Exhibit 10.1


 





 


19 June 2008


 


Anton Kudryashov


31 Abbots Drive


Virginia Water


GU25 4SE


UK


 


Dear Anton:


 


On behalf of CTC Media, Inc. (the “Company”),
I am very pleased to offer you employment with the Company.  The purpose of this letter is to summarize the
terms of your employment with the Company. 
These terms will form the basis of a more comprehensive employment
agreement and option agreement that we expect you and the Company to sign
shortly after your acceptance of this offer. 
Please note that this offer and the terms of your employment with the
Company are both subject to the receipt of formal approval of the Company’s
Board of Directors (the “Board”).


 


Employment. 
You will be employed, effective 4 August 2008 (the “Commencement
Date”), to serve in the position of Chief Executive Officer, reporting to the
Board. You will be based in Moscow, Russia. 
The Company acknowledges that from the Commencement Date through April 5,
2009, you will be permitted to work a reasonable number of days from the United
Kingdom in order to satisfy residency requirements there.


 


Exclusivity.  In return for the compensation payments set
forth in this letter, you agree to devote 100% of your professional time and
energies to the Company and not engage in any other business activities without
prior approval of the Board.


 


Compensation.  Your annual base salary (the “Base Salary”)
will be the Russian ruble equivalent of $660,000 (determined on the basis of
the US$/RUR exchange rate as reported by the Central Bank of the Russian
Federation on the Commencement Date (the “Prevailing Exchange Rate”)), less all
applicable Russian federal and local taxes and withholdings, for the period
commencing on the Commencement Date and ending on December 31, 2009.  For the 2010 calendar year, the Base Salary
shall be increased by 13.64%.  From January 1,
2011, the Base Salary may be adjusted from time to time in accordance with
normal business practice and upon mutual agreement of the parties.  The Base Salary shall be pro-rated for any
year in which you are not an employee of the Company for the full year.


 


Discretionary Bonus. 
Beginning with 2009, you will be eligible for an annual discretionary
award of up to the Russian ruble equivalent of $400,000 (determined on the
basis of the Prevailing Exchange Rate), less all applicable Russian federal and
local taxes and withholdings, subject to the achievement of performance targets
to be set by the Board or a committee thereof in the first quarter of the
relevant year.  Whether such performance
targets 


 


1

















 


have been achieved will be decided by the Board or a committee thereof
in its reasonable discretion.   In any
event, you must be an active employee of the Company on the date the bonus for
any year is distributed in order to be eligible for a bonus award for that
year.  Subject to you being an active
employee of the Company on the date bonuses for 2008 are distributed, you will
be entitled to a discretionary bonus for 2008 in the amount of the Russian
ruble equivalent of $166,667 determined on the basis of the Prevailing Exchange
Rate.


 


Stock Option Grant.  Subject to the approval of the Company’s
Board, the Company will grant to you an option in three tranches. The first
tranche of the option (the “Time-Based Option”) shall be an option to purchase
1,521,241 shares of the Company’s Common Stock (1.0% of the shares outstanding
as of December 31, 2007) which will vest as to 507,081 shares on the first
anniversary of the Commencement Date and as to an additional 126,770 shares at
the end of each of the immediately following eight quarters. The exercise price
of the Time-Based Option will be the average of the official close price per
share of the Company’s Common Stock, as reported by Nasdaq and as measured over
the following 20 trading days: the Commencement Date and the 19 trading days
immediately preceding the Commencement Date.


 


The second tranche of the option (the “Revenue Objective Option”) shall
be an option for an aggregate of 760,621 shares of the Company’s Common Stock.
The Revenue Objective Option shall be further divided into three tranches and
one-third of the option shares shall be subject to achieving the Revenue
Objective in 2009, the second one-third of the option shares shall be subject to
achieving the Revenue Objective in 2010 and the final one-third shall be
subject to achieving the Revenue Objective in 2011.  Upon achieving the Revenue Objective for any
relevant year, the applicable option shares shall vest as to one-third of such
shares on the date that the Board determines that such Revenue Objective has
been achieved and the remainder shall vest in two equal installments on January 1st
of each of the two years immediately following such determination.  If the Revenue Objective for any one year is
not achieved then the applicable option shares for that year shall not vest;
provided, however, that if the Cumulative Revenue Objective for any of the
following years is achieved, the option shares applicable to the earlier
Revenue Objective shall commence vesting from the year in which the Cumulative
Revenue Objective is achieved, in accordance with the schedule set forth in the
immediately preceding sentence of this paragraph.  For example, if the 2009 Revenue Objective is
not achieved but the 2010 Cumulative Revenue Objective is achieved, the Revenue
Objective Option shall commence vesting, in accordance with the schedule set
forth in the third sentence of this paragraph, as to two-thirds of the shares
underlying the Revenue Objective Option from the date the Board determines that
the 2010 Cumulative Revenue Objective has been achieved.  If either or both of the 2009 and 2010
Revenue Objectives are not achieved but the 2011 Cumulative Revenue Objective
is achieved, the Revenue Objective Option shall commence vesting, in accordance
with the schedule set forth in the third sentence of this paragraph, as to 100%
of the shares underlying the Revenue Objective Option from the date the Board
determines that the 2011 Cumulative Revenue Objective has been achieved. For
purposes hereof, “Revenue Objective” means, with respect to any of 2009, 2010
and 2011, that the Company’s consolidated total revenues (as adjusted for
acquisitions that are consolidated for only a portion of such year, “Revenues”)
for such year exceeded the Company’s consolidated total revenues for the
immediately preceding year by at least five percentage points more than the
Russian television advertising market for such year


 


2

















 


exceeded the Russian television advertising market for the immediately
preceding year; by way of example if the Russian television advertising market
for 2009 was 15% more than the Russian television advertising market for 2008,
the Company’s total consolidated revenues for 2009 would need to be at least
20% more than such revenues for 2008 for the Revenue Objective to be met. The “Cumulative
Revenue Objective” means, with respect to 2010, that the compound annual growth
rate for Revenues from 2008 through 2010 exceeded by at least five percentage
points the compound annual growth rate of the Russian television advertising
market from 2008 through 2010; and with respect to 2011, that the compound
annual growth rate for Revenues from 2008 through 2011 exceeded by at least
five percentage points the compound annual growth rate of the Russian
television advertising market from 2008 through 2011.  The exercise price of the Revenue Objective
Option will be the official close price per share of the Company’s Common Stock
on January 2, 2009, as reported by Nasdaq.


 


The third tranche of the option (the “Cost Objective Option”) shall be
an option for an aggregate of 760,620 shares of the Company’s Common Stock. The
Cost Objective Option shall be further divided into three tranches and
one-third of the option shares shall be subject to achieving each of the Cost
Objective and the Reorganization Objective in 2009, the second one-third of the
option shares shall be subject to achieving each of the Cost Objective and the
Reorganization Objective in 2010 and the final one-third shall be subject to
achieving each of the Cost Objective and, if any, the Reorganization Objective
in 2011.  Upon achieving the Cost
Objective and the Reorganization Objective for any relevant year, the applicable
option shares shall be deemed to have commenced vesting from 1 January 2009
in 12 equal quarterly installments.  If
the Reorganization Objective is achieved for each of 2009, 2010 and, if any,
2011 but the Cost Objective is not achieved (i) in 2009 but is achieved in
2010 and/or 2011, the Cost Objective Option shall be deemed to vest as to
two-thirds or 100%, respectively, of the shares underlying the Cost Objective
Option or (ii) in 2009 and/or 2010 but is achieved in 2011, the Cost
Objective Option shall be deemed to vest as to 100% of the shares underlying
the Cost Objective Option, in each case, in accordance with the schedule set
out in the immediately preceding sentence. 
For purposes hereof, “Cost Objective” means, with respect to 2009, 2010
and 2011, that the Company’s total consolidated operating expenses other than (x) depreciation
and amortization, (y) amortization of programming rights and (z) amortization
of sublicensing rights (currently categorized as direct operating expenses and
selling, general and administrative expenses, the “Operating Expenses”, as  adjusted for acquisitions that are
consolidated for only a portion of any year) were lower than Operating Expenses
in 2008 by 2.5%, 4.5% and 6.0%, respectively, for 2009, 2010 and 2011.  The Reorganization Objective shall mean, with
respect to 2009, 2010 and 2011, putting into effect those organizational
objectives for each such year that the Board approves based upon its review and
consideration of the recommendations set out in the study by Booz Allen
Hamilton commissioned by the Company in 2008. The exercise price of the Cost
Objective Option will be the official close price per share of the Company’s
Common Stock on January 2, 2009, as reported by Nasdaq.


 


All option vesting shall be subject to your continued employment by the
Company.  All share numbers and exercise
prices will be adjusted for future share splits or similar share
reorganizations.


 


Vacation.  You will be eligible for a
maximum of 20 business days of vacation per calendar year, subject to proration
to your date of hire and to be taken at such times as may be


 


3

















 


approved in the sole discretion of the
Company.  From the Commencement Date
until April 5, 2009, you shall make a good faith determination regarding
whether days spent in the United Kingdom toward satisfying your UK residency
requirement shall be accrued as vacation days.  
If as a result of time spent in the UK, you exceed the maximum number of
vacation days to which you are entitled through April 5, 2009, the number
of vacation days to which you are entitled for the remainder of 2009 shall be
reduced by the number of extra days taken in that earlier period.


 


Relocation Expenses.  Upon presentation of reasonable documentary
evidence of such expenses to the Audit Committee of the Board, the Company
shall reimburse you for, or, in the case of rent-related prepayments, pay on
your behalf, reasonable out-of-pocket expenses related to relocating from
London to Moscow, including accommodation expenses in Moscow for you and your
immediate family for a period of up to 18 months following the Commencement
Date, hotel accommodation in Moscow until such time as suitable permanent
accommodation can be secured, shipment of household goods to Moscow, fees
charged by a local broker for locating a suitable home for you and your family
in the Moscow area; and business class airfare between London and Moscow for
you and your immediate family for a period of up to 18 months following the Commencement
Date.  To the extent you are required to
pay taxes in any applicable jurisdiction in relation to the reimbursement of
these relocation expenses and upon presentation of reasonable evidence that
such taxes are payable and have been or will be paid by you, the Company shall “gross-up”
the amounts reimbursed to you to make you whole for such taxes.  The maximum amount the Company shall
reimburse you for these relocation expenses shall be $1 million (which shall be
inclusive of any tax “gross-up” amounts).


 


Transportation.  The Company shall provide you with the
exclusive use of a new luxury sedan (which shall remain the property of the
Company) and a driver during the term of your employment with the Company.  You shall have discretion to choose the make
of the car so long as the cost of such car does not exceed the amount allocated
for the CEO’s car in the Company’s current budget.


 


Insurance.  While you are employed by the Company, the
Company shall provide you and your immediate family with medical insurance with
a reputable international health insurance provider.  Your insurance coverage shall be governed by
the terms of the insurance policy and the Company will use its reasonable
efforts to cause such coverage to take effect promptly following the
Commencement Date.


 


Taxes.  Other than as expressly set out above with
respect to the “gross-up” of the reimbursement of relocation expenses, you
shall be responsible for all your own federal and/or local taxes payable in
Russia or any other jurisdiction in which you are subject to tax.


 


Personal assistant.  The Company shall provide you with a personal
assistant who shall work exclusively for you. 
The Company shall also provide office space for a second personal
assistant for whom you shall bear full responsibility for all compensation
expenses.


 


Mobile phone.  The Company shall provide you with a mobile
phone and pay the line rental and service fees and the cost of any
business-related calls and data traffic.


 


4

















 


IT items.  The Company will consider on a case-by-case
basis your reasonable requests for home office equipment (such as a laptop
computer, printer and/or fax machine) and to the extent the Company believes
your service to the Company requires the use of such items it will provide them
to you.


 


Reimbursement
of Expenses. 
While employed, the Company shall reimburse you for reasonable travel or
other business-related out-of-pocket expenses incurred in connection with the
performance of your employment duties upon presentation of receipts and/or
other documentation evidencing such expenses. 
When travelling on business, you shall be entitled to be reimbursed for
business class air fare; provided, however, that for air travel in excess of 5
hours flying time, you shall be entitled to be reimbursed for first class air
fare.


 


Other
Benefits. 
From time to time the Compensation Committee of the Board may approve
other benefit programs to be generally available to the executive management of
the Company.  You will be permitted to
participate in such benefit programs provided that, to the extent applicable,
any policies covering such benefits permit you to participate.


 


Notice
of Termination. 
If the Company elects to terminate your employment other than for cause,
the Company shall provide you with six months’ advance notice.  If you elect to terminate your employment
with the Company, you shall provide the Company with six months’ advance
notice.  For purposes of this letter, “for
cause” termination shall be deemed to exist upon (i) a good faith finding
by the Company that (A) you have failed to adequately perform the material
aspects of your assigned duties for the Company in a manner that materially and
adversely affects the Company, after written notice of such failure of such
duties and a reasonable opportunity to correct such failure, or (B) you
have engaged in dishonesty, gross negligence or intentional misconduct that
materially and adversely affects the Company; (ii) your conviction of, or
the entry of a pleading of guilty or nolo
contendere by you, to any crime involving moral turpitude or any
felony; (iii) your material breach of your non-compete, non-solicitation
and non-disclosure provisions of your employment agreement if such breach is
caused by your intentional misconduct or gross negligence; or (iv) your
intentional violation of Company policy in a manner that materially and
adversely affects the Company, after written notice of such violation and a
reasonable opportunity to correct such failure.


 


Non-Compete;
Non-Solicitation and Non-Disclosure Agreement.
Your employment agreement will contain non-compete, non-solicitation and
non-disclosure provisions.


 


Other
Agreements and Governing Law.  You represent that you are not bound by any
employment contract, restrictive covenant or other restriction preventing you
from entering into employment with or carrying out your responsibilities for
the Company, or which is in any way inconsistent with the terms of this
letter.  Please note that this offer
letter is your formal offer of employment and supersedes any and all prior or
contemporaneous agreements, discussions and understandings, whether written or
oral, relating to the subject matter of this letter or your employment with the
Company.  This letter and the resolution
of any disputes under this letter will be governed by the laws of the state of
Delaware.


 


*              *              *


 


5

















 


If this letter correctly sets
forth the initial terms under which you will be employed by the Company, please
sign this letter in the space provided below and return it to me.  If you do not accept this offer by 27 June 2008, this offer will lapse.


 


	
  

  	
  On behalf of CTC Media, Inc.

  
	
   

  	
   

  
	
   

  	
  /s/ Peter Aven

  
	
   

  	
   

  
	
   

  	
  Peter Aven

  
	
   

  	
  Co-Chairman of the Board

  



 


 


The foregoing correctly sets forth the terms of my initial employment
by CTC Media, Inc.


 


 


	
  /s/ Anton Kudryashov

  	
   

  	
  Date: 

  	
  19 June 2008

  	
   

  
	
  Anton Kudryashov

  	
   

  



 


6