Exhibit 10.58

(Agreement in respect
of placement of advertising
on the CTC Network)

AGENCY AGREEMENT N C-25-400/07 

 

 

 

Moscow

July 11, 2007

 

 

Closed Joint Stock Company “Network of Television Stations” (OGRN
1027700151852), hereinafter referred to as the “Principal”, represented by its
General Director A.E. Rodnyansky, acting pursuant to the Charter on one side,
and Closed Joint Stock Company “Kompaniya TSV” (OGRN 5077746859757), hereinafter
referred to as the “Agent”, represented by the General Director V.L. Vshivkin,
acting pursuant to the Charter, on other side, hereinafter referred to as the
“Parties”, entered into this Agreement as follows:

1. Definitions.

1.1.    For the purpose of interpretation of the terms and conditions of this
Agreement the terms defined below have the following meanings:

1.1.1. “Network Program Block” means a combined audiovisual production (a
product of intellectual activity), developed by the Principal for use by the
broadcasters affiliated with the CTC TV network as a program of a broadcast
company and a program of a cable company (art.1330 of the Civil Code of RF) and
having the same content for all stations of the CTC TV network across Russia.

1.1.2.  “Regional Broadcast Window” means a length of time within a Network
Program Block, during which a broadcaster affiliated with the CTC TV network is
allowed to substitute at its discretion the audiovisual productions of the
Network Program Block for any other productions.

1.1.3.  “Advertising” means the information disseminated by any method, in any
form and using any media, addressed to an unlimited audience and aimed at
attracting attention to the advertised item, to build or maintain interest in it
and promoting it in the market.

1.1.4.  “Social Advertising” means the information disseminated by any method,
in any form and using any media, addressed to an unlimited audience and aimed at
accomplishing charity or other objectives of value to public as well as at
promoting the government’s interests. Social advertising may not mention any
specific makes (models, articles) of products, trademarks, service marks or
other means of their identification, any individuals and corporate entities
except for mentioning governmental authorities, other instruments of the
government, local or municipal authorities, municipal bodies that are not part
of local administration and sponsors.

1.1.5.  “Sponsorship Advertising” means the advertising disseminated under the
condition that a certain person is to be mentioned as a sponsor.

1.1.6.  “Commercial” means an audiovisual production containing advertising.

1.1.7.  “Network Advertising” means advertising material (including sponsorship
advertisin and social advertising agreed with the Principal that is placed on a
charge basis) that the Principal places in the Network Program Blocks in the
time intervals as agreed between the Agent and Principal and broadcast
throughout the entire CTC TV Network. Network Advertising may be broadcast as
commercials and/or in other forms.

1.1.8.  “Clients” means the advertisers (including sponsors), other third
parties representing the advertisers (or sponsors) under respective agreements,
as well as third parties ordering the placement of sponsorship or social
advertising.

1.1.9. “Advertising Services” means the acceptance by the Principal for
broadcasting within the Network Program Blocks of the Network Advertising
(including sponsorship advertising and social advertising placed on a charge
basis) pursuant to the agreements, entered into by the Agent in its name, but on
the account of the Principal.

1.1.10. “Reporting Period” means one calendar month.

1.1.11. “Principal’s Actual Advertising Revenue for Reporting Period (the
“Principal’s Actual Gross Revenue”) shall consist of:

·  revenues generated by advertising agreements by the Agent net of the value
added tax;

·  other revenues (fines, penalty interests and other income including the
termination fee), due to the Principal and actually received by the
Agent/Principal in transactions entered into with Clients by the Agent pursuant
to this Agreement.

 

Agent

 

Principal

 

 

 

 

 

 

 

V.L. Vshyvkin

 

A.E. Rodnyansky

 

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1.1.12. “Entering into transactions” means taking such actions as to create,
vary or terminate private rights and obligations (concluding, amending (agreeing
on amendments), including agreement extensions or terminations, as well as
taking physical actions that result in legally binding consequences).

2. Scope of Agreement

2.1. In accordance with this Agreement the Agent agrees to take in its own name
for a fee certain legal and other actions on behalf and on the account of the
Principal to sell the Principal’s advertising services commencing from January
1, 2008.

2.2. The Principal shall pay to the Agent a fee for taking legal and other
actions, set forth in section 2.1. hereof in such amounts and according to such
procedure as provided hereunder.

2.3. The Principal agrees to broadcast the Network Advertising placed by the
Agent under the agreements made with the Clients pursuant to this Agreement
throughout the CTC TV Network. The procedures for sponsorship advertising shall
be agreed by the Parties in Appendix 3.

2.4. For the purpose of performance of the obligations to the Clients under
agreements entered into by the Agent, the Principal shall allocate time
intervals (advertising blocks or other time intervals) for the placement of
Commercials in the Network Program Blocks between 7 a.m. of the day and 1 a.m.
of the following day, excluding a Regional Broadcast Window with a length of 2
(two) hours on week days and 1 (One) hour on week-ends and holidays:

·               up to 11.25% (eleven point twenty five percent) of the length of
the Network Program Block during any hour excluding the Regional Broadcast
Window.

The Principal shall have discretion in allocating time spots for Commercials to
the Agent in the Network Programming Blocks broadcast between 1 a.m. and 7 a.m.

2.5. The performance by the Agent of sections 4.4., 4.7., 5.2., 5.6., 9.2. of
this Agreement and section 1 of Supplementary Agreement No 1 (guarantee) shall
be secured by a surety of CJSC ““Video International” Group of Companies” with
the surety being jointly liable. A Surety Deed shall be executed with the said
surety.

2.6. This Agreement shall not cover any relations between the Parties, Clients
and other third parties arising in connection with political advertising and
Social advertising broadcast on no-charge basis.

3. Obligations of the Parties

3.1. Obligations and rights in connection with entering into transactions and
approving their terms

3.1.1. The Principal shall grant to the Agent a power to take legal and other
actions in connection with selling Advertising without any further approval on
the part of the Principal, and the Agent shall contract the sale of such
services to the Clients being first and foremost guided by the best interests of
the Principal, the terms and conditions of this Agreement, the instructions of
the Principal as to the terms and condition relating to the pricing of
advertising in agreements with the Clients, which shall be contained in Appendix
1 hereto to be executed by the Parties no later than November 30, 2007, as well
as by all other appendices and addenda to this Agreement.

3.1.2. The Agent shall seek to secure the best possible conditions for the
Principal in the agreements between the Agent and the Clients (“Client
Agreements”). The Agent may, subject to the Principal’s consent, enter into
Client Agreements on terms different from those set forth in Appendix 1, if it
was impossible to obtain better contractual conditions, and, where by
contracting on such terms that are different from those set forth in Appendix 1,
the Agent has averted even more negative consequences for the Principal.

3.1.3. The Agent shall have an obligation to include in Client Agreements the
following provisions:

1. The Client shall be fully responsible for the content and design of the
advertisements placed under the Client Agreement, for any violations of
copyrights and neighboring rights in respect of the works and objects of
neighboring rights being part of the advertisement.  Any financial claims,
including from the authors and owners of the neighboring rights in respect of
the advertisement shall be settled by the Client itself and at its cost.

If as a result of the placement of the advertisement delivered by the Client the
Agent and/or the Principal become subject to third party claims, as well as if
the Agent and/or the Principal suffer any negative consequences in the form of
financial penalties, the Client shall indemnify the Agent and/or the Principal
against all and any damages incurred as a result of such violation and shall pay
a fine in the amount equal to the financial penalties incurred by the Agent
and/or the Principal.

 

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2. The Client shall be required to present to the Agent properly certified
copies of licenses, if the advertised activity is subject to licensing; of
certificates of conformance, if the advertised products are subject to mandatory
certification; and of the registration certificates, if the advertised products
are subject to state registration. Upon the Agent’s request, the Client shall be
required to present within two days the proof of accuracy of the statements made
in the advertisement.

3. If during any calendar year during the term of the Client Agreement the
officially published US Dollar exchange rate fluctuates by more than ± 15%
(hereinafter referred to as “allowed exchange rate corridor” or “corridor”)
against the exchange rate as of January 1 of the respective yea (hereinafter
referred to as the “reference exchange rate”), i.e. if in any day during the
term of the Client Agreement (hereinafter referred to as the “exchange rate
deviation date”) the US Dollar exchange rate deviates by more than 15% against
the reference rate,

and

if during 30 (Thirty) calendar days following the exchange rate deviation date
the average weighted US Dollar exchange rate remains outside the said corridor,

the parties (the Agent and the Client) shall regard such exchange rate deviation
as a condition of force majeure in accordance with the provisions of the Client
Agreement.

Note:  For the purpose of this section:

“US Dollar exchange rate” shall mean the official exchange rate of US Dollar to
Russian Ruble, published by the Central Bank of the Russian Federation on a
particular date.

“Average weighted exchange rate” shall mean average weighted exchange rate of US
Dollar to Russian Ruble calculated according to the following formula:

AW = ∑ Rd · d

TDP

where:

AW – average rate;

Rd – exchange rate of US Dollar to Russian Ruble, published by the Central Bank
of the Russian Federation on a respective date;

d – number of days during which the above US Dollar exchange rate remains
effective,

Tdp – total number of days in the respective period for which the average
weighted rate is calculated.

Upon occurrence and confirmation of the force majeure conditions set forth in
this section, the parties (the Agent and the Client) shall act as follows:

Upon confirmation of the existence of the force majeure condition any party may
initiate amendments to the existing Client Agreement by executing a respective
addendum.

If the parties (the Agent and the Client) fail to come to agreement on amending
the terms of the existing Client Agreement and to execute a respective addendum,
the Client Agreement shall terminate as from the date agreed between the parties
(the Agent and the Client), which shall result in application of the following
provisions to the parties (given the specific nature of the force majeure
conditions set forth above), in particular:

·  the Client shall to pay to the Agent within 30 (thirty) days from the
termination of the Client Agreement for advertising services actually provided,
but not paid for as of the termination date (at earlier agreed prices), and to
pay penalties accrued against the Client prior to the termination of the Client
Agreement;

·  the Agent shall be required within 30 (thirty) days from the termination date
of the Client Agreement to return to the Client all advanced amounts paid by the
latter to the Agent towards the payment for advertising services not provided as
of the termination date of the Client Agreement”.

4. The Agent (the Principal) may not accept for placement any advertising during
the national mourning days declared in the Russian Federation and may reject or
refuse to accept for placement any advertisement in the event it is not
consistent with ethical, political or theme principles of the CTC TV Network or
the applicable law of the Russian Federation.

5.  The liability of the Agent (and, as a consequence, of the Principal) for
non-compliance with the placement and/or dissemination of Advertising may not
exceed one-time placement of the respective advertisement during the same time
(during an equivalent television program) or the price of the advertisement not
run or placed with deviations.

 

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The Agent may deviate from the Principal’s instructions, contemplated by this
section, only if as a result of such deviation the liability of the Agent (and,
as a consequence, of the Principal) to the Client shall be less than provided
under this Agreement.

3.1.4. The Agent shall carry all rights and obligations under agreements with
Clients made pursuant to this Agreement, even if the Principal was named in such
agreement and entered into direct arrangements with the Clients.

3.1.5. The Agent may engage third parties for the performance of this Agreement,
always remaining responsible to the Principal for the actions of such third
parties, and the cost of such third party services shall be paid by the Agent
from the agency fees due to it under this Agreement.

3.1.6. The Principal agrees that for the duration of this Agreement it shall not
grant to third parties a right to enter on its behalf and account into any
transactions for which the Agent is retained hereunder and shall not sell
advertising directly to the Clients without prior written consent of the Agent
except where the Principal entered into arrangements for free social
advertising, political advertising or advertising of media outlets.  The
Principal shall, on a quarterly basis, inform the Agent on any arrangements
entered into to advertise media outlets.

3.1.7. The Agent shall deliver to the Principal reports on the performance of
the Principal’s engagement pursuant to the procedure set forth in section 4.13.
hereof.

3.1.8 The Principal shall be entitled to inspect accounting books and records of
the Agent relating to the Agent’s compliance with the terms and conditions of
this Agreement.  For such inspection, the Agent, upon the Principal’s request,
shall provide certified copies of supporting documents and financial statements.

3.2 Obligation of the Principal to inform on the Network Program Block
programming schedule.

3.2.1. The Principal shall provide to the Agent the information necessary for
entering into transactions with Clients, including the following:

·  No later than three days after the date of this Agreement a forecast schedule
of the Network Program Block programming (hereinafter referred to as the
“Schedule”) for the first quarter of 2008 shall be delivered to the Agent and
the forecast Schedules shall thereafter be delivered to the Agent as they become
available.

Subsequently, the Agent shall be provided with a preliminary draft Schedule for
the respective month no later than two months before it becomes effective.

The approved Schedule for each week shall be delivered by the Principal to the
Agent no later than 8 (eight) calendar days before the beginning of the
respective calendar week.

3.2.2. The Principal may modify the Schedule and, in such case, it shall inform
the Agent on the changes to the preliminary line-up of the Network Program
Blocks for the current month within two days from the date such changes were
made and inform the Agent on the changes in the Schedule for the upcoming
calendar week no later than 2 (Two) calendar days before such changes become
effective.

The Agent shall not be entitled to such prior notice in cases where such changes
are made in an urgent manner in connection with the events of national
significance, or as a result of cancellation or changed timing of sporting
events, which were to be broadcast on air within the Network Program Blocks,
etc. so long as the Agent is informed of such changes in writing on the same day
as the changes are made.

3.3. Obligations and rights of the Parties with respect to acceptance, insertion
or placement of advertisements in the Network Program Block.

3.3.1. The procedures for delivery of the Network Advertising shall be as agreed
by the Parties in Appendix 2.

3.4. The Agent shall have discretion to reject without any consultation with the
Principal any Advertising of the Clients that is non-compliant with Russian law
and the Principal’s technical requirements. If there is doubt as to the
placement of advertisements in dispute (those advertisements that the Client
insists on being compliant with Russian advertising law), the Agent may deliver
a written request to the Principal for the latter to decide (the advertisements
in dispute may be delivered to the Principal on the tape (including VHS tapes) 
or as an electronic file), and the Principal should promptly review the request
and respond in writing with reasonable explanations within five business days
from the receipt of the written request from the Agent.

The Agent’s requests and the Principal’s responses shall be made in writing and
signed by authorized officers.  If no response is received from the Principal
within the period of time set forth in paragraph 1 of this section the Agent
shall be free to act as follows:

·              If the question in the request was such that the Agent requested
a straightforward “yes” or “no” answer, the Agent shall regard the Principal’s
silence as a “yes” answer.

 

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·              If the request was for Principal’s opinion with regard to a
controversial issue, the Agent shall regard the Principal’s silence as the
latter’s consent for the Agent to act at its own discretion.

3.5. When accepting advertising matter from the Agent, the Principal may reject
the Advertising accepted and delivered by the Agent if the Principal determines
that it is not compliant with Russian law, technical requirements or is
inconsistent with the creative, artistic or ethical concepts underlying the
Principal’s programming policy.  The Principal shall deliver to the Agent a
written notice of rejection with reasonable explanations for such rejection no
later than within three business days from the date on which such advertisement
was delivered.

In the event that the Agent did not receive the Principal’s notice of rejection
and the advertisement delivered to the Principal was not placed within the
Network Program Block, and as a consequence the Agent receives a claim from the
respective Client, the Principal agrees to take responsibility for resolving
such claim or to compensate to the Agent any costs incurred in connection with
such claim.

3.6. The Principal shall insert the Commercials into Advertising blocks and
shall place Advertising in strict compliance with the procedures for acceptance
and broadcast of the Advertising in the Network Program Blocks and in accordance
with the Advertising placement schedules delivered by the Agent.

3.7. The Principal shall not broadcast Advertising on the national mourning days
declared in the Russian Federation. The Principal shall then have an obligation
to place the advertisement not run during the same time interval and in similar
programs during the following days or at such other time as may be agreed
between the Agent and the Client.  The Principal shall not be held liable in
accordance with section 5.4. of this Agreement in those cases where the
advertising was not run on the national mourning days.  If the Client refuses to
place its Advertising at the other time, the Principal shall have an obligation
to return the price of Advertising services, if such amount has been already
paid.

3.8. The Principal shall insert the Advertising in the Network Program Block in
accordance with the procedures for acceptance and insertion of the Advertising
in the Network Program Block contained in Appendix 2 hereto.

3.9. Obligations and rights of the Parties with respect to tracking the
placement of Advertising in the Network Program Block and performance of the
obligations.

3.9.1. The Parties shall put in place necessary procedures to track the
placement to ensure that the advertisements were broadcast in full and
correctly.

The Principal shall deliver to the Agent in a timely manner (within five days
from receiving a request) ad run reports, confirming the broadcast of the
advertisements.

3.9.2. If unexpected or other circumstances arise that prevent the performance
of this Agreement, Agent shall immediately inform the Principal about this.

3.9.3. If the Advertising services were provided by the Principal improperly
with deviations from the Client Agreement (i.e. the Principal failed to
broadcast the Advertising in the Network Program Blocks or changed the time
and/or sequence of the Commercials within the Network Program Blocks or
broadcast the advertisements with improper quality or technical parameters
(without voiceover, with interferences, deviation in the timing, content or
version of the commercial, etc.), and also where services were not provided
(including the Principal’s refusal to provide services, including in part), the
Principal shall be required in a way of specific performance upon the Client’s
demand and in accordance with a Client-approved schedule to place the
Advertising not broadcast and/or broadcast in unsatisfactor manner in the same
volume without any additional charge or, if demanded by the Client, to reduce
the charges for the services pro rata or return the respective amount, if the
payment was earlier advanced by the respective Client on such terms and within
such period of time as set forth in this Agreement.

In addition to the performance of is contracted obligations, the Principal shall
also be held liable for non-performance/improper performance of its obligations
to broadcast Advertising to the extent such liability is provided for in the
Client Agreement under section 5.4. of this Agreement.

4. Financial Arrangements

Agent’s Fee:

4.1. The agency fee (the “Agency Fee”) to which the Agent shall be entitled for
the performance of legal and other actions (section 2.1. of the Agreement) shall
be equal to 13% (Thirteen percent) of the Principal’s Actual Gross Revenue in
each Reporting Period.

The Agent’s entitlement to the Agency Fee shall arise from the moment the
Advertising services were actually performed by the Principal in the relevant
Reporting Period.

 

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4.2. The accrued Agency Fee due to the Agent (section 4.1. of this Agreement)
shall be increased by the amount of value added tax in accordance with the
applicable law of the Russian Federation.

The Agency Fee shall be calculated from the Principal’s Actual Gross Revenue,
determined by the Parties in Rubles (if the advertising rates are set in US
Dollar equivalent – at the exchange rate published by the Central Bank of the
Russian Federation as of the last day of the Reporting Period) in a statement
for the respective Reporting Period, as set forth in section 4.13 of this
Agreement.

The payment of the Agency Fee to the Agent shall be made in the manner provided
respectively in section 4.4. to 4.11. hereof.

Settlement Procedures:

4.3. The price of Advertising in the Client Agreements shall be fixed:

·  in Client Agreements with Russian resident Clients and non-resident Clients
paying in Rubles – in Russian Rubles or US Dollar equivalent calculated at the
exchange rate published by the Central Bank of the Russian Federation as of the
day the payment order submitted to the Client’s bank;

·  in Client Agreements with non-resident Clients paying in US Dollars – in
Russian Rubles or US Dollars.  The payment for the Advertising in the
transaction entered into by the Agent in US Dollars with non-resident Clients
can only be made in US Dollars in accordance with the conditions of this
Agreement;

·  in Client Agreements with non-resident Clients paying in freely convertible
currencies other than US Dollars – in Russian Rubles, US Dollars or freely
convertible currency subject to prior approval of the Principal;

·  in agreements for Sponsorship Advertising with Russian resident Clients and
non-resident Clients paying in Rubles – in US Dollar equivalent payable in
Russian Rubles at the exchange rate published by the Central Bank of the Russian
Federation as of the day the payment order is submitted to the Client’s bank, or
in Russian Rubles (subject to prior approval of the Principal); and

·  in agreements for Sponsorship Advertising with non-resident Clients paying in
US Dollars - in US Dollars;

Advertising services contracted by the Clients shall be subject to value added
tax in accordance with the applicable law of the Russian Federation.

4.4. The payments in Russian Rubles under Client Agreements shall be paid to the
Agent’s current account.

Subject to sections 4.6. and 4.9. hereof, the Agent shall be required to
transfer the amounts received under such Client Agreements to the Principal
within three banking days. The said three day period shall be counted from the
moment the funds are credited to the Agent’s account.

4.5. The Agent may (subject to notification of the Principal) instruct the
Client to make the payment in Russian Rubles under the Client Agreement directly
to the Principal’s current account.

4.6. The Agent may transfer to the Clients in Russian Rubles those amounts that
are to be returned to the latter under the Client Agreements made with them,
including from the funds received from other Clients to the Agent’s account for
the benefit of the Principal, but not yet paid to the Principal.

4.7. The payments in US Dollars under Client Agreements with the non-resident
Clients shall be paid to the Agent’s transit currency account.

The Agent shall be required to transfer the amounts received under such Client
Agreements to the Principal’s transit currency account within three banking
days. The said three-day period shall be counted from the moment the funds are
credited to the Agent’s transit currency account.

4.8. In those cases when any hard currency amounts received should be returned
to the Client in accordance with the respective Client Agreement with it, then:

·  if such amount has already been transferred by the Agent to the Principal,
the Principal shall transfer to the Agent’s transit currency account within ten
days the amount to be returned to a non-resident Client in US Dollars and the
Agent shall then return the amount so received to the respective Client. The
said ten-day period shall be counted from the receipt by the Principal of the
Agent’s letter demanding the return accompanied by the respective documents
relating to the non-resident Client; and

 

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·  if such amount has not been transferred to the Principal and is still held in
the Agent’s transit currency account, the latter shall transfer to the Client in
US Dollars the respective amount to be returned.

4.9. The Principal shall be required within 3 (Three) banking days from the
receipt of the funds to the respective account to pay to the Agent the amount
equal to 13% of the funds received (if the funds are received in US Dollars 13%
shall be calculated from the Ruble equivalent of the US Dollar amount calculated
at the exchange rate of the Central Bank of the Russian Federation published on
the day the funds paid by a non-resident Client were credited to the Agent’s
transit currency account) in payment of the Agency Fee due to it under section
4.1. hereof.

In the event that the Principal fails to make payments due to the Agent
hereunder delaying them by more than 5 calendar days, the Agent shall be
entitled to withhold the amount due to it from the Principal out of the amounts
of the new payments received from the Clients to the Agent’s current account of
the benefit of the Principal.

4.10. The settlements between the Parties shall be made on a daily basis as long
as payments are received from the Clients.  The date of payment as between the
Parties hereunder shall be the date, on which the funds are withdrawn from the
payer’s account as evidenced by a bank statement.

4.11. In the event that the amount received from the Principal is larger than
the amount of the Agency Fee due to the Agent for the respective Reporting
Period, the surplus shall be regarded as an advance towards the Agency Fee for
the purpose the settlements in subsequent Reporting Periods.

Reporting:

4.12. Upon transferring the funds, the Agent shall deliver to the Principal an
accompanying letter with a detailed break-down of the amount paid.

4.13. After the end of each month, but no later than 10 (Ten) calendar days
thereafter, the Agent shall deliver to the Principal the Agent’s report (section
3.1.7. of this Agreement).  To the extent the Principal has any objections with
respect to the submitted report it shall within 10 (Ten) calendar days from
receipt thereof deliver to the Agent its objections in writing.  If no
objections are raised within such period, the report shall be deemed accepted
and the engagement completed.

After the end of each Reporting Period, but by tenth day of the month after the
Reporting Period, the Parties shall execute a two-way statement (the
“Statement”), which shall set forth:

·              the Principal’s Actual Gross Revenue for the Reporting Period;

·              the amount of receipts to the Agent’s accounts during the
Reporting Period under the Client Agreements, including in payment for the
Advertising services in the current, past and future Reporting Periods;

·              the amount of funds which the Agent shall be required to transfer
to the Clients in accordance with the terms of the Client Agreements, including
VAT;

·              the amount of receipts to the Principal’s accounts, as stated for
the Reporting Period under the Client Agreements, including in payment for the
Advertising services in the current, past and future Reporting Periods;

·              the amount of funds which the Principal paid to the Clients,
including VAT;

·              the amount of the Agency Fee due to the Agent for the Reporting
Period;

·              the amount of funds paid to the Agent as the Agency Fee,
including as payments in respect of the Reporting Period and as advances towards
payments for any future Reporting Period or as payments for past Reporting
Periods, including VAT;

·              other details, which the parties shall deem appropriate to
reflect in the Statement.

The Principal shall within ten business days either approve the submitted
Statement or deliver objections to it stating the reasons. If the Principal’s
objections are valid, the Parties shall execute a statement setting forth the
steps to be taken to resolve the claims.

If no response is received from the Principal with respect to the submitted
Statement, such Statement shall be deemed approved.

4.14.       The Statement shall be submitted by the Agent together with the
invoice for the Agency Fee.

 

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5.  Liability of the Parties and Releases

5.1. If obligations under this Agreement have not been performed or have been
performed improperly, a Party shall be liable to compensate to the other Party
damaged caused by such non-performance or improper performance.

5.2. In respect of delayed payments under this Agreement the delaying Party
shall pay a penalty interest at the rate of 0.05% (five hundredth of percent) on
the amount of the delayed payment for each day of delay.

5.3. In the event of breach by the Principal of the provision of section 3.1.6.
hereof, the Principal shall be liable to pay to the Agent a penalty equal to 13%
(Thirteen percent) of the Principal’s revenue under the contracted transaction.

5.4. In the event of non-performance or improper performance by the Principal of
the obligations to broadcast Advertising (see section 3.9.3. of this Agreement),
the Principal shall unconditionally satisfy any claims of the Clients to the
Agent under existing Client Agreements. If as a result of non-performance, the
Agent incurs expenses arising out of the Clients’ claims, the Principal shall
indemnify the Agent against all such justified expenses supported by the
documents.

5.5. The Principal shall not be liable for the occurrences where the advertising
was not broadcast in the Network Program Blocks through the fault of the Agent
and the Agent shall be solely responsible for settling any Client claims with
respect to such services.

5.6. In the event that the Agent enters into Client Agreements that do not
contain provisions set forth in sub-section 3 of section 3.1.3. hereof and
circumstances arise that are described in the said subsection, the Agent shall
compensate to the Principal the said lost profits in the amount equal to the
revenue that the Principal did not receive due to the non-performance by the
Client (Clients) of the provisions set forth in subsection 3.

The amount of proved lost profit calculated in the US Dollar equivalent shall be
set forth by the Parties in the Statement, which should be agreed between the
Parties no later than within 30 days after the circumstances set forth in
sub-section 3 of section 3.1.3. hereof arise.

Within 30 days after the execution of the Statement, the Agent shall have an
obligation to pay the amount of lost profit to the Principal.

5.7. All payments hereunder in respect of penalties and damages shall be made in
Rubles against the creditor’s written demand for penalties, which shall be
delivered by registered mail with acknowledgement of receipt within 30 (Thirty)
days from the date of the respective invoice.

5.8. The Parties shall be relieved of the liability for non-performance or
improper performance of the obligations under this Agreement, if such
non-performance or improper performance was caused by the conditions of
force-majeure, i.e. circumstances of extraordinary nature unavoidable in a
particular situation, such as natural calamities, fires, military hostilities,
revolutions, strikes, legislative changes, enactment of mandatory regulations,
unscheduled addresses of the government officials (President of the Russian
Federation, Chairman of the Government of the Russian Federation, State Duma
Speaker) and other circumstances beyond the control of the Parties.

5.9. A Party that is unable to perform its obligations under this Agreement
shall promptly, but no later than within five days, notify the other Party of
the occurrence and cessation of such. In such case, the Parties’ representatives
should as soon as possible consult with each other and agree on the steps to be
taken by the Parties.

The occurrence and duration of such circumstances shall be confirmed by
documents issued by respective competent authorities.

5.10. A failure to notify or to notify in a timely manner on the occurrence of
such circumstances shall result in the Party that failed to notify or to give a
timely notification losing its right to claim any such circumstances as
relieving it from the liability for the failure to perform its obligations in a
timely manner.

5.11. In the event that the Advertising materials were not broadcast due to the
occurrence of the above circumstances, the Principal shall, subject to the
Agent’s consent, broadcast such advertising during the same time interval and in
the similar programs and where such placement is not possible, shall return to
the Agent amounts previously paid for the Advertising not broadcast.

6.  Special Provisions

6.1. In the event that the legislative changes affect the amount and/or terms of
the Advertising to be placed with the Principal, the Parties shall renegotiate
the provisions of sectio 2.4. of this Agreement and the respective plans for
Advertising sales. The Parties agree that the coming into effect of the
legislative changes as contemplated by this section shall not constitute the
ground for a unilateral termination of this Agreement without the payment of the
termination fee by the terminating Party as provided in section 9.2. hereof.

 

8

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7. NOTICES UNDER THE AGREEMENT

7.1. The Parties shall deliver all applications, notices and requests to each
other to the agreed addresses, fax and telephone numbers by courier services
with a copy by fax or electronic mail. Any such application, notice or request
shall be deemed delivered:

·  in case of delivery by courier – on the day of delivery;

·  in case of delivery by fax - on the day of delivery, if delivered during
normal business hours.

·  in case of delivery by electronic mail - on the day of delivery, if delivered
during normal business hours.

7.2. All requests of the Agent to the Principal or of the Principal to the Agent
(except as provided in section 3.4. hereof) shall be reviewed by the respective
Party within three business days after the receipt of the request and replied to
in writing within the same period of time (by fax, electronic mail or courier
service). In the event the response is not received within the said period
(silence of either Party to this Agreement) the requesting Party (the “second
Party”) shall be entitled to proceed as follows:

·              If the question in the request was such that one Party requested
a straightforward “yes” or “no” answer, the second Party shall regard the
silence of the other Party (the “first Party”) as a “yes” answer.

·              If the request was for the first Party’s opinion with regard to a
certain issue, the second Party shall regard the silence of the first Party as
the latter consent for the second Party to act at its own discretion.

7.3. The actions of the Party taken in compliance with section 7.2. of the
Agreement shall be deemed to have been taken in accordance with the terms of
this Agreement without exceeding the authority and in the event any negative
consequences arise such Party may not be held liable.

8. Dispute Resolution

8.1. All disputes and controversies that may arise out of or in connection with
this Agreement shall to the extent possible be resolved through negotiations.

8.2. In the event the Parties fail to reach agreement, the dispute is to be
resolved by the Moscow Arbitration Court.

9. Agreement Validity

9.1. This Agreement shall come into effect upon execution and shall be valid
through 6 a.m. local time on January 1, 2013.

9.2. This Agreement may be terminated before expiry of its term by either Party
subject to a notice at least 180 days from the proposed termination date.  Such
termination notice shall be given by a registered mail with acknowledgement of
receipt.

The terminating Party shall then be required to pay to the other Party a
termination fee equal to 13% of the amount of the Principal’s Actual Gross
Revenues for the six full months preceding the termination date.

The Parties agree that if the termination occurs after December 31, 2008 and the
termination date shall be effective as of January 1 of the respective year and
subject to terminating Party’s notice being received by the other Party at least
180 days before the proposed date of termination, the termination fee provision
shall not apply.

The payment of the termination fee shall be made within 30 (Thirty) days from
the Agreement termination date.

9.3. Any reorganization, change of legal form, shareholders and/or management
(whether sole and/or collective) of the Parties shall not constitute a ground
for the termination and/or change of the provisions set forth in this Agreement.

9.4. Upon expiry of the term of this Agreement it can be renewed by agreement of
the Parties.

9.5. In the event that, as of the date this Agreement is terminated, any
advertising under any agreement made by the Agent in accordance with this
Agreement is not completed and/or any commenced service has not been provided in
full, the obligation of the Parties shall be deemed terminated as from the date
on which such Advertising has been broadcast and all settlements and penalty
payments in accordance with the terms of this Agreement have been completed.

10. Miscellaneous

10.1. This Agreement is made and executed in two equally binding counterparts
with one for each Party.

 

9

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10.2. All and any amendments and supplements to this Agreement shall only be
valid if made in writing and signed by the authorized representatives of the
Parties.

10.3. All and any amendments and supplements to this Agreement shall be its
integral part.

10.4. The Parties agreed not to disclose or otherwise make known to third
parties any terms and conditions of this Agreement or any other confidential
information, which either of the Parties may have made known to the other Party
in connection with the performance of this Agreement (except for any disclosures
made to their agents, consultants and legal counsel) without a prior written
consent to such disclosure of the other Party, save to the exten expressly
required under applicable law, regulations and rules, as approved by the
governmental authorities (including, without limitation, the securities
regulators outside the jurisdiction of the Parties) or ordinary disclosure to
auditors, shareholders or legal counsel of the Parties.

10.5. The headings of the clauses in this Agreement shall be used for
convenience of reference only and shall not be construed as either limiting or
broadening the meaning of the provisions of this Agreement.

10.6. The Parties shall have an obligation to promptly notify each other of any
changes in the legal form, address, banking or other details, which have
occurred.

11. Addresses, Banking Details and Signatures of the Parties:

AGENT:

 

PRINCIPAL:

CJSC “Kompaniya TSV”

 

CJSC “NETWORK OF TELEVISION STATIONS”

Place of Business: 25 Akademeka Pavlova Street, Moscow 121359

 

PLACE OF BUSINESS: 12, 3 KHOROSHEVSKAYA STREET,

 

MOSCOW

Mailing Address: 25 Akademeka Pavlova Street, Moscow 121359

 

MAILING ADDRESS: 12, 3 KHOROSHEVSKAYA STREET,

 

MOSCOW

INN 7731568585

 

INN07115217, ОГРH 1027700151852

KPP 773101001

 

CURRENT ACCOUNT 40702810100000006624 WITH OAO  ALFA BANK, CORRESPONDENT ACCOUNT

OGRN 5077746859757

 

Current account 4070 2810 3382 6011 0108

 

30101810200000000593

With the Kievskoe Branch of the Savings Bank of Russia No 5278

 

BIK 044525593

 

TEL. 797- 4100 FAX 797 – 4101

Correspondent account 3010 1810 4000 0000 0225

 

HARD CURRENCY ACCOUNT DETAILS:

BIK 044525225

 

BENEFICIARY: ZAO SET TELEVISIONNYX STANCIY

Tel.

 

 

Fax

 

BENEFICIARY ACCOUNT: 40702840400003003080

Hard Currency Account Details:

 

BENEFICIARY BANK: ALFA-BANK, MOSCOW, RUSSIA  (107078, MASHA PORYVAEVA ST., 11)

Beneficiary: Beneficiary account:

 

 

 

 

Beneficiary bank:

 

 

 

 

 

On behalf of the Agent

 

On behalf of the Principal

 

 

 

 

 

V.L. Vshivkin seal here

 

A.E. Rodnyansky seal here

 

 

10

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Appendix No 1

(to be completed by November 30, 2007)

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Appendix No 2

(Procedures for Acceptance and Insertion of Network Advertising)

To Agency Agreement No C-25-400/07 dated July 11, 2007

(hereinafter the “Agency Agreement”)

Moscow                                                                                                                     July
11, 2007

Closed Joint Stock Company “Network of Television Stations” (OGRN
1027700151852), hereinafter referred to as the “Principal”, represented by its
General Director A.E. Rodnyansky, acting pursuant to the Charter on one side,
and Closed Joint Stock Company “Kompaniya TSV” (OGRN 5077746859757 ),
hereinafter referred to as the “Agent”, represented by the General Director V.L.
Vshivkin, acting pursuant to the Charter, on other side, hereinafter referred to
as the “Parties”, executed this Appendix to the Agency Agreement as follows:

This Appendix shall set forth the arrangements as between the Agent and the
Principal with respect to the preparation, documenting and inserting into the
Network Program Blocks of the Network Advertising to be delivered by the Agent
in accordance with the Agency Agreement.  Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agency Agreement.

1.  Acceptance and Insertion of the Network Advertising into the Network Program
Blocks:

1.1.  The Agent shall accept the advertisements from the Clients in PAL format
with synchronized voiceover and time code on Betacam SP or Digital Betacam tapes
(hereinafter referred to as the “Tapes”).

The Agent’s representatives shall deliver to the Principal (at 12, 3
Khoroshevskaya Street, Moscow) no later than 4 (four) business days before the
scheduled time for the broadcast of the advertising in the Network Program
Blocks (by 5 p.m. on the delivery day) (on Mondays the deliveries shall be
accepted for Saturday and Sunday of the current week and the next Monday, on
Tuesday for the next Tuesday, on Wednesday for the next Wednesday, on Thursday
for the next Thursday and on Friday for the next Friday) the Tapes with the
video recordings of the Network Advertising and accompanying documents
(Advertising Spot Order Forms).

On pre-holiday days the Tapes with the video recordings of the Network
Advertising and accompanying documents shall be delivered to the Principal
within such time as shall be additionally agreed by the Parties by means of
telephone or fax communications.

An Advertising Spot Order Form shall be delivered together with the Tape
containing the video recording of the Network Advertising (section 1.2. of this
Appendix).

1.2.  In accordance with section 1.1. of this Appendix, the Tape containing the
video recording of the Network Advertising shall be accompanied by an
Advertising Spot Order Form.

The Advertising Spot Order Form shall contain the following details:

·       tape number;

·       spot starting and ending time code (with accuracy to a frame);

·       spot title and version;

·       each spot ID (identification number);

·       frame timing information (with accuracy to a frame).

1.3.  The Network Advertising video recording should conform to the technical
specifications as contained in the current Russian regulations, as well as the
Principal’s requirements applicable to the TV recording. The frame timing should
be divisible by 5 exactly.

1.4.  The Agent shall inform the Principal (traffic department) on any changes
in scheduling the broadcast of the Network Advertising no later than by 2 p.m.
on a day, which is 3 (Three) business days before the scheduled broadcast. This
shall also be a deadline for delivering the Tapes with video recordings of the
commercials for inserting them into advertising blocks.

If an urgent need for the re-cutting of the completed advertising blocks arises,
the Agent shall deliver to the Principal (traffic department) of the Re-Cutting
Orders. Re-cutting shall only be done, if the Principal has a physical ability
to do so.

1.5.  If the video recoding of the Network Advertising is not in conformance
with the requirements set forth in section 1.3. of this Appendix the Principal
(traffic department) shall promptly (within one day) notify Agent of each such
occurrence.

The video recording may be replaced by the Agent for another one as long as the
time requirements set forth in paragraph 1.4 of this Appendix are complied with.

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2. Principal’s Manager Terminal:

2.1.  The Agent shall make available to the Principal a technical service
allowing for access (through Internet, dial-up or dedicated line connection) to
the localized version of the Television Advertising Placement System, containing
data on the Network Advertising placements (hereinafter referred to as the TAPS)
and maintain the same.

The number of terminals shall be as agreed between the Agent and the Principal.

2.2.  The Principal’s manager remote terminal shall allow for access by the
Principal’s managers to the following information, including for editing:

·       Network Program Block programming schedule identifying available
advertising spots;

·       total time allocated to and booked for the Network Advertising within
the Network Program Block programming schedule;

·       advertising block spots booked;

·       advertised product category;

·       client entity;

·       information on Russian/international author works use in the
commercials.

2.3.  The Agent shall deliver to the Principal an electronic Placement Form for
the Network Advertising (other then Sponsorship Advertising) by means of a
report, installed on the Principal’s manager remote terminal.

2.4.  The Principal’s managers shall download the electronic advertising
Placement Form no later than at 2 p.m. (final version) on a day, which is 3
(Three) business days before the placement date.

2.5.  The electronic Placement Form shall contain the following information:

·       placement date (day, month, week day, year);

·       description of all (in-program and between-programs) adverting blocks;

·       reference as to in what commercial break the advertising block is
scheduled to be broadcast within the Network Program Block programming schedule
and its number (within which program or prior to which program the advertising
block is scheduled);

·       title, version and timing information for each advertising spot in the
block;

·       positioning of the commercial, if any;

·       sequence of advertising spots within the block;

·       timing information for the entire length of the block;

·       timing information for all blocks of the day.

3. This Appendix is made and executed in two equally binding counterparts with
one for each Party.

Signatures of the Parties:

Agent:

 

Principal:

 

 

 

 

 

 

 

(V.L. Vshivkin) seal here

 

(A.E. Rodnyansky) seal here

 

 

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Appendix 3

(Procedures for Acceptance and Insertion of Sponsorship Advertising

into Network Program Blocks)

to Agency Agreement No C-25-400/07 dated July 11, 2007

(hereinafter the “Agency Agreement”)

Moscow                                                                                                                     July
11, 2007

Closed Joint Stock Company “Network of Television Stations” (OGRN
1027700151852), hereinafter referred to as the “Principal”, represented by its
General Director A.E. Rodnyansky, acting pursuant to the Charter on one side,
and Closed Joint Stock Company “Kompaniya TSV” (OGRN 5077746859757 ),
hereinafter referred to as the “Agent”, represented by the General Director V.L.
Vshivkin, acting pursuant to the Charter, on other side, hereinafter referred to
as the “Parties”, executed this Appendix 3 (the “Appendix”) to the Agency
Agreement as follows.  Capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to such terms in the Agency Agreement.

Subject to the terms and conditions of the Agency Agreement, the Parties agree
on the arrangements for the placement of the Sponsorship Advertising in the
Network Program Blocks based on the conditions set forth in this Appendix.

2.  For the Purposes of this Appendix the below forms of placement of the
Sponsorship Advertising have the following meanings:

(a) “Opening Sponsor Subtitles” means mandatory reference to an entity or
individual (Sponsor), which/who met the cost of the production and/or broadcast
of the television program, which is to contain a full legal name of the Sponsor.
The duration of appearance in the frame is to be 3 to 5 seconds with the size of
up to 5% of the frame.

(b) “Sponsor’s Still/Dynamic Promotion” means the still image or dynamical
sequence of images with reference to a full legal name of the Sponsor or to its
Product/Logo of 5 to 10 seconds in duration (length should be divisible to 5).

(c) “Sponsor Subtitles at the First Product Showing”  means a mandatory
reference to an entity or individual (the Sponsor), which/who met the cost of
the production and/or broadcast of the television program, which is to contain a
full legal name of the Sponsor. The duration of appearance in the frame shall be
3 to 5 seconds with the size of up to 5% of the frame.

(d) “Frame Corner Digital (Superimposed) Logo” means the Sponsor’s logo
(trademark) graphically generated by a computer and placed in the Program. It
will be possible only together with Opening Sponsor Subtitles or simultaneously
with them. It can be of up to 7% of the frame in size.

(e) “Subtitles Credit” means a recognition of the Sponsor by the Program (with a
mandatory visual presentation of the Sponsor’s legal name) for the Products or
services provided.

(f) “Sponsor Promotion” means a specially produced (to avoid association with a
direct/commercial advertisements) promotion of the Sponsor with required
reference to the full name of the Sponsor (at the beginning of the Program and
at the time of the first appearance of the Product).

(g) “Presenter’s Verbal Credit (Announcement)/Reference to Sponsor/Program
Break” means the presenter’s verbal announcement about the Program Sponsor, in
which reference is made to the Sponsor’s brand and Products with description of
the Products features.

(h) “Presenter’s Verbal Credit (Announcement/Reference to Sponsor/No Program
Break” means the presenter’s verbal announcement about the Program Sponsor
without breaking the running of the Program or reference to the Sponsor’s brand
and Products with a duration of up to 3 seconds.

(i) “Presenter’s Verbal Announcement/No Reference to Sponsor/Reference to Brand
and/or Display of Product/Product Make” means the presenter’s verbal
announcement about the Sponsor’s product/brand with displaying the same, being
part of the Program plot limited to 3 seconds in duration.

(j) “Presenter Giving Sponsor’s Gift/Reference to Sponsor/Program Break” means
the handing by the Program presenter of the gift provided by the Sponsor with a
reference to the trade mark and

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product description of the product specifications as well as a reference to the
legal name of the Sponsor.  Gift can be presented by the Sponsor’s
representative.

(k) “Presenter Giving Sponsor’s Gift/Reference to Sponsor/No Program Break”
means the handing by the Program presenter of the gift provided by the Sponsor
with a reference made only to the Sponsor and no reference made to the Product
make/brand or comments as to its specifications or properties.  The display of
the gift (Product) and handing it over should not interrupt the running of the
Program and a participant of the Program should at all times appear on camera. 
No close-ups of the gift packaging/Product or logos are allowed.

(l) “Presenter Giving Sponsor’s Gift/No Reference to Sponsor/ Reference to Brand
and/or Display of the Product/Product Make” as the Presenter hands over the
gift, reference is made to the make/brand and/or Product or Product make is
displaye comments as to its specifications, properties or distinctive features. 
No close-ups of the gift packaging or logos are allowed.

(m) “Displaying Sponsor’s Sign” means the sign with the entity’s name (including
the one that is not the same as the Sponsor’s name) in the building, where it
conducts its business, to be shown at long distance with the Program
participants present. The length is limited to 3 seconds.

(n) “Displaying Sponsor Packaging (Bags)” means the packaging with the Sponsor’s
logo or trademark on it to be shown at long/middle distances with the Program
participants present. The length is limited to 3 seconds.

(o) “Use of Sponsor-Provided Decorations” means the use of the Sponsor’s
Products, brand elements, its colors and styling for decorating the Program
shooting set.

(p) “Sponsor Providing Clothing to Program Characters/Presenters” means the
clothing of the Program presenters or characters without the Sponsor’s logo.

(q) “Decoration of Program Studio/Interiors with Sponsor-Provided Materials”
means the use of brand elements, its colors and styling for decorating the
Program shooting set.

(r) “Use of Sponsor Promotion Materials in Program Studio/Interiors
(Microphones, Tables) means the use of brand elements, its colors and styling as
well as the products for decorating the Program shooting set.

(s) “Displaying Sponsor Products” means the Sponsor-manufactured or marketed
product appearing in the frame at long or middle distance for 2 to 3 seconds.

(t) “Use of Sponsor Products” means the Sponsor-manufactured or marketed product
appearing as they are being consumed/used by the Program participants. Middle
shots are to be used with duration of 2 to 3 seconds.

(u) “Presence of Sponsor in Studio (Studio Guest)” means the interview of or
address by the Sponsor in the Program without a reference to any make/brand,
appearance of the Product or any comments as to the consumer properties,
qualities or features of the Product.

(v) “Appearance of/Reference to Sponsor’s Product in Special Scene” means
displaying or making reference to the Sponsor-manufactured or marketed product,
which appears or is referred to on camera in a specially set-up and scripted
scene, being incorporated into such scene as a “recurring character”, not as the
scene’s “main character” with appearances (references) made at long or middle
distances together with other products.

3. The Sponsorship advertising shall be placed in the Network Program Blocks as
follows:

3.1. Before any agreements are made for the placement of the Sponsorship
Advertising, the Agent should first agree on the placement arrangements with the
Client and the Principal (Sponsorship Package: name of the program sponsor,
advertised item (program sponsor, its product or service), a form of the
placement of the Sponsorship Advertising (out of the list above in section 2 of
this Appendix), title of the program to be sponsored, date of the placement and
the number of appearances of the Sponsorship Advertising.

3.2. Based on the preliminary agreement, the Agent shall deliver in writing to
the Principal (responsible account manager in the sales department) an Order
Form and letter of guarantee for the placement of the Sponsorship Package no
later than 10 (Ten) business days before:

·          the scheduled day for the placement of the Sponsorship Advertising in
the Network Program Blocks in the event that the Sponsorship Advertising is to
be placed using the form described in item (b) of section 2 of this Appendix;

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·          prior to the start of production work on (shooting of) the television
program/show in the event that the Sponsorship Advertising is to be placed using
any forms other than described in paragraph (b) of section 2 of this Appendix.

If after 2 (Two) business days from the receipt by the Principal from the Agent
of the Form Order (Letter of Guarantee) no reasonable objections or rejection to
accept the Sponsorship Package are raised by the Principal, the Sponsorship
Advertising shall be deemed accepted by the Principal for placement and the
Agent shall be deemed authorized to enter into an agreement with the Client on
the terms set forth in the Order Form (Letter of Guarantee).

The Order for placement of the Sponsorship Advertising (description of the
Sponsorship package) shall contain the name of the program sponsor, advertised
item (program sponsor, its product or service), form of placement of the
Sponsorship Advertising (out of the list above in section 2 of this Appendix),
title of the program to be sponsored, date of placement and the number of
appearances of the Sponsorship Advertising in each program (release of the
program), timing information for each form of placement of the Sponsorship
Advertising, as well as the placement price of the Sponsorship Advertising.

3.3. The Sponsorship Advertising shall be placed by the Principal in the Network
Program Blocks pursuant to the Order Form of the Agent as follows:

3.3.1. The Sponsorship Advertising, placed in the form described in item (b) of
section 2 of this Appendix shall be accepted by the Agent from the Client in PAL
format with synchronized voiceover and time code on Betacam SP or Digital
Betacam tapes (hereinafter referred to as the “Tapes”).  The tapes with the
video recordings shall be delivered to the Principal’s Sales Department 7
(Seven) business days before the commencement of the period during which the
Sponsorship Advertising is to run. The Principal’s person, responsible for the
acceptance of the Tapes: an account manager of the sales department responsible
for this Sponsorship placement.

The placement by the Principal of the Sponsorship Advertising in the Network
Program Blocks in accordance with the first paragraph of this subsection shall
be in accordance with the procedures set forth in Appendix 2 to the Agency
Agreement.

3.3.2. The Sponsorship Advertising placed in the forms described in items (a),
(c) and (d) of section 2 of this Appendix shall be accepted by the Agent from
the Client as a write-up on the Sponsorship Client as well as electronically in
the format to be agreed with the production company (jpg, mpeg, etc.). The
write-ups on the Sponsorship Client and the Tapes with the video recordings
shall be delivered to the Principal’s Sales Department. The Principal’s person,
responsible for the acceptance of the Tapes: an account manager of the sales
department responsible for this Sponsorship placement.

3.3.3. The Sponsorship Advertising placed in the forms described in items (a),
(c) through (v) in accordance with section 2 of this Appendix shall be produced
and inserted into the program (release of the program) by the program production
company pursuant to the respective agreements between the production company and
the Principal. The placement of the Sponsorship Advertising in the Network
Program Blocks in the forms listed in this subsection shall be in accordance
with the following procedure:

3.3.3.1. The Principal shall deliver to the production company a respective
Placement Order (as defined in Appendix 2 to the Agency Agreement) in respect of
the Sponsorship Advertising attaching respective information on the Sponsorship
Client, materials necessary for the production of the program together with the
electronic files in the agreed format.

3.3.3.2. Once the program has been produced, the Principal shall accept the
respective program (release of the program) with the Sponsorship Advertising
inserted into it and as long as the program is consistent with the Order Form,
the respective program (release of the program) shall be included into the
Network Program Blocks in accordance with the Network Program Block Programming
Schedule.

3.3.3.3. In the event that the Sponsorship Advertising has been produced and
inserted into the program with deviations from the form agreed for the placement
or its amount is lesser in scope than requested in the Order Form (Letter of
Guarantee) of the Agent, the Principal shall deliver to the Agent a copy of the
program produced in a pre-view format (DVD, VHS).  Such pre-view copy shall be
delivered to the Agent by courier within 2 (Two) business days after the receipt
of the program (release of the program) by the Principal from the production
company.

3.3.3.4. Based on the video recoding of the program delivered by the Principal
the Agent shall obtain the approval of the Sponsorship Client for the deviations
from the Sponsorship

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package within 3 (Three) business days from the receipt of the material from the
Principal as provided under section 3.3.3.3 of this Appendix and shall
immediately inform the Principal about such approval.

If the Sponsorship Client does not approve the deviations from the Sponsorship
package the Agent shall advise the Principal about this. In such cases the
Principal agrees to satisfy the Client’s claims that arise from the deviations
from the Sponsorship Package to the extent the services were provided
improperly.

If no approval or disapproval with respect to the deviations from the
Sponsorship package is received by the Agent from the Sponsorship Client within
the time period set forth in the first paragraph of this subsection, the Parties
acknowledge that the Sponsorship Client shall be deemed to have agreed to the
deviations from the Sponsorship package.

3.3.4. With the purpose of proper performance of the Agency Agreement and
reporting by the Agent to the Client on the services actually provided with
regard to the placement of the Sponsorship Advertising the Principal shall
deliver to the Agent no later than 15th day of the month following the month of
placement an ad run report as a proof of broadcasting the program containing the
respective Sponsorship Advertising placed in the form described in item (b) of
section 2 of this Appendix. To the extent the video recording of the program
containing the Sponsorship Advertising has been requested the Agent shall
deliver to the Principal a written request for the production of the above video
recording.

4. This Appendix shall come into effect simultaneously with the Agency Agreement
and shall be an integral part of the Agency Agreement.

5. This Appendix is made and executed in two equally binding counterparts with
one for each Party.

Signatures of the Parties:

 

Agent:

 

 

Principal:

 

 

 

 

 

 

 

 

(V.L. Vshivkin) seal here

 

 

(A.E. Rodnyansky) seal here

 

 

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