Advertising Sales Agency Agreement

Confidential information omitted where indicated by "[*]" and filed separately with the commission pursuant to a request for confidential treatment under rule 24b-2 of the Securities Exchange Act of 1934


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STUDIO 1+1
UKRAINE ADVERTISING HOLDINGS BV
INNOVA FILM GMBH
INTERNATIONAL MEDIA SERVICES LTD.
INTER-MEDIA


AND


SERVLAND CONTINENTAL S.A.
TREND ADVERTISING AGENCY LIMITED
VIDEO INTERNATIONAL - KIEV LIMITED
PRIORITET LIMITED


ADVERTISING SALES AGENCY AGREEMENT


DATED MARCH 14, 2001


Confidential Treatment has been requested with respect to certain information contained in this Exhibit


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TABLE OF CONTENTS


Page


1. Interpretation 2 2. Appointment of Agent 3 3. The Agent's Duties 4 4. Technical Support and Reporting 7 5. Sale of the Advertising 8 6. Sales Budget and Pricing 9 7. Broadcasting Schedule and Advertising Schedule 10 8. Intellectual Property 11 9. Rights and Duties of Studio 1+1 Group 11 10. Option over the Agent's Productions 12 11. Financial Provisions 12 12. Information Rights 13 13. Confidentiality 13 14. Force Majeure 14 15. Duration and Termination 14 16. Consequences of Termination 16 17. Nature of Agreement 17 18. Arbitration and Proper Law 18 19. Contract (Rights of Third Parties) Act 1999 18 20. Notices and Service 18


ADVERTISING SALES AGREEMENT dated MARCH 14, 2001 between:


1 BROADCASTING COMPANY STUDIO 1+1, a limited liability company organised
and existing under the laws of Ukraine, whose principal place of business
is at 7/11 Khreshchatik, 7th Floor, 01001 Kiev, Ukraine;


UKRAINE ADVERTISING HOLDINGS BV, a corporation organised and existing
under the laws of The Netherlands, whose principal place of business is
at Leidsekade 98,1017 PP, Amsterdam, The Netherlands;


INNOVA FILM GMBH, a corporation organised and existing under the laws of
Germany, whose principal place of business is at Friedrich Strasse 31-33,
40210, Dusseldorf, Germany;


INTERNATIONAL MEDIA SERVICES LTD., a corporation organised and existing
under the laws of Bermuda, whose principal place of business is at
Clarendon House, 2 Church Street, PO Box HM 1022, Bermuda; and


INTER-MEDIA , a corporation organised and existing under the laws of
Ukraine, whose principal place of business is at 3 Dehtyarivska Street,
Kyiv, Ukraine,


(collectively "Studio 1+1 Group").


AND


2 SERVLAND CONTINENTAL S.A., a corporation organised and existing under the
laws of Belize, whose principal place of business is at 35A Regent
Street, PO Box 1777, Belize City, Belize;


TREND ADVERTISING AGENCY LIMITED a corporation organised and existing
under the laws of Russia, whose principal place of business is at 25
Akademika Pavlova Street, Moscow, 121359;


VIDEO INTERNATIONAL - KIEV LIMITED, a corporation organised and existing
under the laws of Ukraine, whose principal place of business is at, 10
Andreya Ivanova Street, Kiev, 01010, Ukraine;


PRIORITET LIMITED, a corporation organised and existing under the laws of
Ukraine whose principal place of business is at 2 Mezhevaya Street, Kiev,
Ukraine.


(collectively the "Agent").


RECITALS:


(A) Studio 1+1 Group holds a licence for television broadcasting in the
Ukraine, which licence includes the right to sell advertising,
sponsorship and other media related services inserted in the broadcast
("Advertising"). Studio 1+1 Group is willing to enter into an exclusive
advertising sales agreement with the Agent for the Advertising.


(B) The Agent has extensive marketing and sales experience and desires to act
as the exclusive sales agent for Studio 1+1 Group in respect of the
Advertising.


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(C) Studio 1+1 Group has agreed to sell and the Agent agreed to buy the 50%
stake in Prioritet Limited ("Prioritet") held by Studio 1+1 Group.


(D) The Agent has agreed to give Studio 1+1 Group the first option to
purchase the Ukrainian broadcasting rights of any unencumbered production
or co-production of the Agent or its Affiliates.


1. INTERPRETATION


1.1. In this Agreement, unless the context otherwise requires:


"ADVERTISING" has the meaning given that term in Recital (A)
of this Agreement;


"AFFILIATES" means with respect to any person, any other person,
directly or indirectly controlling, or controlled
by, or under direct or indirect common control with,
such person (where "control" shall exist if a person
has direct or indirect ownership of 50% or more of
the voting securities or other ownership interest of
another entity);


"AGENT" has the meaning given in the first paragraph of this
Agreement;


"CPP" OR "COST
PER POINT" means the average cost required to achieve one GRP
per 30 seconds;


"FORCE MAJEURE" means, in relation to either party, any of the
following: act of God, war, economic collapse,
nation-wide industrial action or material adverse
change to the regulatory environment in the Ukraine
directly affecting the performance of its
obligations by any party to this Agreement or any
other matter or thing outside the control of either
party;


"GRP" OR "GROSS
RATING POINT" means the viewers of a broadcast totalling one
percent of adults, being of such age group as
defined by the official television audience research
undertaken in the Territory as amended from time to
time;


"INTELLECTUAL
PROPERTY" means any patent, copyright, registered design,
trade mark or other industrial or intellectual
property right;


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"RATE CARD" means the price list for Advertising slots agreed
between Studio 1+1 Group and the Agent;


"RESTRICTED
INFORMATION" means any information which is disclosed to either
party (Receiving Party) by the other (Disclosing
Party) pursuant to or in connection with this
Agreement (whether orally or in writing, and whether
or not such information is expressly stated to be
confidential or marked as such);


"SALES BUDGET" means the forecast sales budget in US dollars for a
calendar year to be agreed between Studio 1+1 Group
and the Agent;


"SERVICES" has the meaning given that term in Clause 3.1 of
this Agreement;


"STUDIO 1+1 GROUP" has the meaning given in the first paragraph of this
Agreement;


"TERRITORY" means Ukraine.


1.2. Any reference in this Agreement to `writing' or cognate expressions
includes a reference to telex, cable, facsimile transmission or
comparable means of communication.


1.3. Any reference in this Agreement to any provision of a statute shall be
construed as a reference to that provision as amended, re-enacted or
extended at the relevant time.


1.4. The headings in this Agreement are for convenience only and shall not
affect its interpretation.


1.5. All words importing the singular include the plural, all words importing
any gender include every gender, all words importing persons include
bodies corporate and unincorporated; and (in each case) vice versa.


2. APPOINTMENT OF AGENT


2.1. Subject to the terms and conditions of this Agreement, Studio 1+1 Group
hereby appoints the Agent as its exclusive sales agent in the Territory
for the promotion of, and solicitation of customers for the Advertising,
and the Agent hereby agrees to act exclusively for Studio 1+1 Group in
that capacity.


2.2. The appointment will commence on 1 January 2001 for an initial term of
six years until 31 December 2006. In the event that Studio 1+1 Group both
obtains a renewal of the licence referred to in Recital (A) and if it
decides that it wishes to continue to sell the Advertising through an
agent which is not a member of the Studio 1+1 Group then the Agent shall
be given the opportunity to match the terms put forward by any other
parties who have been asked to tender for the right to sell the
Advertising. If the Agent can match those terms then it shall be
reappointed by Studio 1+1 Group as the exclusive


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sales agent for the Advertising in the Territory. The renewed term of
appointment of the Agent will expire on expiry of the renewed licence to
Studio 1+1 Group.


2.3. Subject to the provisions of Clause 15 below if Studio 1+1 Group
terminates this Agreement prior to the 31 December 2006 Studio 1+1 Group
shall pay or allow to the Agent, to compensate the Agent for any loss or
damage sustained by the Agent resulting from the termination, liquidated
damages of an amount equal to the total commission paid to the Agent
under this Agreement in respect of sales made in the 12 months preceding
notification of termination.


2.4. Subject to the provisions of Clause 15 below if the Agent terminates this
Agreement prior to the 31 December 2006 the Agent shall pay or allow to
Studio 1+1 Group, to compensate Studio 1+1 Group for any loss or damage
sustained by Studio 1+1 Group resulting from the termination, liquidated
damages of an amount equal to six weeks revenue from the Advertising
calculated on the basis of the total amount of the revenue for the twelve
months preceding the notification of termination divided by eight.


2.5. The Agent and Studio 1+1 Group agree that all agreements between Studio
1+1 Group and Prioritet and any obligations relating thereto expire on 31
December, 2000 but Prioritet shall be entitled to sell and market the
Advertising in accordance with the terms of this Agreement for the
benefit of the Agent with effect from 1 January 2001.


2.6. The Agent agrees to purchase all of Studio 1+1 Group's interest in
Prioritet with effect from 1 January 2001 in consideration for the waiver
and release by the Agent of all claims of the Agent or Prioritet against
Studio 1+1 Group and all obligations, whether monetary or not, owing by
Studio 1+1 Group to the Agent or Prioritet and the assumption by the
Agent of all assets and liabilities of Prioritet, including without
limitation, its employees. Both parties will use all reasonable
endeavours to complete the formal transfer of Studio 1+1 Group's interest
in Prioritet on or before 30 June 2001.


2.7. Pending completion of formal transfers of Studio 1+1 Group's interest in
Prioritet, Studio 1+1 Group hereby agrees that it holds such interest on
trust for the Agent. Studio 1+1 Group further agrees to follow the
instruction of the Agent in all matters relating to Prioritet and to
cause Prioritet to carry on its business in the ordinary course and not
to permit it to undertake any activities or incur any obligations outside
the ordinary course of its business without the written consent of the
Agent.


3. THE AGENT'S DUTIES


3.1. The Agent shall use all reasonable endeavours to promote and market the
Advertising and to seek potential customers for the Advertising and to
perform such other obligations as contemplated herein (collectively the
"Services"), but the Agent shall not be entitled to conclude any
contracts for the sale of the Advertising on behalf of or as agent of
Studio 1+1 Group, or to bind and/or represent Studio 1+1 Group in any way
which are not in accordance with:


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3.1.1. the Studio 1+1 Group standard terms and conditions referred to
in Clause 5.4; and


3.1.2. the current Rate Card; and


3.1.3. the agreed trading parameters as set out in Clause 6.2.


3.2. The Agent shall conduct sales of the Advertising with all due care and
diligence and shall use all reasonable endeavours to cultivate and
maintain good relations with customers and potential customers in
accordance with sound commercial principles.


3.3. Subject as provided in this Agreement and to any reasonable directions
which Studio 1+1 Group may from time to time properly give, the Agent
shall be entitled to perform the Services in such manner as it may think
fit, provided that the Agent shall at all times act in order to maximise
the sales revenue of Studio 1+1 Group over the whole calendar year, the
rates obtained at peak times and the total share of the third party's
advertising budget subject to and consistent with the terms of the Rate
Card as amended from time to time and to the trading parameters set out
in Clause 6.2.


3.4. The Agent shall procure that its representatives:


3.4.1. make themselves available in the Territory, at all reasonable
times and upon reasonable notice, to Studio 1+1 Group for the
purposes of consultation and advice relating to this Agreement
and the Advertising;


3.4.2. at the expense of the Agent attend meetings in the Territory,
at all reasonable times and upon reasonable notice, with
representatives of Studio 1+1 Group and such customers or
prospective customers as may be necessary for the performance
of its duties under this Agreement;


3.4.3. make such calls upon customers or potential customers for the
purpose of promoting the Advertising as the Agent may think
fit; and


3.4.4. attend such trade exhibitions and other sales outlets, at all
reasonable times and upon reasonable notice from Studio 1+1
Group, or as the Agent may think commercially suitable or as
otherwise agreed with Studio 1+1 Group for the purpose of
promoting the Advertising.


3.5. The Agent shall promptly notify Studio 1+1 Group of all orders for
Advertising in the Territory which it receives from customers. The Agent
shall notify Studio 1+1 Group of the proposed arrangements, including the
proposed rates and terms.


3.6. The Agent shall make all reasonable efforts to enhance communications and
promote negotiations between Studio 1+1 Group and any third party in
respect of the Advertising. Studio 1+1 Group shall have the right to
participate in all negotiations and meetings with agencies and customers
in respect of the Advertising.


3.7. The Agent shall in relation to the Advertising:


3.7.1. describe itself as `exclusive Sales Agent' for Studio 1+1
Group;


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3.7.2. not hold itself out, or permit any person to hold it out, as
being authorised to bind Studio 1+1 Group other than as
permitted under this Agreement; and


3.7.3. not do any act which might reasonably create the impression
that it is so authorised.


3.8. The Agent shall be responsible for obtaining all licences, permits and
approvals which are necessary for the sale of the Advertising in the
Territory and for the performance of its duties hereunder but Studio 1+1
Group shall support and assist the Agent in this respect.


3.9. Each party shall notify the other promptly on becoming aware of any
changes in the laws and regulations in the Territory relating to the
Advertising and shall forthwith notify the other party if it becomes
aware that it or any of the Advertising are or may be in breach of any of
those laws or regulations.


3.10. The Agent shall promptly inform Studio 1+1 Group of:


3.10.1. any complaint (other than in respect of de minimis matters) or
after-sales enquiry concerning the Advertising which is
received by the Agent;


3.10.2. any matters which, in the reasonable opinion of the Agent, is
likely to be relevant in relation to the sale, use or
development of the Advertising; and


3.10.3. any agreement relating in full or in part to the Territory
with respect to non-television advertising, public relations
or production which the Agent enters into with any customer
who, to the knowledge of the Agent, is an existing customer of
Studio 1+1 Group. Subject to the extent permitted by the
provisions of such an agreement the Agent shall give details
of the nature and value of the agreement and its relationship
to any existing agreement of Studio 1+1 Group. This Clause
3.10.3 may be waived by Studio 1+1 Group in writing in its
sole discretion with respect to any individual customer.


3.11. The Agent shall not:


3.11.1. use any advertising, promotional or selling materials when
performing the Services except those supplied or approved by
Studio 1+1 Group;


3.11.2. engage in any conduct which in the reasonable opinion of
Studio ...