**Exhibit 10.8**

** **

**AMENDMENT NO. 10 TO**

**LOAN AND SECURITYAGREEMENT**

 

**THIS AMENDMENT NO. 10TO LOAN AND SECURITY AGREEMENT** (this “Amendment”),is entered into on and as of this 14th day of August, 2002, by and betweenSUNROCK CAPITAL CORP., a Delaware corporation (“Lender”), and DSI TOYS,INC., a Texas corporation (“Borrower”).

 

**RECITALS**

 

A.            Borrower and Lender have enteredinto that certain Loan and Security Agreement, dated as of February 2, 1999 (asthe same has been, and may hereafter be, amended, modified, supplemented orrestated from time to time, the “Loan Agreement”).

 

B.            Borrower desires to guaranty aportion of the obligations owing by DSI (HK) Limited to Standard Chartered Bankpursuant to one or more limited guaranties with substantially the terms set forthin that certain Limited Guarantee attached hereto as Exhibit A (the “LimitedGuarantee”).

 

C.            Lender has agreed to consent to theexecution and delivery of the Limited Guarantee, subject to the terms set forthherein.

 

**NOW, THEREFORE,**in consideration of the premises herein contained herein and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties, intending to be legally bound, agree as follows:

 

**ARTICLE I**

**Definitions**

 

**1.01**        Capitalized terms used in thisAmendment, to the extent not otherwise defined herein, shall have the samemeanings as in the Loan Agreement, as amended hereby.

 

**ARTICLE II**

**Amendments**

 

**2.01        Amendment to Events of Default.**  Effective as of the date hereof, Sections10.1(n) and 10.1(o) of the Loan Agreement are hereby amended andrestated in their entirety to read as follows:

 

“(n)         DSI (HK) Limitedshall fail to maintain its existing credit facilities with Dao Heng BankLimited or Standard Chartered Bank, in each case upon such terms and conditionsas Lender may find adequate to provide financing for the continued operationsof DSI (HK) Limited without further support from Borrower;

 

(o)           Any claim or demandfor payment or performance shall be made on, or asserted against, Borrower inrespect of any guarantee or other agreement executed

 

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by Borrower inconnection with any credit facility maintained by DSI (HK) Limited, including,but not limited to, any claim under Borrower’s partial guaranty of anyindebtedness incurred, or to be incurred, by DSI (HK) Limited and owing toeither Dao Heng Bank Limited or Standard Chartered Bank; or”

 

**2.02        Additional Event of Default.**  Effective as of the date hereof, a new Section10.1(p) is hereby added to the Loan Agreement:

 

“(p)         Borrower shall makeany payment to the holders of the subordinated indebtedness permitted pursuantto Sections 9.9(b) or 9.9(c) of this Agreement at a time whensuch payments are not permitted under the subordination agreements entered intobetween Lender and the holders of such subordinated indebtedness andacknowledged by Borrower.”

 

**ARTICLEIII**

**Ratifications,Representations and Warranties, Covenants and Consent**

 

**3.01**        **Ratifications.**Except as expressly amended hereby, the terms and provisions of the LoanAgreement are ratified and confirmed and shall continue in full force andeffect.  Borrower and Lender agree thatthe Loan Agreement, as amended hereby, and each agreement and instrumentexecuted in connection herewith, are, and shall continue to be, legal, valid,binding and enforceable in accordance with their respective terms.

 

**3.02**        **Representations and Warranties.**  Borrowerhereby represents and warrants to Lender that (a) the execution, delivery andperformance of this Amendment has been authorized by all requisite corporateaction on the part of Borrower and does not violate the Articles ofIncorporation or Bylaws of Borrower; (b) the representations and warrantiescontained in the Loan Agreement, are true and correct on and as of the datehereof; (c) as of the date hereof no Event of Default under the Loan Agreementis continuing and no event or condition exists that with the giving of noticeor the lapse of time, or both, would be an Event of Default; and (d) Borroweris in full compliance with all covenants and agreements contained in the LoanAgreement and each agreement and instrument entered into in connectiontherewith.

 

**3.03**        **Covenant to Pay Legal and Other Expenses.**  As provided in the Loan Agreement, Borrower agrees to pay ondemand all costs and expenses incurred by Lender in connection with thepreparation, negotiation and execution of this Amendment, including, withoutlimitation, the costs and fees of Lender’s legal counsel, and all costs andexpenses incurred by Lender in connection with the enforcement or preservationof any rights under the Loan Agreement, as amended hereby, or any agreement,document or instrument executed in connection therewith.  The fee, costs and expenses referred to inthis Section 3.03 may be charged by Lender to Borrower’s loan account atthe option of Lender.

 

**3.04        Consent to Execution of the LimitedGuarantee.** Lender hereby consents to Borrower’s (a) execution of the LimitedGuarantee upon the terms set forth on Exhibit A hereto and (b)incurrence of the contingent obligations evidenced thereby; provided,however, the consent herein provided shall not extend to any futureincrease in the aggregate amount of such

 

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obligations thereby guaranteed,which at all times shall be limited to less than HKD 19,000,000 in theaggregate, plus interest in respect thereof and costs of collection under theLimited Guarantee.  Any increase in theamount guaranteed shall be constitute an Event of Default under the LoanAgreement without notice or opportunity to cure.

 

**ARTICLE IV**

**MiscellaneousProvisions**

 

**4.01**        **Survival of Representations and Warranties.**  All representations and warranties made herein and in the LoanAgreement shall survive the execution and delivery of this Amendment, and noinvestigation by Lender shall affect the representations and warranties or theright of Lender to rely upon them.

 

**4.02**        **Reference to Loan Agreement.**  The LoanAgreement, as amended hereby, and all other agreements, documents orinstruments now or hereafter executed and delivered pursuant to the termsthereof are hereby amended so that any reference in the Loan Agreement or suchother agreements, documents and instruments shall mean a reference to the LoanAgreement, as amended hereby.

 

**4.03**        **Severability.**  Any provision of this Amendment held by acourt of competent jurisdiction to be invalid or unenforceable shall not impairor invalidate the remainder of this Amendment and the effect thereof shall beconfined to the provision so held to be invalid or unenforceable.

 

**4.04**        **Successors and Assigns.**  ThisAmendment is binding upon and shall inure to the benefit of Lender and Borrowerand their respective successors and assigns, except Borrower may not assign ortransfer any of its rights or obligations hereunder without the prior writtenconsent of Lender.

 

**4.05**        **Counterparts.**  This Amendment may be executed in one ormore counterparts, each of which when so executed shall be deemed to be anoriginal, but all of which when taken together shall constitute one and thesame instrument.

 

**4.06**        **Headings.**  The headings, captions, and arrangementsused in this Amendment are for convenience only and shall not affect theinterpretation of this Amendment.

 

**4.07**        **Applicable Law.  THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETOSHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BEGOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.**

 

**4.08        Final Agreement.   THE FINANCING AGREEMENTS (INCLUDING THELOAN AGREEMENT AND THIS AMENDMENT), AS AMENDED HEREBY, REPRESENT THE ENTIREEXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATETHIS AMENDMENT IS EXECUTED.  THEFINANCING AGREEMENTS, AS AMENDED HEREBY, MAY NOT**

 

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**BE CONTRADICTED BY EVIDENCE OF PRIOR,CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTSBETWEEN THE PARTIES.  NO MODIFICATION,RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENTSHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND LENDER.**

 

**4.09        Release.  BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATUREWHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITSLIABILITY TO REPAY THE OBLIGATIONS (AS DEFINED IN THE LOAN AGREEMENT) OR TOSEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER.  BORROWER HEREBY VOLUNTARILY AND KNOWINGLYRELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OFACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, ORCONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORETHE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTERHAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS ANDASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OFCONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROMANY LOANS (AS DEFINED IN THE LOAN AGREEMENT), INCLUDING, WITHOUT LIMITATION,ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVINGINTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANYRIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR ANY FINANCING AGREEMENT,DOCUMENT OR INSTRUMENT ENTERED INTO IN CONNECTION THEREWITH.**

 

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Executed as of the day and year set forth first above.

 
|   | **DSI TOYS, INC.**        |
|--------|---------------------------|
|   |                      |   |
|   |                      |   |
|   | By:                       | /s/ | Robert L.  Weisgarber |   |
|   | Name:                     |   | Robert L.  Weisgarber |   |
|   | Title:                    |   | CFO |   |
|   |                      |   |
|   |                      |   |
|   | **SUNROCK CAPITAL CORP.** |
|   |                      |   |
|   |                      |   |
|   | By:                       | /s/ | Y. Renee  Hannah |   |
|   | Name:                     |   | Y. Renee  Hannah |   |
|   | Title:                    |   | Account  Executive |   |

 

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**Exhibit A**

 

**(See Attached LimitedGuarantee)**

 

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