICIES, PRINCIPLES OR
PRACTICES OF THE COMPANY; OR

 

(VI)          ANY OTHER ACTION, CONTRACT OR TRANSACTION BY THE COMPANY WHICH
COULD HAVE ADVERSE EFFECT ON THE ASSETS OR THE FINANCIAL CONDITIONS OF THE
COMPANY.

 

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7.13         TAX WARRANTIES

 

(A)           THE COMPANY HAS FILED WITH THE APPROPRIATE AUTHORITIES ALL TAX
RETURNS AND REPORTS IN RESPECT OF ANY AND ALL TAXES REQUIRED TO BE FILED WITH
SUCH TAX AUTHORITIES AND ANY TAXES PAYABLE ARE RECORDED IN FULL IN THE ACCOUNTS
AND WILL BE RECORDED IN FULL IN THE COMPLETION ACCOUNTS.

 

(B)           THE COMPANY HAS PAID OR WILL PAY  TO THE APPROPRIATE TAX
AUTHORITIES ALL TAXES REQUIRED TO HAVE BEEN PAID TO THEM AS OF THE DATE HEREOF
AND AS OF THE COMPLETION DATE.  THE COMPANY IS NOT IN DEFAULT IN RESPECT OF ANY
TAXES FOR ANY YEAR OR PART THEREOF OF THE TAXABLE YEARS UP TO AND INCLUDING THE
COMPLETION DATE.

 

(C)           THERE ARE NO TAX AUDITS CURRENTLY PENDING AGAINST THE COMPANY.

 

7.14         LEGAL AND OTHER COST

 

The Sellers shall bear its own fees and expenses in connection with the
preparation for and completion of the transactions contemplated hereby,
including all fees and expenses of advisers, representatives, counsels and
accountants, and the Sellers shall not, directly or indirectly, charge the
Company, or otherwise seek reimbursement from the Company, for said fees and
expenses.

 

7.15         NO UNDISCLOSED LIABILITIES

 

There are no liabilities of the Company (contingent or otherwise), which relate
to any fact, occurrence or event before the Completion Date and which will not
be reflected in full in the Accounts, the Completion Accounts or appendices
thereof.

 

7.16         NATURE OF DISCLOSURE

 

The Sellers have not during the negotiations hereof, in this Agreement or its
Appendices or during the due diligence review referred to in Article 4 of this
Agreement omitted to disclose any adverse facts or circumstances that would
materially affect the Company’s standing or its operations.

 

7.17         POWERS OF ATTORNEY

 

As of Completion, any power of attorney or similar authority to represent the
Company shall have been terminated or otherwise validly revoked other than such
powers of attorney that grant authority to Company employees to represent the
Company solely with respect to ministerial, routine day-to-day matters.

 

7.18         SYSTEMS

 

All the records and systems (including but not limited to computer systems) and
all data and information of the Company are recorded, stored, maintained or
operated or otherwise held exclusively by the Company and are not wholly or
partly dependent on any facilities or means (including any electronic,
mechanical or photographic process, computerised or otherwise) which are not
under the exclusive ownership and control of the Company.

 

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8.             REPRESENTATIONS, WARRANTIES AND ASSURANCES OF THE PURCHASER

 

The Purchaser hereby represents, warrants and assures that:

 

8.1           IT IS DULY INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING
UNDER THE LAWS OF ITS JURISDICTION OF INCORPORATION;

 

8.2           ALL CORPORATE ACTIONS NECESSARY FOR THE LAWFUL AND VALID
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY HAVE BEEN DULY TAKEN; AND

 

8.3           IT HAS THE AUTHORITY TO EXECUTE AND PERFORM ALL NECESSARY ACTIONS
FOR THE LAWFUL AND VALID CONSUMMATION OF THIS AGREEMENT.

 

9.             LIABILITY OF THE PARTIES

 

Without prejudice to any other remedy available to the Purchaser or its ability
to claim damages on any basis which is available to it by reason of any of the
Warranties being untrue or misleading or being breached, the Sellers jointly and
severally undertake with the Purchaser that they shall, at the direction of the
Purchaser, pay to the Purchaser or (in the case of liability to another person
which has not been discharged) the person to whom the liability has been
incurred the amount necessary to put the Purchaser and/or the Company into the
position they or it would have been in if the Warranty had not been untrue,
misleading or breached, together with all costs and expenses incurred by the
Purchaser and/or the Company as a result of the Warranty being untrue,
misleading or breached (collectively, the “Damages”). The Purchaser shall be
entitled to reduce the amount of any Earn Out Payment by the amount of any
Damages.   Any liability of the Sellers under this Agreement shall be joint and
several.

 

10.           NON-COMPETITION; NON-SOLICITATION AND CONFIDENTIALITY COMMITMENT

 

10.1         TO ASSURE THE PURCHASER THE FULL BENEFIT OF THE BUSINESS, KNOW-HOW
AND GOODWILL OF THE COMPANY, EACH OF THE SELLERS SEVERALLY UNDERTAKES AND
COVENANTS TO THE PURCHASER BY WAY OF FURTHER CONSIDERATION FOR THE OBLIGATIONS
OF THE PURCHASER UNDER THIS AGREEMENT, AS SEPARATE AND INDEPENDENT AGREEMENTS,
THAT HE WILL NOT (WITHOUT THE PURCHASER’S PRIOR WRITTEN CONSENT):

 

(A)           USE (WHETHER FOR HIS OWN BENEFIT OR FOR THE BENEFIT OF ANY OTHER
PERSON, FIRM, COMPANY OR ORGANISATION) OR DISCLOSE TO ANY PERSON, FIRM, COMPANY
OR ORGANISATION ANY OF THE TRADE SECRETS OR OTHER CONFIDENTIAL INFORMATION OF OR
RELATING TO: (A) THE COMPANY OR THE PREDECESSOR; (B) ANY CUSTOMER OR CLIENT OF
THE COMPANY OR THE PREDECESSOR; (C) ANY PERSON, FIRM, COMPANY OR ORGANISATION
WITH WHOM OR WHICH THE COMPANY IS INVOLVED IN ANY KIND OF BUSINESS VENTURE OR
PARTNERSHIP; OR (D) THE BUSINESS OR PRODUCTIONS OF THE COMPANY OR THE
PREDECESSOR WHICH INFORMATION HE MAY HAVE RECEIVED OR OBTAINED, OR MAY RECEIVE
OR OBTAIN IN THE FUTURE, IN CONFIDENCE WHILE HE WAS A SHAREHOLDER, OR IN THE
EMPLOYMENT, OF THE COMPANY OR THE PREDECESSOR, AND WILL LIKEWISE USE HIS BEST
ENDEAVOURS TO PREVENT THE UNAUTHORISED PUBLICATION

 

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OR DISCLOSURE BY ANY THIRD PARTY OF ANY SUCH TRADE SECRETS OR CONFIDENTIAL
INFORMATION;

 

(B)           FOR THREE YEARS AFTER COMPLETION, IN RELATION TO A BUSINESS WHICH
IS SUBSTANTIALLY THE SAME AS OR IN COMPETITION WITH THE BUSINESS OF THE COMPANY
IMMEDIATELY PRIOR TO COMPLETION, EITHER ON HIS OWN ACCOUNT OR FOR ANY OTHER
PERSON, FOR THE PURPOSE OF OBTAINING BUSINESS, ORDERS OR CUSTOM, DIRECTLY OR
INDIRECTLY, SOLICIT OR ENDEAVOUR TO ENTICE AWAY FROM THE COMPANY ANY BUSINESS,
ORDER OR CUSTOM OF ANY PERSON WHO, TO THE SELLER’S KNOWLEDGE, IS AS AT
COMPLETION, OR HAS DURING THE ONE YEAR IMMEDIATELY PRECEDING COMPLETION BEEN, A
CLIENT OR CUSTOMER OF THE COMPANY OR THE PREDECESSOR AND EITHER: (I) WITH WHOM
HE HAS HAD CONTACT OR DEALINGS DURING THE COURSE OF HIS SHAREHOLDING OF, OR
EMPLOYMENT WITH, THE COMPANY OR THE PREDECESSOR DURING THE ONE-YEAR PERIOD
IMMEDIATELY PRECEDING COMPLETION; OR (II) ABOUT WHOM AT COMPLETION HE POSSESSES
ANY CONFIDENTIAL INFORMATION;

 

(C)           FOR THREE YEARS AFTER COMPLETION, IN RELATION TO A BUSINESS WHICH
IS SUBSTANTIALLY THE SAME AS OR IN COMPETITION WITH THE BUSINESS OF THE COMPANY
IMMEDIATELY PRIOR TO COMPLETION, EITHER ON HIS OWN ACCOUNT OR FOR ANY OTHER
PERSON, DIRECTLY OR INDIRECTLY, SUPPLY OR PROVIDE GOODS OR SERVICES TO ANY
PERSON WHO, TO THE SELLER’S KNOWLEDGE, IS AS AT COMPLETION, OR HAS DURING THE
ONE YEAR IMMEDIATELY PRECEDING COMPLETION BEEN, A CLIENT OR CUSTOMER OF THE
COMPANY OR THE PREDECESSOR AND EITHER: (I) WITH WHOM HE HAS HAD CONTACT OR
DEALINGS DURING THE COURSE OF HIS SHAREHOLDING OF, OR EMPLOYMENT WITH, THE
COMPANY OR THE PREDECESSOR IN THE ONE-YEAR PERIOD IMMEDIATELY PRECEDING
COMPLETION; OR (II) ABOUT WHOM AT COMPLETION HE POSSESSES CONFIDENTIAL
INFORMATION;

 

(D)           FOR THREE YEARS AFTER COMPLETION, IN RELATION TO A BUSINESS WHICH
IS SUBSTANTIALLY THE SAME AS OR IN COMPETITION WITH THE BUSINESS OF THE COMPANY
IMMEDIATELY PRIOR TO COMPLETION, EITHER ON HIS OWN ACCOUNT OR FOR ANY OTHER
PERSON, DIRECTLY OR INDIRECTLY, ENTICE AWAY OR ENDEAVOUR TO ENTICE AWAY FROM THE
COMPANY ANY PERSON (INCLUDING, WITHOUT LIMITATION, ANY WRITER, DIRECTOR,
PRODUCER, DEVELOPMENT EXECUTIVE, SCRIPT EDITOR OR CAST MEMBER) WHOM, AS AT
COMPLETION OR AT ANY TIME DURING THE PERIOD OF ONE YEAR IMMEDIATELY PRECEDING
COMPLETION SUPPLIED OR PROVIDED ANY GOODS, SERVICES, IDEAS OR TALENT TO THE
COMPANY OR THE PREDECESSOR AND WITH WHOM HE HAD MATERIAL BUSINESS CONTACT ON
BEHALF OF THE COMPANY OR THE PREDECESSOR IN THE COURSE OF THE PERIOD OF ONE YEAR
IMMEDIATELY PRIOR TO COMPLETION;

 

(E)           FOR THREE YEARS AFTER COMPLETION, IN ANY WAY SEEK TO AFFECT THE
TERMS OF BUSINESS ON WHICH THE COMPANY OR ANY MEMBER OF THE GROUP DEALS OR
CONTRACTS WITH ANY PERSON (INCLUDING, WITHOUT LIMITATION, ANY WRITER, DIRECTOR,
PRODUCER, DEVELOPMENT EXECUTIVE, SCRIPT EDITOR OR CAST MEMBER), FIRM, COMPANY OR
ORGANISATION WHOM OR WHICH SUPPLIED GOODS OR SERVICES TO THE COMPANY OR THE
PREDECESSOR DURING THE PERIOD OF ONE YEAR IMMEDIATELY PRIOR TO COMPLETION OR
ATTEMPT TO PERSUADE ANY SUCH PERSON, FIRM, COMPANY OR ORGANISATION TO CEASE
DEALING WITH THE COMPANY OR SUCH MEMBER OF THE GROUP;

 

(F)            FOR THREE YEARS AFTER COMPLETION, IN RELATION TO A BUSINESS WHICH
IS SUBSTANTIALLY THE SAME AS OR IN COMPETITION WITH THE BUSINESS OF THE COMPANY

 

26

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IMMEDIATELY PRIOR TO COMPLETION, EITHER ON HIS OWN ACCOUNT OR FOR ANOTHER
PERSON, DIRECTLY OR INDIRECTLY, OFFER EMPLOYMENT TO OR EMPLOY OR OFFER OR
CONCLUDE ANY CONTRACT FOR SERVICES WITH ANY SENIOR EMPLOYEE (BEING A PERSON IN
RECEIPT OF A SALARY IN EXCESS OF RUR 80,000 PER MONTH), CONSULTANT OR DIRECTOR
OF THE COMPANY WHO HAS DURING THE ONE-YEAR PERIOD IMMEDIATELY PRECEDING
COMPLETION BEEN EMPLOYED, ENGAGED OR APPOINTED BY THE COMPANY OR THE PREDECESSOR
IN A TECHNICAL, PRODUCTION, SALES, MARKETING, ADVISORY AND/OR MANAGERIAL
CAPACITY AND WITH WHOM HE HAS HAD CONTACT OR DEALINGS DURING THE COURSE OF HIS
EMPLOYMENT WITH THE COMPANY OR THE PREDECESSOR IN THE ONE-YEAR PERIOD
IMMEDIATELY PRECEDING COMPLETION;

 

(G)           FOR THREE YEARS AFTER COMPLETION, IN THE RUSSIAN FEDERATION,
EITHER ALONE OR JOINTLY WITH, OR AS PRINCIPAL, DIRECTOR, MANAGER, CONSULTANT,
AGENT FOR OR EMPLOYEE OF, ANOTHER PERSON, DIRECTLY OR INDIRECTLY CARRY ON OR BE
ENGAGED, EMPLOYED, APPOINTED, CONCERNED OR INTERESTED IN THE BUSINESS OF
PRODUCTION BUSINESS;

 

(H)           FOR THREE YEARS AFTER COMPLETION, OWN BENEFICIALLY OR OTHERWISE OR
BE INTERESTED IN THE SHARE CAPITAL OF ANY COMPANY ENGAGED, CONCERNED OR
INTERESTED WITHIN THE RUSSIAN FEDERATION IN THE PRODUCTION BUSINESS;

 

(I)            EITHER DURING HIS EMPLOYMENT WITH THE COMPANY OR FOR A PERIOD OF
6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF SUCH EMPLOYMENT, IN RELATION
TO A BUSINESS WHICH IS SUBSTANTIALLY THE SAME AS OR IN COMPETITION WITH THE
BUSINESS OF THE COMPANY AT THE APPLICABLE DATE, EITHER ON HIS OWN ACCOUNT OR FOR
ANY OTHER PERSON, FOR THE PURPOSE OF OBTAINING BUSINESS, ORDERS OR CUSTOM,
DIRECTLY OR INDIRECTLY, SOLICIT OR ENDEAVOUR TO ENTICE AWAY FROM THE COMPANY ANY
BUSINESS, ORDER OR CUSTOM OF ANY PERSON WHO IS AS AT THE APPLICABLE DATE, OR HAS
DURING THE PERIOD OF ONE YEAR IMMEDIATELY PRECEDING THE APPLICABLE DATE BEEN, A
CLIENT OR CUSTOMER OF THE COMPANY, THE PREDECESSOR OR ANY  MEMBER OF THE GROUP
IN THE PRODUCTION BUSINESS AND EITHER: (I) WITH WHOM HE HAS HAD CONTACT OR
DEALINGS DURING THE COURSE OF HIS EMPLOYMENT WITH THE COMPANY OR THE PREDECESSOR
DURING THE ONE-YEAR PERIOD IMMEDIATELY PRECEDING THE APPLICABLE DATE; OR
(II) ABOUT WHOM HE POSSESSES ANY CONFIDENTIAL INFORMATION AS AT THE APPLICABLE
DATE.  FOR THE PURPOSE OF THIS AGREEMENT, THE TERM “APPLICABLE DATE” MEANS:
(A) IN RELATION TO THE PERIOD DURING WHICH THE RELEVANT SELLER REMAINS EMPLOYED
BY THE COMPANY, THE DATE UPON WHICH ANY ALLEGED BREACH OF THIS ARTICLE OCCURS;
AND (B) IN RELATION TO THE PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE
TERMINATION OF THE RELEVANT SELLER’S EMPLOYMENT BY THE COMPANY, THE APPLICABLE
TERMINATION DATE OF THAT EMPLOYMENT;

 

(J)            EITHER DURING HIS EMPLOYMENT WITH THE COMPANY OR FOR A PERIOD OF
6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF SUCH EMPLOYMENT WITH THE
COMPANY, IN RELATION TO A BUSINESS WHICH IS SUBSTANTIALLY THE SAME AS OR IN
COMPETITION WITH THE BUSINESS OF THE COMPANY AT THE APPLICABLE DATE, EITHER ON
HIS OWN ACCOUNT OR FOR ANY OTHER PERSON, DIRECTLY OR INDIRECTLY, SUPPLY OR
PROVIDE GOODS OR SERVICES TO ANY PERSON WHO IS AS AT THE APPLICABLE DATE, OR HAS
DURING THE PERIOD OF ONE YEAR IMMEDIATELY PRECEDING THE APPLICABLE DATE BEEN, A
CLIENT OR CUSTOMER OF THE COMPANY, THE PREDECESSOR OR ANY MEMBER OF THE GROUP IN
THE PRODUCTION BUSINESS AND EITHER: (I) WITH WHOM HE HAS HAD

 

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CONTACT OR DEALINGS DURING THE COURSE OF HIS EMPLOYMENT WITH THE COMPANY OR THE
PREDECESSOR IN THE ONE-YEAR PERIOD IMMEDIATELY PRECEDING THE APPLICABLE DATE; OR
(II) ABOUT WHOM HE POSSESSES CONFIDENTIAL INFORMATION AS AT THE APPLICABLE DATE;

 

(K)                                  EITHER DURING HIS EMPLOYMENT WITH THE
COMPANY OR FOR A PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF
SUCH EMPLOYMENT, IN RELATION TO A BUSINESS WHICH IS SUBSTANTIALLY THE SAME AS OR
IN COMPETITION WITH THE BUSINESS OF THE COMPANY AT THE APPLICABLE DATE, EITHER
ON HIS OWN ACCOUNT OR FOR ANY OTHER PERSON, DIRECTLY OR INDIRECTLY, ENTICE AWAY
OR ENDEAVOUR TO ENTICE AWAY FROM THE COMPANY OR ANY OTHER MEMBER OF THE GROUP IN
THE PRODUCTION BUSINESS ANY PERSON (INCLUDING, WITHOUT LIMITATION, ANY WRITER,
DIRECTOR, PRODUCER, DEVELOPMENT EXECUTIVE, SCRIPT EDITOR OR CAST MEMBER) WHOM,
AS AT THE APPLICABLE DATE OR AT ANY TIME DURING THE PERIOD OF ONE YEAR
IMMEDIATELY PRECEDING THE APPLICABLE DATE SUPPLIED OR PROVIDED ANY GOODS,
SERVICES, IDEAS OR TALENT TO THE COMPANY, THE PREDECESSOR OR SUCH MEMBER OF THE
GROUP AND WITH WHOM HE HAD MATERIAL BUSINESS CONTACT ON BEHALF OF THE COMPANY OR
THE PREDECESSOR IN THE COURSE OF THE PERIOD OF ONE YEAR IMMEDIATELY PRIOR TO THE
APPLICABLE DATE;

 

(L)                                     EITHER DURING HIS EMPLOYMENT WITH THE
COMPANY OR FOR A PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF
SUCH EMPLOYMENT, IN ANY WAY SEEK TO AFFECT THE TERMS OF BUSINESS ON WHICH THE
COMPANY OR ANY MEMBER OF THE GROUP IN THE PRODUCTION BUSINESS DEALS OR CONTRACTS
WITH ANY PERSON (INCLUDING, WITHOUT LIMITATION, ANY WRITER, DIRECTOR, PRODUCER,
DEVELOPMENT EXECUTIVE, SCRIPT EDITOR OR CAST MEMBER), FIRM, COMPANY OR
ORGANISATION WHOM OR WHICH SUPPLIED GOODS OR SERVICES TO THE COMPANY, THE
PREDECESSOR OR SUCH MEMBER OF THE GROUP DURING THE PERIOD OF ONE YEAR
IMMEDIATELY PRIOR TO THE APPLICABLE DATE OR ATTEMPT TO PERSUADE ANY SUCH PERSON,
FIRM, COMPANY OR ORGANISATION TO CEASE DEALING WITH THE COMPANY OR SUCH MEMBER
OF THE GROUP;

 

(M)                               EITHER DURING HIS EMPLOYMENT WITH THE COMPANY
OR FOR A PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF SUCH
EMPLOYMENT, IN RELATION TO A BUSINESS WHICH IS SUBSTANTIALLY THE SAME AS OR IN
COMPETITION WITH THE BUSINESS OF THE COMPANY AT THE APPLICABLE DATE, EITHER ON
HIS OWN ACCOUNT OR FOR ANOTHER PERSON, DIRECTLY OR INDIRECTLY, OFFER EMPLOYMENT
TO OR EMPLOY OR OFFER OR CONCLUDE ANY CONTRACT FOR SERVICES WITH ANY SENIOR
EMPLOYEE (BEING A PERSON IN RECEIPT OF A SALARY IN EXCESS OF RUR 80,000 PER
MONTH), CONSULTANT OR DIRECTOR OF THE COMPANY WHO HAS DURING THE ONE-YEAR PERIOD
IMMEDIATELY PRECEDING THE APPLICABLE DATE BEEN EMPLOYED, ENGAGED OR APPOINTED BY
THE COMPANY, THE PREDECESSOR OR A MEMBER OF THE GROUP IN THE PRODUCTION BUSINESS
IN A TECHNICAL, PRODUCTION, SALES, MARKETING, ADVISORY AND/OR MANAGERIAL
CAPACITY AND WITH WHOM HE HAS HAD CONTACT OR DEALINGS DURING THE COURSE OF HIS
EMPLOYMENT WITH THE COMPANY OR THE PREDECESSOR IN THE ONE-YEAR PERIOD
IMMEDIATELY PRECEDING THE APPLICABLE DATE;

 

(N)                                 EITHER DURING HIS EMPLOYMENT WITH THE
COMPANY OR FOR A PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF
SUCH EMPLOYMENT, IN THE RUSSIAN FEDERATION OR ANY OTHER COUNTRY IN WHICH THE
BUSINESS OF THE COMPANY, THE PREDECESSOR OR ANY MEMBER OF THE GROUP IN THE
PRODUCTION BUSINESS WAS CARRIED ON AT OR DURING THE PERIOD OF TWO YEARS
IMMEDIATELY PRECEDING THE

 

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APPLICABLE DATE, EITHER ALONE OR JOINTLY WITH, OR AS PRINCIPAL, DIRECTOR,
MANAGER, CONSULTANT, AGENT FOR OR EMPLOYEE OF, ANOTHER PERSON, DIRECTLY OR
INDIRECTLY CARRY ON OR BE ENGAGED, EMPLOYED, APPOINTED, CONCERNED OR INTERESTED
IN THE PRODUCTION BUSINESS; OR

 

(O)                                 EITHER DURING HIS EMPLOYMENT WITH THE
COMPANY OR FOR A PERIOD OF 6 MONTHS IMMEDIATELY FOLLOWING THE TERMINATION OF
SUCH EMPLOYMENT, OWN BENEFICIALLY OR OTHERWISE OR BE INTERESTED IN THE SHARE
CAPITAL OF ANY COMPANY ENGAGED, CONCERNED OR INTERESTED WITHIN THE RUSSIAN
FEDERATION OR ANY OTHER COUNTRY IN WHICH THE BUSINESS OF THE COMPANY, THE
PREDECESSOR OR ANY MEMBER OF THE GROUP IN THE PRODUCTION BUSINESS WAS CARRIED ON
AT OR DURING THE PERIOD OF TWO YEARS IMMEDIATELY PRECEDING THE APPLICABLE DATE,
IN THE PRODUCTION BUSINESS;

 

(P)                                 FOR THREE YEARS AFTER COMPLETION OR WHILE AT
ANY TIME HE IS A CONSULTANT, DIRECTOR OR EMPLOYEE OF ANY MEMBER OF THE GROUP,
DIRECTLY OR INDIRECTLY CARRY ON A BUSINESS ACTIVITY UNDER A NAME WHICH IS THE
SAME AS, OR SIMILAR TO, THE NAME OF THE COMPANY, THE PREDECESSOR OR ANY MEMBER
OF THE GROUP OR A NAME USED FOR BUSINESS PURPOSES BY A MEMBER OF THE GROUP; OR

 

(Q)                                 AT ANY TIME AFTER COMPLETION, MAKE ADVERSE
COMMENTS IN RELATION TO THE GROUP OR ITS BUSINESSES OR EMPLOYEES;

 

provided always that nothing contained in this Article 10 shall prevent any or
all of the Sellers from at any time holding for investment purposes only any
class of securities in a company that is publicly traded and in which the
Sellers, together with their affiliates, hold and are beneficially interested in
less than 3% of any single class of the securities in that company.

 

10.2                           THE SELLERS AGREE THAT THE COVENANTS AND
UNDERTAKINGS CONTAINED IN ARTICLE 10 ARE REASONABLE AND ARE ENTERED INTO FOR THE
PURPOSE OF PROTECTING THE KNOW-HOW, GOODWILL, CONFIDENTIAL INFORMATION AND TRADE
CONNECTIONS OF THE BUSINESSES OF THE MEMBERS OF THE GROUP.  ACCORDINGLY THE
BENEFIT OF THE COVENANTS AND UNDERTAKINGS MAY BE ASSIGNED BY THE PURCHASER AND
ITS SUCCESSORS IN TITLE WITHOUT THE CONSENT OF THE SELLERS.

 

10.3                           EACH UNDERTAKING CONTAINED IN THIS ARTICLE 10
SHALL BE CONSTRUED AS A SEPARATE UNDERTAKING.  IF ONE OR MORE OF THEM IS HELD TO
BE AGAINST THE PUBLIC INTEREST OR UNLAWFUL OR AN UNREASONABLE RESTRAINT OF
TRADE, THE REMAINING UNDERTAKINGS SHALL CONTINUE TO BIND THE SELLERS.

 

10.4                           FOR THE PURPOSES OF THIS AGREEMENT “CONFIDENTIAL
INFORMATION” SHALL INCLUDE (BUT SHALL NOT BE LIMITED TO):

 

(I)                                     CORPORATE AND MARKETING STRATEGY AND
PLANS AND BUSINESS DEVELOPMENT PLANS;

 

(II)                                  BUSINESS, SALES AND MARKETING METHODS,
CONFIDENTIAL TECHNIQUES AND PROCESSES USED FOR THE CREATION AND/OR DEVELOPMENT
AND/OR PRODUCTION AND/OR FILMING OF ANY TELEVISION PROGRAMME, MOTION PICTURE,
FILM OR PILOT;

 

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(III)                               DETAILS AND SPECIFICATIONS OF ANY CURRENT,
PAST OR PROPOSED MOTION PICTURE, FILM OR TELEVISION OR ENTERTAINMENT PROJECTS OR
PRODUCTS, INCLUDING ALL SCRIPTS, STORY BOARDS AND FINANCIAL ARRANGEMENTS, AND
ANY RESEARCH OR DEVELOPMENT RELATED TO ANY CURRENT, PAST OR PROPOSED MOTION
PICTURE, FILM OR TELEVISION PROGRAMMES, FILMS OR PILOTS AND ALL SCRIPTS AND
STORY BOARDS ASSOCIATED THEREWITH AND ANY MATERIAL RELATING THERETO;

 

(IV)                              THE NAMES, ADDRESSES AND CONTACT DETAILS OF
ANY WRITERS, PRODUCERS, DIRECTORS, PRODUCERS, DEVELOPMENT EXECUTIVES, SCRIPT
EDITORS, CAST MEMBERS, FINANCIERS OR EMPLOYEES WHO ARE INVOLVED IN THE COMPANY’S
PROJECTS FROM TIME TO TIME, INCLUDING CONTACT LISTS IN WHATEVER MEDIUM THIS
INFORMATION IS STORED AND THE IDEAS OF THOSE WRITERS, PRODUCERS, DIRECTORS,
PRODUCERS, DEVELOPMENT EXECUTIVES, SCRIPT EDITORS, FINANCIERS OR EMPLOYEES
RELATING TO THE CREATION, DEVELOPMENT, PRODUCTION OR FILMING OF ANY TELEVISION
PROGRAMMES, FILMS OR OTHERWISE.

 

(V)                                 THE TERMS OF BUSINESS WITH ADVERTISERS,
BROADCASTERS, DISTRIBUTORS, FINANCIERS, SUB-CONTRACTORS, CUSTOMERS AND
SUPPLIERS, INCLUDING ANY PRICING POLICY ADOPTED AND THE TERMS OF ANY
PARTNERSHIP, JOINT VENTURE OR OTHER FORM OF COMMERCIAL CO-OPERATION OR AGREEMENT
WITH ANY THIRD PARTY;

 

(VI)                              SOFTWARE AND TECHNICAL INFORMATION NECESSARY
FOR THE OPERATION OF  THE COMPANY’S COMPUTER AND TECHNOLOGY SYSTEMS AND
APPLICATIONS, INFORMATION RELATING TO PROPRIETARY SOFTWARE (INCLUDING UPDATES),
SOURCE CODE TO PROPRIETARY SOFTWARE, CONFIDENTIAL ALGORITHMS DEVELOPED OR USED
BY THE COMPANY, INFORMATION RELATING TO THE DEVELOPMENT, MAINTENANCE OR
OPERATION OF ANY OF THE COMPANY’S WEBSITES AND THE SOURCE CODE OF EACH WEBSITE;
AND

 

(VII)                           ANY OTHER INFORMATION WHICH IS THE SUBJECT OF AN
OBLIGATION OF CONFIDENCE OWED TO A THIRD PARTY, IN PARTICULAR THE CONTENT OF
DISCUSSIONS OR COMMUNICATIONS WITH ANY PROSPECTIVE CUSTOMERS OR PROSPECTIVE
BUSINESS PARTNERS.

 

11.                                 NOTICES

 

All notices, demands or other communications, which all shall be in the Russian
and English languages, to or upon the respective Parties hereto shall be deemed
to have been duly given or made when delivered by mail or telefax to the Parties
in question as follows.

 

 

If to CTC Network:

 

 

 

 

Address:

3rd Khoroshevskaya Street, 12

 

 

Moscow 123298

 

 

Russia

 

 

 

 

Telefax:

+7 (495) 797-4180

 

 

 

 

Attention:

Alexander Efimovich Rodnyansky

 

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If to CTC Media:

 

 

 

Address:

15A Pravda Street

 

 

Moscow 125124

 

 

Russia

 

 

 

 

Telefax:

+7 (495) 797-4180

 

 

 

 

Attention:

Alexander Efimovich Rodnyansky

 

 

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or at such address as the respective Party hereto may hereafter specify in
writing to the other Parties.

 

12.                                 APPENDICES INCORPORATED

 

Each Appendix to which reference is made herein and which is attached hereto
shall be deemed to be incorporated into this Agreement by such reference.

 

13.                                 INTEGRATION

 

This Agreement, and the Appendices hereto, represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations and understandings relating to the
subject matter hereof.

 

14.                                 THIRD PARTY RIGHTS

 

Except as expressly set out in this Agreement, a person who is not a Party shall
have no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce
or rely upon any term of this Agreement provided that this does not affect any
right or remedy of the third party that exists or is available apart from that
Act.  No Party may declare itself as a trustee of the rights under this
Agreement for the benefit of any third party.

 

15.                                 GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with the laws of
England and Wales.

 

16.                                 ARBITRATION OF THIS AGREEMENT

 

Any dispute, controversy or claim arising out of or relating to this Agreement
or the breach, termination, or invalidity thereof shall be settled by
arbitration in accordance with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce. The arbitral tribunal shall be composed of three
arbitrators, one of whom shall be

 

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selected by the Purchaser, one of whom shall be selected by the Sellers and the
third of whom shall be selected by the other two arbitrators. The arbitration
shall be held in Stockholm and the arbitration proceedings shall be conducted in
the English language.

 

17.                                 SELLER REPRESENTATIVE

 

Any notice, waiver, consent or Performance Report signed by the Seller
Representative in accordance with this Agreement shall be binding upon each of
the other Sellers as if such Sellers had signed such notice, waiver, consent or
Performance Report individually.

 

18.                                 AMENDMENTS; WAIVERS

 

Any amendments or waiver to this Agreement shall be in writing and shall have no
effect unless signed by the Purchaser and the Seller Representative. Any
amendment or waiver effected in accordance with this provision shall be binding
upon each Seller.  Notwithstanding the foregoing, in the event that such
amendment or waiver adversely affects the rights or obligations provided herein
of any Seller in a different manner than any other Seller, such amendment or
waiver shall also require the written consent of such Seller.

 

19.                                 PUBLICITY

 

All press releases and other public relations activities of the Sellers with
regard to the transactions contemplated by this Agreement shall be subject to
the prior written approval of the Purchaser.

 

20.                                 COUNTERPARTS OF THE AGREEMENT

 

This Agreement has been executed in six identical counterparts, one for each
Party hereto.

 

21.                                 PREVAILING LANGUAGE

 

This Agreement is made in Russian and English.  In the event of a dispute as to
the terms of this Agreement the English version shall prevail.

 

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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of
the day and year first above written.

 

 

[**]

 

 

EXECUTED by

 

CJSC “CTC Networks”

 

acting by its General Director

 

Alexander Efimovich Rodnyansky

/s/ Alexander Efimovich Rodnyansky

 

 

 

 

 

EXECUTED by

 

CTC Media, Inc.

 

acting by its President and

 

Chief Executive Officer

 

Alexander Efimovich Rodnyansky

/s/ Alexander Efimovich Rodnyansky

 

 

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Appendices

 

[CTC Media, Inc. agrees to furnish supplementally a copy of any omitted schedule
to the Securities and Exchange Commission upon request.]

 

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