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Bortzov (Bortzov), the deputy managing director of Crocus,
explained Crocus’s view of the business rationales behind the
royalty agreement. Bortzov declared:
9. By 1995, the existing arrangement was
unsatisfactory to Crocus. Crocus was dissatisfied
because it believed that Comtek was collecting
exhibitor fees and using them to pay expenses of the
United States trade shows and the United States
operation before reimbursing Crocus for its expenses.
10. Crocus also perceived that Comtek’s United States
overhead allocations to the foreign Trade Shows were
unreasonable considering the limited nature of the
services provided by Comtek.
11. Comtek, for its part, complained that it believed
that Russian expenses were becoming too great a
percentage of Trade Show receipts. Comtek’s United
States’ shareholders accused Crocus of not using
absolute best efforts to reduce Crocus direct expenses.
12. Finally, Comtek never fully understood (a) how
difficult it was to do business in Russia or (b) that
dealing with quasi-government agencies in Russia is a
sensitive mixture of politics, negotiation, and money.
However, it was my understanding that everyone involved
agreed that ECI’s participation in the Trade Shows
would facilitate the conduct of the Trade Shows,
including the allocation of space from Expocentr.
13. Crocus recommended that Comtek and Crocus enter
into an agreement with ECI to facilitate the conduct of
future Russian Trade Shows.
Like the stockholders’ agreement, the royalty agreement
contains internal inconsistencies and discrepancies with
stipulated facts. First, Article 3.2 of the royalty agreement
designates ECI as “payment agent” to receive all payments of fees
for trade shows outside the United States, while all fees for
trade shows in the United States are to be remitted to
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Last modified: May 25, 2011