exv10w4



 






     EXHIBIT 10.4




 










 





EMPLOYMENT AGREEMENT




     This
AGREEMENT is made and entered into as of the [
       ] day of [        
], 2004, by and between GRAND TOYS INTERNATIONAL LIMITED, a limited company
organized under the laws of the Hong Kong Special Administrative Region of the
People’s Republic of China having its registered office at Room UG202, Floor
UG2, Chinachem Golden Plaza, 77 Mody Road, Tsimshatsui East, Kowloon, Hong Kong
(“Grand”), and DAVID J. FREMED, a citizen of the United States of America
residing at 849 Longview Avenue, North Woodmere, NY 11581 (“Fremed”).



     WHEREAS, Grand, through its wholly-owned subsidiaries, is engaged in the
business of designing, developing, producing, marketing, distributing,
importing and selling toys and toy-related products (the “Business”).



     WHEREAS, Grand is desirous of employing Fremed as its chief financial
officer, and Fremed is willing to serve Grand in such capacity, all upon the
terms and subject to the conditions hereinafter set forth.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, agree as
follows:



     1. Employment



     Grand agrees to employ Fremed, and Fremed agrees to be employed by Grand,
at the location specified in the last sentence of Section 4(d), upon the terms
and subject to the conditions of this Agreement.



     2. Term



     The term of this Agreement shall be for a period of three (3) years
commencing on the date hereof and ending on the date of Grand’s annual general
meeting in 2007 unless sooner terminated as hereinafter provided (the “Term”).



     3. Duties; Efforts; Indemnification.



     (a) During the term of this Agreement, Fremed shall serve as Executive
Vice President and Chief Financial Officer of Grand, reporting directly to the
Chief Executive Officer. He shall be responsible for the management of Grand’s
financial affairs, including without limitation the preparation of financial
statements and compliance with applicable securities laws and regulations, as
well as such other duties as are commensurate with such position. He shall
also perform such executive duties as may be assigned to him from time to time
by the Board of Directors of Grand (the “Board”) or the Chief Executive Officer
so long as such duties are not inconsistent with his position as Chief
Financial Officer of a company of comparable size.



     (b) Fremed shall devote all of his business time, attention and energies,
on a full time and exclusive basis, to the business and affairs of Grand, shall
use his best efforts to advance the best interests of Grand, and shall not
during the Term be engaged in any other business activities,



 









 




whether or not
such business activities are pursued for gain, profit or other pecuniary
advantage, without Board consent; provided, however, that, it shall not be a
violation of this Agreement for Fremed to (i) serve on corporate, civic or
charitable boards or committees or (ii) manage passive personal investments, in
either case so long as any such activities do not interfere with the
performance of his responsibilities as an employee of Grand in accordance with
this Agreement.




     (c) Subject to and in accordance with the provisions of the Memorandum and
Articles of Association of Grand, Grand shall indemnify Fremed to the fullest
extent permitted by applicable law for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorney’s
fees) incurred or paid by Fremed in connection with any third party action,
suit, investigation or proceeding arising out of or relating to the performance
by Fremed of services for, or the acting by Fremed as a director, officer or
employee of, Grand or of any other person or entity at Grand’s request, and
Grand shall advance to Fremed or pay on his behalf such amounts as the
directors of Grand determine to be due by reason of such indemnification.



     4. Compensation and Benefits.



     (a) Base Salary. Grand shall pay to Fremed a base salary (the “Base
Salary”) at a rate of US$330,000 per annum, payable in accordance with Grand’s
payroll practices for its executive employees. The Board will review the Base
Salary for possible increase not less than semiannually during the Term with a
view to ensuring that it remains commensurate with the time and effort required
for the discharge of his responsibilities pursuant to this Agreement.



     (b) Guaranteed Bonus. Fremed shall be entitled to a guaranteed bonus,
payable on each of the first, second and third anniversaries of the date
hereof, which shall be in an amount equal to forty percent (40%) of the amount
of Base Salary he shall have received during the twelve-month period ending on
each such anniversary, respectively. His entitlement to each such bonus payment
shall be unconditional provided that he remains in the employ of Grand as of
the date on which the said payment is due.



     (c) Incentive Compensation. In addition to the amounts of compensation
provided for in subsections (a) and (b) hereof, Fremed shall be eligible for
the following incentive compensation:



          (i) Stock Options. Grand shall grant to Fremed options to purchase
American Depositary Receipts (“ADRs”) representing 300,000 ordinary shares in
the capital of Grand at a price per ADR which shall be equivalent to the
closing market price thereof on the last day prior to the date of the grant on
which securities markets in the United States are open. The options shall be
granted within sixty (60) days after the date of this Agreement, shall become
vested as to ADRs representing 100,000 shares on each of the first, second and
third anniversaries of the such date and shall expire on the fifth anniversary
of such date; provided, however, that upon the occurrence of a Change of
Control, as defined in Section 11, having the result described in the first
sentence of that section, all of such options shall become vested immediately.



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          (ii) Discretionary Compensation. Fremed may, at the discretion of the
Board, be granted additional stock options, share appreciation rights or
bonuses under plans adopted by the Board for the benefit of employees of Grand.



     (d) Out-of-Pocket Expenses. Grand shall promptly pay to Fremed the
reasonable expenses incurred by him in the performance of his duties hereunder
in accordance with Grand’s policies in effect from time to time, including,
without limitation, those incurred in connection with business related travel
or entertainment, or, if such expenses are paid directly by Fremed, shall
promptly reimburse him for such payment, provided that Fremed provides proper
documentation thereof in accordance with Grand’s policy. Without limiting the
generality of the foregoing, Grand shall reimburse to Fremed the amount of any
costs reasonably incurred by him, pursuant to a budget approved in advance by
Grand, to establish a home office from which he may carry our his duties
pending the establishment of a permanent Grand facility in New York or New
Jersey.



     (e) Participation in Benefit Plans. Fremed shall be entitled to
participate in or receive benefits under any pension plan, health and accident
plan or any other employee benefit plan or arrangement made available now or in
the future by Grand to its North American executives and key management
personnel, provided that such plans or arrangements are applicable to employees
who are employed less than full-time. Grand will use its commercial best
efforts to ensure that the benefits provided are no less advantageous as a
whole to Fremed than the benefits he enjoyed at his previous employer, Atari,
Inc., a summary of which is set forth in the attachment hereto. Pending the
establishment of a benefit plan applicable to all United States employees of
Grand and its subsidiaries, Grand shall reimburse to Fremed the cost of
obtaining continuation coverage under the Atari, Inc. benefit plans, which are
estimated at US$1,040 per month.



     5. Termination.



     Fremed’s employment hereunder shall be terminated upon Fremed’s death or
Fremed’s voluntarily leaving the employ of Grand (other than as a result of
Grand’s material breach of this Agreement), and may be terminated as follows:



     (a) For Cause. Grand shall have the right to terminate Fremed’s
employment for “Cause.” A termination for “Cause” is a termination evidenced
by a resolution adopted by the Board finding that Fremed has:



          (i) breached or failed to comply with any of the material terms of this
Agreement, including, without limitation, Sections 3, 7, 8 or 10 of this
Agreement;



          (ii) failed to perform his duties under this Agreement, including refusing
to carry out the reasonable written instructions of the Board or deliberately
and intentionally disregarding the lawful instructions from the Board, in
either case which instructions are consistent with the responsibilities and
duties of Fremed contemplated by this Agreement;



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          (iii) engaged in gross negligence or willful misconduct in connection with
or arising out of the performance of his duties hereunder, including, without
limitation, the misappropriation of funds;



          (iv) been under the influence of drugs or alcohol (other than prescription
medicine or other medically-related drugs to the extent that they are taken in
accordance with their directions) during the performance of his duties under
this Agreement, or while under the influence of drugs or alcohol, engages in
grossly inappropriate conduct;



          (v) engaged in behavior that would constitute grounds for liability for
sexual harassment (as proscribed by the U.S. Equal Employment Opportunity
Commission Guidelines, the New York Division of Human Rights and or any other
applicable state regulatory body) or, in the reasonable opinion of the Board
other egregious conduct violative of laws governing the workplace; or



          (vi) committed any act of fraud, larceny, misappropriation of funds or
embezzlement or been convicted of a felony or a crime of moral depravity;


provided, however, that (A) in the case of clauses (i), (ii) and (iii) above,
Fremed shall receive thirty (30) days’ advance written notice that the Board
intends to meet to consider Fremed’s termination and specifying the actions
constituting Cause, Fremed shall have the opportunity to cure the conduct
constituting Cause during such thirty (30) day period and (B) any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for Grand shall be
conclusively presumed to be done, or omitted to be done, by Fremed in good
faith and in the best interests of Grand.




     (a) For Disability. Grand shall have the right to terminate Fremed’s
Employment as a result of Fremed’s “Disability.” For purposes of this
Agreement, a termination for “Disability” shall occur:



          (i) immediately after the Board has provided a written termination notice
to Fremed supported by a written statement from a reputable independent
physician selected by Grand to the effect that Fremed shall have become so
incapacitated as to be unable to resume, within 90 days, his employment
hereunder by reason of physical or mental illness or injury; or



          (ii) upon rendering of a written termination notice by Grand after Fremed
has been unable to substantially perform his duties hereunder for 90
consecutive days (exclusive of any vacation permitted under Section 4(e)
hereof) or for 180 days in any 360 day period by reason of any physical or
mental illness or injury.


Fremed agrees to make himself available and to cooperate in any reasonable
examination by a reputable independent physician selected by Grand for the
purpose of a termination pursuant to Section 5(b)(i).




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     6. Effect of Termination.



     (a) Death or Disability. In the event of the termination of Fremed’s
employment as a result of his death or Disability, Grand shall:



          (i) pay to Fremed or his estate, as the case may be, the Base Salary plus
accrued and unpaid bonus in accordance with Section 4(b) through the date of
his death or Disability (pro rated for any partial month); and



          (ii) reimburse Fremed, or his estate, as the case may be, for any expenses
pursuant to Section 4(d) (the amounts payable pursuant to the foregoing clauses
(i) and (ii) are hereafter referred to as the “Accrued Obligations”).



     (b) For Cause by Grand, by Fremed Voluntarily or upon expiration of the
Term. In the event that Fremed’s employment is terminated by Grand for Cause
or by Fremed voluntarily or upon expiration of the Term, Grand shall pay to
Fremed the Accrued Obligations and Fremed shall have no further entitlement to
any other compensation or benefits from Grand, except as set forth herein.



     (c) Other than as a result of Fremed’s death or Disability, or by Grand
otherwise than for Cause. In the event that Fremed’s employment is terminated
other than by reason of his death or Disability or by Grand otherwise than for
Cause, then, subject to receipt of a release of Grand and its directors,
officers and employees and their respective successors and assigns of claims of
Fremed against them arising out of or by reason of his termination of
employment hereunder:



          (i) Grand shall pay to Fremed the Accrued Obligations; and



          (ii) Grand shall continue to pay Fremed the Base Salary plus benefits in
accordance with Section 4(e), together with bonus accruing in accordance with
Section 4(b) from and after the most recent anniversary of the date hereof,
until the earlier of (A) the last day of the Term (as if such termination had
not occurred) or (B) the date that shall be six (6) months after the date of
such termination. In addition, options granted to Fremed pursuant to Section
4(c) that would have vested during the said continuation period in the absence
of such termination shall vest as if such termination had not occurred.



     (d) This Section 6 sets forth the only obligations of Grand with respect
to the termination of Fremed’s employment with Grand, and Fremed acknowledges
that upon the termination of his employment, he shall not be entitled to any
payments or benefits which are not explicitly provided herein hereof. Any and
all Accrued Obligations shall be paid within fifteen (15) days of the
termination of Fremed’s employment.



     7. Non-Solicitation; Restriction of Competition; Interference.



     (a) As a significant inducement to Grand to enter into and perform its
obligations under this Agreement, during the Term and until the second
anniversary of the termination or



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expiration of the Term or any extension
hereof, for any reason, Fremed will not, either directly or indirectly:




          (i) either alone or in association with others, solicit, or permit any
person or organizations directly or indirectly to solicit, any individual who
at the time of the solicitation is, or who within the six (6) month period
prior to such solicitation was, an employee of Grand to leave the employ of
Grand or terminate his or her employment relationship with Grand, or hire or
attempt to hire or induce, any employee or employees of Grand to terminate
their employment with, or otherwise cease their relationship with, Grand;



          (ii) solicit, divert or take away, or attempt to divert or to take away,
the business or patronage of any of the clients, customers, vendors or
accounts, or prospective clients, customers, vendors or accounts of Grand;



          (iii) directly or indirectly engage any place in the world in any business
which develops, manufactures, promotes or distributes products that are
competitive with those that are marketed by Grand, or those products which are
then under active development by Grand (a “Competing Business”), whether such
engagement shall be as a director, officer, employee, stockholder, shareholder,
partner, member or other owner, affiliate or other participant in any Competing
Business, provided that employment after the Term or any extension thereof by
an entity that carries both a Competing Business and one or more other
businesses shall not constitute a breach of this clause (iii) if such
employment can be shown not to involve participation in such Competing
Business;



          (iv) assist others in organizing or engaging in any Competing Business in
any capacity or manner described in clause (iii) above;



          (v) induce any client, customer, vendor, agent or other person or entity
with whom or which Grand has a business relationship, contractual or otherwise,
to terminate or alter such business relationship;



          (vi) take any action reasonably likely to cause injury to the relationship
between Grand or any of its respective employees and any client, lessor,
lessee, vendor, supplier, customer, distributor, employee, consultant or other
business associate of Grand or any of its affiliates as such relationship
relates to Grand or its affiliates’ conduct of their business.



     (b) The geographic scope of this Section 7 shall extend to anywhere Grand
is doing business at the time of termination or expiration.



     8. Protection of Confidential Information.



     (a) As a significant inducement to Grand to enter into and perform its
obligations under this Agreement, Fremed acknowledges that he has been and will
be provided with information about, and his employment by Grand will,
throughout the Term, bring him into close contact with, many confidential
affairs of Grand, including, without limitation, books, records, business
plans, proprietary information about the Business, costs, profits, markets,
sales, customers, advertisers, vendors, suppliers, products, key personnel,
pricing policies, operational



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methods, technical processes and other business
affairs and methods, plans for future developments and other information not
readily available to the public (the “Confidential Information”), all of which
are highly confidential and proprietary and all of which were developed by
Grand at great effort and expense. Fremed further acknowledges that the
services to be performed by him under this Agreement are of a special unique,
unusual, extraordinary and intellectual character and that the nature of the
relationship of Fremed with Grand is such that Fremed is capable of competing
with Grand. In recognition of the foregoing, Fremed covenants and agrees
during the Term and thereafter he will:




          (i) keep secret all Confidential Information and not disclose such
Confidential Information to anyone outside of Grand, either during or after the
Term, except with Grand’s prior written consent;



          (ii) not make use of any Confidential Information for his own purposes or
the benefit of anyone other than Grand, provided that the confidential matters
referred to in clauses (i) and (ii) of this Section 7 shall not apply to
information which is generally known to the public other than as a result of
Fremed’s breach of this Section 7;



          (iii) deliver promptly to Grand on termination of this Agreement, or at
any time Grand may so request, all confidential memoranda, notes, records,
reports and other confidential documents (and all copies thereof) relating to
the Business which he may then possess or have under his control, except that
he may retain personal notes, notebooks, journals and diaries provided that
such materials do not contain Confidential Information; and



          (iv) not disparage Grand, any affiliate of Grand, any director, officer,
employee or shareholder of Grand, or any affiliate of any such director,
officer, employee or shareholder of Grand by making (or causing others to make)
any oral or written statements or representations that could reasonably be
construed to be a false and misleading statement of fact or a libelous,
slanderous or disparaging statement of or concerning any of the aforementioned
persons.



     9. Specific Remedies; Severability.



     (a) For the purposes of Sections 7 and 8 of this Agreement, references to
Grand shall include all current and future majority-owned subsidiaries of Grand
and all current and future joint ventures in which Grand may from time to time
be involved. It is understood by Fremed and Grand that the covenants contained
in this Section 9 and in Sections 7 and 8 hereof are essential elements of this
Agreement and that, but for the agreement of Fremed to comply with such
covenants, Grand would not have agreed to enter into this Agreement or
consummate the Transaction. Grand and Fremed have independently consulted with
their respective counsel and have been advised concerning the reasonableness
and propriety of such covenants with specific regard to the nature of the
business conducted by Grand and all interests of Grand and its stockholders.
Fremed agrees that the covenants of Sections 7 and 8 are reasonable and valid.
If Fremed commits a breach of any of the provisions of Sections 7 and 8 hereof,
such breach shall be deemed to be grounds for termination for Cause. In
addition, notwithstanding the provisions of Sections 7 and 8, Fremed
acknowledges that Grand may have no adequate remedy at law if he



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violates any
of the terms hereof. Fremed therefore understands and agrees that Grand shall
have without prejudice as to any other remedies:




          (i) the right upon application to any court of proper jurisdiction to a
temporary restraining order, preliminary injunction, injunction, specific
performance or other equitable relief; and



          (ii) the right apply to any court of proper jurisdiction, to require
Fremed to account for and pay over all compensation, profits, monies, accruals,
increments and other benefits (collectively the “Benefits”) derived or received
by Fremed as a result of any transaction constituting a breach of any of the
provisions of Sections 7 or 8, and, if a court so orders, Fremed hereby agrees
to account for and pay over such Benefits to Grand.



     (b) Each of the rights enumerated in Sections 7 or 8 hereof and the
remedies enumerated in this Section 9 shall be independent of the others and
shall be in addition to and not in lieu of any other rights and remedies
available to Grand at law or in equity. If any provision of this Agreement, or
any part of any of them, is hereafter construed or adjudicated to be invalid or
unenforceable, the same shall not affect the remainder of the covenants or
rights or remedies which shall be given full effect without regard to the
invalid portions. If any of the covenants set forth herein is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall reduce the duration and/or area of such provision and in its reduced form
said provision shall then be enforceable. No such holding of invalidity or
unenforceability in one jurisdiction shall bar or in any way affect Grand’s
right to the relief provided in Section 9(a) or otherwise in the court of any
other state or jurisdiction within the geographical scope of such covenants as
to breaches of such covenants in such other respective states or jurisdictions,
such covenants being, for this purpose, severable into diverse and independent
covenants.



     10. Other Agreements.



     Fremed hereby represents that he is not bound by the terms of any
agreement with any previous employer, or with any other party, that would
impair his right or ability to enter the employ of Grand or perform fully his
obligations pursuant to this Agreement. Fremed further represents and warrants
that his performance of all the terms of this Agreement and as an executive of
Grand does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by him in confidence or in
trust prior to his employment with Grand.



11. Change of Control




     In the event that, as a result of any Change in Control of Grand, Fremed
ceases to act in the capacity of Chief Financial Officer of Grand in accordance
with the provisions of this Agreement for any reason other than termination for
Cause, he shall be entitled to the same compensation and benefits as if his
employment had been terminated by Grand without Cause, as provided in Section
6(c). For purposes hereof, a “Change of Control” of Grand shall mean any sale,
transfer, pledge or other encumbrance of shares, or the issuance of shares, or
any other transaction or event including, without limitation, merger or
consolidation, as a result of which



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Cornerstone Overseas Investments, Limited,
either alone or with its affiliates, shall cease to have control of Grand,
where “control” shall mean the right, either directly or indirectly, to elect a
majority of the directors of Grand without the consent or acquiescence of any
third party.




     12. Notices



     Any notice or other communications required or permitted hereunder shall
be in writing and shall be deemed effective (i) upon delivery, if delivered by
hand and followed by notice by mail or facsimile transmission, or electronic
mail, (ii) three (3) days after the date of deposit in the mails, if mailed by
certified or registered mail (return receipt requested), or (iii) on the next
business day, if mailed by an overnight mail service to the parties or sent by
facsimile transmission,



     If to Grand:




Grand Toy International Limited

Room UG202, Floor UG2

Chinachem Golden Plaza

77 Mody Road

Tsimshatsui East

Kowloon, Hong Kong

Attention: Managing Director

Facsimile No.: (852) 2520 5515




     with copies to:




Katten Muchin Zavis Rosenman

1251 Avenue of the Americas, 29th Floor

New York, NY 10020

Attention: Paul J. Pollock, Esq.

Fax: (212) 894-5511



     and




Dorsey & Whitney

One Pacific Place, Suite 3008

88 Queensway

Hong Kong

Attention: Steven C. Nelson, Esq.

Facsimile No.: (852) 2524-3000




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     If to Fremed:


Mr. David J. Fremed

849 Longview Avenue

North Woodmere, NY 11581

USA

Facsimile No.:


or at such other address or telecopy number (or other similar number) as either
party may from time to time specify to the other.




     13. Entire Agreement



     This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of this Agreement.



     14. Amendment



     This Agreement may be amended or modified only by a written instrument
executed by Grand and Fremed.



     15. Governing Law



     This Agreement shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York, USA, which shall be the
proper law hereof notwithstanding any rule or principle of conflict of laws
therein contained under which any other body of law would be made applicable.
If and to the extent that Fremed should, pursuant to the mandatory laws of any
other jurisdiction, acquire by reason of the employment relationship created
hereunder any rights other than those contemplated by this Agreement, he
expressly waives any and all such rights.



     16. Successors and Assigns



     This Agreement is personal to Fremed and without the prior written consent
of Grand shall not be assignable by Fremed otherwise than by will or the laws
of descent and distribution with respect to Fremed’s rights, if any, to be paid
or receive benefits hereunder. This Agreement shall inure to the benefit of
and be enforceable by Fremed’s legal representatives.



     17. Headings



     The headings of this Agreement are for convenience of reference only and
shall not affect in any manner any of the terms and conditions hereof.



     18. Further Assurances



     The parties agree to do, sign and execute all acts, deeds, documents and
corporate proceedings necessary or desirable to give full force and effect to
this Agreement.



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     19. Counterparts



     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same agreement.



     20. Modifications and Waivers



     No term, provision or condition of this Agreement may be modified or
discharged unless such modification or discharge is authorized by the Board of
Directors of Grand and is agreed to in writing and signed by Fremed. No waiver
by either party hereto of any breach by the other party hereto of any term,
provision or condition of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.



     21. Entire Agreement



     This Agreement constitutes the entire agreement between the parties with
respect to the subject matter herein and supersedes all prior agreements,
negotiations and discussions between the parties hereto.



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     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties or their duly authorized officers as of the date first written
above.



	 	 	 	 	 	 	 
	 	 	 	 	GRAND TOYS INTERNATIONAL LIMITED
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	 
	 
	 	 	 	 	 	
 
	 
	 	 	 	 	 	 David J. Fremed







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