Document:

Exhibit 10.63

 

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

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT is entered into on December 18,
2007  by and between Mr. Serguey
Anatolievich Kalvarsky, a citizen of the Russian Federation, bearing passport
number No
[**] issued by OVD Bogorodskoye, Moscow on February 2, 2000 with his
registered address at [**], and Mr. [**], a citizen of the Russian
Federation, bearing passport number No [**] issued by 84 office of militia of
Krasnoselsky district of St. Petersburg on November 15, 2003 with his
registered address at [**] (each,  a “Seller” and collectively, the “Sellers”),
from one side, and CJSC “CTC NETWORK”, a company organised and existing under
the laws of the Russian Federation, having its registered office at 3rd
Khoroshevskaya str., 12, 123298, Moscow, Russia (“CTC Network”), and CTC Media, Inc.,
a Delaware corporation with its registered office at 2711 Centerville Road, Suite 400, 19808 Wilmington, Delaware, USA (“CTC
Media”), from the other
side.  CTC Network and CTC Media are
hereinafter collectively referred to as the “Purchaser”.

 

WITHNESSETH:

 

WHEREAS, the Sellers are the founders and participants of Soho Media
LLC, a limited liability company organized under the laws of the Russian
Federation, registered by Interdistrict Tax Inspection No. 46, Moscow on November 16,
2007, registration number 1077762535916, having its registered office at 16-1
Valdayskiy proyezd, Moscow, Russia (the “Company”). The charter capital of the
Company is divided into two participatory shares. Each of the Sellers owns one
participatory share in the Company. The participatory share of Mr. Serguey
Anatolievich Kalvarsky amounts to RUR 8,000 and represents 80% of the charter
capital of the Company and the participatory share of Mr. [**] amounts to
RUR 2,000 and represents 20% of the charter capital of the Company.

 

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

 

NOW, THEREFORE, the party hereto agrees as follows:

 

1.             DEFINITIONS

 

As used in this Agreement, unless expressly otherwise stated or evident
in the context, the following terms shall have the following meanings and the
singular (where appropriate) shall include the plural and vice versa.  Any references to appendices or sub-headings shall
mean the appendices and sub-headings of this Agreement:

 

	
  1.1

  	
  “Agreement”

  	
  shall mean this Share Purchase Agreement
  and the Appendices hereto.

  

 

1

 

	
  1.2

  	
  “Company”

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

  
	
   

  	
   

  	
   

  
	
  1.3

  	
  “Completion”

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

  
	
   

  	
   

  	
   

  
	
  1.4

  	
  “Completion Accounts”

  	
  shall mean the financial statements of the
  Company as at the Completion Date prepared in accordance with all applicable
  Russian accounting rules and regulations.

  
	
   

  	
   

  	
   

  
	
  1.5

  	
  “Completion Date”

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

  
	
   

  	
   

  	
   

  
	
  1.6

  	
  “Confidential Information”

  	
  shall have the meaning set out in
  Article 10.6.

  
	
   

  	
   

  	
   

  
	
  1.7

  	
  “CTC Network”

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

  
	
   

  	
   

  	
   

  
	
  1.8

  	
  “CTC Media”

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

  
	
   

  	
   

  	
   

  
	
  1.9

  	
  “Damages”

  	
  shall have the meaning set out in
  Article 9.

  
	
   

  	
   

  	
   

  
	
  1.10

  	
  “Disability”

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

  
	
   

  	
   

  	
   

  
	
  1.11

  	
  “EBIT”

  	
  shall mean the earnings before interest
  expenses and interest income, and profit tax provision or benefit for the
  Company as per audited annual accounts prepared in accordance with US GAAP,
  excluding the amortisation of any purchase price adjustments related to
  intangible assets “pushed down” into the Company’s accounts by the Group.

  
	
   

  	
   

  	
   

  
	
  1.12

  	
  “Financial Year”

  	
  shall mean the period between 1 January to
  31 December.

  
	
   

  	
   

  	
   

  
	
  1.13

  	
  “Group”

  	
  shall mean CTC Media and each of its
  subsidiaries.

  
	
   

  	
   

  	
   

  
	
  1.14

  	
  “Key Performance Indicators”

  	
  shall have the meaning set out in
  Article 0.

  
	
   

  	
   

  	
   

  
	
  1.15

  	
  “Ordinary Course of Business”

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

  
	
   

  	
   

  	
   

  
	
  1.16

  	
  “Other Channel FTA Hours”

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

  

 

2

 

	
  1.17

  	
  “Party”

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

  
	
   

  	
   

  	
   

  
	
  1.18

  	
  “Performance Report”

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

  
	
   

  	
   

  	
   

  
	
  1.19

  	
  “Predecessor”

  	
  shall mean, collectively, Tango LLC and
  Soho Production LLC

  
	
   

  	
   

  	
   

  
	
  1.20

  	
  “Production Business”

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

  
	
   

  	
   

  	
   

  
	
  1.21

  	
  “Purchaser”

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

  
	
   

  	
   

  	
   

  
	
  1.22

  	
  “Purchase Price”

  	
  shall have the meaning set out in
  Article 3.2.

  
	
   

  	
   

  	
   

  
	
  1.23

  	
  “Relevant Audience Share”

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

  
	
   

  	
   

  	
   

  
	
  1.24

  	
  “Ruble Equivalent”

  	
  shall mean, with respect to any US dollar
  amount, such US dollar amount multiplied by the Russian ruble to US dollar
  exchange rate established by the Central Bank of Russia on the relevant
  payment date.

  
	
   

  	
   

  	
   

  
	
  1.25

  	
  “RUR”

  	
  shall mean Russian rubles.

  
	
   

  	
   

  	
   

  
	
  1.26

  	
  “SEC”

  	
  shall mean the US Securities and Exchange
  Commission.

  
	
   

  	
   

  	
   

  
	
  1.27

  	
  “Seller Representative”

  	
  shall
  mean MR. SERGUEY ANATOLIEVICH KALVARSKY.

  
	
   

  	
   

  	
   

  
	
  1.28

  	
  “Seller Bank Account”

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

  

  [**]

  
	
   

  	
   

  	
   

  
	
  1.29

  	
  “Sellers”

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

  
	
   

  	
   

  	
   

  
	
  1.30

  	
  “Shares”

  	
  shall mean a participatory share amounting
  to RUR 8,000 (80% of the charter capital of the Company), which belongs to
  MR. SERGUEY ANATOLIEVICH KALVARSKY, and a participatory share amounting to
  RUR 2,000 (20% of the charter capital of the Company, which belongs to MR.
  [**].

  

 

3

 

	
  1.31

  	
  “Taxes”

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

  
	
   

  	
   

  	
   

  
	
  1.32

  	
  “Termination Without Cause”

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

  
	
   

  	
   

  	
   

  
	
  1.33

  	
  “TV Product”

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

  
	
   

  	
   

  	
   

  
	
  1.34

  	
  “US GAAP”

  	
  shall mean US generally accepted accounting
  principles.

  
	
   

  	
   

  	
   

  
	
  1.35

  	
  “Warranties”

  	
  shall have the meaning set out in
  Article 7.

  
	
   

  	
   

  	
   

  
	
  1.36”

  	
  “Working Capital

  	
  shall be equal to current assets less
  deferred expenses that are not related to the
  production of TV Product less  current
  liabilities of the Company as presented in the Completion Accounts.

  
	
   

  	
   

  	
   

  
	
  1.37

  	
  “2008 Earn Out Payment”

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

  
	
   

  	
   

  	
   

  
	
  1.38

  	
  “2009 Earn Out Payment”

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

  
	
   

  	
   

  	
   

  
	
  1.39

  	
  “2010 Earn Out Payment”

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

  

 

2.             SUBJECT OF THE TRANSACTION

 

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

 

4

 

	
   

  	
   

  	
  Percentage of

  charter capital

  in the

  Company

  acquired from

  Mr. Kalvarsky

  	
   

  	
  Percentage of

  charter capital

  in the Company

  acquired from

  Mr. [**]

  	
   

  	
  Resulting

  overall

  percentage in

  the Company

  	
   

  
	
  CTC
  Network

  	
   

  	
  79.20

  	
  %

  	
  19.80

  	
  %

  	
  99.00

  	
  %

  
	
  CTC
  Media

  	
   

  	
  0.80

  	
  %

  	
  0.20

  	
  %

  	
  1.00

  	
  %

  

 

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

 

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

 

3.1           Aggregate Consideration

 

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

 

3.2           Purchase Price

 

The purchase price for the Shares shall be the Ruble Equivalent of US$
4,000,000 (four million) less the sum of (i) the amount of any
indebtedness of the Company as set out in the Completion Accounts and (ii) if
Working Capital as presented in the Completion Accounts is negative, the amount
by which current liabilities of the Company exceeds the sum of (i) current
assets of the Company less (ii) deferred expenses of the Company that are
not related to the production of TV Product, in each case, as presented in the
Completion Accounts (the result of such calculation being hereinafter referred
to as the “Purchase Price”). Promptly following Completion, the Purchase Price
shall be paid to the Sellers pro rata based on their respective ownership
levels in the Company immediately prior to Completion.

 

3.3           Earn Out Payments

 

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

 

(a)           The Purchaser will pay the 2008 Earn Out Payment,
which shall be equal to the Ruble Equivalent of US$ 2,000,000 (two million)
less the deductions and adjustments set out in Article 3.5(b), within 10
working days from the date of 

 

5

 

filing
of CTC Media’s 2008 annual report on Form 10-K with the SEC, provided that
a Performance Report for 2008 has been signed by the Purchaser and the Seller
Representative;

 

(b)           The Purchaser will pay the 2009 Earn Out Payment,
which shall be equal to the Ruble Equivalent of US$ 2,000,000 (two million)
less the deductions and adjustments set out in Article 3.5(b),  within 10 working days from the date of
filing of CTC Media’s 2009 annual report on Form 10-K with the SEC,
provided that a Performance Report for 2009 has been signed by the Purchaser
and the Seller Representative; and

 

(c)           The Purchaser will pay the 2010 Earn Out Payment,
which shall be equal to the Ruble Equivalent of US$ 2,000,000 (two million)
less the deductions and adjustments set out in Article 3.5(b), within 10
working days from the date of filing of CTC Media’s 2010 annual report on Form 10-K
with the SEC, provided that a Performance Report for 2010 has been signed by
the Purchaser and the Seller Representative;

 

provided, however,
if at any time before the payment of the 2010 Earn Out Payment in 2011, CTC
Media is no longer required to file an annual report (on Form 10-K or any
successor form) with the SEC, any remaining Earn Out Payment shall be made on
or around March 31 of the relevant year.

 

3.4           Payment of Purchase Price and Earn Out Payments

 

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

 

3.5           The Purchase
Price and Earn Out Payment Adjustments

 

(a)           The Purchase
Price and Earn Out Payments are subject to the following conditions subsequent:

 

(i)            Mr. Kalvarsky shall be a continuous full-time
employee of the Company serving as a manager located in Moscow, Russia from the
Completion Date up to and including 31 December 2010 and each of the
Sellers shall be subject to the provisions of Article 10 (Non-competition; Non-solicitation and Confidentiality Commitment).  If (A) Mr. Kalvarsky fails for any
reason (including, without limitation, Disability) to continue to be so
employed by the Company other than as a result of a Termination Without Cause
or death or (B) either Seller breaches of any of his obligations set out
in Article 10 hereof  (i) on or
before 31 December 2009 then the Sellers shall be jointly and severally
liable to repay the Purchase Price and Earn Out Payments previously paid to
them and the Purchaser shall not be obligated to make any further Earn Out
Payments, or (ii) after 31 December 2009 but on or before 31 December 2010
then the Sellers are jointly and severally 

 

6

 

liable
to repay any Earn Out Payments already paid to them (but not the Purchase
Price) and the Purchaser shall not be obligated to make any further Earn Out
Payments.

 

In the event that
Mr. Kalvarsky dies before January 1, 2009 while he is still a full
time employee of the Company and in compliance with Article 10 (Non-competition; Non-solicitation and Confidentiality Commitment),
the Purchaser shall not be obligated to make any Earn Out Payment to Mr. Kalvarsky,
his heirs or estate.  If Mr. Kalvarsky
dies on or after January 1, 2009 while he is still a full time employee of
the Company and in compliance with Article 10 (Non-competition;
Non-solicitation and Confidentiality Commitment), the Purchaser
shall only be obligated to pay to Mr. Kalvarsky’s heirs a pro rata portion
of each Earn Out Payment payable hereunder to Mr. Kalvarsky based on the
number of days Mr. Kalvarsky was alive during the Financial Year to which
the Earn Out Payment relates.

 

(ii)           The Company shall
achieve in each of the 2008, 2009 and 2010 Financial Years the following (the “Key
Performance Indicators”):

 

a.             Number of
free-to-air (FTA) hours: the Company shall produce and sell no less than 300
FTA hours of TV Product in the 2008 Financial Year, provided that the Purchaser
places orders for such number of hours itself and/or ensures such orders are
placed by other TV channels.

 

In each
of the 2009 and 2010 Financial Years, the Company shall (i) produce and
sell not less than 250 FTA hours of TV Product [**] provided that [**] place
orders for at least such number of hours and (ii) produce and sell
a further 50 FTA hours or more of TV Product to TV channels other than  [**] provided that if CTC Network or CTC
Media management does not consent to the production of any TV Product for a TV
channel other than Group networks in accordance with the immediately following
paragraph, the number of FTA hours of TV Product required to be produced and
sold to TV channels other than Group networks shall be reduced by the number of
hours of programming for which such consent was refused (such lesser number of
FTA hours to be produced and sold to TV channels other than Group networks
being referred to as “Other Channel FTA Hours”).

 

Prior to
producing any TV Product for any TV channel other than Group networks, the
Company must obtain the consent of CTC Network or CTC Media management.  Group networks shall be given priority by the
Company when producing and distributing TV Product.  In addition, [**] orders for TV Product will
have priority over orders from other TV channels.

 

b.             Audience share: 
the average audience share to be attained on the Group networks for TV
Product produced and sold  by the 

 

7

 

Company
to Group networks (the “Relevant Audience Share”) shall be mutually agreed by
the Purchaser and the Seller Representative on a project-by-project basis
before such TV Product’s initial launch. 
Relevant Audience Share is not applied to TV products that are created
for TV channels other than Group networks.

 

In the sole discretion of the management of
the Purchaser, TV Product that is not achieving the levels set out for the
Relevant Audience Share for Group networks can be removed from broadcasting
ahead of schedule or moved into timeslots outside of the originally designated
timeslots.

 

c.             EBIT margin: the
Company shall achieve on a stand-alone basis an EBIT margin of no less than 14%
and the Parties acknowledge and agree that, notwithstanding the definition of “Ruble
Equivalent” set out in Article 1 hereto, EBIT shall be determined using
exchange rates deemed appropriate by US GAAP.

 

(iii)          The Sellers shall
cause the following personnel of the Company to remain at their positions with
the Company as at the date of signing of this Agreement until 31 December 2010,
or in case of their leaving the Company, the Sellers shall retain, on behalf of
the Company, other relevant professional individuals to replace such persons,
which individuals shall be acceptable to the Purchaser:

 

Olga Bekker –
Creative producer

Xenia Evenko –
Executive producer

Maria Treyman –
Executive producer

Konstantin
Afanasiev – Executive producer

Ravil’ Valeev –
Director of post-production

Nikolay
Kholnov – Line producer

 

(b)           Calculation of Earn Out Payments

 

Each of the “2008 Earn Out Payment”, the “2009
Earn Out Payment” and the “2010 Earn Out Payment” shall be equal to the Ruble
Equivalent of US$ 2,000,000 (two million) less the sum of (1) the
amount, if any, of Deduction 1 for such Financial Year, (2) the amount, if
any, of Deduction 2 for such Financial Year, (3) the amount of any
adjustments in accordance with Article 3.5(a)(i) (including, without
limitation, any amounts that that are due to be repaid by the Sellers to the
Purchaser pursuant to such Article but remain unpaid as of the date such
Earn Out Payment is made), (4) any uncollectible accounts receivable or
loans as provided in Article 7.6, (5) any unpaid Damages as provided
in Article 9, and (6) the amount of any deductions that would have
been made to an Earn Out Payment  but for
the fact that the amount of such deduction would have put such Earn Out Payment
below 0; provided, however, that an Earn Out Payment can never be
adjusted below 0.

 

8

 

(c)           Calculation of Deduction 1

 

If in the 2008 Financial Year, either (x) the number of FTA hours
of TV Product produced by the Company and sold to Group networks is less than
the number of FTA hours of TV Product ordered by Group networks during the 2008
Financial Year (provided such number of FTA hours ordered by Group networks
does not exceed 300 FTA hours) and/or (y) the Relevant Audience Share for
the Group networks for the 2008 Financial Year was below that agreed in
accordance with Article 3.5(a)(ii)(b), Deduction 1 for
the 2008 Financial Year shall be calculated in accordance with the formula set
out immediately below. Otherwise, Deduction 1 for the 2008 Financial Year shall
be 0.

 

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

 

P = US$ 2 million;

 

X = the number of FTA hours of TV Product actually produced and sold in
the 2008 Financial Year (but not greater than 300) less the aggregate
number of FTA hours of TV Product produced and sold in the 2008 Financial Year
for TV Product where the Relevant Audience Share for the Group networks for
such TV Product during the course of the 2008 Financial Year was less than that
agreed in accordance with Article 3.5(a)(ii)(b); and

 

Z = the number of FTA hours of TV Product actually ordered for
production by Group networks or other TV channels in the
2008 Financial Year (but not greater than 300).

 

If in either the 2009 or 2010 Financial Year
either (x) the number of FTA hours of TV Product produced by the Company
and sold to Group
networks is less than the number of FTA hours of TV Product
ordered by Group
networks in such Financial Year (provided such number of FTA
hours ordered by Group networks does not exceed 250 FTA
hours), (y) the number of FTA hours of TV Product produced by the Company
and sold to TV channels other than Group networks in such
Financial Year is less than the number of Other Channel FTA Hours and/or (z) the
Relevant Audience Share for the Group networks for such
Financial Year was below that agreed in accordance with Article 3.5(a)(ii)(b),
Deduction 1 for such Financial Year shall be calculated in accordance with the
formula set out immediately below. 
Otherwise, Deduction 1 for such Financial Year shall be 0.

 

Deduction 1 = P x (1 – X/Z), where

 

P = US$2 million;

 

X = the sum of (1) the number of FTA hours of TV Product actually
produced by the Company and sold to Group networks in such
Financial Year (but not more than 250 FTA hours) and (2) the number of FTA
hours of TV Product actually produced by the Company and

 

9

 

sold to TV channels other than the Group networks in
such Financial Year (but not more than the number of Other Channel FTA Hours) less
(3) the aggregate number of FTA hours of TV Product where the Relevant
Audience Share for the Group networks for such TV
Product during the course of such Financial Year was less than that agreed in
accordance with Article 3.5(a)(ii)(b); and

 

Z = the sum of (1) the lesser of the
number of FTA hours of TV Products actually ordered by Group networks for
production by the Company in such Financial Year and 250 FTA hours and (2) the
number of Other Channel FTA Hours.

 

(d)           Calculation of Deduction 2

 

If in any of the 2008, 2009 or 2010 Financial Year, the Company’s EBIT
margin is less than 14%, Deduction 2 for such
Financial Year shall be calculated in accordance with the formula set out
immediately below. Otherwise,  Deduction
2 for such Financial Year shall be 0.

 

Deduction 2 = P x (S x 14% - Y) / (S x 14%), where

 

P = US$ 2 million;

 

S = net sales revenue (without VAT) in the relevant Financial Year;

 

14% = the expected EBIT margin; and

 

Y = actual EBIT in the relevant Financial Year if such EBIT is
positive, otherwise Y = 0.

 

4.             DUE DILIGENCE

 

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

 

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

 

10

 

5.                                       TRANSFER OF TITLE

 

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

 

6.                                       COMPLETION

 

6.1                                 Completion

 

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

 

6.2                                 Conditions
precedent for Completion by the Purchaser

 

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

 

(a)                                  New
Information

 

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

 

(b)                                 Warranties
True and Sellers’ Certificate

 

The representations, warranties and assurances given by the Sellers in Article 7
of this Agreement shall be true and correct on the date hereof and as of the
Completion Date and each Seller shall deliver a certificate dated as of the
Completion Date certifying to the same and to the fact that the Sellers have
complied with all covenants, obligations and conditions of this Agreement
required to be performed or completed as of Completion. Template of the
compliance certificate is attached hereto as Appendix 6.2(b).

 

(c)                                  Authority
Approvals

 

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

 

(d)                                 Corporate
Action

 

All corporate actions necessary for the lawful and valid consummation
of the transactions contemplated hereby shall have been duly taken by the
Sellers and, as

 

11

 

applicable, by the Company and shall be in full force and effect. The
Sellers shall have obtained proper waivers of pre-emptive rights from each other
and the Company for the sale of the Shares. 
Copies of documents evidencing such corporate actions and waivers shall
have been delivered to the Purchaser.

 

(e)                                  Spousal
Consents

 

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

 

(f)                                    Due
Diligence

 

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

 

(g)                                 Employment
Agreement

 

Mr. Kalvarsky shall
have executed and delivered an employment agreement with the Company that shall
be effective from the Completion Date and shall run until 31 December 2010.  Such employment agreement shall be in form
and substance satisfactory to the Purchaser and shall provide for a monthly
salary of US$ 15,625 payable in RUR based on the exchange rate set by the
Central Bank of Russia on or around the date of payment, and a discretionary
performance bonus of up to 60% of annual salary.

 

(h)                                 Completion
Accounts

 

The Sellers shall have delivered to the Purchaser copies of the
Completion Accounts and such Completion Accounts shall demonstrate that the
Company does not have any liabilities other than those incurred in the Ordinary
Course of Business.

 

6.3                                 Conditions
precedent for Completion by the Sellers

 

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

 

(a)                                  Warranties
True

 

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

 

(b)                                 Corporate
Action

 

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

 

12

 

6.4                                 Deliveries
at Completion

 

At Completion:

 

(a)                                  The
Sellers sell, transfer and convey to the Purchaser the Shares in the Company by
way of presenting properly registered amendments to the constitutional
documents of the Company listing the Purchaser as valid owners of the Shares in
the percentages set out in Article 2 above;

 

(b)                                 Promptly
following confirmation of satisfaction of sub-article (a) above, the
Purchaser shall pay to the Sellers the Purchase Price on a pro rata basis by
reference to their respective percentage ownership levels in the Company
immediately prior to Completion; and

 

(c)                                  Any
other document, condition, amount or matter herein called for to be produced,
delivered, released, paid or fulfilled at Completion as a condition precedent
to Completion shall be so produced, delivered, released, paid and fulfilled.

 

6.5                                 Best
Efforts; Termination

 

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

 

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

 

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

 

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

 

13

 

7.1                                 Records
and Documentation

 

(a)                                  True,
complete and current copies of the charter,
foundation agreement and registration certificates of the Company are
attached hereto as Appendix 7.1(a).

 

(b)                                 The
Company has not failed to timely file its annual reports or any other documents
with the relevant authorities, as required.

 

(c)                                  The
statutory books, registers and records of the Company are accurate and have
been maintained consistent with good business practice and are in the
possession of the Company.

 

7.2                                 Title
and Authority to Transfer the Shares; Capitalisation

 

(a)                                  The
Sellers have full power, capacity and authority to sell and transfer the
Shares, execute and deliver this Agreement and to perform all other
undertakings set forth in this Agreement. The Shares are freely transferable to
the Purchaser and are free and clear of all liens, encumbrances and
restrictions on the ability to vote the Shares. 
The
Share owned by Mr. Serguey Anatolievich Kalvarysky represents 80% and the
Share owned by Mr. [**] represents 20%, in each case, of
the charter capital of the Company. The Shares are fully paid. There are no outstanding
obligations, warrants, options, pre-emptive rights or other agreements to which
any of the Sellers or the Company is a party or otherwise bound, providing for
the purchase, repurchase, redemption or other acquisition of the Shares, except
for this Agreement.

 

(b)                                 The
Company does not own any interest, directly or indirectly, in any corporation,
partnership or other legal entity and does not have any branch office.

 

(c)                                  Assuming
all filings, registrations, approvals, notifications etc required by applicable
laws are duly made, the execution and delivery of this Agreement by the Sellers
and the completion of the transactions contemplated hereby:

 

(i)                                     will not violate
any provision of the charter or foundation agreement of the Company;

 

(ii)                                  will not violate
any statute, rule, regulation, order, award, judgement, injunction or decree of
any public body or authority by which the Sellers or the Company or any of
their properties or assets is bound; and

 

(iii)                               will not result
in a violation or breach of, or constitute a default under, any license,
franchise, permit, indenture, agreement or other instrument to which the
Sellers or the Company is a party, or by which the Sellers or the Company or
any of their properties or assets is bound.

 

7.3                                 The
Completion Accounts

 

The Completion Accounts will be complete and
correct in all respects and truly and correctly reflect the results of the operation,
the financial condition and the assets and 

 

14

 

liabilities of the Company as at the
Completion Date and will be prepared in conformity with appropriate accounting
principles, book-keeping legislation and tax legislation, consistently applied
by the Company.  Without limiting the
generality of the foregoing, all cash transactions undertaken by the Company
will be properly recorded in the Completion Accounts.

 

7.4                                 Assets
and Properties

 

(a)                                  Appendix 7.4(a) lists all the property and
tangible and intangible assets which shall be owned or leased by the Company at
Completion, including, without limitation, all programming and film rights,
owned real property (if any) and leases to real property.

 

(b)                                 The
Company will have exclusive title to all the real property and other assets
recorded in the Completion Accounts. 
None of the assets will be subject to any liens, mortgages, charges or
other encumbrances at Completion.

 

7.5                                 Intellectual
Property

 

(a)                                  Appendix 7.5(a) lists all intellectual
property which will be owned or used by the Company in the operation of its
business at Completion.  At Completion,
the Company will own all intellectual property necessary to produce the services
and products presently produced by the Predecessor, and to distribute and sell
such products and services in any country where business presently is conducted
by the Predecessor.  None of such
intellectual property is subject to any outstanding order, judgement, lien,
encumbrance or attachment.

 

(b)                                 The activities of the Company
(or of any licensee under any licence granted by the Company) do not infringe
nor are they likely to infringe intentionally any intellectual property rights
of any third party and no claim has been made against the Company or any such
licensee in respect of such infringement.

 

7.6                                 Accounts
Receivable and Loans Given

 

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

 

7.7                                 Pricing
of Contracts

 

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

 

15

 

7.8                                 Compliance

 

(a)                                  All
authorisations and approvals, in accordance with the legislation of the Company’s
location, necessary for the due conduct of its business in its jurisdiction(s) of
operation have been duly obtained and are in full force and effect.  The entry into and the consummation of this
Agreement will not cause any termination, revocation, suspension or
modification thereof, nor has there been any violation of any such
authorisations or approvals of any terms thereof.

 

(b)                                 The
Company has been and is in full compliance with all laws and regulations, in
accordance with the legislation of the Company’s location, in its jurisdiction
applicable to it, including terms and conditions set in any authorisations and
approvals, and with the requirements of all applicable agencies and
authorities, and the Company has obtained all applicable authorisations and
approvals which are required under all of such laws.

 

7.9                                 Contracts
and Commitments

 

(a)                                  The
Company is not party to or bound by:

 

(i)                                     any
other material agreement other than
those listed in Appendix  7.9(a)(i);

 

(ii)                                  any
consultancy agreement, contract, understanding or relationship with any
officer, employee or individual or any such agreement, contract, understanding
or relationship that contains any severance or termination pay liabilities;

 

(iii)                               any
loan or credit arrangement or guarantee other than shown in the Completion
Accounts or listed in Appendix 7.9(a)(iii);

 

(iv)                              any
agreement or contract otherwise outside the Ordinary Course of Business; or

 

(v)                                 any
agreement which is expected to result in a loss to the Company on completion or
performance or cannot be fulfilled or performed by the Company on time and
without undue or unusual expenditure of money.

 

(b)                                 All
agreements or contracts to which the Company is party are valid, binding and
enforceable in accordance with their respective terms. The Company is not in
default in any material respect in the performance of any of the obligations
under any agreement or contract and no event has occurred which (whether with
or without notice, lapse of time or both) would constitute a default thereunder
by the Company.

 

(c)                                  Neither
of the Sellers nor
any person connected with them, as of the signing hereof
or on the Completion Date, have any outstanding personal claims against the
Company, except for outstanding salary payments and business travel expenses
which do not in the aggregate exceed RUR 300,000.  Other than as set out in Appendix
7.9(c), the Company is not party to any contract or arrangement in
which the Sellers are interested, directly or indirectly, nor 

 

16

 

has there been any such contract or arrangement at
any time during the five years up to the date of this Agreement.

 

(d)                                 The Company is not party to, nor
have its profits or financial position for any accounting period been affected
by, any contract or arrangement which is not of an entirely arm’s length
nature.

 

(e)                                  Other than as set out in Appendix 7.9(e), none of the Sellers nor any person
connected with them is a party to any outstanding agreement or arrangement for
the provision of finance, goods, services or other facilities to or by the
Company or in any way relating to the Company or its affairs.

 

7.10                           Labour
Contracts and Pension Agreements

 

(a)                                  At
Completion, the Company shall employ the persons listed in Article 3.5(a)(iii).  The material terms upon which such persons
shall be employed are set out in Appendix 7.10(a).  At Completion, the Company shall also employ
such other persons as is necessary to ensure that the Company is reasonably
likely to be able to produce 300 FTA hours of TV Product annually.

 

(b)                                 The
Company is not engaged in any salary or other contracts or commitments other
than normally engaged with, and complete reserves shall be made in the
Completion Accounts for the total amount of all present and future liabilities
relating to employment or pension agreements that shall be paid.

 

7.11                           Litigation
and Claims

 

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

 

7.12                           Ordinary
Course of Business

 

(a)                                  During
the period from signature hereof and until Completion, the Sellers will ensure
that the Company does not take any action or measure which is outside the Ordinary
Course of Business, unless such action or measure is directly related to the
transactions contemplated herein or has been approved by the Purchaser.

 

(b)                                 From
the date of this Agreement until the Completion Date, there shall not be:

 

(i)                                     any
adverse deviation by or within the Company from the ordinary course of the day
to day business carried on by the Company in accordance with good and sound
business practice;

 

(ii)                                  any
adverse change in the financial conditions, assets, liabilities or prospects of
the Company, including, without limitation, any incurrence of indebtedness by
the Company or the issuance of any guarantee of indebtedness of another;

 

17

 

(iii)                               any
adverse change in the relationship with the customers, suppliers or employees
of the Company or the authorities controlling the activities of the Company,

 

(iv)                              any
agreement or transaction for the sale or acquisition of any essential assets by
the Company, except in the Ordinary Course of Business;

 

(v)                                 any
change in the accounting systems, policies, principles or practices of the
Company; or

 

(vi)                              any
other action, contract or transaction by the Company which could have adverse
effect on the assets or the financial conditions of the Company.

 

7.13                           Tax
warranties

 

(a)                                  The
Company has filed with the appropriate authorities all tax returns and reports
in respect of any and all Taxes required to be filed with such tax authorities
and any Taxes payable are recorded will be recorded in full in the Completion
Accounts.

 

(b)                                 The
Company has paid or will pay  to the
appropriate tax authorities all Taxes required to have been paid to them as of
the date hereof and as of the Completion Date. 
The Company is not in default in respect of any Taxes for any year or
part thereof of the taxable years up to and including the Completion Date.

 

(c)                                  There
are no tax audits currently pending against the Company.

 

7.14                           Legal
and Other Cost

 

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

 

7.15                           No
Undisclosed Liabilities

 

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

 

7.16                           Nature
of Disclosure

 

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

 

18

 

7.17                           Powers
of attorney

 

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

 

7.18                           Systems

 

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

 

8.                                       REPRESENTATIONS, WARRANTIES AND ASSURANCES OF THE
PURCHASER

 

The Purchaser hereby represents, warrants and
assures that:

 

8.1                                 it
is duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation;

 

8.2                                 all
corporate actions necessary for the lawful and valid consummation of the
transactions contemplated hereby have been duly taken; and

 

8.3                                 it
has the authority to execute and perform all necessary actions for the lawful
and valid consummation of this Agreement.

 

9.                                       LIABILITY OF THE PARTIES

 

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

 

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

 

10.1                           To
assure the Purchaser the full benefit of the business, know-how and goodwill of
the Company, each of the Sellers severally undertakes and covenants to the
Purchaser by way of further consideration for the obligations of the Purchaser
under this 

 

19

 

Agreement, as separate and independent agreements,
that he will not (without the Purchaser’s prior written consent):

 

(a)                                  use
(whether for his own benefit or for the benefit of any other person, firm,
company or organisation) or disclose to any person, firm, company or
organisation any of the trade secrets or other Confidential Information of or
relating to: (a) the Company or the Predecessor; (b) any customer or
client of the Company or the Predecessor; (c) any person, firm, company or
organisation with whom or which the Company is involved in any kind of business
venture or partnership; or (d) the business or productions of the Company
or the Predecessor which information he may have received or obtained, or may
receive or obtain in the future, in confidence while he was a shareholder, or
in the employment, of the Company or the Predecessor, and will likewise use his
best endeavours to prevent the unauthorised publication or disclosure by any
third party of any such trade secrets or Confidential Information;

 

(b)                                 for
three years after Completion, in relation to a business which is substantially
the same as or in competition with the business of the Company immediately
prior to Completion, either on his own account or for any other person, for the
purpose of obtaining business, orders or custom, directly or indirectly,
solicit or endeavour to entice away from the Company any business, order or
custom of any person who, to the Seller’s knowledge, is as at Completion, or
has during the one year immediately preceding Completion been, a client or
customer of the Company or the Predecessor and either: (i) with whom he
has had contact or dealings during the course of his shareholding of, or employment
with, the Company or the Predecessor during the one-year period immediately
preceding Completion; or (ii) about whom at Completion he possesses any
Confidential Information;

 

(c)                                  for
three years after Completion, in relation to a business which is substantially
the same as or in competition with the business of the Company immediately
prior to Completion, either on his own account or for any other person,
directly or indirectly, supply or provide goods or services to any person who,
to the Seller’s knowledge, is as at Completion, or has during the one year
immediately preceding Completion been, a client or customer of the Company or
the Predecessor and either: (i) with whom he has had contact or dealings
during the course of his shareholding of, or employment with, the Company or
the Predecessor in the one-year period immediately preceding Completion; or (ii) about
whom at Completion he possesses Confidential Information;

 

(d)                                 for
three years after Completion, in relation to a business which is substantially
the same as or in competition with the business of the Company immediately
prior to Completion, either on his own account or for any other person,
directly or indirectly, entice away or endeavour to entice away from the
Company any person (including, without limitation, any writer, director,
producer, development executive, script editor or cast member) whom, as at
Completion or at any time during the period of one year immediately preceding
Completion supplied or provided any goods, services, ideas or talent to the
Company or the Predecessor and with whom he had material business 

 

20

 

contact on behalf of the Company or the Predecessor in the course of
the period of one year immediately prior to Completion;

 

(e)           for
three years after Completion, in any way seek to affect the terms of business
on which the Company or any member of the Group deals or contracts with any
person (including, without limitation, 
any writer, director, producer, development executive, script editor or
cast member), firm, company or organisation whom or which supplied goods or
services to the Company or the Predecessor during the period of one year
immediately prior to Completion or attempt to persuade any such person, firm,
company or organisation to cease dealing with the Company or such member of the
Group;

 

(f)            for
three years after Completion, in relation to a business which is substantially
the same as or in competition with the business of the Company immediately
prior to Completion, either on his own account or for another person, directly
or indirectly, offer employment to or employ or offer or conclude any contract
for services with any senior employee (being a person in receipt of a salary in
excess of RUR 80,000 per month), consultant or director of the Company who has
during the one-year period immediately preceding Completion been employed,
engaged or appointed by the Company or the Predecessor in a technical,
production, sales, marketing, advisory and/or managerial capacity and with whom
he has had contact or dealings during the course of his employment or
shareholding with the Company or the Predecessor in the one-year period
immediately preceding Completion;

 

(g)           for
three years after Completion, in the Russian Federation, either alone or
jointly with, or as principal, director, manager, consultant, agent for or
employee of, another person, directly or indirectly carry on or be engaged,
employed, appointed, concerned or interested in the business of Production
Business; or

 

(h)           for
three years after Completion, own beneficially or otherwise or be interested in
the share capital of any company engaged, concerned or interested within the
Russian Federation in the Production Business.

 

10.2         Mr. Kalvarsky
undertakes and covenants to the Purchaser by way of further consideration for
the obligations of the Purchaser under this Agreement, as separate and independent
agreements, that he will not (without the Purchaser’s prior written consent):

 

(a)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, in relation to a business which is
substantially the same as or in competition with the business of the Company at
the Applicable Date, either on his own account or for any other person, for the
purpose of obtaining business, orders or custom, directly or indirectly,
solicit or endeavour to entice away from the Company any business, order or
custom of any person who is as at the Applicable Date, or has during the period
of one year immediately preceding the Applicable Date been, a client or
customer of the Company or any other member of the Group in the Production
Business and either: (i) with whom he has had contact or dealings during
the course of his employment with the Company during the 

 

21

 

one-year period immediately preceding the Applicable Date; or (ii) about
whom he possesses any Confidential Information as at the Applicable Date.  For the purpose of this Agreement, the term
“Applicable Date” means: (a) in relation to the period during which Mr. Kalvarsky
remains employed by the Company, the date upon which any alleged breach of this
Article occurs; and (b) in relation to the period of 6 months
immediately following the termination of his employment by the Company, the
applicable termination date of that employment;

 

(b)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment with the Company, in relation to a business
which is substantially the same as or in competition with the business of the
Company at the Applicable Date, either on his own account or for any other
person, directly or indirectly, supply or provide goods or services to any
person who is as at the Applicable Date, or has during the period of one year
immediately preceding the Applicable Date been, a client or customer of the
Company or any other member of the Group in the Production Business and either:
(i) with whom he has had contact or dealings during the course of his
employment with the Company in the one-year period immediately preceding the
Applicable Date; or (ii) about whom he possesses Confidential Information
as at the Applicable Date;

 

(c)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, in relation to a business which is
substantially the same as or in competition with the business of the Company at
the Applicable Date, either on his own account or for any other person,
directly or indirectly, entice away or endeavour to entice away from the Company
or any other member of the Group in the Production Business any person
(including, without limitation, any writer, director, producer, development
executive, script editor or cast member) whom, as at the Applicable Date or at
any time during the period of one year immediately preceding the Applicable
Date supplied or provided any goods, services, ideas or talent to the Company
or such member of the Group and with whom he had material business contact on
behalf of the Company in the course of the period of one year immediately prior
to the Applicable Date;

 

(d)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, in any way seek to affect the terms of business
on which the Company or any member of the Group in the Production Business
deals or contracts with any person (including, without limitation,  any writer, director, producer, development
executive, script editor or cast member), firm, company or organisation whom or
which supplied goods or services to the Company or such member of the Group
during the period of one year immediately prior to the Applicable Date or
attempt to persuade any such person, firm, company or organisation to cease
dealing with the Company or such member of the Group;

 

(e)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, in relation to a business which is
substantially the same as or in competition with the business of the Company at
the Applicable Date, either on his own account or for 

 

22

 

another person, directly or indirectly, offer employment to or employ
or offer or conclude any contract for services with any senior employee (being
a person in receipt of a salary in excess of Ruble 80,000 per month),
consultant or director of the Company who has during the one-year period
immediately preceding the Applicable Date been employed, engaged or appointed
by the Company or a member of the Group in the Production Business in a
technical, production, sales, marketing, advisory and/or managerial capacity
and with whom he has had contact or dealings during the course of his
employment with the Company in the one-year period immediately preceding the
Applicable Date;

 

(f)            either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, in the Russian Federation or any other country
in which the business of the Company or any other member of the Group in the
Production Business was carried on at or during the period of two years
immediately preceding the Applicable Date, either alone or jointly with, or as
principal, director, manager, consultant, agent for or employee of, another
person, directly or indirectly carry on or be engaged, employed, appointed,
concerned or interested in the Production Business; or

 

(g)           either during his employment
with the Company or for a period of 6 months immediately following the
termination of such employment, own beneficially or otherwise or be interested
in the share capital of any company engaged, concerned or interested within the
Russian Federation or any other country in which the business of the Company or
any other member of the Group in the Production Business was carried on at or
during the period of two years immediately preceding the Applicable Date, in
the Production Business;

 

(h)           for three years after
Completion or while at any time he is a consultant, director or employee of any
member of the Group, directly or indirectly carry on a business activity under
a name which is the same as, or similar to, the name of the Company or any
member of the Group or a name used for business purposes by a member of the
Group; or

 

(i)            at any time after
Completion, make adverse comments in relation to the Group or its businesses or
employees.

 

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

 

10.4         The
Sellers agree that the covenants and undertakings contained in Article 10  are reasonable and are entered into for
the purpose of protecting the know-how, goodwill, confidential information and
trade connections of the businesses of the members of the Group.  Accordingly the benefit of the covenants and
undertakings may be assigned by the Purchaser and its successors in title
without the consent of the Sellers.

 

23

 

10.5         Each undertaking contained
in this Article 10 shall be construed as a separate undertaking.  If one or more of them is held to be against
the public interest or unlawful or an unreasonable restraint of trade, the
remaining undertakings shall continue to bind the Sellers.

 

10.6         For the purposes of this
Agreement “Confidential Information” shall include (but shall not be limited
to):

 

(i)            corporate and marketing
strategy and plans and business development plans;

 

(ii)           business, sales and
marketing methods, confidential techniques and processes used for the creation
and/or development and/or production and/or filming of any television
programme, motion picture, film or pilot;

 

(iii)          details
and specifications of any current, past or proposed motion picture, film or
television or entertainment projects or products, including all scripts, story
boards and financial arrangements, and any research or development related to
any current, past or proposed motion picture, film or television programmes,
films or pilots and all scripts and story boards associated therewith and any
material relating thereto;

 

(iv)          the names, addresses and
contact details of any writers, producers, directors, producers, development
executives, script editors, cast members, financiers or employees who are
involved in the Company’s projects from time to time, including contact lists
in whatever medium this information is stored and the ideas of those writers,
producers, directors, producers, development executives, script editors,
financiers or employees relating to the creation, development, production or
filming of any television programmes, films or otherwise.

 

(v)           the terms of business with
advertisers, broadcasters, distributors, financiers, sub-contractors, customers
and suppliers, including any pricing policy adopted and the terms of any
partnership, joint venture or other form of commercial co-operation or
agreement with any third party;

 

(vi)          software and technical
information necessary for the operation of 
the Company’s computer and technology systems and applications,
information relating to proprietary software (including updates), source code
to proprietary software, confidential algorithms developed or used by the
Company, information relating to the development, maintenance or operation of
any of the Company’s websites and the source code of each website; and

 

(vii)         any other information which
is the subject of an obligation of confidence owed to a third party, in
particular the content of discussions or communications with any prospective
customers or prospective business partners.

 

24

 

11.           NOTICES

 

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

 

If to CTC Media:

 

Address:                15A Pravda

Moscow 125124

Russia

 

Telefax:

 

Attention:              Alexander
Efimovich Rodnyansky

 

If to CTC
Network:

 

Address:                3rd Khoroshevskaya St, 12

Moscow 123298

Russia

 

Telefax:

 

Attention:              Alexander
Efimovich Rodnyansky

 

If to Mr. Serguey
Anatolievich Kalvarsky:

 

Address:           [**]

 

Telefax:

 

[**]         [**]                                         [**]                                         [**]

Telefax:

 

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

 

12.           APPENDICES INCORPORATED

 

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

 

25

 

13.           INTEGRATION

 

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

 

14.           THIRD PARTY
RIGHTS

 

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

 

15.           GOVERNING LAW

 

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

 

16.           ARBITRATION OF THIS AGREEMENT

 

Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination, or invalidity thereof shall be settled by
arbitration in accordance with the Rules of the Arbitration Institute of
the Stockholm Chamber of Commerce. The arbitral tribunal shall be composed of
three arbitrators, one of whom shall be selected by the Purchaser, one of whom
shall be selected by the Sellers and the third of whom shall be selected by the
other two arbitrators. The arbitration shall be held in Stockholm and the
arbitration proceedings shall be conducted in the English language.

 

17.           SELLER REPRESENTATIVE

 

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

 

18.           AMENDMENTS; WAIVERS

 

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

 

26

 

19.           PUBLICITY

 

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

 

20.           COUNTERPARTS OF THE AGREEMENT

 

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

 

21.           PREVAILING LANGUAGE

 

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

 

27

 

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

 

 

	
  EXECUTED by

  	
   

  
	
  Serguey Anatolievich Kalvarsky

  	
  /s/ Serguey Anatolievich Kalvarsky

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTED by

  	
   

  
	
  [**]

  	
   

  
	
   

  	
   

  
	
  EXECUTED by

  	
   

  
	
  CTC Media, Inc.

  	
   

  
	
  acting by its President and

  	
   

  
	
  Chief Executive Officer

  	
   

  
	
  Alexander Efimovich Rodnyansky

  	
  /s/ Alexander Efimovich Rodnyansky

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTED by

  	
   

  
	
  CJSC “CTC Network”

  	
   

  
	
  acting by its General Director

  	
   

  
	
  Alexander Efimovich Rodnyansky

  	
  /s/ Alexander Efimovich Rodnyansky

  

 

28

 

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

 

29Exhibit 10.64

 

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

 

SHARE PURCHASE AGREEMENT

 

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

 

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

 

WITHNESSETH:

 

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

 

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

 

NOW, THEREFORE, the
party hereto agrees as follows:

 

1.             DEFINITIONS

 

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

 

1

 

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

 

	
  1.1

  	
   

  	
  “Accounts”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.2

  	
   

  	
  “Accounts Date”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.3

  	
   

  	
  “Agreement”

  	
   

  	
  shall mean this
  Share Purchase Agreement and the Appendices hereto.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.4

  	
   

  	
  “Company”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.5

  	
   

  	
  “Completion”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.6

  	
   

  	
  “Completion
  Accounts”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.7

  	
   

  	
  “Completion
  Date”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.8

  	
   

  	
  “Confidential
  Information”

  	
   

  	
  shall have the
  meaning set out in Article 10.4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.9

  	
   

  	
  “CTC Network”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.10

  	
   

  	
  “CTC Media”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.11

  	
   

  	
  “Damages”

  	
   

  	
  shall have the
  meaning set out in Article 9.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.12

  	
   

  	
  “Defaulted
  Amount”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.13

  	
   

  	
  “Disability”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.14

  	
   

  	
  “EBIT”

  	
   

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

  

 

2

 

	
   

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.15

  	
   

  	
  “Financial Year”

  	
   

  	
  shall mean the
  period between 1 January to 31 December.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.16

  	
   

  	
  “Group”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.17

  	
   

  	
  “Key
  Performance Indicators”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.18

  	
   

  	
  “Multiple
  Defaulting Sellers”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.19

  	
   

  	
  “Ordinary
  Course of Business”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.20

  	
   

  	
  “Other Channel
  Revenue Objective”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.21

  	
   

  	
  “Party”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.22

  	
   

  	
  “Performance
  Report”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.23

  	
   

  	
  “Predecessor”

  	
   

  	
  shall mean
  Kinoconstanta LLC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.24

  	
   

  	
  “Production Business”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.25

  	
   

  	
  “Purchaser”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.26

  	
   

  	
  “Purchase Price”

  	
   

  	
  shall have the
  meaning set out in Article 3.2.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.27

  	
   

  	
  “Relevant
  Audience Share”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.28

  	
   

  	
  “Ruble Equivalent”

  	
   

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

  

 

3

 

	
   

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.29

  	
   

  	
  “RUR”

  	
   

  	
  shall mean
  Russian rubles.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.30 

  	
   

  	
  “SEC” 

  	
   

  	
  shall mean the US Securities and Exchange
  Commission. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.31

  	
   

  	
  “Seller Bank
  Account”

  	
   

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

   

  [**]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.32

  	
   

  	
  “Seller
  Representative”

  	
   

  	
  shall mean MR.
  [**].

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.33

  	
   

  	
  “Sellers”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.34

  	
   

  	
  “Shares”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.35

  	
   

  	
  “Single
  Defaulting Seller”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.36

  	
   

  	
  “Taxes”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.37

  	
   

  	
  “Termination Without Cause”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.38

  	
   

  	
  “TV Product”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.39

  	
   

  	
  “Warranties”

  	
   

  	
  shall have the
  meaning set out in Article 7.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.40

  	
   

  	
  “Working
  Capital”

  	
   

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

  

 

4

 

	
   

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.41

  	
   

  	
  “2008 Earn Out
  Payment”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.42

  	
   

  	
  “2009 Earn Out
  Payment”

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.43

  	
   

  	
  “2010 Earn Out
  Payment”

  	
   

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

  

 

2.             SUBJECT OF THE TRANSACTION

 

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

 

	
   

  	
   

  	
  Percentage of

  charter capital

  in the

  Company

  acquired from

  Mr. [**]

  	
   

  	
  Percentage of

  charter capital

  in the

  Company

  acquired from

  Mr. [**]

  	
   

  	
  Percentage of

  charter capital

  in the

  Company

  acquired from

  Mr. [**]

  	
   

  	
  Percentage of

  charter capital

  in the

  Company

  acquired from

  Mr. [**]

  	
   

  	
  Resulting

  overall

  percentage

  in the

  Company

  	
   

  
	
  CTC Network

  	
   

  	
  59.40

  	
  %

  	
  12.375

  	
  %

  	
  14.85

  	
  %

  	
  12.375

  	
  %

  	
  99.00

  	
  %

  
	
  CTC Media

  	
   

  	
  0.60

  	
  %

  	
  0.125

  	
  %

  	
  0.15

  	
  %

  	
  0.125

  	
  %

  	
  1.00

  	
  %

  

 

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

 

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

 

3.1           Aggregate Consideration

 

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

 

3.2           Purchase Price

 

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

 

5

 

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

 

3.3           Earn Out Payments

 

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

 

The Earn Out Payments shall be paid as
follows:

 

(a)           The Purchaser will pay the 2008 Earn Out Payment, which
shall be equal to the Ruble Equivalent of US$ 11,000,000 (eleven million) less
the deductions and adjustments set out in Article 3.5(b)(i), within 10
working days from the date of filing of CTC Media’s 2008 annual report on Form 10-K
with the SEC, but not later than March 31, 2009, provided that a
Performance Report for 2008 has been signed by the Purchaser and the Seller
Representative. If the Purchaser fails to sign the Performance Report without stating a reason
for such failure by March 20, 2009 then such Performance Report shall be
deemed signed by the Purchaser;

 

(b)           The Purchaser will pay the 2009 Earn Out Payment, which
shall be equal to the Ruble Equivalent of US$ 9,000,000 (nine million) less the
deductions and adjustments set out in Article 3.5(b)(ii), within 10
working days from the date of filing of CTC Media’s 2009 annual report on Form 10-K
with the SEC, but not later than March 31, 2010, provided that a
Performance Report for 2009 has been signed by the Purchaser and the Seller
Representative. If the Purchaser fails to sign the Performance Report without stating a reason
for such failure by March 20, 2010 then such Performance Report shall be
deemed signed by the Purchaser; and

 

(c)           The Purchaser will pay the 2010 Earn Out Payment, which
shall be equal to the Ruble Equivalent of US$ 9,000,000 (nine million) less the
deductions and adjustments set out in Article 3.5(b)(iii), within 10
working days from the date of filing of CTC Media’s 2010 annual report on Form 10-K
with the SEC, but not later than March 31, 2011, provided that a
Performance Report for 2010 has been signed by the Purchaser and the Seller
Representative. If the Purchaser fails to sign the Performance Report without stating a reason
for such failure by March 20, 2011 then such Performance Report shall be
deemed signed by the Purchaser;

 

provided, however,
if at any time before the payment of the 2010 Earn Out Payment in 2011, CTC
Media is no longer required to file an annual report (on

 

6

 

Form 10-K or
any successor form) with the SEC, any remaining Earn Out Payment shall be made
on or around March 31 of the relevant year.

 

3.4           Payment of Purchase Price and Earn
Out Payments

 

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

 

3.5           Purchase Price and Earn Out Payment Adjustments

 

(a)           The Purchase Price and Earn Out Payments are subject to
the following conditions subsequent:

 

(i)            Each of the Sellers shall be continuous full-time
employees of the Company serving as managers located in Moscow, Russia from the
Completion Date up to and including 31 December 2010.  If any one Seller (a “Single Defaulting
Seller”) (A) fails for any reason (including without limitation,
Disability) to continue to be so employed by the Company other than as a result
of a Termination Without Cause or death or (B) breaches of any of his
obligations set out in Article 10 hereof (Non-competition;
Non-solicitation and Confidentiality Commitment) (i) on or
before 31 December 2009, then the Sellers shall be jointly and severally
obligated to repay to the Purchaser any portion of the Purchase Price and/or
Earn Out Payments previously paid to the Single Defaulting Seller or (ii) after
31 December 2009 but on or before 31 December 2010 then the Sellers
shall be jointly and severally obligated to repay to the Purchaser the Earn Out
Payments previously paid to the Single Defaulting Seller (other than his
portion of the Purchase Price) and, in both cases set out in subclauses (i) and
(ii), any and all future Earn Out Payments shall be reduced by an amount equal
to the Single Defaulting Seller’s percentage interest in the Company
immediately prior to Completion (such amount repaid by the Sellers on behalf of
the Single Defaulting Seller and the amount by which future Earn Out Payments
are reduced, hereinafter collectively referred to as the “Defaulted Amount”).
In the event of a Single Defaulting Seller, the Purchaser shall use its
commercially reasonable efforts to retain a manager to replace the Single
Defaulting Seller but, for the avoidance of doubt, such replacement manager
shall not be entitled to any portion of the Purchase Price, any Earn Out
Payment or any other of the rights afforded a Seller under this Agreement. If
notwithstanding the occurrence of a Single Defaulting Seller, (i) the
Company shall have fully achieved each of the Key Performance Indicators set
out in Article 3.5(a)(iii) for each of the 2008, 2009 and 2010
Financial Years and (ii) each of the Sellers other than the Single
Defaulting Seller shall have remained as a full-time employee of the Company
through and including 31 December 2010 and shall not have violated or be
in violation of his obligations set out in Article 10 hereof (Non-

 

7

 

competition; Non-solicitation and
Confidentiality Commitment), the Purchaser shall, on
the date that the 2010 Earn Out Payment is made, also pay to the Sellers (other
than the Single Defaulting Seller) the Defaulted Amount less the sum of (i) any
uncollectible accounts receivable or loans as provided in Article 7.6, (ii) any
unpaid Damages as provided in Article 9 and (iii) the amount of any
Taxes paid by the Purchaser on amounts repaid by the Sellers to the Purchaser
under this Article 3.5(a)(i) as a result of the occurrence of a
Single Defaulting Seller, in each case, to the extent that such amounts were
not already deducted from an Earn Out Payment. 
Such amount shall be paid pro rata to such Sellers based on their
respective ownership interests in the Company immediately prior to Completion.

 

(ii)           If two or more Sellers (“Multiple Defaulting Sellers”) (A) fail
for any reason at any time (including without limitation, Disability) to be
continuous full-time employees of the Company serving as managers located in
Moscow, Russia from the Completion Date up to and including 31 December 2010
other than as a result of a Termination Without Cause or death or (B) breach
any of their respective obligations set out in Article 10 hereof on or before
31 December 2010  (Non-competition; Non-solicitation and Confidentiality
Commitment), the Purchaser can elect, in its sole discretion, either
of the following:  (i) to terminate
this Agreement in which case the Sellers shall be jointly and severally liable
to repay the Purchaser all the Purchase Price and any and all Earn Out Payments
previously paid by the Purchaser to the Sellers and the Purchaser shall be
obligated to transfer the Shares back to the Sellers (or their heirs) according
to their percentage holdings immediately prior to Completion upon such
repayment in full, without benefit of any warranties other than a warranty that
the Purchaser has not pledged the Shares or (ii) to continue with the
Agreement provided that any and all future Earn Out Payments shall be
reduced by an amount equal to the Multiple Defaulting Sellers’ aggregate
percentage interest in the Company immediately prior to Completion and provided
further that if the failure to be so employed or the breach of Article 10
by any one of the Multiple Defaulting Sellers occurs (x) on or before 31 December 2009
the Sellers shall be jointly and severally obligated to repay to the Purchaser
that portion of the Purchase Price and any and all Earn Out Payments previously
paid by the Purchaser to the Multiple Defaulting Sellers or (y) after 31 December 2009
but on or before 31 December 2010 then the Sellers shall be jointly and
severally obligated to repay to the Purchaser any and all Earn Out Payments
previously paid by the Purchaser to the Multiple Defaulting Sellers. The
Sellers’ obligations in Article 10 shall survive any termination of this
Agreement pursuant to this Article 3.5(a)(ii).

 

(iii)          The Company shall achieve in each of
the 2008, 2009 and 2010 Financial Years the following (the “Key Performance Indicators”):

 

a.             Number of free-to-air (FTA) hours:

 

8

 

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

 

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

 

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

 

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

 

b.             EBIT margin: the Company shall achieve on a stand-alone
basis an EBIT margin of no less than 14% and the Parties acknowledge and agree
that, notwithstanding the definition of “Ruble Equivalent” set out in Article 1
hereto, EBIT shall be determined using exchange rates deemed appropriate by US
generally accepted accounting principles.

 

c.             Value of a multiplier EV/EBIT: the Company shall achieve
an EV/EBIT ratio of no more than:

 

x6.3 in 2008

 

9

 

x5.4 in 2009

x4.9 in 2010

 

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

 

d.             Pricing of programming: The average price of TV Product
sold to CTC Network in 2008 shall be as follows:

 

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

 

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

 

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

 

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

 

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

 

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

 

e.             Relevant Audience
Share for standard television sitcoms and series produced and sold by the
Company to CTC Network shall be no less than 10% (based on the measuring of TNS
Gallup Media Russia/All 4+ audience for such TV Product in the 7 – 11 p.m.
timeslot) or no less than 12% (based on the measuring of TNS Gallup Media
Russia/All 6-54 audience for such TV Product in the 7 – 11 p.m. timeslot.

 

10

 

Relevant Audience Share for television sitcoms and
series  for children
and/or teenagers produced and sold by the Company to CTC Network shall be no
less than 10% (based on the measuring of TNS Gallup Media Russia/All 4+
audience for such TV Product in the 4  – 7 p.m. timeslot) or no
less than 12% (based on the measuring of TNS Gallup Media Russia/All 6-54
audience for such TV Product in the 4  – 7 p.m. timeslot.

 

Relevant Audience Share for shows or made for TV
movies produced and sold by the Company to CTC Network shall be no less than
the audience share threshold mutually agreed by the Purchaser and the Seller
Representative on a project-by-project basis before such TV Product’s initial
launch.

 

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

 

In the sole discretion of the management of CTC
Network, TV Product that is not achieving the levels set out for the Relevant
Audience Share can be removed from broadcasting ahead of

 

11

 

schedule or moved into timeslots outside of the
originally designated timeslots.

 

(b)           The Earn Out
Payments shall be calculated as follows:

 

(i)            Calculation of
2008 Earn Out Payment

 

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

 

Calculation
of 2008 Deduction 1

 

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

 

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

 

P = US$ 11
million;

 

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

 

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

 

12

 

Calculation of 2008 Deduction 2

 

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

 

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

 

S = net sales
revenue (without VAT) in 2008

 

Y = actual EBIT
in 2008

 

(ii)           Calculation of
2009 Earn Out Payment

 

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

 

Calculation
of 2009 Deduction 1

 

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

 

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

 

P = US$ 9
million;

 

13

 

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

 

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

 

Calculation
of 2009 Deduction 2

 

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

 

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

 

S = net sales
revenue (without VAT) in 2009

 

Y = actual EBIT
in 2009

 

(iii)          Calculation of
2010 Earn Out Payment

 

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

 

14

 

Calculation of 2010
Deduction 1

 

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

 

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

 

P = US$ 9
million;

 

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

 

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

 

Calculation
of 2010 Deduction 2

 

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

 

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

 

S = net sales
revenue (without VAT) in 2010

 

Y = actual EBIT
in 2010

 

15

 

4.             DUE DILIGENCE

 

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

 

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

 

4A.          RETENTION OF PERSONNEL

 

The Sellers shall cause the following personnel of
the Company to remain at their positions with the Company as at the date of
signing of this Agreement until 31 December 2010, or in case of their leaving the Company, the Sellers
shall retain, on behalf of the Company, other relevant professional individuals
to replace such persons, which individuals shall be acceptable to the
Purchaser:

 

Artemiy
Loginov - Creative producer  

Ilya Polezhaykin - Creative producer

Dmitry
Permyakov - Creative producer  

Anton Kolbasov - Creative producer

Alexander Zhigalkin - Creative producer  

Victoria Wilson - Head of editors group

Alla Kurakina - Executive producer

Tatiana Davtyan - Executive producer

Ivan Permin - Director of post-production

 

5.             TRANSFER OF
TITLE

 

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

 

6.             COMPLETION

 

6.1           Completion

 

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

 

16

 

6.2           Conditions
precedent for Completion by the Purchaser

 

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

 

(a)           New Information

 

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

 

(b)           Warranties True
and Sellers’ Certificate

 

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

 

(c)           Authority
Approvals

 

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

 

(d)           Corporate
Action

 

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

 

(e)           Spousal Consents

 

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

 

(f)            Due Diligence

 

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

 

(g)           Employment
Agreements

 

Each of the
Sellers shall have executed and delivered an employment agreement with the
Company that shall be effective from the Completion Date and shall run until 31

 

17

 

December 2010.  Such agreements shall be in form and
substance acceptable to the Purchaser and shall provide for a monthly salary of
RUR 248,000 payable in RUR, which monthly salary shall be subject to annual
adjustment based on official inflation rate in the Russian Federation. In
addition, each of the Sellers shall be entitled to performance bonuses based on
the results of the Company in any Financial Year, the amounts and conditions of
such performance bonuses shall be established no later that March 31 of
such Financial Year.

 

(h)           Accounts and
Completion Accounts

 

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

 

6.3           Conditions
precedent for Completion by the Sellers

 

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

 

(a)           Warranties True

 

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

 

(b)           Corporate Action

 

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

 

6.4           Deliveries at
Completion

 

                At Completion:

 

(a)           The Sellers sell,
transfer and convey to the Purchaser the Shares in the Company by way of
presenting properly registered amendments to the constitutional documents of
the Company listing the Purchaser as valid owners of the Shares in the
percentages set out in Article 2 above;

 

(b)           Promptly
following confirmation of satisfaction of sub-article (a) above, the
Purchaser shall pay to the Sellers the Purchase Price on a pro rata basis by
reference to their respective percentage ownership levels in the Company
immediately prior to Completion; and

 

(c)           Any other
document, condition, amount or matter herein called for to be produced,
delivered, released, paid or fulfilled at Completion as a condition precedent
to Completion shall be so produced, delivered, released, paid and fulfilled.

 

18

 

6.5           Best Efforts;
Termination

 

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

 

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

 

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

 

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

 

7.1           Records and
Documentation

 

(a)           True, complete
and current copies of
the charter, foundation agreement and registration certificates of the Company are
attached hereto as Appendix B.

 

(b)           The Company has
not failed to timely file its annual reports or any other documents with the
relevant authorities, as required.

 

(c)           The statutory
books, registers and records of the Company are accurate and have been
maintained consistent with good business practice and are in the possession of
the Company.

 

7.2           Title
and Authority to Transfer the Shares; Capitalisation

 

(a)           The Sellers have
full power, capacity and authority to sell and transfer the Shares, execute and
deliver this Agreement and to perform all other undertakings set forth in this
Agreement. The Shares are freely transferable to the Purchaser and are free and
clear of all liens, encumbrances and restrictions on the ability to vote the
Shares.  The Share owned by MR. [**]
represents 60%, the Share owned by MR. [**] represents 12.5%, the Share owned
by MR. [**] represents 15% and the Share owned by MR. [**] represents 12.5 %,
in each case, of the charter capital of the Company. The
Shares are fully paid. 

 

19

 

There are no outstanding obligations, warrants,
options, pre-emptive rights or other agreements to which any of the Sellers or
the Company is a party or otherwise bound, providing for the purchase,
repurchase, redemption or other acquisition of the Shares, except for this
Agreement.

 

(b)           The
Company does not own any interest, directly or indirectly, in any corporation,
partnership or other legal entity and does not have any branch office.

 

(c)           Assuming all
filings, registrations, approvals, notifications etc required by applicable
laws are duly made, the execution and delivery of this Agreement by the Sellers
and the completion of the transactions contemplated hereby:

 

(i)            will not violate
any provision of the charter or foundation agreement of the Company;

 

(ii)           will not violate
any statute, rule, regulation, order, award, judgement, injunction or decree of
any public body or authority by which the Sellers or the Company or any of
their properties or assets is bound;

 

(iii)          will not result
in a violation or breach of, or constitute a default under, any license,
franchise, permit, indenture, agreement or other instrument to which the
Sellers or the Company is a party, or by which the Sellers or the Company or
any of their properties or assets is bound.

 

7.3           The Accounts

 

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

 

7.4           Assets and
Properties

 

(a)           Appendix
C lists all the property and tangible and intangible
assets owned or leased by the Company, including, without limitation, all
programming and film rights, owned real property (if any) and leases to real
property.

 

(b)           The Company has
exclusive title to all the real property and other assets recorded in the
Accounts except for such assets that have been sold at ordinary market terms in
the Ordinary Course of the Business after the Accounts Date.  None of the assets are subject to any liens,
mortgages, charges or other encumbrances.

 

(c)           The Company owns
or leases, and will following the consummation of the transactions contemplated
hereunder, continue to own or lease all the assets 

 

20

 

and rights, and produce all services required to
conduct its business as currently conducted on a stand alone basis.

 

7.5           Intellectual
Property

 

(a)           Appendix
D lists all intellectual property owned or used by
the Company in the operation of its business. 
The Company owns all intellectual property necessary to manufacture
products presently manufactured and produce the services presently produced,
and to distribute and sell such products and services in any country where
business presently is conducted.

 

(b)           The intellectual
property listed in Appendix D
comprises all such rights necessary to permit the operation of the Company’s
business as now being conducted.  None of
the intellectual property is subject to any outstanding order, judgement, lien,
encumbrance or attachment.

 

(c)           The activities of
the Company (or of any licensee under any licence granted by the Company) do
not infringe and are not likely to infringe intentionally any intellectual
property rights of any third party and no claim has been made against the
Company or any such licensee in respect of such infringement.

 

7.6           Accounts
Receivable and Loans Given

 

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

 

7.7           Pricing of
Contracts

 

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

 

7.8           Compliance

 

(a)           All
authorisations and approvals, in accordance with the legislation of the
Company’s location, necessary for the due conduct of its business in its
jurisdiction(s) of operation have been duly obtained and are in full force
and effect.  The entry into and the
consummation of this Agreement will not cause any termination, revocation,
suspension or modification thereof, nor has there been any violation of any
such authorisations or approvals of any terms thereof.

 

(b)           The Company has
been and is in full compliance with all laws and regulations, in accordance
with the legislation of the Company’s location, in its jurisdiction applicable
to it, including terms and conditions set in any authorisations and approvals,
and with the requirements of all applicable agencies and authorities, 

 

21

 

and the Company has obtained all applicable
authorisations and approvals which are required under all of such laws.

 

7.9           Contracts and
Commitments

 

(a)           The Company is
not party to or bound by:

 

(i)            any other
material agreement than those listed in Appendix
E;

 

(ii)           any consultancy
agreement, contract, understanding or relationship with any officer, employee
or individual or any such agreement, contract, understanding or relationship
that contains any severance or termination pay liabilities;

 

(iii)          any loan or
credit arrangement or guarantee other than shown in the Accounts or listed in Appendix F;

 

(iv)          any agreement or
contract otherwise outside the Ordinary Course of Business; or

 

(v)           any agreement
which is expected to result in a loss to the Company on completion or
performance or cannot be fulfilled or performed by the Company on time and
without undue or unusual expenditure of money.

 

(b)           All agreements or
contracts to which the Company is party are valid, binding and enforceable in
accordance with their respective terms. The Company is not in default in any
material respect in the performance of any of the obligations under any
agreement or contract and no event has occurred which (whether with or without
notice, lapse of time or both) would constitute a default thereunder by the
Company.

 

(c)           Neither of the
Sellers nor any person connected with them, as of the signing hereof or on the
Completion Date, have any outstanding personal claims against the Company,
except for outstanding salary payments and business travel expenses which do
not in the aggregate exceed RUR 300,000. 
Other than as set out in Appendix G,
the Company is not party to any contract or arrangement in which the Sellers
are interested, directly or indirectly, nor has there been any such contract or
arrangement at any time during the five years up to the date of this Agreement.

 

(d)           The Company is
not party to, nor have its profits or financial position for any accounting
period been affected by, any contract or arrangement which is not of an
entirely arm’s length nature.

 

(e)           Other than as set
out in Appendix H, none of the
Sellers nor any person connected with them is a party to any outstanding
agreement or arrangement for the provision of finance, goods, services or other
facilities to or by the Company or in any way relating to the Company or its
affairs.

 

22

 

7.10         Labour Contracts
and Pension Agreements

 

(a)           Accurate,
complete and updated summaries of the essential employment provisions of the
employees of the Company are shown in Appendix
I.

 

(b)           The Company is
not engaged in any salary or other contracts or commitments other than normally
engaged with, and complete reserves have been made in the Accounts and shall be
made in due course in the Completion Accounts, for the total amount of all
present and future liabilities relating to employment or pension agreements
that shall be paid.

 

7.11         Litigation and
Claims

 

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

 

7.12         Ordinary Course
of Business

 

(a)           During the period
from signature hereof and until Completion, the Sellers will ensure that the
Company does not take any action or measure which is outside the Ordinary
Course of Business, unless such action or measure is directly related to the
transactions contemplated herein or has been approved by the Purchaser.

 

(b)           Since the
Accounts Date there has not been, nor will there from the date hereof until the
Completion Date be:

 

(i)            any adverse
deviation by or within the Company from the ordinary course of the day to day
business carried on by the Company in accordance with good and sound business
practice;

 

(ii)           any adverse
change in the financial conditions, assets, liabilities or prospects of the
Company, including, without limitation, any incurrence of indebtedness by the
Company or the issuance of any guarantee of indebtedness of another;

 

(iii)          any adverse
change in the relationship with the customers, suppliers or employees of the
Company or the authorities controlling the activities of the Company,

 

(iv)          any agreement or
transaction for the sale or acquisition of any essential assets by the Company,
except in the Ordinary Course of Business;

 

(v)           any change in the
accounting systems, policies, principles or practices of the Company; or

 

(vi)          any other action,
contract or transaction by the Company which could have adverse effect on the
assets or the financial conditions of the Company.

 

23

 

7.13         Tax warranties

 

(a)           The Company has
filed with the appropriate authorities all tax returns and reports in respect
of any and all Taxes required to be filed with such tax authorities and any
Taxes payable are recorded in full in the Accounts and will be recorded in full
in the Completion Accounts.

 

(b)           The Company has
paid or will pay  to the appropriate tax
authorities all Taxes required to have been paid to them as of the date hereof
and as of the Completion Date.  The
Company is not in default in respect of any Taxes for any year or part thereof
of the taxable years up to and including the Completion Date.

 

(c)           There are no tax
audits currently pending against the Company.

 

7.14         Legal and Other
Cost

 

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

 

7.15         No Undisclosed
Liabilities

 

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

 

7.16         Nature of Disclosure

 

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

 

7.17         Powers of
attorney

 

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

 

7.18         Systems

 

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

 

24

 

8.             REPRESENTATIONS, WARRANTIES AND ASSURANCES OF THE PURCHASER

 

The Purchaser hereby represents, warrants and assures that:

 

8.1           it is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation;

 

8.2           all corporate
actions necessary for the lawful and valid consummation of the transactions
contemplated hereby have been duly taken; and

 

8.3           it has the
authority to execute and perform all necessary actions for the lawful and valid
consummation of this Agreement.

 

9.             LIABILITY OF THE PARTIES

 

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

 

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

 

10.1         To assure the
Purchaser the full benefit of the business, know-how and goodwill of the
Company, each of the Sellers severally undertakes and covenants to the
Purchaser by way of further consideration for the obligations of the Purchaser
under this Agreement, as separate and independent agreements, that he will not
(without the Purchaser’s prior written consent):

 

(a)           use (whether for
his own benefit or for the benefit of any other person, firm, company or
organisation) or disclose to any person, firm, company or organisation any of
the trade secrets or other Confidential Information of or relating to: (a) the
Company or the Predecessor; (b) any customer or client of the Company or
the Predecessor; (c) any person, firm, company or organisation with whom
or which the Company is involved in any kind of business venture or
partnership; or (d) the business or productions of the Company or the
Predecessor which information he may have received or obtained, or may receive
or obtain in the future, in confidence while he was a shareholder, or in the
employment, of the Company or the Predecessor, and will likewise use his best
endeavours to prevent the unauthorised publication 

 

25

 

or disclosure by any third party of any such trade
secrets or Confidential Information;

 

(b)           for three years
after Completion, in relation to a business which is substantially the same as
or in competition with the business of the Company immediately prior to
Completion, either on his own account or for any other person, for the purpose
of obtaining business, orders or custom, directly or indirectly, solicit or
endeavour to entice away from the Company any business, order or custom of any
person who, to the Seller’s knowledge, is as at Completion, or has during the
one year immediately preceding Completion been, a client or customer of the
Company or the Predecessor and either: (i) with whom he has had contact or
dealings during the course of his shareholding of, or employment with, the
Company or the Predecessor during the one-year period immediately preceding
Completion; or (ii) about whom at Completion he possesses any Confidential
Information;

 

(c)           for three years
after Completion, in relation to a business which is substantially the same as
or in competition with the business of the Company immediately prior to
Completion, either on his own account or for any other person, directly or
indirectly, supply or provide goods or services to any person who, to the
Seller’s knowledge, is as at Completion, or has during the one year immediately
preceding Completion been, a client or customer of the Company or the
Predecessor and either: (i) with whom he has had contact or dealings
during the course of his shareholding of, or employment with, the Company or
the Predecessor in the one-year period immediately preceding Completion; or (ii) about
whom at Completion he possesses Confidential Information;

 

(d)           for three years
after Completion, in relation to a business which is substantially the same as
or in competition with the business of the Company immediately prior to
Completion, either on his own account or for any other person, directly or
indirectly, entice away or endeavour to entice away from the Company any person
(including, without limitation, any writer, director, producer, development
executive, script editor or cast member) whom, as at Completion or at any time
during the period of one year immediately preceding Completion supplied or
provided any goods, services, ideas or talent to the Company or the Predecessor
and with whom he had material business contact on behalf of the Company or the
Predecessor in the course of the period of one year immediately prior to
Completion;

 

(e)           for three years
after Completion, in any way seek to affect the terms of business on which the
Company or any member of the Group deals or contracts with any person (including,
without limitation, any writer, director, producer, development executive,
script editor or cast member), firm, company or organisation whom or which
supplied goods or services to the Company or the Predecessor during the period
of one year immediately prior to Completion or attempt to persuade any such
person, firm, company or organisation to cease dealing with the Company or such
member of the Group;

 

(f)            for three years
after Completion, in relation to a business which is substantially the same as
or in competition with the business of the Company

 

26

 

immediately prior to Completion, either on his own
account or for another person, directly or indirectly, offer employment to or
employ or offer or conclude any contract for services with any senior employee
(being a person in receipt of a salary in excess of RUR 80,000 per month),
consultant or director of the Company who has during the one-year period
immediately preceding Completion been employed, engaged or appointed by the
Company or the Predecessor in a technical, production, sales, marketing,
advisory and/or managerial capacity and with whom he has had contact or
dealings during the course of his employment with the Company or the
Predecessor in the one-year period immediately preceding Completion;

 

(g)           for three years
after Completion, in the Russian Federation, either alone or jointly with, or
as principal, director, manager, consultant, agent for or employee of, another
person, directly or indirectly carry on or be engaged, employed, appointed,
concerned or interested in the business of Production Business;

 

(h)           for three years
after Completion, own beneficially or otherwise or be interested in the share
capital of any company engaged, concerned or interested within the Russian
Federation in the Production Business;

 

(i)            either during his
employment with the Company or for a period of 6 months immediately following
the termination of such employment, in relation to a business which is
substantially the same as or in competition with the business of the Company at
the Applicable Date, either on his own account or for any other person, for the
purpose of obtaining business, orders or custom, directly or indirectly,
solicit or endeavour to entice away from the Company any business, order or
custom of any person who is as at the Applicable Date, or has during the period
of one year immediately preceding the Applicable Date been, a client or
customer of the Company, the Predecessor or any 
member of the Group in the Production Business and either: (i) with
whom he has had contact or dealings during the course of his employment with
the Company or the Predecessor during the one-year period immediately preceding
the Applicable Date; or (ii) about whom he possesses any Confidential
Information as at the Applicable Date. 
For the purpose of this Agreement, the term “Applicable Date” means: (a) in
relation to the period during which the relevant Seller remains employed by the
Company, the date upon which any alleged breach of this Article occurs;
and (b) in relation to the period of 6 months immediately following the
termination of the relevant Seller’s employment by the Company, the applicable
termination date of that employment;

 

(j)            either during his
employment with the Company or for a period of 6 months immediately following
the termination of such employment with the Company, in relation to a business
which is substantially the same as or in competition with the business of the
Company at the Applicable Date, either on his own account or for any other
person, directly or indirectly, supply or provide goods or services to any
person who is as at the Applicable Date, or has during the period of one year
immediately preceding the Applicable Date been, a client or customer of the
Company, the Predecessor or any member of the Group in the Production Business
and either: (i) with whom he has had 

 

27

 

contact or dealings during the course of his
employment with the Company or the Predecessor in the one-year period
immediately preceding the Applicable Date; or (ii) about whom he possesses
Confidential Information as at the Applicable Date;

 

(k)                                  either
during his employment with the Company or for a period of 6 months immediately
following the termination of such employment, in relation to a business which
is substantially the same as or in competition with the business of the Company
at the Applicable Date, either on his own account or for any other person,
directly or indirectly, entice away or endeavour to entice away from the
Company or any other member of the Group in the Production Business any person
(including, without limitation, any writer, director, producer, development
executive, script editor or cast member) whom, as at the Applicable Date or at
any time during the period of one year immediately preceding the Applicable
Date supplied or provided any goods, services, ideas or talent to the Company,
the Predecessor or such member of the Group and with whom he had material
business contact on behalf of the Company or the Predecessor in the course of
the period of one year immediately prior to the Applicable Date;

 

(l)                                     either
during his employment with the Company or for a period of 6 months immediately
following the termination of such employment, in any way seek to affect the
terms of business on which the Company or any member of the Group in the
Production Business deals or contracts with any person (including, without limitation,
any writer, director, producer, development executive, script editor or cast
member), firm, company or organisation whom or which supplied goods or services
to the Company, the Predecessor or such member of the Group during the period
of one year immediately prior to the Applicable Date or attempt to persuade any
such person, firm, company or organisation to cease dealing with the Company or
such member of the Group;

 

(m)                               either
during his employment with the Company or for a period of 6 months immediately
following the termination of such employment, in relation to a business which
is substantially the same as or in competition with the business of the Company
at the Applicable Date, either on his own account or for another person,
directly or indirectly, offer employment to or employ or offer or conclude any
contract for services with any senior employee (being a person in receipt of a
salary in excess of RUR 80,000 per month), consultant or director of the
Company who has during the one-year period immediately preceding the Applicable
Date been employed, engaged or appointed by the Company, the Predecessor or a
member of the Group in the Production Business in a technical, production,
sales, marketing, advisory and/or managerial capacity and with whom he has had
contact or dealings during the course of his employment with the Company or the
Predecessor in the one-year period immediately preceding the Applicable Date;

 

(n)                                 either
during his employment with the Company or for a period of 6 months immediately
following the termination of such employment, in the Russian Federation or any
other country in which the business of the Company, the Predecessor or any
member of the Group in the Production Business was carried on at or during the
period of two years immediately preceding the 

 

28

 

Applicable Date, either alone or jointly with, or as
principal, director, manager, consultant, agent for or employee of, another
person, directly or indirectly carry on or be engaged, employed, appointed,
concerned or interested in the Production Business; or

 

(o)                                 either
during his employment with the Company or for a period of 6 months immediately
following the termination of such employment, own beneficially or otherwise or
be interested in the share capital of any company engaged, concerned or
interested within the Russian Federation or any other country in which the
business of the Company, the Predecessor or any member of the Group in the
Production Business was carried on at or during the period of two years
immediately preceding the Applicable Date, in the Production Business;

 

(p)                                 for
three years after Completion or while at any time he is a consultant, director
or employee of any member of the Group, directly or indirectly carry on a business
activity under a name which is the same as, or similar to, the name of the
Company, the Predecessor or any member of the Group or a name used for business
purposes by a member of the Group; or

 

(q)                                 at
any time after Completion, make adverse comments in relation to the Group or
its businesses or employees;

 

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

 

10.2                           The
Sellers agree that the covenants and undertakings contained in Article 10  are reasonable and are entered into for
the purpose of protecting the know-how, goodwill, confidential information and
trade connections of the businesses of the members of the Group.  Accordingly the benefit of the covenants and
undertakings may be assigned by the Purchaser and its successors in title
without the consent of the Sellers.

 

10.3                           Each
undertaking contained in this Article 10 shall be construed as a separate
undertaking.  If one or more of them is
held to be against the public interest or unlawful or an unreasonable restraint
of trade, the remaining undertakings shall continue to bind the Sellers.

 

10.4                           For
the purposes of this Agreement “Confidential Information” shall include (but
shall not be limited to):

 

(i)                                     corporate
and marketing strategy and plans and business development plans;

 

(ii)                                  business,
sales and marketing methods, confidential techniques and processes used for the
creation and/or development and/or production and/or filming of any television
programme, motion picture, film or pilot;

 

29

 

(iii)                               details
and specifications of any current, past or proposed motion picture, film or
television or entertainment projects or products, including all scripts, story
boards and financial arrangements, and any research or development related to
any current, past or proposed motion picture, film or television programmes,
films or pilots and all scripts and story boards associated therewith and any
material relating thereto;

 

(iv)                              the
names, addresses and contact details of any writers, producers, directors,
producers, development executives, script editors, cast members, financiers or
employees who are involved in the Company’s projects from time to time,
including contact lists in whatever medium this information is stored and the ideas
of those writers, producers, directors, producers, development executives,
script editors, financiers or employees relating to the creation, development,
production or filming of any television programmes, films or otherwise.

 

(v)                                 the
terms of business with advertisers, broadcasters, distributors, financiers,
sub-contractors, customers and suppliers, including any pricing policy adopted
and the terms of any partnership, joint venture or other form of commercial
co-operation or agreement with any third party;

 

(vi)                              software
and technical information necessary for the operation of  the Company’s computer and technology systems
and applications, information relating to proprietary software (including
updates), source code to proprietary software, confidential algorithms
developed or used by the Company, information relating to the development,
maintenance or operation of any of the Company’s websites and the source code
of each website; and

 

(vii)                           any
other information which is the subject of an obligation of confidence owed to a
third party, in particular the content of discussions or communications with
any prospective customers or prospective business partners.

 

11.                                 NOTICES

 

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

 

	
   

  	
  If to CTC Network:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  3rd Khoroshevskaya Street, 12

  
	
   

  	
   

  	
  Moscow 123298

  
	
   

  	
   

  	
  Russia

  
	
   

  	
   

  	
   

  
	
   

  	
  Telefax:

  	
  +7 (495) 797-4180

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Alexander Efimovich Rodnyansky

  

 

30

 

	
   

  	
  If to CTC Media:

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  15A Pravda Street

  
	
   

  	
   

  	
  Moscow 125124

  
	
   

  	
   

  	
  Russia

  
	
   

  	
   

  	
   

  
	
   

  	
  Telefax:

  	
  +7 (495) 797-4180

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Alexander Efimovich Rodnyansky

  

 

	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  

 

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

 

12.                                 APPENDICES INCORPORATED

 

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

 

13.                                 INTEGRATION

 

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

 

14.                                 THIRD PARTY RIGHTS

 

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

 

15.                                 GOVERNING LAW

 

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

 

16.                                 ARBITRATION OF THIS AGREEMENT

 

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

 

31

 

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

 

17.                                 SELLER REPRESENTATIVE

 

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

 

18.                                 AMENDMENTS; WAIVERS

 

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

 

19.                                 PUBLICITY

 

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

 

20.                                 COUNTERPARTS OF THE AGREEMENT

 

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

 

21.                                 PREVAILING LANGUAGE

 

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

 

32

 

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

 

 

[**]

 

 

	
  EXECUTED
  by

  	
   

  
	
  CJSC “CTC Networks”

  	
   

  
	
  acting by its General
  Director

  	
   

  
	
  Alexander Efimovich
  Rodnyansky

  	
  /s/ Alexander Efimovich
  Rodnyansky

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXECUTED
  by

  	
   

  
	
  CTC Media, Inc.

  	
   

  
	
  acting by its President
  and 

  	
   

  
	
  Chief Executive Officer

  	
   

  
	
  Alexander Efimovich
  Rodnyansky

  	
  /s/ Alexander Efimovich
  Rodnyansky

  	
   

  

 

33

 

Appendices

 

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

 

34

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