Document:

China Agritech, Inc. - Exhibit 10.3

 

ESCROW AGREEMENT 

This Escrow Agreement (the "Agreement"), dated
effective as of the last date set forth opposite the respective signatories
hereto, is entered into by and among China Agritech, Inc., a Delaware
corporation (the "Company"), each of the parties listed below who were Investors
to the private offering of securities of the Company, Chang Yu, in his
individual capacity ("Chang"), and Securities Transfer Corporation (hereinafter
referred to as "Escrow Agent"). 

WHEREAS, each of the Investors has entered
into a Stock Purchase Agreement (the "SPA") evidencing their participation in
Company's private offering (the "Offering") of securities. As an inducement to
the Investors to participate in the Offering and as set forth in the SPA, Chang
agreed to place the "Escrow Shares" (as hereinafter defined) into escrow for the
benefit of the Investors in the event the Company failed to satisfy the
"Performance Thresholds" (as hereinafter defined). 

WHEREAS, pursuant to the requirements of the
SPA, the Company, Chang and the Investors have agreed to establish an escrow on
the terms and conditions set forth in this Agreement; 

WHEREAS, the Escrow Agent has agreed to act as escrow agent
pursuant to the terms and conditions of this Agreement; and 

WHEREAS, all capitalized terms used but not defined herein
shall have the meanings assigned them in the SPA; 

NOW, THEREFORE, in consideration of the mutual promises of the
parties and the terms and conditions hereof, the parties hereby agree as
follows: 

1. Appointment of Escrow Agent.
The Investors, Chang and the Company hereby appoint Securities Transfer
Corporation as Escrow Agent to act in accordance with the terms and conditions
set forth in this Agreement, and Escrow Agent hereby accepts such appointment
and agrees to act in accordance with such terms and conditions. 

2. Establishment of Escrow.
Upon the execution of this Agreement, Chang shall deliver to the Escrow Agent a
stock certificate evidencing 544,096 shares (the "Escrow Shares") of the
Company's common capital stock along with a stock power executed in blank.

3. Representations of Chang.
Chang hereby represents and warrants to the Investors as follows: 

  (i) The Escrow
  Shares are validly issued, fully paid and nonassessable shares of the Company,
  and free and clear of all pledges, liens and encumbrances. 

  
  (ii) Performance
  of this Agreement and compliance with the provisions hereof will not violate
  any provision of any applicable law and will not conflict with or result in
  any breach of any of the terms, conditions or provisions of, or constitute a
  default under, or result in the creation or imposition of any lien, charge or
  

  encumbrance upon, any of the properties or assets of Chang
  pursuant to the terms of any indenture, mortgage, deed of trust or other
  agreement or instrument binding upon Chang, other than such breaches, defaults
  or liens which would not have a material adverse effect taken as a whole. 

4. Disbursement of Escrow Shares. 
COMPANY advised the Investors that in the event the consolidated
financial statements of the Company reflect less than $7 million of After-Tax
Net Income for the fiscal year ending December 31, 2006 (the "First Guaranteed
NI"), Chang Yu agrees to transfer to the Investors on a pro rata basis for no
purchase price that certain number of shares of the Company's Common Stock which
represent 5% of the total Common Stock that Chang Yu owns directly or indirectly
as of August 30, 2005, i.e., 544,096 shares of the Company's Common Stock. In
the event the consolidated financial statements of the Company reflect between
$7 million and $7.5 million of After-Tax Net Income for the fiscal year ending
December 31, 2006 (the "Second Guaranteed NI"), Chang Yu agrees to transfer to
the Investors on a pro rata basis for no purchase price that certain number of
shares of the Company's Common Stock which represent 2.5% of the total Common
Stock that Chang Yu owns directly or indirectly as of August 30, 2005, i.e.,
272,048 shares of the Company's Common Stock. Nonrecurring expenses of the
Company shall not be deducted from After-Tax Net Income for the purposes of
calculating the First Guaranteed NI or the Second Guaranteed NI. In the event
that either the First Guaranteed NI or the Second Guaranteed NI is not achieved
based on the Company's audited financial statements for the period as filed with
the U.S. Securities and Exchange Commission ("SEC"), the Company's attorney,
Charles Law of King and Wood LLP ("Law"), shall provide written instruction to
the Escrow Agent instructing the Escrow Agent to issue and deliver certificates
evidencing certain number of shares of the Escrow Shares, according to the
formula of the SPA, to the Investors, on a pro rata basis, within ten (10)
business days of the date the audit report for the period is filed with the SEC.
The Escrow Agent need only rely on the letter of instruction from LAW in this
regard. If the consolidated financial statements of the Company reflect greater
than $7.5 million of After-Tax Net Income for the fiscal year ending December
31, 2006, Law shall provide written instruction to the Escrow Agent for the
release of the Escrow Shares to Chang. 

5. Duration. This
Agreement shall terminate on the sooner of the distribution of all the Escrow
Shares or the 10th business day following the filing of the Company's
audited financial statements for fiscal 2006 with the SEC. 

6. Interpleader.
Should any controversy arise among the parties hereto with respect to this
Agreement or with respect to the right to receive the Escrow Shares, Escrow
Agent shall have the right to consult counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. Escrow Agent is also
hereby authorized to institute an appropriate interpleader action upon receipt
of a written letter of direction executed by the parties so directing Escrow
Agent. If Escrow Agent is directed to institute an appropriate interpleader
action, it shall institute such action not prior to thirty (30) days after
receipt of such letter of direction and not later than sixty (60) days after
such date. Any interpleader action instituted in accordance with this Section 6
shall be filed in any court of competent jurisdiction in Dallas County, Texas,
and the Escrow Shares in dispute shall be deposited with the court and in such
event Escrow Agent shall be relieved of and discharged from any and all
obligations and liabilities under and pursuant to this Agreement with respect to
the Escrow Shares. 

Page 2 

7. 
Exculpation and Indemnification of Escrow Agent. 

(a) Escrow Agent is
not a party to, and is not bound by or charged with notice of any agreement out
of which this escrow may arise. Escrow Agent acts under this Agreement as a
depositary only and is not responsible or liable in any manner whatsoever for
the sufficiency, correctness, genuineness or validity of the subject matter of
the escrow, or any part thereof, or for the form or execution of any notice
given by any other party hereunder, or for the identity or authority of any
person executing any such notice. Escrow Agent will have no duties or
responsibilities other than those expressly set forth herein. Escrow Agent will
be under no liability to anyone by reason of any failure on the part of any
party hereto (other than Escrow Agent) or any maker, endorser or other signatory
of any document to perform such person's or entity's obligations hereunder or
under any such document. Except for this Agreement and instructions to Escrow
Agent pursuant to the terms of this Agreement, Escrow Agent will not be
obligated to recognize any agreement between or among any or all of the persons
or entities referred to herein, notwithstanding its knowledge thereof. 

(b) Escrow Agent
will not be liable for any action taken or omitted by it, or any action suffered
by it to be taken or omitted, in good faith and in the exercise of its own best
judgment, and may rely conclusively on, and will be protected in acting upon,
any order, notice, demand, certificate, or opinion or advice of counsel
(including counsel chosen by Escrow Agent), statement, instrument, report or
other paper or document (not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained) which is reasonably believed by Escrow Agent
to be genuine and to be signed or presented by the proper person or persons. The
duties and responsibilities of the Escrow Agent hereunder shall be determined
solely by the express provisions of this Agreement and no other or further
duties or responsibilities shall be implied, including, but not limited to, any
obligation under or imposed by any laws of the State of Texas upon fiduciaries.

(c) Escrow Agent
will be indemnified and held harmless, jointly and severally, by the Company and
Chang from and against any expenses, including reasonable attorneys' fees and
disbursements, damages or losses suffered by Escrow Agent in connection with any
claim or demand, which, in any way, directly or indirectly, arises out of or
relates to this Agreement or the services of Escrow Agent hereunder; except,
that if Escrow Agent is guilty of willful misconduct, fraud or gross negligence
under this Agreement, then Escrow Agent will bear all losses, damages and
expenses arising as a result of such willful misconduct, fraud or gross
negligence. Promptly after the receipt by Escrow Agent of notice of any such
demand or claim or the commencement of any action, suit or proceeding relating
to such demand or claim, Escrow Agent will notify the other parties hereto in
writing. For the purposes hereof, the terms "expense" and "loss" will include
all amounts paid or payable to satisfy any such claim or demand, or in
settlement of any such claim, demand, action, suit or proceeding settled with
the express written consent of the parties hereto, and all costs and expenses,
including, but not limited to, reasonable attorneys' fees and disbursements,
paid or incurred in investigating or defending against any such claim, demand,
action, suit or proceeding. The provisions of this Section 7 shall survive the
termination of this Agreement. 

8. Compensation of Escrow Agent. The
Company will pay Escrow Agent $1,500 for all services rendered by Escrow Agent
hereunder. 

Page 3 

9. Resignation of Escrow Agent.
At any time, upon ten (10) days' written notice to the Company, Escrow Agent may
resign and be discharged from its duties as Escrow Agent hereunder. As soon as
practicable after its resignation, Escrow Agent will promptly turn over to a
successor escrow agent appointed by the Company the Escrow Shares held hereunder
upon presentation of a document appointing the new escrow agent and evidencing
its acceptance thereof. If, by the end of the 10-day period following the giving
of notice of resignation by Escrow Agent, the Company shall have failed to
appoint a successor escrow agent, Escrow Agent may interplead the Escrow Shares
into the registry of any court having jurisdiction. 

10. Records. Escrow
Agent shall maintain accurate records of all transactions hereunder. Promptly
after the termination of this Agreement or as may reasonably be requested by the
parties hereto from time to time before such termination, Escrow Agent shall
provide the parties hereto, as the case may be, with a complete copy of such
records, certified by Escrow Agent to be a complete and accurate account of all
such transactions. The authorized representatives of each of the parties hereto
shall have access to such books and records at all reasonable times during
normal business hours upon reasonable notice to Escrow Agent. 

11. Notice. All
notices, communications and instructions required or desired to be given under
this Agreement must be in writing and shall be deemed to be duly given if sent
by registered or certified mail, return receipt requested, or overnight courier.

12. Execution in Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. 

13. Assignment and Modification.
This Agreement and the rights and obligations hereunder of any of the parties
hereto may not be assigned without the prior written consent of the other
parties hereto. Subject to the foregoing, this Agreement will be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and permitted assigns. No other person will acquire or have any
rights under, or by virtue of, this Agreement. No portion of the Escrow Shares
shall be subject to interference or control by any creditor of any party hereto,
or be subject to being taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of any such party hereto prior to
the disbursement thereof to such party hereto in accordance with the provisions
of this Agreement. This Agreement may be changed or modified only in writing
signed by all of the parties hereto. 

14. APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN,
EXCEPT THAT THE PORTIONS OF THE TEXAS TRUST CODE, SECTION 111.001, ET SEQ. OF
THE TEXAS PROPERTY CODE, CONCERNING FIDUCIARY DUTIES AND LIABILITIES OF TRUSTEES
SHALL NOT APPLY TO THIS AGREEMENT. THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND
LIABILITIES, IT BEING THEIR INTENT TO CREATE SOLELY AN AGENCY RELATIONSHIP AND
HOLD THE ESCROW AGENT LIABLE ONLY IN THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD,
OR GROSS 

Page 4 

NEGLIGENCE. ANY LITIGATION CONCERNING THE SUBJECT MATTER OF
THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED IN THE COURTS OF DALLAS COUNTY,
TEXAS, AND ALL PARTIES CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THOSE
COURTS. 

15. Headings. The headings contained
in this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement. 

16. Attorneys' Fees.
If any action at law or in equity, including an action for declaratory relief,
is brought to enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees from
the other party (unless such other party is the Escrow Agent), which fees may be
set by the court in the trial of such action or may be enforced in a separate
action brought for that purpose, and which fees shall be in addition to any
other relief that may be awarded. 

Page 5 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date set forth opposite their respective names. 

	 	 	Company:
	 	 	China Agritech, Inc.
	 	 	 
	 	 	/s/ Chang Yu
	 	 	By: Chang Yu
	 	 	Its: CEO and President
	 	 	Dated: January 11, 2006
	 	 	 
	 	 	/s/ Chang Yu
	 	 	Chang Yu
	 	 	Dated: January 11,
    2006
	 	 	 
	 	 	 
	 	Escrow Agent:	 
	 	Securities Transfer
    Corporation	 
	 	 	 
	 	 	 
	 	By: /s/ Kevin Halter
    Jr.	 
	 	Its: President	 
	 	Dated: ______________	 
	 	 	 
	 	 	INVESTORS:
	 	 	 
	 	 	PINNACLE CHINA FUND,
    L.P.
	 	 	 
	 	 	By: /s/ Barry M. Kitt
	 	 	Name: Barry M. Kitt
	 	 	Title: Sole Member,
    Kitt China Management,
	 	 	L.L.C.,
	 	the Manager of
    Pinnacle China Management, L.L.C.,	 
	 	the General Partner of
    Pinnacle China Advisors, L.P.,	 
	 	the General Partner of
    Pinnacle China Fund, L.P.	 
	 	 	 
	 	 	 
	 	 	Ardsley Partners
    Offshore Fund, Ltd.

Page 6

	 	By: /s/ Steven Napoli
	 	 
	 	   Name:
    Steven Napoli
	 	   Title:
    Partner/Agent
	 	 
	 	Ardsley Partners Fund
    II, L.P.
	 	 
	 	By: /s/ Steven Napoli
	 	 
	 	   Name:
    Steven Napoli
	 	   Title:
    Partner
	 	 
	 	Ardsley Partners
    Institutional Fund, L.P.
	 	 
	 	By: /s/ Steven Napoli
	 	 
	 	   Name:
    Steven Napoli
	 	   Title:
    Partner
	 	 
	 	Jayhawk China Fund
    (Cayman), Ltd.
	 	 
	 	By: /s/ Marcey Berges
	 	 
	 	   Name:
    Marcey Berges
	 	   Title:
    CFO
	 	 
	 	Renaissance U.S.
    Growth Investment Trust PLC
	 	 
	 	By: /s/ Russell
    Cleveland
	 	 
	 	   Name:
    Russell Cleveland
	 	 
	 	   Title:
    President
	 	RENN Capital Group,
    Inc., Investment Manager
	 	 
	 	BFS U.S. Special
    Opportunities Trust PLC
	 	 
	 	By: /s/ Russell
    Cleveland
	 	 
	 	   Name:
    Russell Cleveland
	 	 
	 	   Title:
    President
	 	RENN Capital Group,
    Inc., Investment Adviser
	 	 
	 	Gary C. Evans

Page 7

	 	Signature: /s/ Gary C. Evans
	 	 
	 	Daniel Conwill IV
	 	 
	 	Signature: /s/ Daniel Conwill IV
	 	 
	 	Chet Morrison
	 	 
	 	Signature: /s/ Chet Morrison
	 	 
	 	David Kenkel
	 	 
	 	Signature: /s/ David Kenkel
	 	 
	 	George Resta
	 	 
	 	Signature: /s/ George Resta
	 	 
	 	Bob Jackson
	 	 
	 	Signature: /s/ Bob Jackson
	 	 
	 	Tom Matava
	 	 
	 	Signature: /s/ Tom Matava
	 	 
	 	Carolyn Prahl
	 	 
	 	Signature: /s/ Carolyn Prahl
	 	 
	 	Jim Brown
	 	 
	 	Signature: /s/ Jim Brown

Page 8

	 	James Lynch
	 	 
	 	Signature: /s/ James Lynch
	 	 
	 	Edwin Young
	 	 
	 	Signature: /s/ Edwin Young
	 	 
	 	Mike Studer
	 	 
	 	Signature: /s/ Mike Studer
	 	 
	 	John Trescot Jr.
	 	 
	 	Signature: /s/ John Trescot Jr.
	 	 
	 	W. W. Gay
	 	 
	 	Signature: /s/ W. W. Gay
	 	 
	 	Harold E. Gear
	 	 
	 	Signature: /s/ Harold E. Gear
	 	 

Page 9EX-10.1

EMPLOYMENT CONTRACT 1 566

This Employment Contract (“the Contract”) is made and entered into on the “4th” of
January 2003 between LLC «EDN Sovintel» (“Company”) located at the address: Russian Federation, the
city of Moscow, 127427, 25/2/2 Dubovoi Roschi str., and citizen Nikolai Vladimirovich Tokarev
residing at the address: the city of Moscow, 7, 2nd Frunzenskaya str. Apt.35, passport
45 98 288242, issued by the 107 precinct of militia of the city of Moscow on 08.12.1998 (“the
Employee”).

The Parties agreed as follows:

1. Subject matter of the Contract

1.1 The Company hereby employs the Employee, while the Employee hereby agrees to do the work
in the position of the Company Director for Finance and Investments on the terms and in compliance
with the requirements set forth in this Contract.

1.2 As an employee of the Company the Employee shall fulfill duties entrusted with him and
shall be vested with rights and authority laid down in this Contract, as well as those periodically
indicated by the Financial Director of the Company. During the working period the Employee reports
to the Financial Director of the Company and higher-up superiors.

1.3 This Contract is an agreement on the main work.

1.4 The place of work is the office of the Company in the city of Moscow, Russian Federation.
In cases when the Company requires that the Employee should perform duties outside the city of
Moscow the Employee hereby agrees to perform such duties.

2.  Contract period

This Contract is concluded for an indefinite period.

The Employee shall get down to work on the «4th » of January 2003.

3. Payment procedures

3.1 The Company shall pay a salary to the Employee along with other fees in accordance with
the Company’s policies on a regular basis.

3.2 The Company shall pay the Employee a monthly official salary equivalent to 7,083.33 US
dollars in rubles at the rate of the Central Bank of the Russian Federation as of the date of
payroll calculation. The payroll calculation is normally the last calendar date of the current
month. In some cases stipulated by the labour legislation the payroll calculation date may be
shifted to an earlier date of the current calendar month, which is necessary for the timely payment
of the salary. In this case the payroll calculation date is established by an internal normative
act. From the above sum and from other fees paid by the Companies the Company shall withhold and
pay taxes in the amounts and in the procedure prescribed by the effective Russian legislation.

3.3 This provision does not release the Employee from the responsibility to pay taxes on
incomes received from all other sources unrelated to the trade relations between the Company and
the Employee in compliance with the effective Russian legislation.

3.4 The salary shall be paid and other payments provided by this Contract shall be made to
the Employee not later than the 10th day of the month following the month to be paid
for.

4. Payment of bonuses

The Company is entitled to pay bonuses and fees in accordance with the Premium Provision,
which is an inalienable part of this Contract.

5. Privileges and benefits

5.1 The Employee is subject to mandatory social insurance in the state extra-budgetary funds
at the expense of the Employer in the procedure laid down in the Russian legislation.

5.2 The Employee is entitled to receive additional privileges and bonuses, both individual and
collective, provided for by the Company, including medical insurance. The medical insurance, life
insurance and insurance against the loss of the ability to work for the period of business trips is
made in conformity with the general policy of the Company.

5.3 The Employee shall provide timely information to the Company about the additional grounds
for privileges prescribed by the legislation of the Russian Federation.

5.4 The Employee shall have the right to receive information on privileges and benefits from
the Company’s personnel manager.

6. Reimbursement of expenses

The Company shall reimburse the Employee for all reasonably incurred actual expenses related
to the performance of official duties on condition of those being agreed upon with the Financial
Director of the Company. The reimbursement of expenses is effected provided the Employee submits
the respective substantiation documents in the procedure specified by the Company.

7. Employee’s duties

The Employee hereby assumes the following commitments:

7.1 The Employee shall perform his official duties and tasks of the Company professionally and
in time making the maximum use of his knowledge and skills, shall at all times comply with the
instructions and internal policy of the Company, shall apply every effort to protect the interests
and reputation of the Company.

7.2 The Employee shall adhere to the rules of conduct prescribed by the internal regulations
and the Corporate Policy Guidelines.

7.3 The Employee shall handle the materials, office aids, communications means and other
material valuables provided to him by the Company with care. The Employee shall be bear material
liability both for the direct actual damage personally inflicted by him on the Company and for the
damage that the Company sustained as a result of his compensating other persons for the damage.

7.4 The Company shall make sure that the Employee is briefed on the provisions of the safety
precautions on a continuous basis and the Employee shall sign for being aware of the above
precautions. At the request of the Company the Employee shall undergo training on the above safety
precautions and shall observe the safety instructions effective within the Company. The Employee
shall be responsible for breaching the above-mentioned safety precautions in accordance with the
effective legislation of the Russian Federation.

7.7 The Employee shall not, without prior written consent of the Company, directly or via a
third person:

i) either urge or compel a person that is employed by the Company or any of its
affiliated companies to terminate or not to extend the Employment Contract of that
person with the Company or with any of its affiliated companies throughout the
effective period of this Contract and two years upon termination of the latter or

ii) either urge or compel a physical or legal person that is the customer or vendor of
the Company or of any of its affiliated companies to break relations or not to extend
relations with the Company or with any of its affiliated companies throughout the
effective period of this Contract and two years upon termination of the latter or

iii) directly or indirectly exercise or take part in the activities undertaken by the
Company and participate in the similar or competitive activities in any way for two
years upon termination of this Contract.

7.8 In case of dismissal the Employee undertakes not to take away from the Company any
materials or concepts developed during the work with the Company.

7.9 The Employee shall notify the Company in time about any objects of intellectual property
created by him throughout the effective period of this Contract. Through signing this Contract the
Employee agrees that any exclusive rights for the use of any inventions, useful models, industrial
samples, domain names, web-pages and software in the source and object codes and any other forms
created in connection with the performance of the Employee’s duties specified in this Contract
(‘objects of intellectual property’) as well as all the related documentation will belong to the
Company. The Employee also agrees that the Company has exclusive rights for the use of objects of
intellectual property and for publishing them in any way at its discretion. The Company is entitled
to submit on its own behalf patent applications, applications for any inventions, useful models and
industrial samples created by the Employee during the performance of his official duties. The
Employee also undertakes to render assistance to the Company in the protection of the rights both
in case of infringement of these rights by third persons and in case the Company lays any claims or
files lawsuits in connection with the exercise by the Company of the said rights.

7.10 The Employee assures and guarantees that Appendix 2 to this Contract is a full list of
all the Employee-patented objects of intellectual property, Employee-registered trademarks and
domain names, as well as the objects of intellectual property, trademarks and domain names with
relation to which the Employee filed requests for registration. Appendix 2 shall also contain the
list of all the materials that are objects of the copyright law and are related to the Company’s
sphere of activity.

8. Employer’s responsibilities

8.1 The Employer undertakes to give a job to the Employee in accordance with the labour
function determined by the Contract.

8.2 The Employer undertakes to provide the Employee with the equipment, instruments, technical
documentation and other things required for the Employee to perform his official duties under this
Contract.

8.3 The Employer undertakes to provide working conditions that meet the requirements of the
effective legislation.

8.4 The Employer undertakes to pay the salary and other fees specified in the Contract to the
Employee in time and in full.

8.5 The Employer shall bear other responsibilities assigned to it by the Labour Code of the
Russian Federation, including those prescribed by Article 22 of the said Code.

9. Working hours and rest time

9.1 The normal prescribed duration of the working time is 40 (forty) hours a week with a
five-day working week.

9.2 However for some categories of personnel responsible for the technical support of the
telecommunications networks of the Company and its clients through a non-stop operating cycle an
aggregate working time record is in use. In this case the duration of the working time in an
accounting period (month, quarter etc.) may not exceed the normal number of the working hours. The
accounting period shall not exceed one year.

9.3 The Employee is entitled to an annual leave of 28 (twenty eight) calendar days. The
Employee agrees that the schedule of leaves shall be coordinated with the Financial Director of the
Company or with another representative of the Company’s management in accordance with the Company
policy.

9.4 The schedule of leaves of each department of the Company shall be approved by the Director
General or another person acting in his stead.

9.5 The annual paid leave may be split into parts as agreed by the Employee and the Company.
In this case at least one part of the leave shall not be less than 14 calendar days.

10. Temporary disability to work

10.1 In case of temporary disability to work (illness, accident etc.) the Employee shall, to a
possible extent, promptly report it to his immediate superior or another authorized person of the
Employer.

10.2 The Employee shall submit to the Employer a certificate of incapacity of work confirming
his temporary disability (illness, accident etc.) not later than 3 (three) days after such
disability is over.

10.3 The Employer shall pay the Employee a temporary disability benefit in accordance with the
effective legislation.

11. Waiver of conflict of interests and competition

11.1 During the employment by the Company and two years after this Contract expires the
Employee shall not be directly or indirectly involved, have interest or relations, or participate
in some capacity or in some way (be that as an investor, principal, agent, consultant, employee or
otherwise) with any company, except the Company, relating to trade or commercial activities in the
sphere of telecommunications, including any competitive trade or commercial activity, except cases
when the Company gave a prior written consent to that.

11.2 During the employment period and two years after the termination of his labour relations
the Employee shall not directly or indirectly offer his services to any customer of the Company or
to any entity to which as a potential customer the Company offers its services; offer employment of
any personnel of the Company and have a direct or indirect interest in any firm competing with the
Company, as well as disclose any private information, commercial secrets or confidential
information concerning the Company, including without limitations names of the employees,
independent contractors, customers or potential customers.

11.3 During the effective period of this Contract, as well as within three years upon
termination of the latter the Employee undertakes not to disclose, directly or indirectly, to any
person, firm, corporation, partnership, association or other legal entity, confidential
information pertaining to the financial status, vendors, customers, sources and methods of getting
new orders or ways of doing business with the Company, affiliated companies and subsidiaries,
except the publicly accessible information or the information subject to disclosure by law.

11.4 The Employee shall not, without prior consent of the Company, directly or via a third
person:

i) urge or compel any person employed by the Company or by any of its affiliated
companies to terminate or to discontinue the Employment Contract of this person with
the Company or a company affiliated with the Company within the effective period of
this Contract and two years after its termination or

ii) urge or compel any physical or legal person that is a customer or vendor of the
Company or any of its affiliates to break relations or to discontinue relations with
the Company or its affiliate within the effective period of this Contract and two years
after its termination.

12. Specific performance

The Employee acknowledges that violation by the Employee of understandings of sections 11 and
13 of this Contract will be detrimental to the Company and the Company, therefore, is entitled to
seek the specific performance of these provisions judicially. This right complements other rights
of the Company related to the protection and compensation for the damage inflicted by the Employee.
The Company reserves the right to demand reimbursement for the damage and other economic
compensations for the violation by the Employee of the obligations and understandings contained in
sections 11 and 13.

13. The law “On corruption of foreign officials” and the respective standards of the
effective legislation of the Russian Federation

As a precondition for employment under this Contract the Employee agrees to sign a document on
complying with the law ‘On corruption of foreign officials’ and the respective standards of the
Russian legislation, to undergo additional training on observing the above in accordance with the
policies and procedures of the Company.

14. Assignment

The parties under the Contract are not entitled to assign their rights to third persons. The
Company is entitled to transfer the Employee to another enterprise, organization or institution in
accordance with the rules established by the Labour Code of the Russian Federation.

15. Notices

All notices shall be sent in writing to the following address:

Company:

127427, Moscow,

25/2/2 Dubovoi Roschi str.

To: Director General

Stan Abbeloos

Tel.: 258 78 00

Employee:

To: Nikolai Vladimirovich Tokarev

City of Moscow, 7, 2nd Frunzenskaya str., apt. 35

Tel.     

Each party shall notify the other party about the change of the address in writing.

16. Completeness of the Contract

16.1 This Contract and Appendices thereto are the complete Contract between the parties on
the employment and supersede all previous agreements, both written and oral, between the parties.
Any changes to the essential terms and conditions of this Contract shall be made as a Supplement to
be signed by the parties.

16.2 All changes and additions to this Contract are its inalienable part.

17. Termination of the Contract

This Contract may be terminated on the grounds established by the Labour Code of the Russian
Federation.

18.  Contract termination payments

18.1 In case of termination of this Contract at the initiative of one of the parties to the
Contract the Companies shall pay the Employee the entire salary up to the date of termination.

18.2 If the Company terminates the Contract on the grounds stipulated in paragraphs 5-7, 9
and 11 of article 81 of the Labour Code of the Russian Federation, the Company shall only pay the
official salary in proportion to the time worked before the Contract termination date and the
money compensation for all unused leave days.

18.3 If the Company terminates the Contract because the Employee fails to match his official
position or fails to perform due to the state of health that prevents this work from being
continued; if the Employee is called up to military service or is assigned to perform an
alternative civil service; because of reinstatement of the personnel who had earlier performed this
work or if the Employee refused transfer in connection with the employer’s redeployment to a
different location, the Employee shall receive a severance pay in the amount of a two-week average
salary and a money compensation for all unused leave days.

18.4 If during the effective period of this Contract the Employee did not use up all or a part
of monies to which he/she was entitled as per the terms on privileges and benefits (for example,
medical insurance), the Employee shall not receive any money or other compensation in case this
Contract is terminated.

19. Binding force of the Contract

This Contract may be binding for the legal successors of the parties if this is provided for
in the legislation of the Russian Federation.

20. Selection of legislation

This Contract is governed by the legislation of the Russian Federation. In cases not covered
by this Contract the parties shall follow the applicable legislation of the Russian Federation.

21. Labour disputes

21.1 Any disputes or claims related to this Contract shall be resolved by way of negotiations.
In case a dispute is initiated by the Employee, the negotiations shall be held with the head of the
department and the head of the Company or a person acting in his stead with the participation of
the Company’s personnel and legal services.

21.2 If a positive settlement is not achieved, disputes shall be reviewed by a Russian court
of law in accordance with the effective legislation of the Russian Federation.

22. Other terms and conditions

The Employee undertakes not to accept compensations from the Company and its associated
enterprises, except those provided under this Contract.

The employee shall immediately inform the Company if he himself or any member of his family is
connected or will be connected with any state structure or institution.

IN WITNESS THEREOF the parties signed this Contract in two copies in the year and on the date
indicated above.

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	Stab Abbeloos

Director General

	 	

Full name
	 
	 	 
	Round seal:

	 	

	MOSCOW *LIMITED LIABILITY COMPANY “EDN

SOVINTEL”.(reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

1

Appendix 1

to Employment Contract 1 566 dated “4th “ of January 2003

The parties hereby confirm that the below-listed documents are an inalienable part of this
Contract:

1. Corporate Policy Guidelines.

2. Premium Provision.

3. Provision on complying with the law “On corruption of foreign officials” and the respective
standards of the effective legislation of the Russian Federation.

4. Provision «On protection of personal data of employees»

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	Stan Abbeloos

Director General

	 	

Full name
	 
	 	 
	Round seal:

	 	

	MOSCOW *LIMITED LIABILITY COMPANY “EDN

SOVINTEL” (reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

2

Appendix 2

to Employment Contract dated “4th “ of January 2003 1 566

List of objects of intellectual property owned by the Employee

3

SUPPLEMENT 1 1

This Supplement (Supplement) was made on the 28th of February 2003 between LLC TeleRoss
(the Company) located in the Russian Federation, LLC EDN Sovintel (Company) located by the
following address: Russian Federation, Moscow, 127427, 25/2/2 Dubovoi Roschi str., and citizen
Nikolai Tokarev residing by the following address: Moscow, 40 Frunzenskaya emb., apt.117, passport
series 45 98 1 288242 issued by the 107 militia precinct of Moscow on 08.12.1998 (the Employee).

The parties agreed on the following:

	 	1.	 	In connection with the Employee’s transfer to another position items a) and b) of article 1
of Employment Contract 1 566 dated «04» January 2003 shall be worded as follows:

à) The Company hereby hires the Employee, while the Employee hereby agrees to fulfill the work
in the position of the Financial Director, Financial Department of the Company, on the terms and in
compliance with the requirements laid down in Employment Contract 1 566 dated «4th » of
January2003.

b) In the capacity of the Financial Director of the Financial Department the Employee shall
perform duties entrusted with him and is vested with rights and authority provided for in this
Contract, as well as those periodically indicated by the Director General. In the working period
the Employee reports to the Director General and higher-up superiors.

	 	2.	 	Item b) of article 3 of Employment Contract 1 566 dated the «4th » of January 2003
shall be worded as follows:

b) The Company shall pay the Employee the annual official salary in the amount equivalent to
108,000 US dollars, which is paid on a monthly basis in the amount equivalent to 9,000 US dollars
in accordance with the practices of payment for the work adopted by the Company. From the above
amount and from other fees paid by the Company the Company shall withhold and pay taxes in the
amounts and in the procedure stipulated by the effective Russian legislation.

Other articles of the Employment Contract remain unchanged.

This Supplement becomes effective from the «3rd» of March 2003.

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	M.I.Murayev

1st Deputy to Director General

	 	

N.V.Tokarev
	 
	 	 
	Round seal:

	 	

	MOSCOW * LIMITED LIABILITY COMPANY “EDN

SOVINTEL” (reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

4

SUPPLEMENT 12

This Supplement (Supplement) was made on the 25th of March 2004 between LLC «EDN
Sovintel» (the Company) located by the address: Russian Federation, the city of Moscow, 115114, 1
Kozhevnichevsky proezd, and citizen Nikolai Vladimirovich Tokarev residing by the address: Moscow,
40 Frunzenskaya emb., apt. 117, passport series 45 98 1 288242, issued by the 107 militia precinct
of the city of Moscow on 08.12.1998 (the Employee).

The parties agreed as follows:

	 	1.	 	Item 3.2 of article 3 of Employment Contract 1 566 dated the 4th of January 2003
shall be worded as follows:

3.2 The Company shall pay the Employee the monthly official salary in the amount equivalent to
10,000 US dollars, which is paid in accordance with the practices of payment for the work adopted
by the Company. From the above amount and from other fees paid by the Company the Company shall
withhold and pay taxes in the amounts and in the procedures provided for in the effective Russian
legislation.

Other articles of the Employment Contract remain unchanged.

This Supplement becomes effective from the 1st of March 2004.

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	M.I.Murayev

1st Deputy to Director General

	 	

N.V.Tokarev
	 
	 	 
	Round seal:

	 	

	MOSCOW * LIMITED LIABILITY COMPANY “EDN

SOVINTEL”. (reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

5

SUPPLEMENT 1 3

This Supplement (Supplement) was made on the 2nd of August 2004 between LLC «EDN
Sovintel» (the Company) located by the address: Russian Federation, the city of Moscow, 115114, 1
Kozhevnichevsky proezd, and citizen Nikolai Vladimirovich Tokarev residing by the address: Moscow,
40 Frunzenskaya emb., apt. 117, passport series 45 98 1 288242, issued by the 107 militia precinct
of the city of Moscow on 08.12.1998 (the Employee).

The parties agreed as follows:

	 	1.	 	Item 3.2 of article 3 of Employment Contract 1 566 dated January 4, 2003 shall be worded as
follows:

3.2 The Company shall pay the Employee the monthly official salary in the amount equivalent to
15,000 US dollars, which is paid in accordance with the practices of payment for the work adopted
by the Company. From the above amount and from other fees paid by the Company the Company shall
withhold and pay taxes in the amounts and in the procedures provided for in the effective Russian
legislation.

Other articles of the Employment Contract remain unchanged.

This Supplement becomes effective from the 2nd of August 2004.

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	M.I.Murayev

Acting Director General

	 	

N.V.Tokarev
	 
	 	 
	Round seal:

	 	

	MOSCOW * LIMITED LIABILITY COMPANY “EDN

SOVINTEL” (reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

6

SUPPLEMENT 1 4

This Supplement (Supplement) was made on the «19th » of April 2005 between LLC «EDN
Sovintel» (the Company) located by the address: Russian Federation, the city of Moscow, 115114, 1
Kozhevnichevsky proezd, and citizen Nikolai Vladimirovich Tokarev residing by the address: Moscow,
40 Frunzenskaya emb., apt. 117, passport series 45 98 1 288242, issued by the 107 militia precinct
of the city of Moscow on 08.12.1998 (the Employee).

The parties agreed as follows:

	 	1.	 	In connection with the Employee’s transfer to another position items 1.1 and 1.2 of article 1
of Employment Contract 1 566 dated January 4, 2003 shall be worded as follows:

1.1 The Company hereby hires the Employee, while the Employee hereby agrees to perform the
work in the position of the Financial Director of the Company for Russia on the terms and in
compliance with the requirements specified in Employment Contract 1 566 dated January 4, 2003.

1.2 In the capacity of the Financial Director for Russia the Employee shall perform duties
entrusted with him and is vested with rights and authority provided for in this Contract, as well
as those periodically indicated by the Director General. In the working period the Employee reports
to the Director General and higher-up superiors.

Other articles of the Employment Contract remain unchanged.

This Supplement becomes effective on the 19th of April 2005.

	 	 	 
	 
	 	 
	 
	 	 
	On behalf of the Company:

	 	Employee:
	 
	 	 
	(Signature)

	 	(Signature)
	 

	 	 
	 
	 	 
	M.I.Murayev

1st Deputy to Director General

	 	

N.V.Tokarev
	 
	 	 
	Round seal:

	 	

	MOSCOW * LIMITED LIABILITY COMPANY “EDN

SOVINTEL” (reg.) 1 19138

* EDN SOVINTEL

	 	

	 
	 	 

7

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