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EXHIBIT 10.5




 









 








HONG KONG TOY CENTRE LIMITED




September 1, 2003




Mr. Raymond Chan Hong Leung




Dear Raymond,



We are pleased to offer you the position of the Executive Vice President
– Operations/Comptroller with Hong Kong Toy Centre Ltd. (the “Company”). Should
you agree with the terms and conditions of our offer as set out herein, please
confirm your acceptance of the same by signing on a copy of this letter and
returning the same to us.





	1.	 	Position and Duties
	 
	 	 	Service with Company. You will be employed by the Company as Executive
Vice President – Operations/Comptroller. The duties include the
management on all operational matters of the Company and also as
Comptroller of the Company and all other reporting companies of the
Company. The reporting companies of the Company will include the
following companies:-

Gatelink Mould Engineering Ltd

Asian World Enterprises Co., Ltd

Great Wall Alliance Limited

Playwell Industry Limited

Zhejiang Playwell Toy Co. Ltd

Beiliewei PRC Retail Group – Mainland China

Kord Group
	 
	 	 	The business scope of the Company itself includes the marketing, sales,
product development, and manufacturing of “Playwell” branded products,
the manufacturing services to third party customers, as well as acting as
the Hong Kong resident Manager of the following companies:-

Fun-4-All Corp UK

Grand Toys International, Inc HK
	 
	 	 	You will perform such reasonable duties as the Company shall assign to
you from time to time, including acting as an officer or director of the
Company’s affiliated companies as requested by the Company. You will
report to Jeff Hsieh, the President and CEO of the Company.
	 
	 	 	Performance of Duties. You agree to serve the Company faithfully and to
the best of your ability. You hereby confirm that you are under no
contractual commitments inconsistent with your obligations set forth in
this Agreement.
	 
	 	 	Location of Work. You will perform your duties at our offices or
elsewhere within or outside of Hong Kong as required from time to time.




 









 






	 	 	Other rules and regulations. You will abide by the Company’s policies,
rules, and regulations as may be established or amended from time to time
at our sole discretion and in such manner as appropriate, including but
not limited to circulars, electronic emails, memorandums, staff manuals
and the Company’s intranet. You will also abide by all applicable
governmental laws, rules and regulations.
	 
	2.	 	Commencement and Duration
	 
	 	 	Your employment with the Company will commence on January 1, 2004 (the
“Commencement Date”). This Agreement is deemed to commence on Commence
Date and will continue until terminated in accordance with Section 5 of
this letter.
	 
	3.	 	Remuneration
	 
	 	 	Salary. You will be paid a salary of US$175,000 (or HK$1,350,000) per
year payable monthly in accordance with the Company’s normal payroll
procedures and policies.
	 
	 	 	Bonus. The Company will pay, at its sole discretion, a performance cash
bonus against certain performance standards from time to time.
	 
	 	 	Expenses. The Company will pay or reimburse you for reasonable and
necessary out-of-pocket business expenses incurred by you in the
performance of your duties under this Agreement, subject to the Company’s
normal policies for submitting expense receipts for verification.
	 
	 	 	Cornerstone Convertible Preference Share Grant. On the Commencement
Date, the Company will grant to you, without charge, the worth of
US$1,000,000 of Convertible Preference Shares (“Cornerstone CP”) issued
by Cornerstone Overseas Investments Ltd (“Cornerstone”) with the attached
preferential right for Cornerstone to deliver the equivalent value of
Grand Toys International Inc American Depository Receipt (“Grand ADR”).
You agree that for three years from date of Grant, you will not, without
consent of the Company, exercise the conversion rights of the Cornerstone
CP, so long as you are employed by the Company, other than in accordance
to the following allowed manner:-
	 
	 	 	Not more than one third of the total grant exercisable after the one
year.
	 
	 	 	Not more than two thirds of the total grant exercisable after two
years.
	 
	 	 	Balance after three years from the date of Grant.
	 
	 	 	Option Grant. On the Commencement Date the Company will vest you an
option to acquire that number of Cornerstone CP in the Company with a
face value of US$1,000,000 on the Commencement Date. Such option shall
be fully vested on the date of Grant and shall be exercisable at the rate
of one third after one year from the date of Grant, two thirds after two
years, and balance after three years from the date of Grant. The option
will expire ten years from the date of Grant.




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	 	 	The exercise price per
Cornerstone CP will be the equivalent value of the number of Grand ADR’s
deemed convertible per the trading price of the Grand ADR’s on the date
of Grant. The option shall not be assignable or transferable. You agree
that for three years from the date of exercise, you will not, without
consent of the Company, sell or otherwise transfer the Grand ADR’s
obtained upon exercise of the option by paying the due amount for the
exercise of this option; provided, however, that the foregoing
restriction on sale or transfer of the Shares will only apply for so long
as you are employed by the Company.
	 
	 	 	Right of First Refusal. You agree that you will not sell, transfer or
otherwise dispose of any Cornerstone CP, without permitting Jeff Hsieh or
the Company the opportunity to acquire all or a portion of Cornerstone
CP.
	 
	4.	 	Grand Toys International Inc.
	 
	 	 	As you are aware, the Company may become part of Grand Toys International
Inc. (“Grand”). In such case, you may be nominated to perform certain
duties for Grand and in turn, Grand may at its board’s discretion grant
you certain Grand options or share grants in recognition for your
contributions to Grand.
	 
	5.	 	Termination
	 
	 	 	Either party may terminate this contract of employment by giving the
other three (3) months’ notice in writing or by agreeing to make a
payment of wages in lieu of the notice entitlement.
	 
	 	 	Notwithstanding the aforementioned, we may dismiss you without notice or
payment in lieu thereof pursuant to Section (9) of the Ordinance if you
(a) willfully disobey our lawful and reasonable order; or (b) conduct
yourself in such a manner to be inconsistent with an employee’s due and
faithful discharge of its duties; or (c) you have acted fraudulently or
dishonestly; or (d) you habitually neglect your duties; (e) you engage in
gross or willful misconduct; (f) you are convicted of a serious crime;
(g) you violate the terms of this employment agreement; (h) you engage in
conduct that may be damaging to or reflect poorly upon the Company or its
affiliates, including Grand; or (i) any other grounds on which an
employer would be entitled to terminate an employment contract without
notice at Common Law (collectively, “for cause”).
	 
	 	 	On Termination of your employment you shall immediately return to the
Company, in accordance with any instructions which may be given to you,
all items of property belonging to the Company in your possession or
under your control including customer lists, sales records, technical
information and data, specifications, software manuals, correspondence,
notes, reports, papers and other documents (together with any summaries,
extracts or copies thereof), Company car, keys, credit cards, passes and
tools. You must, if so required by the Company, confirm in writing that
you have complied with your obligations under this provision.




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	6.	 	Non-Competition
	 
	 	 	You agree that during the term of this Agreement or any extension
thereof, and for a period of one year after the termination of this
Agreement, that you will not, without the Company’s prior written
consent: (a) complete with the business activities of the Company or its
affiliates as they currently are as of the date of this agreement and
also as they may be on the date of termination or accept employment with
a competitor of the Company or its affiliates; (b) solicit any person,
firm, or entity who, at any time during a one-year period preceding the
termination of this Agreement, was a customer, vendor, supplier,
distributor, consultant, agent, manufacturer or other business contact of
the Company or its affiliated, with the sole exception that you may
conduct business (provided you do not breach any other term or provision
of this Agreement) with any entity who was previously known to or
associated with you; or (c) solicit to leave or hire other individuals
who were employees of the Company or its affiliated on the date you left
the Company.
	 
	 	 	You agree that the limitations set forth above are reasonable in time and
geographic scope and, if any provision hereof is held invalid or
unenforceable, the remainder shall nevertheless remain in full force and
effect and that this Agreement shall be enforced to the broadest possible
extent. In particular, you agree that if any court of competent
jurisdiction or arbitration panel shall determine that the duration or
geographical limit of the foregoing non-competition covenant is invalid
or unenforceable, it is the intention of you and of the Company that it
shall not be terminated thereby but shall be deemed to have been amended
to the extent required to render it valid and enforceable, such amendment
to apply only with respect to the jurisdiction of the court making such
adjudication.
	 
	7.	 	Confidential Information
	 
	 	 	Except in the proper performance of your duties, you will not either
during your employment or at any time afterwards use or communicate to
any person, and during your employment you will use your best endeavor to
prevent the disclosure of, any information of a confidential nature
concerning the business of the Company or of any person having dealings
with it and which comes to your knowledge during the course of your
employment, unless an officer of the Company expressly authorizes in
writing such disclosure or use.
	 
	 	 	By way of illustration but not limitation, confidential information
includes inventions, discoveries, developments and improvements,
know-how, techniques, designs, processes, formulae and data, plans for
research, development, new products, marketing, and selling, information
regarding business plans and budgets, unpublished financial statements,
licenses, prices and costs, and information concerning suppliers and
customers that has not been publicly displayed.




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	8.	 	Governing Law
	 
	 	 	Your employment with the Company shall be governed by and construed in
accordance with the laws of the Special Administrative Region of Hong
Kong of the People’s Republic of China and the parties hereby submit to
the Hong Kong courts or Labour Tribunal in respect of any dispute or
matter arising out of or in connection with this employment agreement.
	 
	9.	 	Personal Data
	 
	 	 	You unconditionally and irrevocably consent to the Company’s disclosure
and/or transfer of any personal data collected from you.
	 
	10.	 	Miscellaneous
	 
	 	 	This offer shall be in substitution for any subsisting agreement or
arrangement (oral or otherwise) which we may have with you which shall be
deemed to have been terminated by mutual consent as from the Commencement
Date.
	 
	 	 	The expiration or termination of the employment with us howsoever arising
shall not operate to affect such of the provisions in this letter which
are expressed to operate or have effect thereafter.
	 
	 	 	In the event of any variation of the remuneration payable to you pursuant
to the terms of this letter being made by our mutual consent such
variation shall not constitute a new offer but (subject to any express
mutual agreement to the contrary) your employment with us hereunder shall
continue subject in all respects to the terms and conditions as set out
herein with such variation as aforementioned.
	 
	 	 	Should any provision of this letter and the terms and conditions set out
herein be found by any court of competent jurisdiction to be invalid or
unenforceable for any reason, the invalidity of such provision shall not
affect the other provisions of this letter and all provisions not
affected by such invalidity shall remain in full force and effect.
Notwithstanding the aforementioned, if a provision is held to be invalid
because of its extent (in terms of time, geographical coverage
and/otherwise) such term shall be reduced in scope to ensure its validity
and shall be read and continue to form part of the terms and conditions
herein as if the original extent had been reduced.
	 
	 	 	Any delay by us in exercising our rights under this letter shall not
constitute a waiver of any of our rights hereunder.





	 	 	 
	

	 	Sincerely,

/s/ Jeff Hsieh

	

	 	

	

	 	Jeff Hsieh







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I hereby accept the terms of the offer

as set out above in this letter and

agree to be bound by such terms and

conditions as set out herein.




	 	 	 
	/s/  Raymond
Chan

	 
	 	 
	Date:

	
	 







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