Document:

exv10w6

 

Exhibit 10.6

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 HENRY HU, a Hong Kong resident at Room 1007, Tower 2, Harbour
Centre, 8 Hok Cheng Street, Hung Hom, Kowloon, Hong Kong (“Employee”).

     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 Employee as its Chairman of the
Board and Chief Executive Officer, and Employee 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 Employee, and Employee agrees to be employed by
Grand, at its offices in the Hong Kong Special Administrative Region of the
People’s Republic of China (“Hong Kong”) as specified in first paragraph of
this Agreement, 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, Employee shall serve as Chairman of
the Board and Chief Executive Officer of Grand. He shall be responsible for
the management of Grand’s general business affairs, including all such 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”) so long as such duties are not inconsistent with his
position as Chief Executive Officer of a company of comparable size.

          (b) Employee 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

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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 Employee to (i) serve on corporate, civic or charitable boards or
committees, (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, or
(iii) provide consulting services to Cornerstone Overseas Investments, Limited
(“Cornerstone”) or Centralink Investments Limited with respect to certain
acquisition transactions and the arrangement of debt and equity financing under
Employee’s Consulting Agreement with Cornerstone, dated [                   ].

          (c) Subject to and in accordance with the provisions of the Memorandum and
Articles of Association of Grand, Grand shall indemnify Employee 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 Employee in connection with any third party action,
suit, investigation or proceeding arising out of or relating to the performance
by Employee of services for, or the acting by Employee as a director, officer
or employee of, Grand or of any other person or entity at Grand’s request, and
Grand shall advance to Employee 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 Employee a base salary (the “Base
Salary”) at a rate of US$250,000 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) Incentive Compensation. In addition to the amounts of compensation
provided for in subsection (a) hereof, Employee shall be eligible for such
incentive compensation, including stock options, share appreciation rights or
bonuses under plans adopted by the Board for the benefit of employees of Grand,
as the Board may determine at its discretion from time to time.

          (c) Out-of-Pocket Expenses. Grand shall promptly pay to Employee 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 Employee, shall
promptly reimburse him for such payment, provided that Employee provides proper
documentation thereof in accordance with Grand’s policy.

          (d) Participation in Benefit Plans. Employee shall be entitled to
participate in or receive benefits under any pension plan, health and accident
plan or any other employee

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benefit plan or arrangement made available now or in the future by Grand
to its Hong Kong executives and key management personnel, provided that such
plans or arrangements are applicable to employees who are employed less than
full-time.

     5. Termination

          Employee employment hereunder shall be terminated upon Employee’s death or
Employee’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 Employee’s
employment for “Cause.” A termination for “Cause” is a termination evidenced
by a resolution adopted by the Board finding that Employee 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 Employee contemplated by this Agreement;

               (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 under Hong Kong law 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,
Employee shall receive thirty (30) days’ advance written notice that the Board
intends to meet to consider Employee’s termination and specifying the actions
constituting Cause, Employee 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

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based upon the advice of counsel for Grand shall be conclusively presumed to be
done, or omitted to be done, by Employee in good faith and in the best
interests of Grand.

          (b) For Disability. Grand shall have the right to terminate Employee’s
Employment as a result of Employee’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 Employee supported by a written statement from a reputable independent
physician selected by Grand to the effect that Employee 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
Employee 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.

Employee 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).

     6. Effect of Termination

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

               (i) pay to Employee or his estate, as the case may be, the Base Salary
through the date of his death or Disability (pro rated for any partial month);
and

               (ii) reimburse Employee, or his estate, as the case may be, for any
expenses pursuant to Section 4(c) (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 Employee Voluntarily or upon expiration of the
Term. In the event that Employee’s employment is terminated by Grand for Cause
or by Employee voluntarily or upon expiration of the Term, Grand shall pay to
Employee the Accrued Obligations and Employee 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 Employee’s death or Disability, or by Grand
otherwise than for Cause. In the event that Employee’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

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assigns of claims of Employee against them arising out of or by reason of
his termination of employment hereunder:

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

               (ii) Grand shall continue to pay Employee the Base Salary plus benefits in
accordance with Section 4(d) 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 one year after the
date of such termination.

          (d) This Section 6 sets forth the only obligations of Grand with respect
to the termination of Employee’s employment with Grand, and Employee
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 Employee’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 first
anniversary of the termination or expiration of the Term or any extension
hereof, for any reason, Employee 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 was an employee of Grand on the date
of Employee’s termination 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 who
was a client, customer, vendor or prospective client of Grand within the one
year period prior to date of the Employee’s termination;

               (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;

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               (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

          As a significant inducement to Grand to enter into and perform its
obligations under this Agreement, Employee 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 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. Employee 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 Employee with Grand is such that Employee is capable of
competing with Grand. In recognition of the foregoing, Employee covenants and
agrees during the Term and thereafter he will:

          (a) 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;

          (b) 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 this Section 8 shall not apply to information which is generally
known to the public other than as a result of Employee’s breach of this Section
8;

          (c) 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

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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

          (d) 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 Employee 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 Employee to
comply with such covenants, Grand would not have agreed to enter into this
Agreement or consummate the Transaction. Grand and Employee 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. Employee agrees that the covenants of Sections 7 and 8 are
reasonable and valid. If Employee 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, Employee acknowledges that Grand may have no adequate remedy at law if
he violates any of the terms hereof. Employee 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
Employee to account for and pay over all compensation, profits, monies,
accruals, increments and other benefits (collectively the “Benefits”) derived
or received by Employee 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, Employee
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

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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

          Employee 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. Employee 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, Employee
ceases to act in the capacity of Chief Executive 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 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

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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

          If to Employee:

Mr. Henry Hu

Room 1007, Tower 2

Harbour Centre

8 Hok Cheng Street

Hung Hom, Kowloon

Hong Kong

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.

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     14. Amendment

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

     15. Governing Law

          This Agreement shall be governed by, and interpreted and construed in
accordance with, the laws of Hong Kong. If and to the extent that Employee
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 Employee and without the prior written
consent of Grand shall not be assignable by Employee otherwise than by will or
the laws of descent and distribution with respect to Employee’s rights, if any,
to be paid or receive benefits hereunder. This Agreement shall inure to the
benefit of and be enforceable by Employee’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.

     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 Employee. 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.

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     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:	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	 	 	Henry Hu

12exv10w7

 

Exhibit 10.7

ADS PURCHASE AGREEMENT

by

and

among

Centralink Investments Limited

Stephen Altro,

2870304 Canada Inc.,

136011 Canada Inc.,

David Mars,

136012 Canada Inc.,

and

2884330 Canada Inc.

dated

August
[       ], 2004

 

 

Table of Contents

	 	 	 	 	 	 	 
	Recitals
	 	 	 	 	1	 
	Article I.
	 	     Definitions	 	 	1	 
	Article II.
	 	     Purchase and Sale of Shares and Closing	 	 	3	 
	2.1
	 	Purchase and Sale	 	 	3	 
	2.2
	 	Purchase Price	 	 	4	 
	2.3
	 	The Closing	 	 	4	 
	Article III.
	 	     Representations and Warranties of Sellers	 	 	5	 
	3.1
	 	Title to Shares	 	 	5	 
	3.2
	 	Incorporation; Power and Authority	 	 	5	 
	3.3
	 	Valid and Binding Agreement	 	 	5	 
	3.4
	 	No Breach; Consents	 	 	5	 
	3.5
	 	Brokerage	 	 	6	 
	Article IV.
	 	     Representations and Warranties of Buyer	 	 	6	 
	4.1
	 	Incorporation; Power and Authority	 	 	6	 
	4.2
	 	Valid and Binding Agreement	 	 	6	 
	4.3
	 	No Breach; Consents	 	 	6	 
	4.4
	 	Brokerage	 	 	6	 
	4.5
	 	Financial Condition	 	 	6	 
	Article V.
	 	     Agreements of Sellers	 	 	7	 
	5.1
	 	Conditions	 	 	7	 
	5.2
	 	Consents and Authorizations; Regulatory Filings	 	 	7	 
	5.3
	 	No Sale	 	 	7	 
	Article VI.
	 	     Agreement of Buyer	 	 	7	 
	6.1
	 	Conditions	 	 	7	 
	Article VII.
	 	     Conditions to Closing	 	 	7	 
	7.1
	 	Conditions to Buyer’s Obligations	 	 	7	 
	7.2
	 	Conditions to Sellers’ Obligations	 	 	8	 
	Article VIII.
	 	     Termination	 	 	8	 
	8.1
	 	Termination	 	 	8	 
	8.2
	 	Effect of Termination	 	 	9	 
	Article IX.
	 	     Indemnification	 	 	9	 
	9.1
	 	Indemnification by Sellers	 	 	9	 
	9.2
	 	Indemnification by Buyer	 	 	10	 
	9.3
	 	Sole and Exclusive Remedy	 	 	11	 
	Article X.
	 	     General	 	 	11	 
	10.1
	 	Press Releases and Announcements	 	 	11	 
	10.2
	 	Expenses	 	 	11	 
	10.3
	 	Further Assurances	 	 	11	 
	10.4
	 	Amendment and Waiver	 	 	11	 
	10.5
	 	Notices	 	 	12	 

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	10.6
	 	Assignment	 	 	13	 
	10.7
	 	No Third Party Beneficiaries	 	 	13	 
	10.8
	 	Severability	 	 	13	 
	10.9
	 	Complete Agreement	 	 	13	 
	10.10
	 	Signatures; Counterparts	 	 	14	 
	10.11
	 	GOVERNING LAW	 	 	14	 
	10.12
	 	Specific Performance	 	 	14	 
	10.13
	 	Arbitration	 	 	14	 
	10.14
	 	Construction	 	 	14	 
	10.15
	 	Time of Essence	 	 	15	 
	Signatures
	 	 	 	 	16	 

ii

 

ADS PURCHASE AGREEMENT

     This ADS PURCHASE AGREEMENT (this “Agreement”) is made and entered into as
of the                     day of June, 2004, by and among Centralink Investments Limited, a
limited company organized under the laws of the British Virgin Islands
(“Buyer”), Stephen Altro (“Altro”), 2870304 Canada Inc. and 136011 Canada Inc.
(collectively, together with Altro, the “Altro Group”), and David Mars
(“Mars”), 136012 Canada Inc. and 2884330 Canada Inc. (collectively, together
with Mars, the “Mars Group” and, together with the Altro Group, the “Sellers”).

Recitals

     WHEREAS, the Altro Group and the Mars Group own, respectively,
                    and                     American Depositary Shares (“Grand ADSs”), each
representing beneficial ownership of one ordinary voting share in the capital
of Grand Toys International Limited, a private limited company organized under
the laws of the Hong Kong Special Administrative Region of the Peoples Republic
of China (“Grand HK”), having a nominal value of one Hong Kong dollar (HK$1.00)
per share and collectively evidenced by one or more American Depositary
Receipts (“Grand ADRs”).

     WHEREAS, pursuant to Section 9.16 of that certain Subscription and
Exchange Agreement, dated as of November 14, 2003, by and among Grand Toys
International, Inc. (“Grand US”), Grand HK and Buyer, as amended by Amendment
No. 1 to Subscription and Exchange Agreement dated as of March 6, 2004,
Amendment No. 2 to Subscription and Exchange Agreement dated as of March 31,
2004 and Amendment No. 3 to Subscription and Exchange Agreement dated as of May
31, 2004 (as so amended, the “Subscription Agreement”), it is a condition to
the completion of the transactions contemplated by the Subscription Agreement
that Buyer agree to purchase from the Altro Group 465,634 Grand ADSs (the
“Altro ADSs”) and from the Mars Group 458,553 Grand ADSs (the “Mars ADSs” and,
together with the Altro ADSs, the “Sale ADSs”).

     WHEREAS, Sellers desire to sell, and Buyer desires to purchase, the Sale
ADSs on the terms and subject to the conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

Article I. Definitions

     The following terms have the meanings assigned to them below:

     “Agreement” has the meaning set forth in the first paragraph of this
Agreement.

     “Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange
Act.

     “Altro” has the meaning set forth in the first paragraph of this
Agreement.

 

 

     “Altro ADSs” has the meaning set forth in the recitals of this Agreement.

     “Altro Group” has the meaning set forth in the first paragraph of this
Agreement.

     “Altro Purchase Price” has the meaning set forth in Section 2.2.

     “Buyer” has the meaning set forth in the first paragraph of this
Agreement.

     “Buyer Losses” has the meaning set forth in Section 9.1(a)(v).

     “Closing” has the meaning set forth in Section 2.3(a).

     “Closing Date” has the meaning set forth in Section 2.3(a).

     “Consent” means any authorization, consent, approval, filing, waiver,
exemption or other action by or notice to any Person.

     “Contract” means a contract, agreement, commitment or binding
understanding, whether oral or written, that is in effect as of the date of
this Agreement or any time after the date of this Agreement.

     “Disclosure Schedule” means the schedule delivered by Sellers to Buyer on
or prior to the date of this Agreement.

     “Effective Time” has the meaning as defined in the Subscription Agreement.

     “Encumbrance” means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.

     “Governmental Authorization” means any approval, consent, license, permit,
waiver, registration or other authorization issued, granted, given, made
available or otherwise required by any Governmental Entity or pursuant to Law.

     “Governmental Entity” means any federal, state, local, foreign,
international or multinational entity or authority exercising executive,
legislative, judicial, regulatory, administrative or taxing functions of or
pertaining to government.

     “Governmental Order” means any judgment, injunction, writ, order, ruling,
award or decree by any Governmental Entity or arbitrator.

     “Grand ADR” has the meaning set forth in the recitals of this Agreement.

     “Grand ADSs” has the meaning set forth in the recitals of this Agreement.

     “Grand HK” has the meaning set forth in the recitals of this Agreement.

     “Grand US” has the meaning set forth in the recitals of this Agreement.

2

 

     “Law” means any constitution, law, ordinance, principle of common law,
regulation, statute or treaty of any Governmental Entity.

     “Loss” means any Litigation, Governmental Order, complaint, claim, demand,
damage, deficiency, penalty, fine, cost, amount paid in settlement, liability,
obligation, Tax, Encumbrance, loss, expense or fee, including court costs and
reasonable attorneys’ fees and expenses.

     “Mars” has the meaning set forth in the first paragraph of this Agreement.

     “Mars Group” has the meaning set forth in the first paragraph of this
Agreement.

     “Mars ADSs” has the meaning set forth in the recitals of this Agreement.

     “Mars Purchase Price” has the meaning set forth in Section 2.2.

     “Organizational Documents” means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) the limited liability company agreement and articles or
certificate of formation of a limited liability company, (v) any charter or
similar document adopted or filed in connection with the creation, formation or
organization of a Person and (vi) any amendment to any of the foregoing.

     “Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.

     “Required Consents” has the meaning set forth in Section 5.2.

     “Sale ADSs” has the meaning set forth in the recitals of this Agreement.

     “Seller Group” means the Altro Group or the Mars Group.

     “Sellers” has the meaning set forth in the first paragraph of this
Agreement.

     “Seller Losses” has the meaning set forth in Section 9.2(a).

     “Subscription Agreement” has the meaning set forth in the recitals of this
Agreement.

Article II. Purchase and Sale of Shares and Closing

     2.1 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, Sellers agree to sell to Buyer, and Buyer agrees to
purchase from Sellers, the Sale ADSs in the amounts set forth opposite each
such Seller’s name on Exhibit A hereto. Each Seller waives any co-sale rights,
rights of first refusal or similar rights that such Seller may have

3

 

relating to Buyer’s purchase of the Sale ADSs, whether conferred by the Buyer’s Organizational Documents,
by Contract or otherwise.

     2.2 Purchase Price. The purchase price (the “Altro Purchase Price”) of
the Altro ADSs, at $4.00 per Altro ADS, is one million eight hundred sixty two
thousand five hundred thirty six dollars ($1,862,536), which amount shall be
allocated among the Altro Group as indicated on Exhibit A hereto. The purchase
price (the “Mars Purchase Price”) of the Mars ADSs, at $4.00 per Mars ADS, is
one million eight hundred thirty four thousand two hundred twelve dollars
($1,834,212), which amount shall be allocated among the Mars Group as indicated
on Exhibit A hereto.

     2.3 The Closing.

	(a)	 	The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place at the offices of Katten
Muchin Zavis Rosenman at 575 Madison Avenue, New York, New York,
at 10:00 a.m. local time, on the Closing Date, as defined in the
Subscription Agreement (the “Closing Date”), or at such other
place and on such other date as may be mutually agreed by Buyer
and Sellers, in which case “Closing Date” means the date so
agreed. The failure of the Closing to occur on such date will not
ipso facto result in termination of this Agreement and will not
relieve any party of any obligation under this Agreement. The
Closing will be effective as of the close of business on the
Closing Date.
	 
	(b)	 	Subject to the conditions set forth in this Agreement, on
the Closing Date (except as otherwise set forth below):

	(i)	 	     Sellers will deliver to Buyer:
	 
	(A)	 	certificates formerly representing not less than
the number of shares of Grand US stock that shall correspond to
the number of Grand ADSs to be purchased from each of Sellers
respectively hereunder, free and clear of all Encumbrances,
duly endorsed or accompanied by duly executed stock powers;
	 
	(B)	 	a certificate of each Seller dated the Closing Date
stating that the conditions set forth in subsections (a)
through (c) of Section 7.1 have been satisfied;
	 
	(C)	 	a copy of the text of the resolutions adopted by
the board of directors (or similar body) of any Seller that is
not a natural person authorizing the execution, delivery and
performance of this Agreement, certified by an appropriate
officer of such Seller; and
	 
	(D)	 	such other certificates, documents and instruments
as Buyer shall reasonably request for the purpose of (1)
evidencing the accuracy of Sellers’ representations and
warranties, (2) evidencing the performance and compliance by
Sellers with agreements contained in this Agreement, (3)
evidencing the satisfaction of any condition referred to in Section 7.1 or (4)
otherwise facilitating the consummation of the transactions
contemplated by this Agreement.

4

 

	 	 	All actions to be taken by Sellers in connection with consummation of the
transactions contemplated by this Agreement and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated by this Agreement will be in form and substance
reasonably satisfactory to Buyer.

	(ii)	 	     Buyer will deliver to Sellers:
	 
	(A)	 	the Altro Purchase Price and the Mars Purchase
Price, by wire transfer of immediately available funds to the
accounts designated by Altro and Mars, respectively, by notice
given in writing to Buyer no later than three business days
prior to the Closing; and
	 
	(B)	 	a certificate of Buyer dated the Closing Date
stating that the conditions set forth in subsections (a) and
(b) of Section 7.2 have been satisfied;

	(c)	 	All items delivered by the parties at the Closing will be
deemed to have been delivered simultaneously, and no items will be
deemed delivered or waived until all have been delivered.
	 
	(d)	 	Notwithstanding any investigation made by or on behalf of
any of the parties to this Agreement or the results of any such
investigation and notwithstanding the fact of, or the
participation of such party in, the Closing, the representations,
warranties and agreements in this Agreement will survive the
Closing.

Article III. Representations and Warranties of Sellers

     Each Seller represents and warrants to Buyer that, as to such Seller, as
of the date of this Agreement and as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement):

     3.1 Title to Shares. Such Seller owns, of record and beneficially, the
number of Sale ADSs listed opposite such Seller’s name on Exhibit A hereto,
free and clear of any Encumbrance. At Closing, Buyer will obtain good and
valid title to such Sale ADSs, of record and beneficially, free and clear of
any Encumbrance.

     3.2 Incorporation; Power and Authority. If such Seller is not a natural
person, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Such Seller has all necessary
power and authority to execute, deliver and perform this Agreement.

     3.3 Valid and Binding Agreement. If such Seller is not a natural person, the execution, delivery and
performance of this Agreement by such Seller has been duly and validly
authorized by all necessary corporate or equivalent action. This Agreement has
been duly executed and delivered by such Seller and constitutes the valid and
binding obligation of such Seller, enforceable against it in accordance with
its terms.

     3.4 No Breach; Consents. Except as set forth in Schedule 3.4, the
execution, delivery and performance of this Agreement by such Seller will not
(a) contravene any provision of the

5

 

Organizational Documents, if any, of such
Seller; (b) violate or conflict with any Law, Governmental Order or
Governmental Authorization; (c) conflict with, result in any breach of any of
the provisions of, constitute a default (or any event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
result in a violation of, increase the burdens under, result in the
termination, amendment, suspension, modification, abandonment or acceleration
of payment (or any right to terminate) or require a Consent under any Contract
or Governmental Authorization that is either binding upon or enforceable
against such Seller; (d) result in the creation of any Encumbrance upon the
Sale ADSs held by such Seller; or (e) require any Governmental Authorization.

     3.5 Brokerage. No Person will be entitled to receive any brokerage
commission, finder’s fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made by or on behalf of such Seller for which Buyer or
the Company is or could become liable or obligated.

Article IV. Representations and Warranties of Buyer

     Buyer represents and warrants to Sellers that as of the date of this
Agreement and as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement):

     4.1 Incorporation; Power and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, with all necessary power and authority to
execute, deliver and perform this Agreement.

     4.2 Valid and Binding Agreement. The execution, delivery and performance
of this Agreement by Buyer have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and
delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.

     4.3 No Breach; Consents. The execution, delivery and performance of this Agreement by Buyer will
not (a) contravene any provision of the Organizational Documents of Buyer; (b)
violate or conflict with any Law, Governmental Order or Governmental Authority;
(c) conflict with, result in any breach of any of the provisions of, constitute
a default (or any event which would, with the passage of time or the giving of
notice or both, constitute a default) under, result in a violation of, increase
the burdens under, result in the termination, amendment, suspension,
modification, abandonment or acceleration of payment (or any right to
terminate) or require a Consent, including any Consent under any Contract or
Governmental Authorization that is either binding upon or enforceable against
Buyer; or (d) require any Governmental Authorization.

     4.4 Brokerage. No Person will be entitled to receive any brokerage
commission, finder’s fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made by or on behalf of Buyer for which any Seller is or
could become liable or obligated.

     4.5 Financial Condition. Buyer is solvent and will, as of the Closing
Date, be in possession of sufficient funds to discharge its obligations
hereunder.

6

 

Article V. Agreements of Sellers

     Each Seller agrees with Buyer, jointly and severally with other members of
the same Seller Group and severally but not jointly with members of the other
Seller Group, that:

     5.1 Conditions. Sellers will use their best efforts to cause the
conditions set forth in Section 7.1 to be satisfied and to consummate the
transactions contemplated by this Agreement as soon as reasonably possible and
in any event prior to the Closing Date.

     5.2 Consents and Authorizations; Regulatory Filings. Sellers will obtain
all Consents and Governmental Authorizations required for the consummation of
the transactions contemplated by this Agreement, including those listed on
Schedule 3.4 (the “Required Consents”). Sellers will keep Buyer reasonably
advised of the status of obtaining the Required Consents.

     5.3 No Sale. No Seller will sell, pledge, transfer or otherwise place any
Encumbrance on any Sale ADSs owned by such Seller except as provided in this
Agreement.

Article VI. Agreement of Buyer

     6.1 Conditions. Buyer agrees with Sellers that Buyer will use its best efforts to cause
the conditions set forth in Section 7.2 to be satisfied and to consummate the
transactions contemplated by this Agreement as soon as reasonably possible and
in any event prior to the Closing Date.

Article VII. Conditions to Closing

     7.1 Conditions to Buyer’s Obligations. The obligation of Buyer to take
the actions required to be taken by it at the Closing is subject to the
satisfaction or waiver, in whole or in part, in Buyer’s sole discretion (but no
such waiver will waive any rights or remedy otherwise available to Buyer), of
each of the following conditions at or prior to the Closing:

	(a)	 	The representations and warranties set forth in Article
III will be true and correct (without taking into account any
supplemental disclosures after the date of this Agreement by
Sellers or the discovery of information by Buyer);
	 
	(b)	 	Sellers will have performed and complied with each of
their agreements contained in this Agreement;
	 
	(c)	 	Each Required Consent was obtained and is in full force
and effect;
	 
	(d)	 	No Litigation is pending or threatened (i) challenging or
seeking to prevent or delay consummation of the transactions
contemplated by this Agreement, (ii) asserting the illegality of
or seeking to render unenforceable any material provision of this
Agreement; or (iii) imposing or seeking to impose material damages
or sanctions directly arising out of the transactions contemplated
by this Agreement on Buyer or any of their respective officers or
directors; and

7

 

	(e)	 	No Law or Governmental Order was enacted, entered,
enforced, promulgated, issued or deemed applicable to the
transactions contemplated by this Agreement by any Governmental
Entity that would reasonably be expected to result, directly or
indirectly, in any of the consequences referred to in Section
7.1(d).

     7.2 Conditions to Sellers’ Obligations. The obligation of Sellers to take
the actions required to be taken by them at the Closing is subject to the
satisfaction or waiver, in whole or in part, in Sellers’ sole discretion (but
no such waiver will waive any right or remedy otherwise available under this
Agreement), of each of the following conditions at or prior to the Closing:

	(a)	 	The representations and warranties set forth in Article
IV will be true and correct;
	 
	(b)	 	Buyer will have performed and complied with each of its
agreements contained in this Agreement; and
	 
	(c)	 	No Law or Governmental Order will have been enacted,
entered, enforced, promulgated, issued or deemed applicable to the
transactions contemplated by this Agreement by any Governmental
Entity that prohibits the Closing.

Article VIII. Termination

     8.1 Termination. This Agreement will terminate automatically upon any
termination of the Subscription Agreement, regardless of the reason for such
termination. It may also be terminated prior to the Closing:

	(a)	 	by the mutual written consent of Buyer and Sellers;
	 
	(b)	 	by either Altro or Mars, if

	(i)	 	Buyer has breached any representation, warranty or
agreement contained in this Agreement;
	 
	(ii)	 	the transactions contemplated by this Agreement
have not been consummated on or before the Closing Date;
provided, that neither Altro nor Mars will be entitled to
terminate this Agreement pursuant to this Section 8.1(b)(ii) if
any Seller’s failure to comply fully with its obligations under
this Agreement has prevented the consummation of the
transactions contemplated by this Agreement;
	 
	(iii)	 	any of the conditions set forth in Section 7.2
have become impossible to satisfy;

	(c)	 	by Buyer, if

	(i)	 	any Seller has breached any representation,
warranty or agreement contained in this Agreement;

8

 

	(ii)	 	the transactions contemplated by this Agreement
have not been consummated on or before the Closing Date;
provided, that Buyer will not be entitled to terminate this
Agreement pursuant to this Section 8.1(c)(ii) if Buyer’s
failure to comply fully with its obligations under this
Agreement has prevented the consummation of the transactions
contemplated by this Agreement;
	 
	(iii)	 	any of the conditions set forth in Section 7.1
have become impossible to satisfy.

     8.2 Effect of Termination. The right of termination under Section 8.1 is
in addition to any other rights Buyer or Sellers may have under this Agreement
or otherwise, and the exercise of a right of termination
will not be an election of remedies and will not preclude an action for
breach of this Agreement. If this Agreement is terminated, all continuing
obligations of the parties under this Agreement will terminate except that
Sections 10.1 (press releases), 10.2 (expenses), 10.11 (governing law) and
10.13 (arbitration) will survive indefinitely unless sooner terminated or
modified by the parties in writing.

Article IX. Indemnification

     9.1 Indemnification by Sellers.

	(a)	 	Sellers in each Seller Group agree, jointly and severally
with other members of the same Seller Group and severally but not
jointly with members of the other Seller Group, to indemnify and
hold harmless Buyer against any Loss, whether or not actually
incurred prior to the applicable date referred to in Section
9.1(b), arising from, relating to or constituting (i) any breach
or inaccuracy in any of the representations and warranties of
Sellers in the same Seller Group contained in this Agreement or in
the Disclosure Schedule as the same may be brought down to the
Closing Date or any closing certificate delivered by or on behalf
of Sellers in the same Seller Group pursuant to this Agreement
(any such breach or inaccuracy determined without regard to any
qualification for “materiality,” “in all material respects” or
similar qualifications), or (ii) any breach of any of the
agreements of any Seller in the same Seller Group contained in
this Agreement (collectively, “Buyer Losses”).
	 
	(b)	 	If Buyer has a claim for indemnification under this
Section 9.1, Buyer will deliver to Sellers one or more written
notices of Buyer Losses prior to the second anniversary of the
Closing Date. Sellers will have no liability under this Section
9.1 unless the written notices required by the preceding sentence
are given in a timely manner. Any written notice will state in
reasonable detail the basis for such Buyer Losses to the extent
then known by Buyer and the nature of the Buyer Loss for which
indemnification is sought, and it may state the amount of the
Buyer Loss claimed. If such written notice (or an amended notice)
states the amount of the Buyer Loss claimed and Sellers notify
Buyer that Sellers do not dispute the claim described in such
notice or fails to notify Buyer within 20 business days after
delivery of such notice by Buyer whether Sellers dispute the

9

 

	 	 	claim described in such notice, the Buyer Loss in the amount specified
in Buyer’s notice will be admitted by Sellers, and Sellers will
pay the amount of such Buyer Loss to Buyer. If Sellers have
timely disputed the liability of Sellers with respect to such
claim, Sellers and Buyer will proceed in good faith to negotiate a
resolution of such dispute. If a written notice does not state
the amount of the Buyer Loss claimed, such omission will not
preclude Buyer from recovering from Sellers the amount of the
Buyer Loss with respect to the claim described in such notice if
any such amount is promptly provided after it is determined. In
order to assert its right to indemnification under this Article
Article IX, Buyer will not be required to provide any notice
except as provided in this Section 9.1(b).
	 
	(c)	 	Sellers will pay the amount of any Buyer Loss to Buyer
within ten days following the determination of Sellers’ liability
for and the amount of a Buyer Loss (whether such determination is
made pursuant to the procedures set forth in this Section 9.1, by
agreement between Buyer and Sellers or by any arbitration award or
judicial determination that has, in either case, become final and
unappealable).

     9.2 Indemnification by Buyer.

	(a)	 	Buyer agrees to indemnify and hold harmless each of
Sellers against any Loss, whether or not actually incurred prior
to the date referred to in Section 9.2(b), arising from, relating
to or constituting (i) any breach or inaccuracy in any of the
representations and warranties of Buyer contained in this
Agreement or any closing certificate delivered by or on behalf of
Buyer pursuant to this Agreement (any such breach or inaccuracy to
be determined without regard to any qualification as to
“materiality,” “in all material respects” or similar
qualifications) or (ii) any breach of any of the agreements of
Buyer contained in this Agreement (“Seller Losses”).
	 
	(b)	 	If any Seller has a claim for indemnification under this
Section 9.2, such Seller will deliver to Buyer one or more written
notices of Seller Losses prior to the second anniversary of the
Closing Date. Buyer will have no liability under this Section 9.2
unless the written notices required by the preceding sentence are
given in a timely manner. Any written notice will state in
reasonable detail the basis for such Seller Losses to the extent
then known by Sellers and the nature of the Seller Losses for
which indemnification is sought, and it may state the amount of
Seller Losses claimed. If such written notice (or an amended
notice) states the amount of Seller Losses claimed and Buyer
notifies the Seller or Sellers asserting such claim that Buyer
does not dispute the claim described in such notice or fails to
notify such Seller or Sellers within 20 business days after
delivery of such notice that Buyer disputes the claim described in
such notice, Seller Losses in the amount specified in Sellers’
notice will be admitted by Buyer, and Buyer will pay the amount of
such Seller Losses to the Seller or Sellers asserting such claim.
If Buyer has timely disputed its liability with respect to such
claim, Buyer and such Seller or Sellers will proceed in good faith
to negotiate a resolution of such dispute. If a written notice
does not state the amount of the Seller Losses claimed, such
omission will not preclude any Seller from recovering from Buyer
the

10

 

	 	 	amount of Seller Losses sustained by such Seller with respect
to the claim described in such notice if any such amount is
promptly provided once determined. In order to assert its right
to indemnification under this Article Article IX, no Seller will
be required to provide any notice except as provided in this
Section 9.2(b).
	 
	(c)	 	Buyer will pay the amount of any Seller Losses to the
Seller or Sellers entitled to such payment ten (10) days following
the determination of Buyer’s liability for and the amount of the
Seller Losses (whether such determination is made pursuant
to the procedures set forth in this Section 9.2, by agreement
between such Seller or Sellers and Buyer, or by any arbitration
award or judicial determination that has, in either case, become
final and unappealable).

     9.3 Sole and Exclusive Remedy. Prior to or in connection with the
Closing, the parties will have available to them all remedies available under
Law, including specific performance or other equitable remedies. After the
Closing, the rights set forth in Sections 9.1 and 9.2 will be the exclusive
remedy for breach or inaccuracy of any of the representations and warranties
contained in Article III and IV of this Agreement occurring on or prior to the
Closing Date and will be in lieu of other contract damages, but the parties
otherwise will have available to them all other remedies available under Law,
including specific performance or other equitable remedies. Notwithstanding
the foregoing, nothing in this Agreement will prevent any party from bringing
an action based upon allegations of fraud by the other party in connection with
this Agreement. In the event such action is brought, the prevailing party’s
attorneys’ fees and costs will be paid by the non-prevailing party.

Article X. General

     10.1 Press Releases and Announcements. Except as required by Law or any
Governmental Entity, any public announcement or similar publicity with respect
to this Agreement or the transactions contemplated by this Agreement will be
issued, if at all, at such time and in such manner as Buyer determines and
approves. Buyer will have the right to be present for any in-person
announcement.

     10.2 Expenses. Except as otherwise expressly provided for in this
Agreement, Sellers, on the one hand, and Buyer, on the other hand, will each
pay all expenses incurred by each of them in connection with the transactions
contemplated by this Agreement, including legal, accounting, investment banking
and consulting fees and expenses incurred in negotiating, executing and
delivering this Agreement and the other agreements, exhibits, documents and
instruments contemplated by this Agreement (whether the transactions
contemplated by this Agreement are consummated or not).

     10.3 Further Assurances. On and after the Closing Date, Sellers will take
all appropriate action and execute any documents, instruments or conveyances of
any kind that may be reasonably requested by Buyer to carry out any of the
provisions of this Agreement.

     10.4 Amendment and Waiver. This Agreement may not be amended, nor may any
provision of this Agreement or any default, misrepresentation, or breach of
warranty or

11

 

agreement under this Agreement be waived, except in a writing
executed by the party against which such amendment or waiver is sought to be
enforced. Neither the failure nor any delay by any Person in exercising any
right, power or
privilege under this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege. In
addition, no course of dealing between or among any persons having any interest
in this Agreement will be deemed effective to modify or amend any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement. The rights and remedies of the parties to this Agreement are
cumulative and not alternative.

     10.5 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five business days after being mailed, if sent by first class mail,
return receipt requested, or (iv) when receipt is acknowledged by an
affirmative act of the party receiving notice, if sent by facsimile, telecopy
or other electronic transmission device (provided that such an acknowledgement
does not include an acknowledgment generated automatically by a facsimile or
telecopy machine or other electronic transmission device). Notices, demands
and communications to Buyer and Sellers’ Representative will, unless another
address is specified in writing, be sent to the address indicated below:

     If to Buyer:

Centralink Investments Limited

Room UG 202, Floor UG2

Chinachem Golden Plaza

77 Mody Road

Tsimshatsui East

Kowloon, Hong Kong

Attn: Mr. Henry Hu

Facsimile No. 852-2520-5515

     With a copy to:

Dorsey & Whitney

One Pacific Place, Suite 3008

88 Queensway

Hong Kong

Attn: Steven C. Nelson, Esq.

Facsimile No. 011 852 2524 3000

     If to any Seller in the Altro Group:

[ADDRESS]

12

 

Attn:

Facsimile No.

     With a copy to:

Katten Muchin Zavis Rosenman

575 Madison Avenue

New York, New York 10022

Attn: Paul J. Pollock, Esq.

Facsimile No. (212) 894-5511

     If to any Seller in the Mars Group:

[ADDRESS]

Attn:

Facsimile No.

     With a copy to:

Katten Muchin Zavis Rosenman

575 Madison Avenue

New York, New York 10022

Attn: Paul J. Pollock, Esq.

Facsimile No. (212) 894-5511

     10.6 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any party to this Agreement without
the prior written consent of the other parties to this Agreement, except that
Buyer may assign any of its rights under this Agreement to any Subsidiary of
Buyer, so long as it remains responsible for the performance of all of its
obligations under this Agreement. Subject to the foregoing, this Agreement and
all of the provisions of this Agreement will be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
permitted assigns.

     10.7 No Third Party Beneficiaries. Nothing expressed or referred to in
this Agreement confers any rights or remedies upon any Person that is not a
party or permitted assign of a party to this Agreement.

     10.8 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

     10.9 Complete Agreement. This Agreement contains the complete agreement
between the parties and supersedes any prior understandings, agreements or
representations by or among the parties, written or oral.

13

 

     10.10 Signatures; Counterparts. This Agreement may be executed in one or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same instrument. A facsimile signature will be considered an original
signature.

     10.11 GOVERNING LAW. THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES, OF THE STATE OF NEW YORK WILL GOVERN ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE
PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.

     10.12 Specific Performance. Each of the parties acknowledges and agrees
that the subject matter of this Agreement is unique, that the other parties
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or
otherwise are breached, and that the remedies at law would not be adequate to
compensate such other parties not in default or in breach. Accordingly,
subject to the provisions of Section 9.3, each of the parties agrees that the
other parties will be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions of this Agreement in addition to any
other remedy to which they may be entitled, at law or in equity. The parties
waive any defense that a remedy at law is adequate and any requirement to post
bond or provide similar security in connection with actions instituted for
injunctive relief or specific performance of this Agreement.

     10.13 Arbitration. Any dispute, claim or controversy arising out of or in
connection with this Agreement shall be fully determined by arbitration in
accordance with the International Arbitration Rules of the American Arbitration
Association. Unless the parties agree otherwise, there shall be three
arbitrators. The place of arbitration shall be New York, New York, United
States of America and the language of the arbitration shall be English. None
of the Parties shall contest the choice of New York as the proper forum for
such dispute and notice in accordance with Section 10.5 shall be sufficient for
such arbitration panel to conduct such proceedings. Except as the arbitrators
shall otherwise determine, the evidentiary aspects of the arbitral proceedings
shall be conducted in accordance with the Rules on the Taking of Evidence in
International Commercial Arbitration adopted by the Council of the
International Bar Association on June 1, 1999.

     10.14 Construction. The parties and their respective counsel have participated jointly in
the negotiation and drafting of this Agreement. In addition, each of the
parties acknowledges that it is sophisticated and has been advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement
will be construed as if drafted jointly by the parties and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. The parties intend that
each representation, warranty and agreement contained in this Agreement will
have independent significance. If any party has breached any representation,
warranty or agreement in any respect, the fact that there exists another
representation, warranty or agreement relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached will not detract from or mitigate the

14

 

fact that the party is in breach
of the first representation, warranty or agreement. Any reference to any Law
will be deemed to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The headings preceding the text of
articles and sections included in this Agreement and the headings to the
schedules and exhibits are for convenience only and are not be deemed part of
this Agreement or given effect in interpreting this Agreement. References to
sections, articles, schedules or exhibits are to the sections, articles,
schedules and exhibits contained in, referred to or attached to this Agreement,
unless otherwise specified. The word “including” means “including without
limitation.” The use of the masculine, feminine or neuter gender or the
singular or plural form of words will not limit any provisions of this
Agreement. A statement that an item is listed, disclosed or described means
that it is correctly listed, disclosed or described, and a statement that a
copy of an item has been delivered means a true and correct copy of the writing
has been delivered.

     10.15 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.

[The remainder of this page intentionally left blank]

15

 

     IN WITNESS WHEREOF, Buyer and Sellers have executed this ADS Purchase
Agreement as of the date first above written.

	 	 	 	 	 	 	 
	BUYER:	 	SELLERS:
	 
	 	 	 	 	 	 
	GRAND TOYS INTERNATIONAL, LTD.	 	 	 	 
	 	 	 	 	
 
	By:	 	 	 	Name: Stephen Altro
	

	 	
 	 	 	 	 
	Name:
	 	 	 	 	 	 
	

	 	
 	 	 	 	 
	Title:	 	 	 	2870304 CANADA INC.
	

	 	
 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	
 
	 
	 	 	 	 	 	 
	 	 	 	 	136011 CANADA INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	
 
	 
	 	 	 	 	 	 
	 	 	 	 	
 
	 	 	 	 	Name: David Mars
	 
	 	 	 	 	 	 
	 	 	 	 	136012 CANADA INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	
 
	 
	 	 	 	 	 	 
	 	 	 	 	2884330 CANADA INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	
 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	
 

16

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