procedure stipulated by applicable laws or other regulations. The Parties hereby agree that in the context of the present Agreement political advertising shall include public opinion polls during election campaigns, provision of information to the electorate, advertising of commercial activities of political parties and candidates.

 

1.1.13. Social advertising: means information disseminated by any method, in any form and with the use of any media, addressed to an unlimited audience and aimed at accomplishing charity or other objectives of value to the public as well as at promoting the government’s interests.

 

Social advertising may not mention any specific makes (models, articles) of goods, trademarks, service marks or other means of their identification, any individuals or legal entities except for mentioning governmental authorities, other instruments of the government, local or municipal authorities, municipal bodies that are not part of local authorities, and sponsors.

 

1.1.14. Advertising services: mean acceptance by the Principal of the federal advertising (including social advertising on a charge basis and commercials in the Teleshop format) to be broadcast in the Network Program Block in the form of commercials. Advertising services shall not cover: political, sponsorship, regional advertising, social advertising on a free basis, broadcast of teleshops and interactive projects.

 

1.1.15. Unauthorized advertising: means federal advertising (including social advertising on a charge basis) broadcast by the Principal in the Network Program Block at its own discretion without obtaining the Agent’s prior written consent.

 

Unauthorized advertising shall not include:

 

a)  advertising bumpers of the Principal broadcast at the beginning and at the end of advertising blocks, that do not contain advertisements of third parties.

 

1.1.16. Clients: mean advertisers and any other third parties representing advertisers’ interests  pursuant to corresponding agreements.

 

1.1.17. Principal’s actual gross revenue shall consist of:

 

·       Total operating revenue, i.e. the total cost of actually rendered services connected with the broadcast of the federal advertising, less the value-added tax, under transactions conducted by the Agent with Clients within the framework of the execution of the present Agreement, as well as under transactions conducted by the Principal at its discretion (or by persons authorized by the Principal) based on the Agent’s written agreement;

 

·      total non-operating revenue obtained by the Agent ( fines, penalties and other revenue, including that received as compensations) under transactions conducted by the Agent with Clients for the purpose of executing the present Agreement.

 

1.1.18. Reporting period: means one calendar month.

 

1.1.19. Entering into transactions: means performance of actions aimed at creating, changing or terminating civil rights and obligations (condlucing, amending (approval of amendments), including agreement extension and termination, as well as performance of physical actions resulting in legally binding consequences).

 

2. Scope of the Agreement

 

2.1. Pursuant to the present Agreement the Agent shall perform, in its own name and in return for a fee, at the Principal’s instruction, on its own behalf but at the Principal’s expense, legal and other acts  as regards the sale to Clients of Advertising Services rendered by the Principal, commencing on January 1, 2009, 06.00 (Moscow time).

 

2.2. The Principal shall pay to the Agent a fee for performing legal and other acts stipulated in Paragraph 2.1 of the Agreement in such amounts and according to the procedure stipulated hereunder.

 

2.3. The Principal undertakes to disseminate the federal advertising provided by the Agent based on agreements signed with Clients pursuant to the present Agreement within the whole Network broadcast territory.

 

If, during the duration of the present Agreement, the Principal’s broadcast area broadens, the Principal shall disseminate the federal advertising within all and any additional broadcast coverage areas resulting from said broadening.

 

2.4. The Principal shall, at the Agent’s demand (to enable the Agent to sign agreements with Clients for selling services connected with the placement of the federal advertising), provide, within 60% (sixty percent) of the advertising time, such amount of the Network broadcast minutes as required by the Agent for performing its obligations. Said amount shall be calculated by the Parties based on the arithmetic mean value of the Network broadcast time a day: 19 (nineteen) hours (hereinafter referred to

 

 

as the broadcast volume) and the total broadcast time volume allocated for broadcasting commercials in the amount of 15% (fifteen percent) during an astronomic hour.

 

2.5. The Agreement shall not cover political, sponsorship, regional advertising, social advertising on a free basis, including advertising in teleshops, interactive projects.

 

3. Obligations of the Parties

 

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

 

3.1.1. The Principal shall vest the Agent with the right to perform legal and other acts in connection with the sale of Advertising Services without any additional approval on the part of the Principal, and the Agent shall contract the sale of said services to the Clients being first and foremost guided by the best interests of the Principal, the terms and conditions of the present Agreement, the Principal’s instructions as to the terms and the procedure related to the pricing of advertising services in agreements with Clients, stipulated in Attachment No. 1 to the present Agreement as well as any other attachments and addenda thereto.

 

3.1.2. The Agent shall seek to secure the best possible conditions for the Principal when signing agreements with Clients (“Client Agreements”). The Agent may, subject to the Principal’s consent, enter into Client Agreements on terms other than those stipulated in Attachment No. 1, if it was impossible to obtain better contractual conditions, and, where by contracting on terms other than those stipulated in Attachment No. 1, the Agent averted even more adverse consequences for the Principal.

 

3.1.3. When entering into Client Agreements the Agent shall set forth the following provisions:

 

“1. The Client shall be fully responsible for the content and design of the advertisements placed under the Client Agreement, for any infringement of copyrights and related rights with respect to the works and objects of related rights being part of the advertisement. All and any financial claims, including from the authors and owners of related rights, with respect to the advertisement shall be settled by the Client on its own and at its expense.

 

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

 

2. The Client shall be required to present to the Agent duly certified copies of licenses if the advertised activity is subject to licensing; certificates of conformity if the advertised products (services) are subject to mandatory certification; and registration certificates if the advertised products are subject to the state registration. At the Agent’s request, the Client shall provide within two days documentary proof of the reliability of the information contained in the advertisement.

 

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

 

and

 

if durng 30 (thirty) calendar days following the exchange rate deviation date the average weighted US dollar exchange rate remains outside said corridor,

 

the parties (the Agent and the Client) shall regard, as per the terms and conditions of the Client Agreement, such exchange rate deviation as a particular case of force majeure stipulated by the corresponding agreement.

 

Note: For the purpose of this paragraph:

 

“US dollar exchange rate” shall mean the official rate of US follar to Russian rouble set by the Central Bank of the Russian Federation as of the respective date.

 

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

 

AW = Rd   ·   d

 

 

Tdp

where:

AW — average rate;

Rd — exchange rate of US dollar to Russian rouble set by the Central Bank of the Russian Federation as of a respective date of the period;

d — number of days during which the above US dollar exchange rate remains effective; ,

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

 

Upon occurrence and confirmation of the force majeure stipulated in this paragraph the parties (the Agent and the Client) shall act as follows:

 

Upon confirmation of the existence of the force majeure either party may initiate amendments to the existing Client Agreement by executing and signing a corresponding addendum.

 

If the parties (the Agent and the Client) fail to agree on amending the terms and conditions of the existing Client Agreement and fail to sign a corresponding addendum the Client Agreement shall be understood to be terminated as of the date agreed upon by the parties (the Agent and the Client), which shall entail the following provisions to be applied to the parties (given the specific nature of the force majeure specified above), in particular:

 

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

 

·  within 30 (thirty) days upon the termination of the corresponding Client Agreement the Agent shall return to the Client all advance payments transferred by the Client to the Agent for the payment of the advertising services that failed to be provided by the time of the agreement termination.

 

4. The Agent (Principal) shall not accept for placement any advertising on national mourning days declared in the Russian Federation and may reject or refuse to accept for placement any advertisement if it is not consistent with the Principal’s ethical, political or theme principles or runs counter to effective Russian law.

 

5.  The Agent’s (and, consequently, the Principal’s) liability for infringing the procedure for placing and/or disseminating advertising shall not exceed a single placement of relevant advertising materials during a similar interval (during an equivalent television program) or the price of an advertisement that has not been placed or of an advertisement placed with violations”.

 

The Agent shall have the right to deviate from the Principal’s instructions stipulated in this paragraph provided that due to said deviation the Agent’s (and, consequently, the Principal’s) liability to the Client  becomes less than that stipulated by the present Agreement.

 

3.1.4. The Agent shall exercise all rights and bear all obligations under Client Agreements entered into within the framework of the present Agreement, even if the Principal was named in said agreements and entered into direct relations with Clients.

 

3.1.5. For the purpose of the execution of the present Agreement the Agent may bring in third parties; in this case the Agent shall remain liable to the Principal for the actions of said third parties and the costs of said third parties’ services shall be paid by the Agent out of the agency fee due to the Agent pursuant to the terms and conditions of the present Agreement.

 

3.1.6. The Principal shall vest the Agent with the exclusive right to enter into agreements for selling advertising services. The Principal undertakes not to vest third parties, during the duration of the Agreement, with the right to conduct, in its interests and at its expenses, transactions that are assigned, pursuant to the present Agreement, to be conducted by the Agent.

 

The Principal may independently sell advertising services related to the broadcast of advertising in the Network Program Block provided that the Principal obtains the Agent’s prior written consent, with the exception of cases when the Principal conducts transactions for providing services connected with dissemination of mass media advertisements in the Network Program Block, services related to dissemination of the social advertising on a free basis, and services related to dissemination of the political advertising. The Principal shall conduct transactions for providing services related to dissemination of mass media advertisements in the Network Program Block at its own discretion and shall inform the Agent on a quarterly basis about the transactions conducted thereby. The Principal shall not be required to obtain prior approval in case of placing advertisements that appear to be unauthorized advertising.

 

 

3.1.7. The Agent shall forward to the Principal reports on the performance of the Principal’s instructions according to the procedure stipulated by Paragraph 4.14 of the present Agreement.

 

3.1.8. At the Principal’s demand, the Agent shall provide copies of certificates of conformity, declarations of conformity, licenses and/or other corresponding documents confirming the state registration.

 

3.2 Obligations of the Principal to provide information on the Network Program Block schedule.

 

3.2.1. The Principal shall timely provide the Agent with information required for signing Client Agreements, including:

 

·  Within at least three days upon the signing of the present Agreement the Principal shall provide the Agent with a forecast Network Program Block schedule for the first quarter of 2009; thereafter a forecast  broadcast schedule for each current month shall be delivered to the Agent within at least two days before the schedule effective date.

 

The approved Network Program Block schedule for each calendar week shall be provided by the Principal to the Agent within at least 10 (ten) calendar days prior to the beginning of the corresponding calendar week.

 

3.2.2. The Principal may modify the broadcast schedule provided that:

 

·      The Principal notifies the Agent of the modifications made in the forecast Network Program Block schedule for the current month within 2 (two) business days upon the introduction of said modifications;

 

·      The Principal notifies the Agent in advance of modifications made in the broadcast schedule for a calendar week within at least 2 (two) calendar days before said modifications become effective.

 

The Principal shall not be required to notify the Agent in advance only if modifications are made in an urgent manner in connection with events of national significance, or as a result of the cancellation or changed timing of sporting events that were to be broadcast live, etc., so long as  it is impossible to notify the Agent of said modifications due to objective reasons given that the Agent is informed about said modifications in writing on the day of the introduction of said modifications.

 

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

 

3.3.1. The procedure for providing and placing the federal advertising shall be stipulated by the Parties in Attachment No. 2.

 

3.4. The Agent shall have discretion to reject, without the Principal’s approval, Clients’ advertising if the latter fails to be compliant with Russian law and the Principal’s technical requirements. If there are doubts about placing disputable advertisements (advertisements claimed by the Client to be compliant with Russian advertising law) the Agent may forward a written request to the Principal for the latter to make the final decision (said disputable advertisements can be delivered to the Principal on tape (including VHS tapes) or as electronic files), and the Principal shall promptly consider said request and respond in writing with reasonable explanations within 5 (five) business days upon receipt of the Agent’s written request (see also Article 6 of the present Agreement).

 

The Agent’s requests and the Principal’s replies shall be executed in writing and shall be signed by authorized representatives. If no reply is received from the Principal within the deadline stipulated in the first passage of this paragraph the Agent shall be free to act as follows:

 

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

 

·      If the request was for the Principal’s opinion with regards to a controversial issue the Agent shall regard the Principal’s failure to reply as the Principal’s consent allowing the Agent to act at its own discretion.

 

3.5. When accepting advertising materials from the Agent the Principal  shall have the right to reject advertisements accepted and provided by the Agent for being broadcast in the Network Program Block if the Principal determines that said advertisements are not compliant with Russian law, technical requirements or are inconsistent with the creative, artistic or ethical concepts underlying the Principal’s programming policy and (or) are not consistent with the Principal’s ethical, political or theme principles. The Principal shall forward to the Agent a written refusal specifying reasoned explanations within at least three business days upon delivery of said advertisements.

 

If the Agent fails to be provided in good time with the Principal’s refusal notification and the advertisement delivered to the Principal was not placed in the Network Program Block, and, as a

 

 

consequence, the Agent receives a claim from a Client, the Principal undertakes to settle said claim on its own or to compensate the Agent for all and any costs incurred under said claim.

 

3.6. The Principal shall insert particular commercials into advertising blocks and shall ensure that advertisement is placed in strict compliance with the procedure for accepting advertising materials and broadcasting them in the Network Program Block and in accordance with the advertising placement schedules delivered by the Agent.

 

3.7. The Principal shall not broadcast advertisements on national mourning days declared in the Russian Federation. The Principal shall place such advertisements that failed to be broadcast during a similar interval and in similar programs during the following days or at such time as may be agreed between the Agent and the Client. The Principal shall not be held liable as per Paragraph 5.5 of the Agreement if an advertisement fails to be run on Russian national mourning days. If the Client refuses to have its advertisement placed during some other time interval the Principal shall repay the cost of the corresponding advertising services for placing an advertisement if placement of said advertisement has already been paid for.

 

3.8. The Principal shall ensure that advertisements are broadcast in the Network Program Block according to the procedure for accepting and broadcasting advertisements in the Network Program Block stipulated in Attachment No.2 to the present Agreement.

 

3.9 . Rights and obligations of the Parties with respect to tracking the placement of advertisements in the Network Program Block.

 

3.9.1. The Parties shall take all and any required measures aimed at tracking the completeness and correct placement of advertisements in the Network Program Block.

 

The Principal shall timely (within 5 (five) days upon receipt of a request) provide the Agent with ad run reports confirming that the corresponding advertising services related to the advertising placement have been rendered.

 

3.9.2. In case of unexpected and other circumstances preventing the execution of the present Agreement the Agent shall immediately notify the Principal of this.

 

3.9.3. If the advertising services have been provided by the Principal improperly, with deviations from the Client Agreement (i.e. the Principal failed to broadcast an advertisement in the Network Program Block or changed the time and/or sequence of commercials within the Network Program Block or broadcast an advertisement with improper quality or infringed technical parameters (without voiceover, with interferences, deviation from the timing, content or version of the commercial, etc.), as well as if said services have not been provided (including the Principal’s refusal to provide services, including in part), for the purpose of fulfilling its obligations in kind, the Principal shall be required, at the Client’s demand and according to the Client-approved schedule, to place the advertisement that has not been broadcast and/or has been broadcast improperly within the same scope and without any additional charge, or, if demanded by the Client, to reduce the cost of its services or to repay a corresponding amount if the payment was earlier advanced by the respective Client, under the conditions and within the deadlines stipulated by the present Agreement.

 

In addition to fulfilling its contractual obligations the Principal shall be held liable for non-fulfillment/improper fulfillment of its obligations to broadcast advertisements as per Paragraph 5.5 of the present Agreement.

 

3.9.4. The Agent shall not be held liable to the Principal for the Client’s failure to execute the transaction entered into by the Agent within the framework of the present Agrement, except for the cases stipulated by Additional Agreement No. 1 to this Agreement. If the Client fails to execute the transaction entered into by the Agent the latter shall immediately notify the Principal, collect required evidence and, at the Principal’s request, assign thereto the rights under said transaction subject to the claim assignment rules.

 

4. Financial Arrangements

 

The Agent’s fee:

 

4.1. The agency fee (hereinafter referred to as the agency fee) due to the Agent for performing legal and other acts (Paragraph 2.1 of the Agreement) shall be 12% (twelve percent) of the Principal’s actual gross revenue in each reporting period.

 

The Agent’s right to the agency fee shall arise at the moment the advertising services are actually rendered by the Principal in the relevant reporting period.

 

 

4.2. The Agent’s agency fee accrued as specified above (Paragraph 4.1 of the Agreement) shall be increased by the amount of the value-added tax as per effective Russian law.

 

The Agent’s agency fee shall be calculated from the amount of the Principal’s actual gross revenue calculated by the Parties in RUR (if the advertising rates are set in US dollar equivalent — at the exchange rate of the Central Bank of the Russian Federation as of the last day of the reporting period) in the Statement for the corresponding reporting period stipulated by Paragraph 4.14 of the present Agreement.

 

The agency fee due to the Agent shall be paid according to the procedure stipulated, respectively, by Paragraph 4.4 — 4.12 of the present Agreement.

 

Settlements procedure:

 

4.3. The cost of the advertising services in Client Agreements signed by the Agent shall be fixed:

 

·  under Client Agreements with Russian resident Clients and non-resident Clients effecting payments in RUR: in Russian roubles in US dollar equivalent paid in Russian roubles at the rate of the Central Bank of the Russian Federation as of the day of the corresponding payment, i.e. as of the date when monetary funds are debited from the Client’s settlement account;

 

·  under Client Agreements with non-resident Clients effecting payment in US dollars: in Russian roubles or in US dollars. Payment for advertising services under transactions conducted by the Agent in US dollars with non-resident Clients for the purpose of executing the terms and conditions of the Agreement can be effected by Clients only in US dollars;

 

·  under Client Agreements with non-resident Clients effecting payments in freely convertible currencies other than US dollar: in Russian roubles, US dollars or freely convertible currency subject to the Principal’s prior approval.

 

Advertising services contracted by Clients shall be subject to the value-added tax as per effective Russian law.

 

4.4. Payments under Client Agreements entered into by the Agent in Russian roubles shall be paid to the Agent’s settlement account.

 

Within three banking days the Agent shall transfer monetary funds received under said Client Agreements to the Principal, subject to Paragraph 4.6 and 4.9 of the present Agreement. Said three-day deadline shall be calculated as of the time the Agent obtains the addendum to the bank statement confirming that monetary funds have been credited to the Agent’s settlement account.

 

4.5. The Agent may (after forwarding a notification to the Principal) instruct the Client, based on the financial order addressed to said Client, to effect payment in RUR under the Client Agreement directly to the Principal’s settlement account.

 

4.6. The Agent may transfer to Clients monetary funds in RUR subject to be returned to Clients under signed Client Agreements, including out of funds received from other Clients in favour of the Principal on the Agent’s account that have not yet been transferred to the Principal. In case of return of the whole price of the agreement or payment monetary funds are returned to the client in  RUR and in the same amount in which said funds were received. In case of partial return the RUR amount is determined proportionally to the decreased contract price of payment.

 

4.7. Payment effected in US dollars under Client Agreements with non-resident Clients shall be transferred to the Agent’s transit currency account.

 

Within three banking days the Agent shall transfer the monetary funds received under the Client Agreement in full to the Principal’s transit currency account. Said three-day deadline shall be calculated as of the time the Agent obtains the addendum to the bank statement confirming that said monetary funds have been credited to the Agent’s account. Upon receipt of monetary funds the Principal shall provide the Agent with a copy of the payment order.

 

4.8. In cases when earlier received foreign currency monetary funds are to be returned to the Client under the Client Agreement:

 

·  if monetary funds are transferred by the Agent to the Principal, within ten days the Principal shall transfer the amount subject to be returned to a non-resident Client in US dollars to the Agent’s transit currency account, and the Agent, in its turn, shall return said monetary funds to the Client. Said ten-day deadline shall be calculated as of the time the Principal receives from the Agent a letter with a demand for the return of monetary funds confimed by corresponding documents related to the non-resident Clients; and

 

 

·  if monetary funds have not yet been transferred to the Principal and are still kept on the Agent’s transit currency account, the Agent shall transfer the corresponding amount due to be returned in US dollars to the Client.

 

4.9 . Out of the monetary funds received in RUR in favour of the Principal on the Agent’s settlement accounts under Client Agreements, based on the Agreement signed with the Principal, the Agent may withhold the following amounts:

 

·  12% (twelve percent) of the difference between the amount of funds received in RUR in favour of the Principal on the Agent’s settlement accounts and/or on the Principal’s settlement accounts, and the amount of funds returned by the Agent and/or the Principal to Clients’ accounts under Client Agreements, and

 

·  12% of the difference between the RUR equivalent of the USD amounts received  in favour of the Principal on the Agent’s transit currency accounts and/or on the Principal’s currency account under Client Agreements signed with non-resident Clients, and the RUR equivalent of the USD amounts returned by the Principal and/or the Agent in USD to non-resident Clients under Client Agreements. The RUR equivalent of USD amounts shall be determined at the rate of the Central Bank of the Russian Federation effective as of the date when monetary funds from a non-resident Client were credited to the Agent’s transit currency account and/or the Principal’s currency account.

 

The deductions specified above shall be withheld for paying the agency fee.

 

4.10. Settlements between the Parties shall be effeted on a daily basis as long as payments are received from Clients. The Agent shall have the right to withhold funds due as the agency fee on a daily basis. All payments under settlements between the Parties shall be made inclusive of the value-added tax. The date of payment effected by the Parties under the present Agreement shall be the date when monetary funds are debited from the payer’s account, which shall be confirmed by a corresponding bank statement.

 

4.11. If the amount withheld and kept on the Agent’s settlement account exceeds the amount of the agency fee due to the Agent for the corresponding reporting period, the surplus shall be understood to be advance payment under the agency fee during mutual settlements in the following reporting periods.

 

4.12. In case of debt due by the Principal to the Agent, specified in a corresponding bilateral statement, the Principal shall repay said debt by the 20 th  date of the month following the reporting one; said payment shall be confirmed by a copy of the corresponding payment order.

 

If the debt due by the Principal to the Agent fails to be transferred to the Agent’s settlement account within the stipulated deadline the Agent may withhold said outstanding amount from monetary funds owned by the Principal, received from Clients on the Agent’s settlement account, which shall be reflected in a corresponding bilateral statement.

 

Procedure for submitting reporting  documents:

 

4.13. Upon the transfer of monetary funds the Agent shall forward to the Principal an accompanying letter with a detailed breakdown of the amount paid.

 

4.14. Upon the termination of each month, within at least 10 (ten) calendar days, the Agent shall forward to the Principal the Agent’s Repor