**EXHIBIT10.5**

 
| **Date:**    |   | 29th April 2002       |
|--------------|--------|-----------------------|
| **Our ref:** |   | C&I/LC/TEAM10/BLC |

 

 

**CONFIDENTIAL**

 

DSI (HK) Ltd.

#### Suite 1401, New T&TCentre,

Harbour City,

Tsimshatsui,

Kowloon.

 

Attn.:  Mr.Alfred Chan

 

 

Dear Sirs,

 

 

**BANKING FACILITIES: DSI (HK) LTD.**

 

 

We are pleased to confirm that the Bank is willing to make available toyour company (the “Company”) the following supplier finance facilities up tothe amounts indicated.

 

 

**1.                   POST-SHIPMENTFACILITY — HKD19,000,000.-**

 

Negotiationof clean or discrepant documents presented under irrevocable letters of creditissued by banks acceptable to the Bank, up to 100% of the bill amount and formaximum tenor of 90 days.

 

 

**2.                   FACTORING FACILITY —HKD19,000,000.-**

 

For purchase of receivables in accordance with the terms of theReceivables Purchase Agreement(s) entered into and the rider(s) (if any) fromtime to time agreed between the Bank and the Company (“Agreement”).

 

Expressions used in this section have the same meanings as defined inthe Agreement unless otherwise defined or the context otherwise requires.

 

The above limit represents the FIU Limit.  Aggregate Funds In Use in respect of Debts purchased from theCompany shall not at any time exceed the FIU Limit or, when aggregated with thetotal amount for the time being outstanding under Facility 1, shall not at anytime exceed HKD19,000,000.-.

 

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Customer list is to be advised to and approved by the Bank from time totime.

 

Prepayment will be made by the Bank up to the Prepayment Percentage (ifnot zero) less the Bank’s Service Charge, but subject to the FIU Limit and theConcentration Percentage not being exceeded, and conditional upon compliance inall other respects with the terms of the Agreement.

 

Credit insurance cover (if applicable) will be taken out in the Bank’sname with either a credit insurer or factoring company appointed by the Bank.

 

The following will also be required for all receivables purchased bythe Bank:-

 

(1)**                                 **copy of invoice endorsed with notice ofassignment of the relevant debt to the Bank of the right to receive payment inrespect of the invoice and otherwise complying with the terms of the Agreement;

 

(2)**                                 **if required by the Bank, formalassignment of debt in the Bank’s approved form, duly executed by you;

 

(3)**                                 **cargo receipt, bill of lading, airwaybill or other evidence of delivery of goods or completion of servicessatisfactory to the Bank;

 

Collectionwill be done either through the Bank, the Bank’s service provider or afactoring company appointed by the Bank. All proceeds are directly payable to the Bank.

 

DiscountingCharge will be payable monthly, calculated as the percentage stipulated in theAgreement of the Funds In Use from time to time.

 

Service Charge will be calculated as stipulated in the Agreement.

 

Shoulda repayment against an individual invoice be overdue, no further prepayment isallowed until that overdue has been rectified.

 

 

**INTEREST,COMMISSIONS AND FEES**

 

A default rate of Prime plus 8% per annum, or HIBOR plus 8% per annum,whichever is higher, will apply to amounts not paid when due or in excess ofagreed facility amounts.  “Prime” meansthe rate which we announce or apply from time to time as our prime rate forlending Hong Kong Dollars and “HIBOR” means the rate which we determine to bethe Hong Kong Interbank Offered Rate for the relevant period.  Commissions will be charged at our standardrates.  Export bills will be discountedat 3-month HIBOR plus 2% per annum for Hong Kong Dollar bills and at our standardbills finance rates for foreign currency bills.  All past due bills shall bear interest at 4% per annum above therates charged on your regular bills outstandings.

 

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You shall pay to the Bank an arrangement fee of HKD8,000.-, payable onthe date on which the Bank’s offer of the above facilities are accepted by youas signified by your counter-signing of this letter.  The arrangement fee is non-refundable in any event.  A handling fee in an amount to be mutuallyagreed will be payable on each anniversary of the date of this letter if thefacilities are continuing.  The feeswill be debited to your current account.

 

Whether or not the documentation for the above facilities is executedor the facilities are made available to you as contemplated following youracceptance of this letter, you shall forthwith on demand reimburse the Bank allout of pocket expenses (including but not limited to legal fees anddisbursements) incurred by the Bank in connection with the facilitiesincluding, without limitation, the negotiation, preparation, execution and/orenforcement of this letter and the documentation referred to below.

 

 

**AVAILABILITYAND REPAYMENT**

 

The above facilities are subject to periodic review by the Bank at itsdiscretion, and it is expressly agreed that they will at all times be availableat the sole discretion of the Bank. Notwithstanding any other provisions contained in this letter or in anyother document, the Bank will at all times have the right to require immediatepayment and/or cash collateralisation of all or part of any sums actually orcontingently owing to it in respect of the above Facility 1, and the right toimmediately terminate or suspend, in whole or in part, all of the aboveFacilities 1 to 2 and all further utilisation of the facilities.

 

 

**ASSIGNMENT**

 

The Company may not assign ortransfer all or any of it’s rights, benefits or obligations under this letter(and any documentation or transactions to which this letter relates) withoutthe Bank’s prior written consent.

The Bank may at any time assignor transfer to any one or more banks or other financial institutions all or anyof it’s rights, benefits or obligations under this letter (and anydocumentation or transactions to which this letter relates) or change itslending office.

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**DOCUMENTATION**

 

Before the above facilities may be used, the enclosed copy of thisletter and the Bank’s standard form General Customer Agreement must be signedby the Company and returned to us together with a certified copy of appropriateauthorising board resolutions.

 

The following documentation are held/will also be required:

 

·**                                                            **Corporate guarantee by DSI Toys, Inc.,limited to the principal amount of HKD19,000,000.-, plus interest and othercharges.

 

·**                                                           **Receivable Purchase Agreement and otherrelated documents, including without limitation formal assignment of debtswhere required, in the Bank’s approved forms for the above Facility 2.

 

·**                                                           **Certified true copies of the certificatesof incorporation and memoranda and articles of association of the Company andDSI Toys, Inc.

 

·**                                                           **A signed original copy of the auditedfinancial statements of the Company within 9 months after its financial yearend.  A signed original copy of theinterim management accounts of the Company within 3 months after the respectiveperiod.

 

·**                                                           **Such other information as the Bank mayrequest from time to time.

 

 

**UNDERTAKINGS**

 

The Company undertakes to the Bank that it will:

 

·**                                                           **Not encumber its assets by way of adebenture / floating charge over all assets without the prior written consentof the Bank.

 

·**                                                           **Inform the Bank within seven days fromexecution of any new pledge / charge over the Company’s assets.

 

·**                                                           **Not utilize the above facilities tofinance any related companies transactions.

 

·**                                                            **Immediatelyinform the Bank of any change of its directors or beneficial shareholders oramendment of its memorandum or articles of association.

 

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By acceptance of this letter the Company givesconsent to the Bank to disclose details of the Company’s****account relationship withthe Bank (including credit balances and any security given for the facilities)to all or any of the following persons (whether in or outside Hong Kong): (i)its Head Office and any of its offices, branches, related companies orassociates, (ii) any actual or proposed participant or sub-participant in, orassignee or novatee of the Bank’s rights in relation to the Company’s accounts,(iii) any agent, contractor or third party service provider which providesservices of any kind to the Bank in connection with the operation of itsbusiness, (iv) any financial institution with which the Company has or proposesto have dealings to enable credit checks to be conducted on the Company,  and (v) any person to whom the Bank is underan obligation to make disclosure under the requirements of any law binding onthe Bank or any of its branches.

 

Please sign the enclosed copy of this letter and return it to theBank’s Credit Operations at 11th Floor, Standard Chartered Tower, 388 Kwun TongRoad, Kwun Tong, Hong Kong, for the attention of Mr. Franco Fu, within onemonth after the date of this letter, after which this offer will lapse.  This letter will be governed by Hong KongSAR law.

 

We enclose a set of documents which should also be completed andreturned to the Bank at the above mentioned address.  If you have any queries regarding the completion of the requireddocuments, please contact Mr. Franco Fu, whose telephone number is 2282-6253.  With regard to queries on banking arrangements,you can contact our Relationship Manager Ms. Daniella Koo, whose telephonenumber is 2821-1835.

 

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We are pleased to be of service to you and take this opportunity tothank you for your custom.

 

 

Yours faithfully,

For and on behalf of **STANDARD CHARTERED BANK**

 

 

 

 

 
| /s/ IRIS LI                                  |   | /s/ SANDRA LEUNG                         |
|----------------------------------------------|--------|------------------------------------------|
| Iris Li  Senior Credit Documentation Manager |   | Sandra Leung  Manager, Credit Operations |

 

SL/IL/FF/mc

Encl.

 

Agreed.

For and on behalf of **DSI (HK) LTD.**

 
| /s/ ALFRED CHAN |   |   |
|-----------------|--------|--------|
|            |   |   |

 

 

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