Exhibit 10.4


 


CTC
MEDIA, INC.


STOCK
OPTION AGREEMENT


 


                                                THIS STOCK OPTION AGREEMENT (this “Agreement”)
made as of this 7th day of November 2008, is entered into
between CTC Media, Inc., a Delaware corporation (the “Company”), and Anton Kudryashov (“Optionee”).


 


Preliminary
Statements:


 


A.                                   The Company desires to retain the services of Optionee by providing
him with this incentive to contribute to the financial success of the Company
and its subsidiaries.


 


B.                                     All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.


 


NOW, THEREFORE, it is hereby agreed as follows:


 


1.                                       Grant of Option.  The Company hereby grants to
Optionee, as of the Grant Date, an option (the “Option”)
to purchase up to 3,042,482 shares of Common Stock (the “Option Shares”).  The
first 1,521,241 Option Shares shall be hereinafter referred to as the “A Option Shares”, the next 760,621 Option Shares shall be
hereinafter referred to as the “B Option Shares”
and the remaining 760,620 Option Shares shall be hereinafter referred to as the
“C Option Shares”.


 


                                                Of the 760,621 B Option Shares, 253,541 B Option Shares shall be
referred to as the “B-1 Option Shares”,
253,540 B Option Shares shall be referred to as the “B-2 Option
Shares” and 253,540 B Option Shares shall be referred to as the “B-3 Option Shares”.


 


                                                Of the 760,620 C Option Shares, 253,540 C Option Shares shall be
referred to as the “C-1 Option Shares”,  253,540 C Option Shares shall be referred to as the “C-2 Option Shares” and 253,540 C Option Shares shall be
referred to as the “C-3 Option Shares”.


 


                                                Subject to the terms and conditions set out in this Agreement, the
Option with respect to A Option Shares shall be exercisable at the A Exercise
Price, and with respect to the B Option Shares and the C Option Shares shall be
exercisable at the B/C Exercise Price.


 


2.                                       Option Term.  The Option shall have a term of ten (10) years
measured from the Grant Date and, except as provided in Paragraph 5(e), shall
accordingly expire at the close of business on the Expiration Date, unless
sooner terminated in accordance with Paragraph 5 or 6.


 


3.                                       Limited Transferability.   During Optionee’s lifetime, the Option shall
be exercisable only by Optionee (or his permitted transferee, including a
trustee of a trust set forth below) and shall not be assignable or transferable
other than by will or by the laws of descent 


 


1

















 


and distribution following Optionee’s death; provided,
however, that Optionee may transfer the Option to a trustee of a trust solely
for his benefit and/or the benefit of his immediate family members so long as
such transfer does not result in the Company incurring any additional
stock-based compensation expense under US generally accepted accounting principles. 
For this purpose, “immediate family members” shall include Optionee’s spouse,
children, parents and/or parents-in-law.


 


4.                                      Conditions to, and Dates of, Exercise.


 


(a)                                  A Option Shares.  The Option shall become exercisable for the A
Option Shares in accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of A Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or after
  August 4, 2009

  	
   

  	
  507,081

  	
   

  
	
  On or after
  September 30, 2009

  	
   

  	
  633,851

  	
   

  
	
  On or after
  December 31, 2009

  	
   

  	
  760,621

  	
   

  
	
  On or after
  March 31, 2010

  	
   

  	
  887,391

  	
   

  
	
  On or after
  June 30, 2010

  	
   

  	
  1,014,161

  	
   

  
	
  On or after
  September 30, 2010

  	
   

  	
  1,140,931

  	
   

  
	
  On or after
  December 31, 2010

  	
   

  	
  1,267,701

  	
   

  
	
  On or after
  March 31, 2011

  	
   

  	
  1,394,471

  	
   

  
	
  On or after
  June 30, 2011

  	
   

  	
  1,521,241

  	
   

  



 


(b)                                 B-1 Option Shares.  (i) Except as set forth in Paragraphs
4(b)(ii) and 4(b)(iii) below, the Option shall only become
exercisable with respect to the B-1 Option Shares if the Revenue Objective for
2009 is achieved.  Subject to the
achievement of such Revenue Objective, the Option shall become exercisable for
the B-1 Option Shares in accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-1 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2009

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2011

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2012

  	
   

  	
  253,541

  	
   

  



 


(ii)                                  Notwithstanding the fact that the Revenue Objective for 2009 is not
achieved, if the Cumulative Revenue Objective for 2010 is achieved, the Option
shall become exercisable for the B-1 Option Shares in accordance with the
following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-1 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2010

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2012

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  253,541

  	
   

  



 


2

















 


(iii)                               Notwithstanding the fact that neither the Revenue Objective for 2009
nor  the Cumulative Revenue Objective for
2010 is achieved, if the Cumulative Revenue Objective for 2011 is achieved, the
Option shall become exercisable for the B-1 Option Shares in accordance with
the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-1 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2011

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2014

  	
   

  	
  253,541

  	
   

  



 


(c)                                  B-2 Option Shares. (i) Except as
set forth in Paragraphs 4(c)(ii) and 4(c)(iii) below, the Option
shall only become exercisable with respect to the B-2 Option Shares if the
Revenue Objective for 2010 is achieved. 
Subject to the achievement of such Revenue Objective, the Option shall
become exercisable for the B-2 Option Shares in accordance with the following
schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-2 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2010

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2012

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  253,540

  	
   

  



 


(ii)                                  Notwithstanding the fact that the Revenue Objective for 2010 is not
achieved, if the Cumulative Revenue Objective for 2010 is achieved, the Option
shall become exercisable for the B-2 Option Shares in accordance with the
following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-2 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2010

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2012

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  253,540

  	
   

  



 


(iii)                               Notwithstanding the fact that neither the Revenue Objective for 2010
nor the Cumulative Revenue Objective for 2010 is achieved, if the Cumulative
Revenue Objective for 2011 is achieved, the Option shall become exercisable for
the B-2 Option Shares in accordance with the following schedule:


 


3

















 


	
  Date:

  	
   

  	
  Aggregate number of B-2 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2011

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2014

  	
   

  	
  253,540

  	
   

  



 


(d)                                 B-3 Option Shares. The Option shall only
become exercisable with respect to the B-3 Option Shares if the Revenue
Objective for 2011 is achieved and/or the 
Cumulative Revenue Objective for 2011 is achieved.  Subject to the achievement of such
Objective(s), the Option shall become exercisable for the B-3 Option Shares in
accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of B-3 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2011

  	
   

  	
  84,514

  	
   

  
	
  On or
  after January 1, 2013

  	
   

  	
  169,028

  	
   

  
	
  On or
  after January 1, 2014

  	
   

  	
  253,540

  	
   

  



 


(e)                                  C-1 Option Shares.  (i) Except as set forth in Paragraphs
4(e)(ii) and 4(e)(iii) below, the Option shall only become
exercisable with respect to the C-1 Option Shares if both the Cost Objective
for 2009 and the Reorganization Objective for 2009 are achieved.  Subject to the achievement of such
Objectives, the Option shall become exercisable for the C-1 Option Shares in
accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of C-1 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2009

  	
   

  	
  105,642

  	
   

  
	
  On of
  after June 30, 2010

  	
   

  	
  126,770

  	
   

  
	
  On or
  after September 30, 2010

  	
   

  	
  147,898

  	
   

  
	
  On or
  after December 31, 2010

  	
   

  	
  169,026

  	
   

  
	
  On or
  after March 31, 2011

  	
   

  	
  190,155

  	
   

  
	
  On of
  after June 30, 2011

  	
   

  	
  211,283

  	
   

  
	
  On or
  after September 30, 2011

  	
   

  	
  232,412

  	
   

  
	
  On or
  after December 31, 2011

  	
   

  	
  253,540

  	
   

  



 


(ii)                                  Notwithstanding the fact that the Cost Objective for 2009 is not
achieved, if each of the Reorganization Objectives for 2009 and 2010 and the
Cost Objective for 2010 is achieved, the Option shall become exercisable for
the C-1 Option Shares in accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of C-1 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2010

  	
   

  	
  190,155

  	
   

  
	
  On of
  after June 30, 2011

  	
   

  	
  211,283

  	
   

  
	
  On or
  after September 30, 2011

  	
   

  	
  232,412

  	
   

  
	
  On or
  after December 31, 2011

  	
   

  	
  253,540

  	
   

  



 


4

















 


(iii)                               Notwithstanding the fact that neither the Cost Objective for 2009
nor the Cost Objective for 2010 is achieved, if each of the Reorganization
Objectives for 2009, 2010 and 2011 and the Cost Objective for 2011 is achieved,
the Option shall become exercisable for all of the C-1 Option Shares on the
Determination Date for 2011.


 


(f)                                    C-2 Option Shares. (i) Except as
set forth in Paragraph 4(f)(ii) below, the Option shall only become
exercisable with respect to the C-2 Option Shares if both the Cost Objective
for 2010 and the Reorganization Objective for 2010 are achieved.  Subject to the achievement of such
Objectives, the Option shall become exercisable for the C-2 Option Shares in
accordance with the following schedule:


 


	
  Date:

  	
   

  	
  Aggregate number of C-2 Option Shares for

  which the Option is then exercisable:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or
  after the Determination Date for 2010

  	
   

  	
  190,155

  	
   

  
	
  On of
  after June 30, 2011

  	
   

  	
  211,283

  	
   

  
	
  On or
  after September 30, 2011

  	
   

  	
  232,412

  	
   

  
	
  On or
  after December 31, 2011

  	
   

  	
  253,540

  	
   

  



 


(ii)                                  Notwithstanding the fact that the Cost Objective for 2010 is not
achieved, if each of the Reorganization Objectives for 2009 and 2010 and the
Cost Objective for 2011 is achieved, the Option shall become exercisable for
all of the C-2 Option Shares on the Determination Date for 2011.


 


(g)                                 C-3 Option Shares. The Option shall only
become exercisable with respect to the C-3 Option Shares if both the Cost
Objective for 2011 and the Reorganization Objective for 2011 are achieved.  Subject to the achievement of such Objectives,
the Option shall become exercisable for all of the C-3 Option Shares on the
Determination Date for 2011.


 


                                                Whether or not any Objective is achieved shall be determined in good
faith by the Board or a committee thereof in its sole discretion.


 


5.                                       Cessation of Service.  The option term specified in
Paragraph 2 shall terminate (and the Option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:


 


(a)                                  Should Optionee cease to remain in Service for any reason (other
than death or Disability) while the Option is outstanding, then Optionee shall
have a period of ninety (90) days (commencing with the date of such cessation
of Service) during which to exercise the Option, but in no event shall the
Option be exercisable at any time after the Expiration Date.


 


(b)                                 Should Optionee die while the Option is outstanding, then the
personal representative of Optionee’s estate or the person or persons to whom
the Option is transferred pursuant to Optionee’s will or in accordance with the
laws of inheritance shall have the right to exercise the Option.  Such right shall lapse, and the Option shall
cease to be 


 


5

















 


outstanding, upon the earlier of (i) the
expiration of the twelve (12) month period measured from the date of Optionee’s
death or (ii) the Expiration Date.


 


(c)                                  Should Optionee cease Service by reason of Disability while the
Option is outstanding, then Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of Service) during which to
exercise the Option.  In no event shall
the Option be exercisable at any time after the Expiration Date.


 


(d)                                 During the limited period of post-Service exercisability, the Option
may not be exercised in the aggregate for more than the number of Option Shares
for which the Option is, at the time of Optionee’s cessation of Service,
exercisable pursuant to the exercise schedule specified in Paragraph 4 or the
special acceleration provisions of Paragraph 6. 
Upon the expiration of such limited exercise period or (if earlier) upon
the Expiration Date, the Option shall terminate and cease to be outstanding for
any vested Option Shares for which the Option has not been exercised.  To the extent Optionee is not vested in the
Option Shares at the time of Optionee’s cessation of Service, the Option shall
immediately terminate and cease to be outstanding with respect to those shares.


 


(e)                                  If the Optionee is precluded from exercising the Option solely by
virtue of any law (including applicable securities law) or pursuant to any
blackout or insider trading policy, then notwithstanding anything in this
Agreement to the contrary, the Option shall remain exercisable for thirty (30)
days following the date the Option first becomes exercisable after such
preclusion lapses.  During the limited
period of post-Service exercisability provided for in the immediately preceding
sentence, the Option may not be exercised in the aggregate for more than the
number of Option Shares for which the Option is, at the time of Optionee’s
cessation of Service, exercisable pursuant to the exercise schedule specified
in Paragraph 4 or the special acceleration provisions of Paragraph 6.


 


6.                                      Acceleration of Option.


 


(a)                                  In the event of any Corporate Transaction where the successor
corporation in such transaction (or the parent thereof) does not assume the
Option or replace the Option with a cash incentive program which provides
Optionee with an economic benefit substantially similar to the Option, the
exercisability of the Option shall, to the extent the Option is not otherwise
fully exercisable, automatically accelerate in full so that the Option shall,
immediately prior to the effective date of such Corporate Transaction, become fully
exercisable for all the Option Shares and may be exercised for any or all of
those Option Shares as fully-vested shares of Common Stock.


 


(b)                                 Without limiting the generality of Section 6(a) above, in
the event of (i) any Corporate Transaction where neither MTG or Alfa is
party to the merger or the asset sale or (ii) a Change in Control where a
party other than MTG or Alfa achieves control of a majority of the voting power
of the Company’s then outstanding capital stock through direct and/or indirect
beneficial ownership, the exercisability of the Option shall, to the extent the
Option is not otherwise fully exercisable, automatically accelerate so that the
Option shall, immediately prior to the effective date of such Corporate
Transaction or upon the Change in Control, become exercisable for (i) all
the A Option Shares and (ii) those of the B and/or 


 


6

















 


C Option Shares for which the
applicable Objectives have been achieved as of the effective date of such Corporate
Transaction or Change in Control but which have not yet become exercisable
because of the vesting schedules applicable to such B and/or C Option Shares,
and, in each case, may be exercised for any or all of such Option Shares as
fully-vested shares of Common Stock.


 


(c)                                  In connection with any Corporate Transaction where the
exercisability of the Option automatically accelerates, the Option shall be
exercised to the extent then exercisable prior to or in connection with the
closing of such Corporate Transaction and, to the extent that the Option is not
so exercised, it shall terminate and cease to be outstanding immediately
following the closing of such Corporate Transaction.  Without limiting the generality of Section 5,
a Change in Control that is not also a Corporate Transaction shall not effect
the term of the Option.


 


(d)                                 This Agreement shall not in any way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.


 


7.                                       Adjustment in Option Shares.  In the event of (i) an
extraordinary dividend, other distribution, stock split, stock dividend,
recapitalization, reverse stock split, reorganisation, merger, split-up,
split-off, combination of shares, exchange of shares or similar corporate
transaction or event whereby the Common Stock is affected, or (ii) any
unusual or nonrecurring events affecting the Company, its affiliates or the
financial statements of such entities, or changes in applicable rules, rulings,
regulations or other requirements of any governmental body or securities
exchange or quotation system, such that in either case an adjustment is
necessary or appropriate in order to prevent dilution or enlargement of the
benefits hereunder, the Board shall make such appropriate adjustments to (i) the
total number and/or class of securities subject to the Option and (ii) the
A Exercise Price and the B/C Exercise Price or such Option.


 


8.                                       Shareholder Rights.  The holder of the Option
shall not have any shareholder rights with respect to the Option Shares until
such person shall have exercised the Option, paid the A Exercise Price and/or
the B/C Exericse Price, as the case may be, and become a holder of record of
the purchased shares.


 


9.                                      Manner of Exercising Option.


 


(a)                                  In order to exercise the Option  with respect
to all or any part of the Option Shares for which the Option is at the time
exercisable, Optionee (or any other person or persons exercising the Option)
shall provide written notice of Optionee’s election to exercise all or a
portion of the Option and shall take the following additional actions:


 


(i)                                     Pay the aggregate A Exercise Price and/or B/C Exercise Price, as the
case may be, for the purchased shares in one or more of the following forms:


 


(A)                              cash or
check made payable to the Company; or


 


7

















 


(B)                                by a “net
exercise” method whereby the Company withholds from the delivery of the shares
of Common Stock for which the Option is exercised that number of shares of
Common Stock having a Fair Market Value equal to the aggregate exercise price
for the shares of Common Stock for which the Option is exercised; or


 


(C)                                in
shares of Common Stock held by Optionee (or any other person or persons
exercising the Option) for the requisite period necessary to avoid a charge to
the Company’s earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or


 


(D)                               If the
Common Stock is at the time traded on Nasdaq or any Stock Exchange at the time
the Option is exercised, then the A Exercise Price and B/C Exercise Price may
also be paid through a special sale and remittance procedure pursuant to which
Optionee (or any other person or persons exercising the Option) shall
concurrently provide irrevocable written instructions (a) to a
Company-designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate A Exercise Price
and/or B/C Exercise Price payable, as the case may be, for the purchased shares
plus all applicable national and local income and employment taxes required to
be withheld by the Company by reason of such exercise and (b) to the
Company to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.


 


                                                Except to the extent the sale and remittance procedure is utilized
in connection with the Option exercise, payment of the A Exercise Price and/or
B/C Exercise Price, as the case may be, must accompany the notice delivered to
the Company in connection with the option exercise.


 


(ii)                                  Furnish to the Company appropriate documentation that the person or
persons exercising the Option (if other than Optionee) have the right to
exercise the Option.


 


(iii)                               Make appropriate arrangements with the Company for the satisfaction
of all applicable national and local income and employment tax withholding
requirements applicable to the Option exercise.


 


(b)                                 As soon as practical after the Exercise Date, the Company shall
issue to or on behalf of Optionee (or any other person or persons exercising
the Option) a certificate for the purchased Option Shares, with the appropriate
legends (if any) affixed thereto.


 


(c)                                  In no event may the Option be exercised for any fractional shares.


 


10.                                 Non-Competition and Non-Solicitation;
Proprietary Information.  Notwithstanding
any provision of this Agreement to the contrary, Optionee shall not be
permitted to exercise the Option if he is in breach of Section 7 (Non-Competition and Non-


 


8
















 


Solicitation) or Section 8 (Proprietary
Information) of his employment agreement with the Company dated as
of November 7, 2008 (as such agreement may be amended from time to
time).


 


11.           Representation. The Company
represents that it has properly reserved the number of shares subject to the
grant hereunder and has all corporate authority to make the grant. The shares
subject to the awards described herein shall be registered on a Form S-8
or other appropriate registration statement under the Securities Act of 1933,
as amended.


 


12.           Changes in Accounting Policies; Reporting
Methodologies.   In the
event that the Company changes its accounting policies and/or there is a change
in the method in which the size of the Russian television advertising market is
calculated and/or reported, in each case, so as to impact the manner in which
any of the Objectives are determined, Optionee and the Board or a committee
thereof shall in good faith negotiate appropriate amendments to the manner in
which the Objectives are determined to take into account such changes so that
there is no dilution or enlargement to Optionee of the benefits of the Option.


 


13.           Repricing.  The Board may, without approval of the
stockholders of the Company, amend this Agreement to provide an exercise
price per share that is lower than the then-current exercise price per share of
any Option Shares.


 


14.           Successors and Assigns.   Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and Optionee, Optionee’s assigns and the legal representatives, heirs
and legatees of Optionee’s estate.


 


15.           Notices.  Any notice required to be given or delivered
to the Company under the terms of this Agreement shall be in writing and
addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered
to Optionee shall be in writing and addressed to Optionee at the address
indicated below Optionee’s signature line. 
All notices shall be deemed effective (i) upon personal delivery, (ii) five
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (iii) two business days after being sent via
reputable international overnight courier.


 


16.           Non-Statutory Option.  Optionee acknowledges that the Option is not
intended to satisfy the requirements of Section 422 of the US Internal
Revenue Code of 1986, as amended.


 


17.           Governing Law.  The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware without resort to that State’s conflict-of-laws rules.


 


18.           Arbitration.   Any dispute concerning, arising out of or
relating to this Agreement shall be submitted to binding arbitration before the
London Court of International Arbitration (the “LCIA”) and the arbitration shall be conducted pursuant to the
LCIA Rules.  The number of arbitrators
shall be three (the “Arbitrators”).  One Arbitrator shall be selected by the
Company, one shall be selected by Optionee and the third (who shall serve as
Chair of the arbitral tribunal) shall be selected by the other two
Arbitrators.  In the event that either
the Company or Optionee shall fail to select its or his Arbitrator within
thirty days after the matter is 


 


9

















 


submitted for arbitration, then, upon request of the
other, such Arbitrator shall be appointed by the LCIA.  In the event the two Arbitrators selected by
the Company and Optionee fail to select the third Arbitrator within 15 calendar
days of the appointment of the second Arbitrator, then, upon request of either
of them, such third Arbitrator shall be appointed by the LCIA.  The arbitration shall be conducted in accordance
with the following additional provisions:


 


(i)                                   The
parties shall commence the arbitration by jointly filing a written submission
with the LCIA.


 


(ii)                                The
seat of arbitration shall be London, England; the language to be used in the
arbitral proceedings shall be English; and the governing law shall be the
substantive internal laws of the State of Delaware.


 


(iii)                             Not later
than 30 calendar days after the conclusion of the arbitration hearing, the
Arbitrators shall prepare and distribute to the parties a writing setting forth
the arbitral decision (which shall be by majority vote) and the Arbitrators’
reasons therefor.  Any award rendered by
the Arbitrators shall be final, conclusive and binding upon the parties, not
subject to appeal, and judgment thereon may be entered and enforced in any
court of competent jurisdiction, provided that the Arbitrators shall have no
power or authority to grant injunctive relief, specific performance or other
equitable relief.


 


(iv)                            The
Arbitrators shall have no power or authority, to (x) modify or disregard
any provision of this Agreement, including the provisions of this Section 18,
or (y) address or resolve any issue outside the scope of this arbitration
provision that is not submitted by the parties.


 


(v)                               The
parties shall not be entitled to discovery, and the Arbitrators shall have no
power to order discovery of documents, oral testimony or other materials.


 


(vi)                            In
connection with any arbitration proceeding pursuant to this Agreement, each
party shall bear its or his own costs and expenses.


 


19.           Captions.  The captions of the sections of this
Agreement are for convenience of reference only and in no way define, limit or
affect the scope or substance of any section of this Agreement.


 


20.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


 


10

















 


IN WITNESS WHEREOF, the parties hereto have
caused the Option to be executed as of the date set forth in the preamble.


 


 


	
   

  	
  CTC
  MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Boris
  Podolsky

  
	
   

  	
   

  	
     Boris
  Podolsky

  
	
   

  	
   

  	
     Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Optionee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Anton
  Kudryashov

  
	
   

  	
  Anton
  Kudryashov

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  31 Abbots
  Drive

  
	
   

  	
   

  	
  Virginia
  Water

  
	
   

  	
   

  	
  GU25 4SE

  
	
   

  	
   

  	
  UK

  
				



 


11

















 


APPENDIX


 


                The following definitions shall
be in effect under the Agreement:


 


A.            Adjusted Revenues shall mean, with
respect to any fiscal year of the Company, Revenues for such fiscal year as
adjusted to include the total operating revenues for any acquisition for which
the Company began consolidating the results of operations of the acquired
business with the Company’s results of operations during such fiscal year on a pro forma annualized basis as if the acquired business had
been owned by the Company for the entirety of such fiscal year.


 


B.            Agreement shall mean this Stock
Option Agreement.


 


C.            A Exercise Price shall mean US$22.07 per A Option Share.


 


D.            AKAR shall mean the Association of
Communication Agencies of Russia or its any successor organization thereto.


 


E.             Alfa shall mean ABH Holdings
Corporation together with its affiliates (as such term is defined in the
Exchange Act).


 


F.             A Option Share shall have the
meaning set forth in Section 1.


 


G.            Baseline Operating Expenses shall
mean Operating Expenses for 2008, as adjusted to include Operating Expenses for
any acquisition for which the Company began consolidating the results of
operations of the acquired business with the Company’s results of operations
during 2008 on a pro forma annualized basis as if
the acquired business had been owned by the Company for all of 2008.


 


H.            B/C Exercise Price shall mean the
official Nasdaq close price per share of Common Stock on January 2, 2009
or the first trading day thereafter if such date is not a trading day, as
reported on Nasdaq.


 


I.              B Option Share shall have the
meaning set forth in Section 1.


 


J.             B-1 Option Share shall have the
meaning set forth in Section 1.


 


K.            B-2 Option Share shall have the
meaning set forth in Section 1.


 


L.             B-3 Option Share shall have the
meaning set forth in Section 1.


 


M.           Board shall mean the Company’s
Board of Directors.


 


N.            Change in Control shall mean any
party either alone or with its affiliates (as such term is defined in the
Exchange Act) achieving control of a majority of the voting power of the
Company’s then outstanding capital stock through direct and/or indirect
beneficial ownership.


 


O.            Common Stock shall mean the Company’s
common stock.


 


A-1

















 


P.             C Option Share shall have the
meaning set forth in Section 1.


 


Q.            C-1 Option Share shall have the
meaning set forth in Section 1.


 


R.            C-2 Option Share shall have the
meaning set forth in Section 1.


 


S.             C-3 Option Share shall have the
meaning set forth in Section 1.


 


T.            Corporate Transaction shall mean
either of the following shareholder-approved transactions to which the Company
is a party:


 


(i)            a
merger or consolidation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company’s outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or


 


(ii)           the
sale, transfer or other disposition of all or substantially all of the Company’s
assets in complete liquidation or dissolution of the Company.


 


U.            Company shall mean CTC Media, Inc.,
a Delaware corporation.


 


V.            Cost Objective shall mean, with
respect to any of 2009, 2010 and 2011, that Operating Expenses were lower than
Baseline Operating Expenses by 2.5%, 4.5% and 6.0%, respectively, for 2009,
2010 and 2011.


 


W.           Cumulative Revenue Objective shall
mean, with respect to 2010, that the percentage compounded annual growth rate
by which 2010 Revenues exceeded 2008 Adjusted Revenues is at least five
percentage points greater than the percentage compounded annual growth rate by
which the Russian Television Advertising Market Size increased from 2008 to
2010, and, with respect to 2011, that the percentage compounded annual growth
rate by which 2011 Revenues exceeded 2008 Adjusted Revenues is at least five
percentage points greater than the percentage compounded annual growth rate by
which the Russian Television Advertising Market Size increased from 2008 to
2011; by way of example if the Russian Television Advertising Market Size grew
by 10% from 2008 to 2009 and by a further 10% from 2009 to 2010, Revenues for
2010 would need to be at least 32.25% more than Adjusted Revenues for 2008 for
the Cumulative Revenue Objective for 2010 to be met (or, on average, 15% growth
year-on-year).


 


X.            Determination Date shall mean the
date on which the Board or a committee thereof determines in good faith whether
any Objective for the immediately preceding fiscal year has been achieved,
which date shall be no later than 30 calendar days following the date on which
the Company files its annual report on Form 10-K with the US Securities
and Exchange Commission for such year but in no event later than 100 calendar
days after the end of such fiscal year; provided, that with respect to
any Revenue Objective or Cumulative Revenue Objective, such date shall be no
later than the later of (x) such date and (x) 30 calendar days
following the date on which AKAR publicly announces the Russian Television
Advertising Market Size for such year.


 


Y.            Disability shall mean the inability
of Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and 


 


A-2

















 


shall be determined by the Board or a committee
thereof on the basis of such medical evidence as the Board or such committee
deems warranted under the circumstances.


 


Z.            Employee shall mean an individual
who is in the employ of the Company (or any Parent or Subsidiary), subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance.


 


AA.        Exchange Act shall mean the US
Securities Exchange Act of 1934, as amended.


 


BB.          Exercise Date shall mean the date
on which the Option shall have been exercised in accordance with Paragraph 9 of
the Agreement.


 


CC.          Expiration Date shall mean August 4,
2018.


 


DD.         Fair Market Value per share of
Common Stock on any relevant date shall be determined in accordance with the
following provisions:


 


(i)            If
the Common Stock is at the time traded on Nasdaq, then the Fair Market Value
shall be the official close price per share of Common Stock on the date in
question, as the price is reported by Nasdaq. 
If there is no close price for the Common Stock on the date in question,
then the Fair Market Value shall be the close price on the last preceding date
for which such quotation exists.


 


(ii)           If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing price per share of Common Stock on the date
in question on the Stock Exchange determined by the Board to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange.  If there is no closing price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing
price on the last preceding date for which such quotation exists.


 


(iii)          If
the Common Stock is at the time neither listed on any Stock Exchange nor traded
on Nasdaq, then the Fair Market Value shall be determined in good faith by the
Board.


 


EE.          Grant Date shall mean November 7,
2008.


 


FF.          MTG shall mean Modern Times Group
MTG AB together with its affiliates (as such term is defined in the Exchange
Act).


 


GG.          Nasdaq shall mean the Nasdaq Stock
Market, any market thereof or any successor system, as applicable.


 


HH.         Objective shall mean any or all of
the Revenue Objective, the Cumulative Revenue Objective, the Cost Objective
and/or the Reorganization Objective.


 


II.            Operating Expenses shall mean 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 


 


A-3

















 


expenses and selling, general and administrative
expenses, as adjusted for acquisitions that are consolidated for only a portion
of any year), each denominated in Russian rubles; provided  that
operating expenses that are generated in a currency other than Russian rubles
shall be translated into Russian rubles using the same weighted average
exchange rate methodology used by the Company to translate its financial
statements into US dollars.


 


JJ.            Option Shares shall mean,
collectively, the A Option Shares, B Option Shares and C Option Shares and
individually, any of them.


 


KK.         Optionee shall mean Anton
Kudryashov.


 


LL.          Parent shall mean any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company, provided each corporation in the unbroken chain (other than the
Company) owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.


 


MM.       Reorganization Objective shall
mean, with respect to 2009, 2010 and 2011, achieving in such year those
organizational objectives that the Board establishes for such year based upon
its review and consideration of the recommendations set out in the study by
Booz Allen Hamilton commissioned by the Company in 2008; which organizational
objectives for any year shall be provided to Optionee no later than December 20th of the immediately preceding year.


 


NN.         Revenue Objective shall mean, with
respect to any of 2009, 2010 and 2011, that Revenues for such year exceeded
Adjusted Revenues for the immediately preceding year by at least five
percentage points more than the Russian Television Advertising Market Size for
such year exceeded the Russian Television Advertising Market Size for the
immediately preceding year; by way of example if the Russian Television
Advertising Market Size for 2009 was 15% more than the Russian Television
Advertising Market Size for 2008, Revenues for 2009 would need to be at least
20% more than Adjusted Revenues for 2008 for the Revenue Objective to be met.


 


OO.         Revenues shall mean, with respect
to any fiscal year of the Company, the consolidated total operating revenues of
the Company for such year expressed in Russian rubles less total
operating revenues attributable to any acquisition by the Company for which the
Company began consolidating the results of operations of the acquired business
with the Company’s results of operations during such fiscal year, each
denominated in Russian rubles; provided  that revenues that are
generated in a currency other than Russian rubles shall be translated into
Russian rubles using the same weighted average exchange rate methodology used
by the Company to translate its financial statements into US dollars.


 


PP.          Russian Television Advertising Market Size
shall mean, with respect to any year, the monetary size of the Russian
television advertising market for such year as reported by AKAR.


 


QQ.         Service shall mean the Optionee’s
performance of services for the Company (or any Parent or Subsidiary) in the
capacity of an Employee, a non-employee member of the board of directors or an
independent consultant.


 


A-4

















 


RR.          Stock Exchange shall mean the
American Stock Exchange, the New York Stock Exchange or the London Stock
Exchange.


 


SS.          Subsidiary shall mean any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.


 


A-5