SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 28, 1999
eGames, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-27102 23-2694937
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 750-6606
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On September 28, 1999, eGames, Inc. (the "Company") entered into an
agreement with Sovereign Bank to extend and increase its existing $1 million
revolving credit facility to a $1.5 million revolving credit facility expiring
October 31, 2000, as described in the Amended and Restated Line of Credit Note
and Amendment to Line of Credit Loan and Security Agreement, attached hereto as
Exhibits 99.1 and 99.2, and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. None.
b. None.
c. Exhibits.
99.1 Amended and Restated Line of Credit Note
99.2 Amendment to Line of Credit Loan and Security Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eGames, Inc.
By: /s/ Gerald W. Klein
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Gerald W. Klein, President and
Chief Executive Officer
Dated: October 25, 1999
EXHIBIT 99.1
AMENDED AND RESTATED
LINE OF CREDIT NOTE
$1,500,000.00 Date: September 28, 1999
THIS AMENDED AND RESTATED LINE OF CREDIT NOTE is made this 28th day of
September 1999 by eGames, Inc. ("Maker") in favor of Sovereign Bank ("Bank").
BACKGROUND
Maker and Bank pursuant to a commitment letter between Maker and Bank
dated February 4, 1999 (the "Bank Commitment") entered into a loan transaction
whereby Bank agreed to extend a line of credit to Maker in a sum up to
$1,000,000.00 ("Original Loan").
The Original Loan is evidenced and secured by the following documents
each dated March 10, 1999: Line of Credit Loan and Security Agreement between
Maker and Bank (the "Original Loan Agreement") and a Line of Credit Note from
Maker to Bank in the stated principal amount of $1,000,000.00 (the "Original
Note").
The Bank Commitment, Original Note and Original Loan Agreement are
hereinafter collectively called (the "Original Loan Documents").
Maker has requested that among other modifications, Bank extend the
Maturity Date as defined in the Original Loan Documents, increase the principal
balance of the Original Loan from $1,000,000.00 to $1,500,000.00, and amend the
Original Loan Documents to reflect such modifications pursuant to a commitment
letter dated September 17, 1999 by and between Bank and Maker (the "Second Bank
Commitment"). Bank has agreed to the foregoing request, conditioned upon the
agreements of Maker as hereinafter set forth and as set forth in the First
Amendment to the Line of Credit Loan and Security Agreement by and between Maker
and Bank, of even date herewith (the "Loan Modification Agreement"). The Second
Bank Commitment, the Loan Modification Agreement and this Amended and Restated
Line of Credit Note shall be collectively called the "Modification Documents".
The term "Note" as used in the Original Loan Documents and the Modification
Documents shall mean this Amended and Restated Line of Credit Note. The Original
Loan Agreement and the Loan Modification Agreement shall be collectively
referred to as the "Loan Agreement".
This Note amends and restates the Original Note and is issued in
connection with the Modification Documents and is entitled to the benefits of
the Original Loan Documents as modified by the Modification Documents.
<PAGE>
NOW THEREFORE, Maker and the Bank each intending to be legally bound
hereby, agree that the Original Note is hereby amended and restated in its
entirety upon the terms and conditions hereinafter set forth:
FOR VALUE RECEIVED, without defalcation, demand or setoff, eGAMES, INC,
a Pennsylvania corporation ("Maker"), in accordance with the terms and
conditions set forth below, hereby promises to pay to the order of SOVEREIGN
BANK (the "Bank"), the principal sum of One Million Five Hundred Thousand
Dollars ($1,500,000.00) or such lesser amount as may be advanced to Maker
pursuant to the Loan Agreement in lawful money of the United States of America,
together with interest thereon at an annual rate equal to the "Prime Rate" (as
defined below) plus .50%.
I. The "Prime Rate" is the floating annual rate of interest
that is announced from time to time by the Bank as the Prime Rate and is used by
the Bank as a reference base with respect to different rates charged to
borrowers. The Prime Rate shall change simultaneously and automatically upon the
Bank's designation of any change in such Prime Rate. The Bank's determination
and designation from time to time of the referenced rate shall not in any way
preclude the Bank from making loans to other borrowers at a rate which is higher
or lower than or different from the Prime Rate.
II. Interest shall be due and payable monthly in arrears
commencing September 30, 1999 and continuing on the thirtieth day of each month
thereafter until the Bank's credit availability evidenced by this Note has
expired or been terminated, and the principal amount of and all accrued interest
with regard to this Note have been paid in full (it being understood that
interest shall again accrue upon any subsequent borrowing under the Loan
Agreement).
III. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed (365/360 or 366/360 as appropriate).
IV. Principal shall be due and payable on the earlier to occur
of (i) an Event of Default (as defined in the Loan Agreement), or (ii) October
31, 2000.
V. Upon the occurrence of a default hereunder, the rate of
interest shall be increased to a rate equal to two percent (2%) above the Prime
Rate, payable on the date of default (the "Default Rate"). Interest at the rate
provided for herein, or the Default Rate, shall continue to accrue at such rate,
and continue to be paid even after default, maturity, acceleration, recovery of
judgment, bankruptcy or insolvency proceeding of any kind until such monetary
default has been cured.
VI. If any of the aforesaid payments of interest shall become
overdue for a period in excess of ten (10) days, Maker shall pay the Bank a
"late charge" of five percent (5%) of the monthly interest payment then past
due.
<PAGE>
VII. All payments of principal and interest with regard to
this Note shall be made in lawful money of the United States of America in
immediately available funds at the Bank's office at Two Aldwyn Center, Lancaster
Avenue and Route 320, Villanova, Pennsylvania 19085 or at such other place as
the Bank shall designate in writing.
VIII. Maker shall not be obligated to pay and the Bank shall
not collect interest at a rate in excess of the maximum permitted by law or the
maximum that will not subject the Bank to any civil or criminal penalties. If,
because of the acceleration of maturity, the payment of interest in advance or
any other reason, Maker is required, under the provisions of the Loan Agreement
to pay interest at a rate in excess of such maximum rate, the rate of interest
under such provisions shall immediately and automatically be reduced to such
maximum rate, and any payment made in excess of such maximum rate, together with
interest thereon at a rate provided herein from the date of such payment, shall
be immediately and automatically applied to the reduction of the unpaid
principal balance of this Note as of the date on which such excess payment is
made. If the amount to be so applied to reduction of the unpaid principal
balance exceeds the unpaid principal balance, the amount of such excess shall be
refunded by the Bank to Maker.
IX. Notwithstanding the face amount of this Note, the
liability of the Maker under this Note shall be limited at all times to the
unpaid principal amount of, all accrued unpaid interest on, all late charges
with respect to, and all costs incurred in the collection of any sum due under
and in connection with the Line of Credit Facility (as provided in Article 2 of
the Original Loan Agreement) and as reflected on the records of the Bank and all
other amounts due under this Note or the Loan Agreement.
X. This Note is the Note referred to in Article 2 of the
Original Loan Agreement and is entitled to all the benefits of the Loan
Agreement and all the security referred to therein. In the event of a conflict
between the terms of this Note and the terms of the Loan Agreement, the terms of
the Loan Agreement shall control.
XI. All of the agreements, conditions, covenants, provisions
and stipulations contained in the Loan Agreement which are to be kept and
performed by Maker are hereby made a part of this Note to the same extent and
with the same force and effect as if they were fully set forth herein, and Maker
covenants and agrees to keep and perform them, or cause them to be kept and
performed, strictly in accordance with their terms.
XII. Upon the occurrence of an Event of Default as that term
is defined in Article 8 of the Original Loan Agreement, then, and in such event,
the Bank may declare this Note to be due and payable, whereupon the entire
unpaid balance of principal, together with all accrued interest thereon, shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything herein or
in the Loan Agreement to the contrary notwithstanding.
<PAGE>
XIII. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AS THAT TERM
IS DEFINED IN THE LOAN AGREEMENT, MAKER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF THE COMMONWEALTH OF
PENNSYLVANIA OR ELSEWHERE TO APPEAR AT ANY TIME FOR MAKER IN ANY ACTION BROUGHT
AGAINST SUCH MAKER ON THIS NOTE AT THE SUIT OF THE BANK, WITH OR WITHOUT
DECLARATION FILED, AS OF ANY TERM, AND THEREIN TO CONFESS OR ENTER JUDGMENT
AGAINST MAKER FOR THE ENTIRE UNPAID PRINCIPAL OF THIS NOTE AND ALL OTHER SUMS
PAYABLE BY OR ON BEHALF OF MAKER PURSUANT TO THE TERMS OF THIS NOTE OR THE LOAN
AGREEMENT, AND ALL ARREARAGES OF INTEREST THEREON, TOGETHER WITH COSTS OF SUIT,
ATTORNEY'S COMMISSION FOR COLLECTION OF TEN PERCENT (10%) OF THE TOTAL AMOUNT
THEN DUE BY MAKER TO THE BANK (BUT IN ANY EVENT NOT LESS THAN TWO THOUSAND
DOLLARS ($2,000.00)), AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY
AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE AUTHORITY GRANTED HEREIN TO CONFESS
JUDGMENT SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF BUT SHALL CONTINUE FROM
TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE
HEREUNDER.
XIV. The remedies of the Bank as provided herein or in the
Loan Agreement, and the warranties contained herein or in the Loan Agreement,
shall be cumulative and concurrent, and may be pursued singly, successively, or
together at the sole discretion of the Bank, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or release thereof.
XV. Maker hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by the Bank under the terms of this
Note or of the Loan Agreement, as well as all benefit that might accrue to Maker
by virtue of any present or future laws exempting any property, real or
personal, or any part of the proceeds arising from any sale of any such
property, from attachment, levy, or sale under execution, or providing for any
stay of execution, exemption from civil process, or extension of time for
payment; and Maker agrees that any real estate that may be levied upon pursuant
to a judgment obtained by virtue hereof, on any writ of execution issued
thereon, may be sold upon any such writ in whole or in part in any order desired
by the Bank.
XVI. Maker and all endorsers, sureties and guarantors hereby
jointly and severally waive presentment for payment, demand, notice of demand,
protest and notice of protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, or enforcement of the
payment of this Note, and they agree that the liability of each of them shall be
unconditional, without regard to the liability of any other party, and shall not
be affected in any manner by any indulgence, extension of time, renewal, waiver
or modification granted or consent to any and all extensions of time, renewals,
waivers, or modifications that may be granted by the Bank with respect to the
payment or other provisions of this Note, and to the release of the collateral
or any part thereof, with or without substitution, and agree that additional
makers, endorsers, guarantors, or sureties may become parties hereto without
notice to them or affecting their liability hereunder.
<PAGE>
XVII. The Bank shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by the Bank, and then only to the extent
specifically set forth in the writing. A waiver on one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy to a
subsequent event.
XVIII. This instrument shall be governed by and construed
according to the domestic internal laws (but not the law of conflict of laws) of
the Commonwealth of Pennsylvania.
XIX. Whenever used, the singular number shall include the
plural, the plural the singular, the use of any gender shall be applicable to
all genders, and the words the "Bank" and "Maker" shall be deemed to include the
respective successors and assigns of the Bank and Maker.
XX. Any provision contained in this Note which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
caused this Note to be duly executed by its authorized officers, and its
corporate seal to be affixed and attested, the day and year first above written.
ATTEST: eGAMES, INC
By: /s/ Ellen Pulver Flatt By: /s/ Thomas W. Murphy
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Corporate Seal
EXHIBIT 99.2
AMENDMENT TO LINE OF CREDIT LOAN
AND SECURITY AGREEMENT
THIS AMENDMENT TO LINE OF CREDIT LOAN AND SECURITY AGREEMENT
("Amendment" or "Agreement") dated September 28th, 1999, by and between eGames,
Inc. ("Borrower") and Sovereign Bank ("Bank").
BACKGROUND
Borrower executed and delivered to Bank a certain Amended and Restated
Line of Credit Note of even date herewith in the stated principal sum of One
Million Five Hundred Thousand ($1,500,000.00) Dollars, evidencing an extension
of a Line of Credit ("Loan").
To further evidence and secure the Loan, Borrower is executing this
Agreement which amends in certain respects, the Line of Credit Loan and Security
Agreement ("Original Loan Agreement") executed and delivered to Bank on March
10, 1999.
The Borrower and the Bank have agreed to modify such terms and
conditions of the Original Loan Agreement as hereinafter set forth. All
capitalized terms used but not defined herein have the meanings defined in the
Original Loan Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties hereto intending to be
legally bound hereby, agree as follows:
1. Paragraph 2.1.0.1. of the Original Loan Agreement is hereby
amended by:
A. Deleting the word "One Million ($1,000,000.00) Dollars"
and replacing it with "One Million Five Hundred Thousand
($1,500,000.00) Dollars"; and
B. Deleting the date "October 31, 1999" and replacing it with
"October 31, 2000".
2. Paragraph 2.1.0.4 of the Original Loan Agreement is hereby
amended by:
A. Deleting the date "October 31, 1999" and replacing it with
"October 31, 2000"; and
B. Deleting the date "June 30, 1999" and replacing it with
"June 30, 2000".
3. Paragraph 2.2.0.1 of the Original Loan Agreement is hereby
amended by deleting the number "One Million ($1,000,000.00)
Dollars" and replacing it with the number "One Million Five
Hundred Thousand ($1,500,000.00) Dollars.
<PAGE>
4. Paragraph 2.2.0.3 of the Original Loan Agreement is hereby
amended by deleting the date "March 30, 1999" and replacing it
with the date "September 30, 1999".
5. Paragraph 2.2.0.4 of the Original Loan Agreement is hereby
amended by deleting the date "October 31, 1999" and replacing
it with the date "October 31, 2000".
6. Paragraph 2.2.0.7 of the Original Loan Agreement is hereby
deleted in its entirety.
7. Paragraph 2.2.0.9 is hereby amended by adding at the end of
the paragraph the following:
"Borrower represents and warrants that there will be no
material change from the draft of its financial statement
dated June 30, 1999 which has been delivered to the Bank and
the final audited financial statement of Borrower dated June
30, 1999."
8. Article 5 of the Original Loan Agreement is hereby amended by
adding at 5.8:
"Fee: Borrower shall pay to Bank an annual line of credit
commitment fee of .25%, which fee is presently Three Thousand
Seven Hundred Fifty ($3,750.00) Dollars".
9. Paragraph 6.1.1.1. of the Original Loan Agreement is hereby
amended by adding the following:
"As soon as available, and in any event not later than 60 days
after the close of each fiscal year of Borrower beginning with
the fiscal year ending June 30, 2000, the annual consolidating
report of Borrower containing a balance sheet of Borrower as
of the end of such fiscal year and related statements of
income, shareholders' equity and changes in financial position
of Borrower for such fiscal year, setting forth in each case
in comparative form the corresponding figures of the previous
annual audit report, all in reasonable detail, prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved,
compiled by the chief financial officer of Borrower."
10. Paragraph 6.1.1.2 of the Original Loan Agreement is hereby
amended by adding the following:
"As soon as available, and in any event not later than 30 days
after the close of each three-month period of each fiscal year
of Borrower, the consolidating, balance sheet and profit and
loss statement of Borrower as of the end of such quarter and
related statements of income, shareholders' equity and changes
in financial position of Borrower for such three-month period
and for the period from the beginning of the current fiscal
year to the end of such three-month period, setting forth in
each case in comparative form the corresponding figures for
the corresponding periods of the preceding fiscal year, all in
reasonable detail, prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved, and compiled by an
independent certified public accountant or the chief financial
officer of Borrower."
<PAGE>
11. Article 6 is hereby amended by adding as paragraph 6.1.5 the
following:
"Monthly Accounts Receivable. Within 15 days of the preceding
month's end, Borrower shall furnish an accounts receivable aging
report of the preceding month's end prepared by the chief
financial officer of Borrower."
12. Article 6 is amended by adding as paragraph 6.19 the following:
"Minimum Net Income;
"During the term of the Loan, Borrower will maintain a minimum net
income as follows:
6/30/99 to 9/30/99 - no losses.
6/30/99 to 12/31/99 - Five Hundred Thousand ($500,000.00)
Dollars.
6/30/99 to 3/31/2000 - One Million ($1,000,000.00) Dollars.
6/30/99 to 6/30/2000 - One Million Five Hundred Thousand
($1,500,000.00) Dollars."
Borrower's compliance with this covenant shall be verified at
the close of each fiscal quarter of Borrower in accordance
with Paragraphs 6.1.1.1 and 6.1.1.2 of the Original Loan
Agreement as amended hereby."
13. Paragraph 9.2 of the Original Loan Agreement is hereby amended
by deleting the name "David F. Ciccanti" and replacing it with
"Thomas M. McGrory".
14. Paragraph 9.14 of the Original Loan Agreement is hereby amended by
adding the following:
"Borrower represents to Bank that it maintains its Collateral
at the locations listed on Schedule 9.14 attached hereto and
made a part hereof. Borrower further represents and warrants
that it shall have executed and filed, if appropriate, any and
all instruments, documents, certificates, opinions and
assurances ("Documents") required by Bank to evidence, secure,
perfect or in any other manner protect Bank's first lien
position in the Collateral. Borrower shall have executed,
filed and returned to Bank all such Documents within ten (10)
business days of Bank's request for such documentation.
Failure by Borrower to timely perform this covenant shall be
an immediate Event of Default without the requirement of Bank
to give notice or opportunity to cure such default before Bank
pursues its remedies under the Loan Agreement. This Paragraph
shall further be a Condition for Lending, as defined in
Article 5 of the Loan Agreement."
<PAGE>
15. Except as expressly modified hereby, the terms and conditions
of the Original Loan Agreement shall remain unmodified and in
full force and effect. Any reference in the Loan Documents to
the Loan Agreement shall mean such document as modified by
this Amendment.
IN WITNESS WHEREOF, the parties each intending to be legally bound
hereby have executed this Amendment the day and year first above written.
ATTEST: eGAMES, INC
By: /s/ Ellen Pulver Flatt By: /s/ Thomas W. Murphy
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Corporate Seal
SOVEREIGN BANK
By: /s/ Thomas M. McGrory
---------------------------------
Thomas M. McGrory, Vice President
