**Exhibit10.9**

 
| Standard   Chartered | **Guarantee - G3 Limited (92)**         |
|---------------------------|-----------------------------------------|
|                      | **(By  one or more limited companies/** |
|                      | **corporations)**                       |

 

To:  Standard Chartered Bank

 

1.                                       Inconsideration of STANDARD CHARTERED BANK (hereinafter called “the Bank”, whichexpression shall include and extend to its successors and assigns) granting orcontinuing banking facilities or other accommodation for so long as the Bankmay think fit to DSI (HK) Ltd.                                                (hereinaftercalled the “Customer”)  We DSI Toys.Inc. of 1100 West Sam Houston Parkway, North, Houston, Texas  77043                                                                                            herebyunconditionally guarantee, undertake and agree on written demand by the Bank:

 

(a)                                  topay and discharge the following (hereinafter called the “Liabilities”):

 

(i)            all moneys now or hereafter advancedto or paid for or on account of the Customer (whether alone or jointly with anyother person) by the Bank; and

 

(ii)           all other liabilities of the Customerto the Bank whatsoever, whether actual or contingent, present or future andincluding, without limitation, liabilities incurred as a guarantor or suretytogether with all interest thereon and commission, costs, charges and expenseschargeable by the Bank to the Customer (including legal fees), from time totime remaining unpaid and undischarged;

 

PROVIDED ALWAYS that (subject as mentioned in Clause12) the amount for which we shall be liable to the Bank under this sub-clause(and not including any amounts due under sub-clauses (b) and (c) of thisClause) shall not exceed HONG KONG DOLLARS NINETEEN MILLIONONLY                                                                                                        (HKD19,000,000.—       ) plus interest,commission, cost, charges and expenses as aforesaid;

 

(b)                                 topay interest, in the currency in which such sums are denominated, in the Bank’sbooks on all sums due from us to the Bank under this Guarantee (hereinaftercalled the “Guaranteed Sums”) or the outstanding balance thereof from time totime during the period from the date of demand by the Bank as aforesaid or fromthe date of discontinuance of this Guarantee by us until the date when theGuaranteed Sums are discharged in full (after as well as before judgment) at arate or rates per annum conclusively certified by the Bank to be one and onehalf of one per cent. (1-1/2%) above the rate or rates at which the Customerwould have been liable to pay interest on the amounts demanded by the Bank underthe facilities or other accommodation extended by the Bank to the Customer (andto the extent permitted by law the Bank shall be entitled to compound suchinterest monthly);

 

1

----

 

(c)                                  topay all costs and expenses (on a full indemnity basis) arising out of or inconnection with the recovery or attempted recovery by the Bank of moneys due tothe Bank under this Guarantee.

 

2.                                       ThisGuarantee shall extend to cover:

 

(a)           inthe case of the death, bankruptcy or liquidation of the Customer, all sumswhich would have been owing to the Bank by the Customer if such death hadoccurred or such bankruptcy or liquidation had commenced at the time when theBank received actual notice thereof and notwithstanding such death, bankruptcyor liquidation;

 

(b)           allmoneys obtained from or liabilities incurred to the Bank notwithstanding thatthe borrowing or the incurring of such liabilities may have been invalid or inexcess of the powers of the Customer or of any director, attorney, agent orother person purporting to borrow or act on behalf of the Customer andnotwithstanding any other irregularity in the borrowing or the incurring ofsuch liabilities;

 

(c)           inthe event of the discontinuance by any means of this Guarantee, all cheques,drafts, bills, notes and negotiable instruments drawn by or for the account ofthe Customer on the Bank and purporting to be dated on or before the date whensuch discontinuance became known to the Bank or (in the case of notice todiscontinue given hereunder) took effect although presented to or paid by theBank after that date and all liabilities of the Customer to the Bank at suchdate whether actual or contingent and whether payable forthwith or at somefuture time and also all credits then established by the Bank for the Customer.

 

3.             Weshall be deemed to be liable as the sole or principal debtor(s) for theLiabilities and this Guarantee shall be binding on us notwithstanding that theCustomer is not so bound either because the Customer is an infant or under adisability or is an unincorporated body which is under no liability todischarge obligations undertaken or purported to be undertaken on its behalf orfor any other reason whatsoever.

 

4.             Ifthis Guarantee is given in respect of the Liabilities of a firm it shall applyto all moneys borrowed and Liabilities incurred until receipt by the Bank ofactual notice of dissolution of the firm but if there shall be any other changein the constitution of the firm this Guarantee shall continue and, in additionto securing the debts and Liabilities of the firm as constituted before thechange, shall apply to the debts and Liabilities of the firm as constitutedafter such change.

 

5.             TheBank may at all times without prejudice to this Guarantee and withoutdischarging or in any way affecting our liability hereunder:

 

(a)           determine,vary or increase any credit to the Customer;

 

(b)           grantto the Customer or to any other person any time or indulgence;

 

(c)           renew any bills,notes or other negotiable instruments or securities;

 

2

----

 

(d)           dealwith, exchange, release, modify or abstain from perfecting or enforcing anysecurities or other guarantees or rights which the Bank may now or hereafterhave from or against the Customer or any other person;

 

(e)           compoundwith the Customer or with any other person or guarantor.

 

6.             ThisGuarantee shall not be affected by any failure on the Bank’s part to take anysecurity or by the invalidity of any security taken or by any existing orfuture agreement by the Bank as to the application of any advances made or tobe made to the Customer.  Our liabilityhereunder shall not be discharged or in any way affected by any act or omissionon the part of the Bank under or in relation to this Guarantee or by any courseof dealing between the Bank and us.

 

7.             ThisGuarantee shall not be considered as satisfied or discharged by anyintermediate payment or satisfaction of the whole or any part of theLiabilities or by any other matter or thing whatsoever but shall constitute andbe a continuing guarantee to the Bank and shall extend to cover the ultimatebalance of the Liabilities and shall be binding upon us until the expiration ofone month after the receipt by the Bank from us of notice in writing todiscontinue it.

 

8.             ThisGuarantee shall be in addition to and is not to prejudice or be prejudiced byany other guarantee or other security whether by way of mortgage, charge, lienor otherwise which the Bank may now or at any time hereafter have or hold fromus, the Customer or any other party for all or any part of the Liabilities andon discharge by payment or otherwise shall remain the property of the Bank.

 

9.             Inthe event of this Guarantee being determined or ceasing from any cause to bebinding as a continuing guarantee on us:

 

(a)           itshall be lawful for the Bank to continue to provide facilities (as hereinbeforementioned) to the Customer and to continue any account with the Customernotwithstanding such event and our liability for the amount of the Liabilitiesat the date this Guarantee is determined shall continue notwithstanding anysubsequent payment to or drawing upon or advance by the Bank by or to or for oron behalf of the Customer; and

 

(b)           theBank may forthwith without thereby affecting its rights under this Guaranteeopen a new or separate account with the Customer and, if the Bank does not opena new or separate account, the Bank shall nevertheless be treated as if it haddone so at the time (the “relevant time”) that the Bank received notice orbecame aware that this Guarantee had determined or ceased to be binding as acontinuing guarantee and as from the relevant time all moneys paid by or onbehalf of the Customer shall be credited or be treated as having been creditedto the new or separate account and shall on settlement of any claim in respectof this Guarantee not operate to reduce the amount due from the Customer at therelevant time or the interest thereon unless the person or persons paying insuch moneys shall at the time of payment direct the Bank in writing toappropriate the sum specially to that purpose.

 

10.           TheBank shall be entitled at all times to place and keep in a separate or suspenseaccount or accounts to our credit or to the credit of such other person as theBank may think fit any moneys received under this Guarantee or as a result ofthe exercise of any of its rights against the Customer or any other surety inrespect of the Liabilities for so long and in such manner as the

 

3

----

 

Bank may determine without any intermediate obligation to apply thesame or any part thereof in or towards the discharge of the Liabilities and theBank shall be entitled to prove against us as if any amount standing to thecredit of such account had not been received. We hereby irrevocably waive any right of appropriation in respect of anysums paid by us.

 

11.           Until all theLiabilities have been fully paid and discharged (and notwithstanding that wemay have discharged the amount of this Guarantee), we shall not take any stepto enforce any right against the Customer or his/their representatives inrespect of this Guarantee or of any moneys paid hereunder or prove in anybankruptcy, liquidation, administration, winding up or other proceeding havingan effect equivalent thereto of the Customer (each of which proceedings arehereinafter called a “Liquidation”) in respect thereof in competition with theBank or claim the benefit of any securities held by the Bank.

 

12.           We have not takenand, until the Liabilities and Guaranteed Sums have been discharged andsatisfied in full, will not take without the Bank’s prior written consent anysecurity (which for the purposes of this Clause shall include any promissorynote, cheque or bill of exchange) from the Customer in connection with thisGuarantee; and in the event of our having taken or taking any security incontravention of this provision we will hold the same on trust for the Bank asfurther security for the Bank and will forthwith deposit the same and alldocuments relating thereto with the Bank and we will account to the Bank forall moneys at any time received by us in respect thereof and in default of ourso doing the maximum amount for which we are to be liable under this Guarantee(as set out in Clause 1(a) above) shall be increased by the amount by which anydividend in the bankruptcy or in the Liquidation of the Customer or otherwisepayable by the Customer to the Bank is thereby diminished.

 

13.           Any settlement ordischarge between us and the Bank shall be conditional upon no security(including without limitation, any guarantee) furnished or payment made to theBank by the Customer or any other person being avoided or reduced by virtue ofany relevant statutory provisions or enactments relating to bankruptcy, windingup or liquidation or other proceeding having an equivalent effect to any of theforegoing for the time being in force in any jurisdiction and the Bank shall beentitled to retain any security held in respect of our liability hereunder(hereinafter called the “Guarantee Security”) until the expiration of theperiod or periods under such provisions or enactments within which such paymentor security could be avoided or reduced and if within any such period thepayment or security is so avoided or reduced the Bank shall be entitled toretain the Guarantee Security or any part thereof for and during such furtherperiod as the Bank in its entire discretion shall determine.

 

14.           In any proceedingsunder or for any other purpose of this Guarantee a certificate signed by anyofficer or representative of the Bank certifying the amount of the Liabilitiesshall be accepted by us as conclusive evidence thereof.

 

15.           (a)           We will pay and discharge theLiabilities and any interest payable by us pursuant to Clause 1(b) hereof, inwhatever currency or currencies the Liabilities are entered in the books of theBank and if any part of the Liabilities is entered in a different currency fromany other part or parts of the Liabilities we shall pay and discharge each partof the Liabilities and any interest payable by us pursuant to Clause 1(b)hereof, in the currency in which such part or as the case may be such interestis entered in the books of the Bank and if any such payment or discharge is

 

4

----

 

subject to any withholding or other tax, duty, levy, impost or chargeimposed or levied by or on behalf of any government or any politicalsubdivision or taxing authority thereof we shall pay to the Bank suchadditional amounts as may be necessary to ensure the receipt by the Bank of thefull amount of the Liabilities and any such interest.

 

(b)           Forthe purposes of ascertaining at any time and in particular on the date of anydemand hereunder the maximum amount (if any) for which we are to be liable inaccordance with Clause 1(a) hereof if some or all of the Liabilities areentered in the books of the Bank in a currency or currencies other than thecurrency in which such maximum amount is denominated (the “Limit Currency”)those parts of the Liabilities denominated in currencies other than the LimitCurrency will be converted, notionally, into the Limit Currency at the rate atwhich the Bank would sell to us, in accordance with its usual practices, the currencyin which such other parts of the Liabilities are denominated provided alwaysand we agree that if some or all of the Liabilities are entered in the books ofthe Bank in a currency other than the Limit Currency, and the amount of theLiabilities exceeds the maximum amount stipulated in Clause 1(a), the Bankshall be at liberty to elect which parts of the Liabilities shall be and formpart of the Guaranteed Sums.

 

16.           Anynotice or demand hereunder shall be in writing and shall be deemed to have beensufficiently given if sent by prepaid (and, if posted to a place outside HongKong, air mail) post to the address of the person to whom such notice or demandis to be given as appearing herein or to such other address as such person mayfrom time to time have notified to the Bank and any notice or demand so sentshall be deemed to have been served on the day following the date of posting ifposted in Hong Kong to an address in Hong Kong and on the eighth day followingposting if posted to or from a place outside Hong Kong and in proving suchservice it shall be sufficient to prove that the envelope containing the noticewas properly addressed, stamped and posted.

 

17.           Ifany one or more of the provisions of this Guarantee or any part or partsthereof shall be declared or adjudged to be illegal, invalid or unenforceableunder any applicable law, such illegality, invalidity or unenforceability shallnot vitiate any other provisions of this Guarantee and this Guarantee shall beconstrued as if such illegal, invalid or unenforceable provisions were notcontained herein.

 

18.           Inthis Guarantee wherever the context so requires or admits (i) where theCustomer comprises two or more persons all references to the Customer shall beconstrued as references to all or any of such persons, (ii) the singular shallinclude the plural and vice versa, (iii) the expression “person” shall mean andinclude a company, society, corporation, firm or an individual and in the caseof an individual his or her executors, administrators, committee, receiver orother person lawfully acting on behalf of every such person, (iv) theexpression “this Guarantee” shall be construed as including and extending toany separate or independent stipulation or agreement herein contained, and (v)any reference to any statutory provision or enactment shall be deemed toinclude a reference to any modification or re-enactment thereof for the timebeing in force.

 

19.           Wherethis Guarantee is signed by more than one party our liability hereunder shallbe joint and several and every agreement and undertaking on our part shall beconstrued accordingly

 

5

----

 

and all references to us in this Guarantee shall, where the contextrequires or admits, be construed as references to all or any of us and the Bankshall be at liberty to release or discharge any of us from the liabilities ofthis Guarantee or to accept any composition from or make any other arrangementswith any of us without releasing or discharging the other or others of us orotherwise prejudicing or affecting the rights and remedies of the Bank againstthe other or others of us and no one of us shall be nor shall this Guarantee bereleased or discharged by any takeover, reconstruction, amalgamation, merger,liquidation or change in the constitution of any of us.

 

20.           ThisGuarantee shall remain valid and binding for all purposes notwithstanding anychange by amalgamation, consolidation or otherwise which may be made in theconstitution of the company or corporation by which the business of the Bankmay from time to time be carried on and shall be available to the companycarrying on that business for the time being.

 

21.           ThisGuarantee is and will remain the property of the Bank notwithstanding thepayment in full of any claim or claims of the Bank hereunder.

 

22.           ThisGuarantee shall be governed by and construed in accordance with the laws ofHong Kong and we hereby submit to the non-exclusive jurisdiction of the HongKong courts.

 

23.           Wehereby appoint the person named below (if any) as our agent to accept serviceof any legal process in Hong Kong in connection with this Guarantee.  We agree that any writ, summons, order,judgment or other document shall be deemed duly and sufficiently served on usif addressed to us or to the said agent and left at, or sent by post to therespective address of us or the said agent last known to the Bank.  The foregoing shall not limit the rights ofthe Bank to serve process on us in any manner permitted by law in anyjurisdiction.

 

24.           Weagree that the Chinese translation shall not apply in construing this securityand that the English version shall govern for all purposes.

 

Dated   19th  day   of    August    ,2002.

 
| Name of Process Agent  (if any) |   |   |
|---------------------------------|--------|--------|
| Address of Process  Agent:      |   |   |
|                            |   |   |
|                            |   |   |

 

 

6

----

 

 

Corporate Signatory

 

Signed by:

 
| JOSEPH S. WHITAKER               |   | /s/ Joseph S. Whitaker  |
|----------------------------------|--------|-------------------------|
| a Director for and on  behalf of |   | (Signature of Director) |
|                             |   |                    |
| DSI TOYS, INC.                   |   |                    |
| (Name of Company)                |   |                    |

 

in the presence of:

 
| Name of Witness:                           | THOMAS V. YARNELL         |   |                  |
|--------------------------------------------|---------------------------|--------|-----------------------|
|                                       |                      |   |                  |
| I/D Card No.  (or equivalent)  of Witness: | TX. Dr. License  08433265 |   |                  |
|                                       |                      |   |                  |
| Address of Witness:                        | 2819 CRYSTAL FALLS        |   |                  |
|                                       | KINGWOOD, TX              |   |                  |
|                                       | 77345                     |   |                  |
| Occupation of Witness:                     | ATTORNEY                  |   | /s/ Thomas V. Yarnell |
|                                       |                      |   | Signature of Witness  |
|                                            |                           |        |                       |  |

 

7

----