EXHIBIT 99.1
LOAN AGREEMENT
THIS LOAN AGREEMENT is made this 9th day of August, 2000, by and
between SUMMIT BANK (Bank) and eGames, Inc., a Pennsylvania corporation
(referred to herein as the Borrower).
1. DEFINITIONS. The terms set forth below shall be defined as follows:
1.1 Bank Address is: 7111 Valley Green Road, Fort Washington, PA
19034-2209.
1.2 Borrower is eGames, Inc., a Pennsylvania corporation.
1.3 Borrower Address is: 2000 Cabot Boulevard West, Suite 110,
Langhorne, PA 19047.
1.4 Collateral means all property (real, personal and mixed,
tangible and intangible), assets or rights owned by Borrower,
all of which have been pledged to secure the payment of the
Obligations, whether now owned or existing or hereafter
created or acquired and the cash and noncash proceeds thereof
as the same is more fully described in that certain Security
Agreement between the parties hereto of even date herewith.
1.5 Date of Agreement is August 9, 2000.
1.6 Event of Default means each and every event specified as such
in Section 6 of this Agreement or in any Loan Document.
1.7 Loan Document(s) means any Loan Agreement, Note, Surety
Agreement, Security Agreement, Mortgage or any other document
heretofore, now or hereafter executed by or on behalf of
Borrower to Bank, together with all modifications, extensions
and/or renewals thereof.
1.8 Maturity Date shall have the meaning attributed to such term
in the Notes (as hereinafter defined).
1.9 Obligations means all indebtedness, obligations and
liabilities of Borrower to Bank of every kind and description,
direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, including, but
not limited to, any overdrafts, whether for payment or
performance, now existing or hereafter arising, whether
presently contemplated or not, regardless of how the same
arise or by what instrument, agreement or book account they
may be evidenced, or whether evidenced by any instrument,
agreement or book account, including, but not limited to, all
loans (including any loan by modification, renewal, extension
or derivative transactions), all indebtedness, all
undertakings to take or refrain from taking any action, all
indebtedness, liabilities or obligations owing from Borrower
to others which Bank may have obtained by purchase,
negotiation, discount, assignment or otherwise; and all
interest, taxes, fees, charges, expenses and reasonable
attorney's fees (whether or not such attorney is a regularly
salaried employee of Bank) chargeable to Borrower or incurred
by Bank under this Agreement, or any other document or
instrument delivered in connection herewith, therewith or in
connection with any other loan between Bank and Borrower
whether now existing or entered into at a later date.
1.10 Security Interest means any transaction which creates or
provides for a lien or security interest by agreement in and
to any Collateral or property of Borrower. To the extent not
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defined in Section 1, (or in any other Loan Documents),
unless the context otherwise requires, all other terms
contained in this Agreement shall have the meanings
attributed to them by the Uniform Commercial Code in force
in the Commonwealth of Pennsylvania (UCC), as of the Date of
Agreement, to the extent that same are used or defined
therein.
To the extent not defined in Section 1, unless the context
otherwise requires, all accounting terms in this Agreement
shall be construed in accordance with generally accepted
accounting principles (GAAP) as of the Date of Agreement, to
the extent that same are used or defined herein.
2. COMMITMENTS
2.1 Subject to the terms and conditions of the Loan Documents,
Bank agreed to lend to Borrower and Borrower agrees to borrow
from Bank an aggregate amount at any one time outstanding not
to exceed Two Million Dollars ($2,000,000.00) from the Date of
Agreement to the Maturity Date (Loan-A). Within such limits,
Borrower may borrow, repay and reborrow at any time or from
time to time. Loan-A shall be evidenced by a Two Million
Dollars ($2,000,000.00) Secured Line of Credit Note in favor
of Bank (Note-A) and secured by a first priority security
interest in all assets of Borrower. Borrower shall use the
proceeds of Note-A for working capital and short term
borrowing requirements. A commitment fee of Ten Thousand
Dollars ($10,000.00) shall be due and payable by Borrower to
Lender at the time of Closing.
3. REPRESENTATIONS AND WARRANTIES
3.1 Borrower represents and warrants to Bank, and such
representations and warranties shall be continuing so long as
any Obligations shall remain outstanding as follows:
3.1.1 Borrower: (i) has all necessary licenses, patents,
trademarks, copyrights and permits to carry on and
operate all of its properties; and (ii) has the power
and authority to own the Collateral, to enter into
and perform the Loan Documents and to incur the
Obligations. Borrower has been duly incorporated and
organized and is validly existing as a corporation,
in good standing under the laws of the jurisdiction
of incorporation and is duly qualified as a foreign
corporation in those jurisdictions where the conduct
of its business or the ownership of its properties
requires qualification.
3.1.2 Borrower has not changed its name, form, identity or
structure, been the surviving entity in a merger or
acquired any business; or changed the location of the
Equipment (as defined in the Security Agreement); or
changed the location of its place of business or
chief executive office or the location of its records
with respect thereto or the location of any returns
of inventory.
3.1.3 This Agreement and any Loan Documents constitute
valid and legally binding Obligations of Borrower and
are enforceable against Borrower in accordance with
their respective terms.
3.1.4 Borrower has filed all Federal, state and local tax
returns and other reports Borrower is required to
file and has paid or made adequate provision for
payment of all such taxes, assessments and other
governmental charges.
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3.1.5 All property owned or utilized by Borrower in
the operation of its business is in compliance and
will continue to be in compliance with all require-
ments of all applicable environmental laws, including
without limitation, the Pennsylvania Hazardous
Sites Cleanup Act (Pa.Stat.Ann.tit.35 6070.101
et seq., as amended); the Pennsylvania Solid Waste
Management Act (Pa.State.Ann.tit. 35 6018.101 etseq.,
as amended); the Pennsylvania Clean Streams Law
(Pa.Stat.Ann.tit. 35 691.1 et seq., as amended);
the Pennsylvania Storage Tank and Spill Prevention
Act (Pa.Stat.Ann.tit. 35 6020.1 et seq.); the
Hazardous and Solid Waste Amendments of 1984 Pub.
L98-616 (42 U.S.C. 699 et seq., as amended); the
Resource Conservation and Recovery Act (42 U.S.C.
6901 et seq., as amended) and the Comprehensive
Environmental Response, Compensation and Liability
Act (42 U.S.C. 9601 et seq., as amended; (all
such Federal, state, county, municipal or other
laws, ordinances or regulations are hereinafter
collectively referred to as the Environmental Laws).
3.1.6 The execution and performance of this Agreement and
any Loan Document will not violate or result in a
default or in the creation or imposition of any lien
or encumbrance upon any of the assets, properties
or property rights of Borrower (immediately, with
the passage of time, or with the giving of notice and
the passage of time) under any other contract,
agreement, or instrument to which Borrower is a
party or by which Borrower is bound, nor will it
result in the acceleration of any obligation
under any mortgage, lien, lease, franchise, license,
permit, agreement, instrument, order, arbitration
award, judgment or decree, or in the termination
of any license, franchise, lease, or permit, to
which Borrower is a party or by which it is bound;
and it will not violate or conflict with any other
restriction of any kind or character to which
Borrower is subject.
3.1.7 Borrower incurs the Obligations herein from Bank for
business purposes only and shall not incur the
Obligations for personal, household or family
purposes.
3.1.8 Except as disclosed on Schedule 3.1.8 attached hereto
and made a part hereof, there is no claim, loss,
infringement, contingency, litigation or proceeding
pending, or, to Borrower's knowledge, threatened or
imminent against or otherwise affecting Borrower that
involves the possibility of any judgment or liability
not fully covered by insurance or that may result in
a material adverse change in the business,
properties, prospects, operation or condition
(financial or otherwise) of Borrower.
3.1.9 Borrower has complied in all material respects with
all applicable statutes, regulations, ordinances,
court decrees, or other directives of the United
States of America and all states, counties,
municipalities, and agencies with respect to the
manufacture and sale of Borrower's goods, the
rendition of Borrower's services and/or the conduct
of Borrower's business; furthermore, Borrower has
received no notice of any violation of applicable
statutes, regulations, ordinances, court decrees, or
other directives of the United States of America and
all states, counties, municipalities, and agencies.
3.1.10 Borrower has heretofore delivered to Bank current
financial statements, acceptable to Bank (as
evidenced by Banks execution hereof), which were
prepared by independent certified public accountants.
The financial statements were true, correct and
complete and were prepared in accordance with GAAP,
consistently applied and present fairly the financial
position and results of operations of Borrower as of
the date of and for the period involved. The
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financial statements make full and adequate provision
for all obligations, liabilities and commitments
(fixed and contingent) of Borrower as of the date of
the financial statements. Since the date of the
financial statements, there has been no material
adverse change in the business, prospects, operation
or condition (financial or otherwise) of Borrower.
3.1.11 With respect to each Employee Benefit Plan maintained
by Borrower, no Prohibited Transaction or Reportable
Event (as defined in Title IV of the Employee
Retirement Income Security Act of 1974, as amended)
has occurred and is continuing; Borrower is not
subject to a thirty (30) day notice to the Pension
Benefit Guaranty Corporation, and Borrower will
comply with the provisions of the Employee Retirement
Income Security Act of 1974, as amended and the
Internal Revenue Code of 1986, as amended, nor are
there any unfunded obligations or liabilities.
3.1.12 Borrower is the owner of the Collateral free and
clear of all Security Interests, encumbrances or
liens, except liens which arise by operation of law
with respect to Obligations of Borrower which are not
yet due and payable; and Borrower will defend the
Collateral against all claims and demands of all
persons at any time claiming an interest therein.
3.1.13 To the best of Borrower's knowledge, Borrower is, and
if Borrower makes future improvements subject to the
following Borrower will be, in compliance with all
requirements of the Americans With Disabilities Act
of 1990, 42 U.S.C. 12101 et seq., including, but not
limited to, those regulations promulgated by the
Architectural and Transportation Barrier Compliance
Board at 36 CFR 1191 et seq., and by the Department
of Justice at 28 CFR 36 et seq.
3.1.14 The advent of the year 2000 has not and shall not
adversely affect Borrower's operations or the
performance of its information technology. Without
limiting the generality of the foregoing, (i) the
hardware and software utilized by Borrower are
designed to be used prior to, during and after
calendar year 2000 A.D. and such hardware and
software will operate during each such time period
without error relating to date data, specifically
including any error relating to, or the conduct of,
date data which represents or references different
centuries or more than one century, (ii) the
hardware and software utilized by Borrower
will not abnormally end or provide invalid or
incorrect results as a result of date data, and (iii)
the hardware and software utilized by Borrower
have been designed to ensure year 2000 A.D.
compatibility, including date data, century
recognition, leap year, calculations which
accommodate same century and multi-century formulas
and date values, and date data interface values that
reflect the century.
4. GENERAL COVENANTS
4.1 Borrower covenants and agrees that so long as any obligations
shall remain outstanding:
4.1.1 Borrower shall not permit any further mortgage,
pledge, Security Interest in or lien or encumbrance
upon any of the property, assets or rights of
Borrower without the prior written consent of Bank
which consent shall not be unreasonably withheld,
conditioned or delayed.
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4.1.2 Borrower shall not create any additional class of
stock, declare a stock split or issue any stock
divisions, warrants, debentures or convertible
debentures without the written consent of Bank which
shall not be unreasonably withheld, conditioned or
delayed.
4.1.3 Borrower shall not merge or consolidate with or sell,
assign, lease or otherwise transfer or dispose of
(whether in one transaction or in a series of
transactions) all or substantially all of its assets,
or ownership interests (whether now owned or
hereafter acquired or arising) to, any person or
entity, or acquire all or substantially all of the
assets or the business of any person or entity
without the prior written consent of Bank, which
consent shall not be unreasonably withheld,
conditioned or delayed.
4.1.4 Borrower shall not make loans, advances or
investments, or become a surety or guarantor for any
obligation of another without the prior written
consent of Bank, which consent shall not be
unreasonably withheld, conditioned or delayed.
4.1.5 Borrower shall continue to engage in an efficient and
economical manner in a business of the same general
type and manner as conducted by it on the Date of
Agreement.
4.1.6 Borrower shall furnish to Bank:
4.1.6.1 Within ninety (90) days of the end of each fiscal
year of Borrower, annual financial statements
prepared at an audit level of opinion in accordance
with GAAP, consistently applied, by an independent
CPA reasonably acceptable to Bank;
4.1.6.2 Within ninety (90) days of the end of each fiscal
year of Borrower, annual 10-KSB Reports;
4.1.6.3 Within forty five (45) days after the end of each
fiscal quarter of Borrower, internally prepared
10-QSB Report including a Balance Sheet and Profit
and Loss Statement, prepared in accordance with GAAP,
consistently applied, and signed by Borrower's Chief
Financial Officer.
4.1.6.4 Within forty five (45) days after the end of each
fiscal quarter of Borrower, internally prepared
financial statements, prepared in accordance with
GAAP, consistently applied, and signed by Borrower's
Chief Financial Officer.
4.1.6.5 Within thirty (30) days after the end of each fiscal
quarter of Borrower, an accounts receivable aging
report.
4.1.6.6 Promptly and in form satisfactory to Bank, such other
information as Bank may reasonably request from time
to time.
4.1.7 Comply with all present and future laws, rules and
regulations applicable to either Borrower in the
operation of its business and the ownership of
Borrower's assets, and all material agreements to
which Borrower is subject.
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4.2 Borrower further covenants and agrees to:
4.2.1 Promptly notify Bank of any condition or event which
constitutes, or would constitute with the passage of
time or giving of notice or both, an Event of Default
under this Agreement or any Loan Document and
promptly inform Bank of any events or change in the
financial condition of Borrower occurring since the
date of the last financial statement of Borrower
delivered to Bank, which individually or
cumulatively, when viewed in light of prior financial
statements, could result in a material adverse change
in the business, properties, prospects, operation or
condition (financial or otherwise) of Borrower;
4.2.2 Maintain in good standing Borrower's corporate
existence in its jurisdiction of incorporation and
its status as a foreign corporation qualified to do
business in those jurisdictions where Borrower is
currently or hereafter may be required to be
qualified;
4.2.3 Pay or deposit promptly when due all sales, use,
excise, personal property, licensing fees income,
withholding, corporate, franchise and other taxes,
assessments and governmental charges and, when
requested by Bank, submit to Bank proof satisfactory
to Bank that such payments and/or deposits have been
made;
4.2.4 Maintain casualty insurance coverage with an
insurance company on the Collateral in such amounts
and of such types as may be requested by Bank, and in
any event, as are ordinarily carried by similar
businesses;and, in the case of all policies insuring
property in which Bank shall have a Security Interest
of any kind whatsoever, all such insurance policies
shall provide that the proceeds thereof shall name
Bank as loss payee and additional insured and shall
be payable to Borrower and Bank, as their respective
interests may appear; provided, however, that in the
event of a casualty loss less than Fifty
Thousand Dollars ($50,000.00), the proceeds shall be
payable to Borrower. If the proceeds of a casualty
loss exceed Fifty Thousand Dollars ($50,000.00), Bank
shall retain the right, in its sole discretion, to
apply said proceeds to the satisfaction of the
Obligations. Borrower shall produce proof of payment
of premiums for said insurance policies as Bank may
reasonably request. All said policies or certificates
thereof, including all endorsements thereof and
those required hereunder, shall be deposited with
Bank; and such policies shall contain provisions that
no such insurance may be canceled or decreased or
amended in such manner and to such extent as prudent
business would dictate. If Borrower shall at any time
or times hereafter fail to obtain and/or maintain
any of the policies of insurance required herein, or
fail to pay any premium in whole or in part relating
to any such policies, Bank shall be notified within
thirty (30) days of any such failure to obtain and/or
maintain said policies of insurance or the failure to
pay any premium when due, the Bank may, but shall not
be obliged to, obtain and/or cause to be maintained
insurance coverage with respect to the Collateral,
including, at Bank's option, the coverage provided by
all or any of the policies of Borrower and pay all
or any part of the premium therefor, without waiving
any Event of Default by Borrower, and any sums,
including reasonable attorney fees, court costs,
expenses and other charges related thereto, so
disbursed by Bank shall be payable, on demand, by
Borrower to Bank and shall be an additional
Obligation;
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4.2.5 Notify Bank in writing within ten (10) days, of any
claim, litigation, action or proceeding filed or
commenced by or against Borrower that could result in
a material adverse change in the business,
properties, prospects, operation or condition
(financial or otherwise) of Borrower;
4.2.6 Permit Bank, at Borrower's expense, through Bank's
authorized attorneys, accountants or representatives,
to inspect the Collateral and inspect, examine and
audit the books, accounts, records, ledgers and
assets of every kind and description of Borrower with
respect thereto at reasonable times and upon
reasonable prior notice in a manner that does not
unduly interfere with Borrower's business operations;
and
4.2.7 At any time and from time to time upon request of
Bank, execute and deliver to Bank, in form and
substance satisfactory to Bank, such documents as
Bank shall deem necessary or desirable to perfect or
maintain perfected the Security Interest of Bank in
the Collateral or which may be necessary to comply
with the provisions of the laws of the Commonwealth
of Pennsylvania or the laws of any other jurisdiction
in which Borrower may then be conducting business or
in which any of the Collateral may be located.
5. FINANCIAL COVENANTS
5.1 Borrower covenants and agrees that so long as any Obligations
shall remain outstanding, Borrower shall:
5.1.1 From and after the Date of Agreement, Borrower shall
maintain a Minimum Effective Net Worth (defined as
GAAP Net Worth plus subordinated loans to
shareholders, less intangible assets and any amounts
due from shareholders or affiliated entities) of
$3,100,000.00 as of June 30, 2000; $3,250,000.00 as
of September 30, 2000, $3,400,000.00 as of December
31, 2000; $3,550,000.00 as of March 31, 2001; and
$3,700,000.00 as of June 30, 2001 and at all times
thereafter.
5.1.2 From and after the Date of Agreement, Borrower shall
maintain Maximum Senior Debt to Effective Net Worth
(defined as the ratio of total liabilities less
subordinated loans to shareholders at a test date,
divided by effective net worth as of the same test
date) of no more than 1.50:1.00, tested on a
quarterly basis.
5.1.3 From and after the Date of Agreement, Borrower shall
maintain minimum working capital of $1,500,000.00,
tested on a quarterly basis.
5.2 Borrower shall maintain its primary operating and deposit
accounts with Bank while any funds are outstanding under the
Loan.
6. EVENTS OF DEFAULT AND ACCELERATION
6.1 The occurrence of any one or more of the following events
shall constitute an Event of Default hereunder:
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6.1.1 Failure to pay any principal, interest or any of the
Obligations within five (5) days following the date
the same became due;
6.1.2 Failure to perform or observe any covenant, term or
agreement herein set forth or set forth in any Loan
Document for a period of thirty (30) days following
written notice from Bank unless the nature of such
failure cannot reasonably be cured within such thirty
(30) day period and Borrower diligently prosecutes a
cure thereof, in which event Borrower shall have an
additional thirty (30) days to cure such failure;
6.1.3 Any representation or warranty made or deemed made by
the Borrower herein or in any Loan Document or which
is contained in any certificate, document, opinion or
other statement furnished now or at any time shall
prove to be incorrect in any material respect on or
as of the date made or deemed to be made;
6.1.4 Failure to pay or perform any Obligation of Borrower
to Bank, whether by maturity or acceleration, set
forth herein or in any Loan Document pursuant to the
terms hereof or thereof;
6.1.5 A proceeding being filed or commenced against
Borrower for dissolution or liquidation; or Borrower
voluntarily or involuntarily terminating or
dissolving or being terminated or dissolved;
insolvency of Borrower, or Borrower fails to pay on
their debts as they become due in the ordinary course
of business; or a creditor's committee is appointed
for the business of the Borrower, or Borrower makes
an assignment for the benefit of creditors, or a
petition in bankruptcy or for reorganization or
to effect a plan of arrangement with creditors is
filed by the Borrower; or Borrower applies for or
permits the appointment of a receiver or trustee for
any or all of its property, assets or rights, or
any such receiver or trustee shall have been
appointed for any or all of its property, assets or
rights; or any of the above actions or proceedings
whatsoever are commenced by or against any other
party liable for the Obligations and, with respect
to any such involuntary proceeding, the same is not
dismissed or vacated within sixty (60) days and
Borrower diligently pursues such dismissal and
vacation during such sixty (60) day period;
6.1.6 Any attachments, liens or additional Security
Interests being placed upon any of the Collateral
without Bank's prior written consent, which consent
shall not be unreasonably withheld, conditioned or
delayed;
6.1.7 Acquisition at any time or from time to time of title
to the whole or any part of the Collateral by any
person, partnership or corporation other than
Borrower without Bank's prior written consent, which
consent shall not be unreasonably withheld,
conditioned or delayed;
6.1.8 Any final judgment, order or decree rendered against
Borrower exceeding $25,000 and remaining
undischarged, unstayed or outstanding against
Borrower for a period of thirty (30) days;
6.1.9 Any investigation undertaken by any governmental
entity or if any indictment, charge or proceeding is
filed or commenced, whether criminal or civil,
pursuant to Federal or State law against Borrower for
which forfeiture of any of the property or assets of
Borrower or Surety is a penalty and remaining
undischarged, unstayed or undismissed for a period of
twenty (20) days;
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6.1.10 Any Reportable Event occurs or if any Employee
Benefit Plan is terminated or Bank reasonably
believes that such plan may be terminated pursuant to
and as defined in the Employee Retirement Income
Security Act of 1974, as amended;
6.1.11 The occurrence of a material adverse change or
occurrence in the business, properties, prospects,
operation or condition (financial or otherwise) of
Borrower; or
6.1.13 Any Event of Default shall occur under the terms of
the Loan Documents or any loan between Bank and
Borrower whether now existing or entered into at a
later date.
6.2 If any Event of Default shall occur, then or at any time
thereafter, while such Event of Default shall continue, Bank
may declare all Obligations to be due and payable, without
notice, protest, presentment, dishonor or demand, all of which
are hereby expressly waived by Borrower and/or Surety.
7. RIGHTS AND REMEDIES
Bank shall have the following rights and remedies at any time following
an Event of Default:
7.1 Bank, and any officer or agent of Bank, is hereby constituted
and appointed as true and lawful attorney-in-fact of Borrower
with power upon Borrower's failure to do so within ten (10)
days following written request or demand by Bank:
7.1.1 To endorse the name of Borrower upon any instrument
of payment (including payments made under any policy
of insurance) that may come into possession of Bank
in full or in part payment of any Obligation;
7.1.2 To sign and endorse the name of Borrower upon any
invoice, freight or express bill, bill of lading,
storage or warehouse receipt, drafts against account
debtors or other obligors;
7.1.3 To notify the post office authorities to change the
address for delivery mail of Borrower to an address
designated by Bank and to receive, open and dispose
of all mail addressed to Borrower;
7.1.4 To sign the name of Borrower upon any Local, State or
Federal agency information release form including,
but not limited to, Tax Information Authorization
Form 8821 of the Internal Revenue Service.
7.1.5 To sell, assign, sue for, collect or compromise
payment of all or any part of the Collateral in the
name of Borrower, or in its own name, or make any
other disposition of Collateral, or any part thereof,
which disposition may be for cash, credit or any
combination thereof, and Bank may purchase all or any
part of the Collateral at public or, if permitted by
law, private sale, and in lieu of actual payment of
such purchase price, may setoff the amount of such
price against the Obligations;
7.1.6 Granting to Bank, as the attorney-in-fact of
Borrower, full power of substitution and full power
to do any and all things reasonably necessary to
exercise its rights and remedies as fully and
effectually as Borrower might or could do but for
this appointment, and hereby ratifying all that said
attorney-in-fact shall lawfully do or cause to be
done by virtue hereof. Neither Bank nor its agents
shall be liable for any acts or omissions or for any
error of judgment or mistake of fact or law in its
capacity as such attorney-in-fact. This power of
attorney is coupled with an interest and shall be
irrevocable so long as any Obligations shall remain
outstanding; and
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7.1.7 To appraise or reappraise any property, assets or
rights of Borrower, at Borrower's expense, in any
Federally regulated transaction as defined under
Title XI of the Financial Institution, Reform,
Recovery and Enforcement Act of 1989 and such expense
(whether or not such appraiser is a salaried employee
of Bank) shall be part of the Obligations payable on
demand.
7.2 Bank shall have the right to setoff, without notice to
Borrower, any and all deposits or other sums at any time or
times credited by or due from Bank to Borrower, whether in a
special account or other account or represented by a
certificate of deposit (whether or not matured) which deposits
and other sums shall at all times constitute additional
security for the Obligations and may be setoff against all or
any part of the Obligations at any time.
7.3 Bank shall have, in addition to any other rights and remedies
contained herein, and any Loan Document, all of the rights and
remedies of a secured party under the Uniform Commercial Code
in force in the Commonwealth of Pennsylvania, as of the Date
of Agreement, and all rights and remedies available at law or
in equity, all of which rights and remedies shall be
cumulative, and nonexclusive, to the extent permitted by law.
7.4 Any notice required to be given by Bank of a sale or other
disposition of the Collateral or other intended action by Bank
made in accordance with the terms herein or any Loan Document
at least ten (10) days prior to such proposed action, shall
constitute fair and reasonable notice to Borrower of any such
action. In the event that any of the Collateral is used in
conjunction with any real estate, the sale of the Collateral
in conjunction with and as one parcel with any such real
estate of Borrower, shall be deemed to be a commercially
reasonable manner of sale. The net proceeds realized by Bank
upon any such sale or other disposition, after deduction of
the expenses of retaking, holding, preparing for sale, selling
or the like and reasonable attorneys' fees and any other
expenses incurred by Bank, shall be applied toward
satisfaction of the Obligations hereunder. Bank shall account
to Borrower for any surplus realized upon such sale or other
disposition and Borrower shall remain liable for any
deficiency. The commencement of any action, legal or
equitable, shall not affect the Security Interest of Bank in
the Collateral until the Obligations hereunder or any judgment
therefor are fully paid.
7.5 If at any time Bank determines that any applicable law,
regulation, condition or directive, or the interpretation of
any thereof, relating to capital adequacy (including, but not
limited to, any request, guideline or policy, whether or not
having the force of law and including but not limited to any
regulation promulgated by the Board of Governors of the
Federal Reserve System as now or from time to time hereafter
in effect) by any authority charged with the administration or
interpretation thereof, or any change in any of the foregoing,
has or would have the effect of reducing the rate of return on
Bank's capital as a consequence of Bank's obligations under
this Agreement to a level below that which Bank would have
achieved but for such law, regulation, condition, directive,
interpretation or change (taking into consideration Bank's
policies with respect to capital adequacy) by an amount deemed
by Bank to be material, then from time to time Borrower shall
pay to Bank on demand such additional amount(s) as will
compensate Bank for such reduction.
<PAGE>
7.5.1 Bank will promptly notify Borrower in writing of any
event of which it has knowledge occurring after the
date hereof, which will entitle Bank to compensation
pursuant to Section 7.5. A certificate or notice from
Bank claiming right of compensation under Section 7.5
and setting forth the additional amount(s) to be paid
to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, Bank may
use any reasonable averaging and attribution methods.
7.5.2 Borrower's failure to pay such additional amount(s) s
following receipt of written notice as provided for
in Section 7.5.1 above shall result in Borrower
becoming liable for the difference between the actual
return achieved and what Bank had expected to achieve
and shall become a part of the Obligations herein
secured by the Collateral.
8. GENERAL PROVISIONS
8.1 The failure of Bank at any time or times hereafter to require
strict performance by Borrower of any of the provisions,
warranties, terms and conditions contained herein or in any
Loan Document shall not waive, affect or diminish any right of
Bank at any time or times thereafter to demand strict
performance thereof; and, no rights of Bank hereunder or in
any Loan Document shall be deemed to have been waived by any
act or knowledge of Bank, its agents, officers or employees,
unless such waiver is contained in an instrument in writing
signed by an officer of Bank and directed to Borrower
specifying such waiver. No waiver by Bank of any of its rights
shall operate as a waiver of any other of its rights or any of
its rights on a future occasion.
8.2 Any demand or notice required or permitted to be given
hereunder or in any Loan Document shall be deemed effective
when deposited in the United States mail, and sent by
certified mail, return receipt requested, postage prepaid, or
by nationally-recognized overnight courier providing proof of
delivery, addressed as follows, or to such other address as
may be provided by the party to be notified, on ten (10) days
prior written notice to the other party:
If to Borrower: eGames, Inc.
2000 Cabot Boulevard West
Suite 110
Langhorne, PA 19047
Attn: Mr. Gerald W. Klein, President
Copy to: McCausland, Keen & Buckman
Radnor Court, Suite 160
259 Radnor-Chester Road
Radnor, PA 19087
Attn: James G. Logue, Esquire
If to Bank: Summit Bank
7111 Valley Green Road
Fort Washington, Pa 19034-2209
Attn:David F.Ciccanti,Vice President
Copy to: Jaffe, Friedman, Schuman, Sciolla,
Nemeroff & Applebaum, P.C.
7848 Old York Road, Suite 200
Elkins Park, PA 19027
Attn: Gary Jaffe, Esquire
8.3 Any notice required to be given by Bank made in accordance
with the terms herein or any Loan Document at least ten (10)
days prior to such proposed action, shall constitute fair and
reasonable notice to Borrower of any such action.
<PAGE>
8.4 This Agreement and the Loan Documents contain the entire
understanding between the parties hereto with respect to the
transactions contemplated herein and such understanding shall
not be modified except in writing signed by or on behalf of
the parties hereto.
8.5 Borrower shall not hold Bank liable and shall indemnify Bank
for any and all losses, damages and claims incurred due to any
action or failure to act by Bank herein or under any Loan
Document except as a result of Bank's gross negligence or
willful misconduct. This provision shall survive the
termination or expiration of this Agreement or any Loan
Document.
8.6 Wherever possible, each provision herein or in any Loan
Document shall be interpreted in such manner as to be
effective and valid under applicable law; should any portion
of this Agreement or any Loan Document be declared invalid for
any reason in any jurisdiction, such declaration shall have no
effect upon the remaining portions of this Agreement or any
Loan Document, furthermore, the entirety of this Agreement or
any Loan Document shall continue in full force and effect in
all other jurisdictions and said remaining portions herein or
in any Loan Document shall continue in full force and effect
in the subject jurisdiction as if this Agreement or any Loan
Document had been executed with the invalid portions thereof
deleted.
8.7 In the event Bank seeks to take possession of any or all of
the Collateral by court process, Borrower hereby irrevocably
waives any bonds and any surety or security relating thereto
required by any statute, court rule or otherwise as an
incident to such possession and waives any demand for
possession prior to the commencement of any suit or action to
recover.
8.8 The provisions of this Agreement or any Loan Document shall be
binding upon and shall inure to the benefit of the successors
and assigns of Bank and Borrower; provided, however, Borrower
may not assign any of its rights or delegate any of its
Obligations hereunder or in any Loan Document without the
prior written consent of Bank.
8.9 This Agreement or any Loan Document is and shall be deemed to
be a contract entered into and made pursuant to the laws of
the Commonwealth of Pennsylvania and shall, in all respects,
be governed, construed, applied and enforced in accordance
with such laws.
8.10 If, prior hereto and/or at any time or times hereafter, Bank
shall employ counsel in connection with the execution and
consummation of the transactions contemplated herein or in any
Loan Document or to commence, defend or intervene, file a
petition, complaint, answer, motion or other pleadings, or to
take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to this
Agreement or any Loan Document, or to enforce any rights of
Bank hereunder, or in any Loan Document, whether before or
after the occurrence of any Event of Default, or to collect
any of the Obligations then, in any of such events, Borrower
agrees to pay reasonable attorneys' fees (whether or not such
attorney is a regularly salaried employee of Bank), and any
expenses, costs and charges relating thereto, and such shall
be part of the obligations payable on demand and secured by
the Collateral.
8.11 With respect to all or any part of the Obligations, in the
event that the Bank seeks to enter into a participation,
intercreditor and/or assignment agreement, then Borrower
hereby authorizes Bank to release all or part of any financial
or credit information provided by Borrower to Bank to any
other bank or financial institution with providing Borrower
contemporaneous notice thereof.
<PAGE>
8.12 Each reference herein or in any Loan Document to Bank shall be
deemed to include its successors and assigns, and each
reference to Borrower and any pronouns referring thereto as
used herein shall be construed in the neuter, singular or
plural as the context may require, and shall be deemed to
include successors and assigns of Borrower, all of whom shall
be bound by the provisions hereof or in any Loan Document.
8.13 The section headings herein are included for convenience only
and shall not be deemed to be a part of this Agreement or any
Loan Document.
8.14 This Agreement and the Loan Documents are intended to take
effect as instruments under seal.
9. ASSIGNMENT BY BANK
Bank may, from time to time, without notice to the Borrower,
participate, sell, assign, transfer or otherwise dispose of all or any
part of the Obligations and/or the Collateral therefor. In such event,
each and every immediate and successive purchaser, assignee, transferee
or holder of all or any part of the Obligations and/or the Collateral
shall have the right to enforce this Agreement, by legal action or
otherwise, for its own benefit as fully as if such purchaser, assignee,
transferee or holder were herein by name specifically given such
rights. Bank shall have an unimpaired right to enforce this Agreement
for its benefit to that portion of the Obligations as Bank has not
sold, assigned, transferred or otherwise disposed of.
10. WAIVER OF JURY TRIAL
BORROWER WAIVES TRIAL BY JURY AND CONSENTS TO AND CONFERS PERSONAL
JURISDICTION ON COURTS OF THE COMMONWEALTH OF PENNSYLVANIA OR OF THE
FEDERAL GOVERNMENT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA, AND
EXPRESSLY WAIVES ANY OBJECTIONS AS TO VENUE IN ANY OF SUCH COURTS, AND
AGREES THAT SERVICE OF PROCESS MAY BE MADE ON BORROWER BY MAILING A
COPY OF THE SUMMONS TO BORROWER OR SURETY AT BORROWER'S ADDRESS, BANK
LIKEWISE WAIVES TRIAL BY JURY.
___TM____ __DC___
Initial Initial
(Borrower) (Bank)
11. WARRANT OF ATTORNEY FOR CONFESSION OF JUDGMENT BORROWER HEREBY
IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ANY CLERK OF ANY
COURT OF RECORD UPON THE OCCURRENCE OF AN EVENT OF DEFAULT TO APPEAR
FOR AND CONFESS JUDGMENT AGAINST BORROWER (A) FO SUCH OF THE
OBLIGATIONS AS ARE DUE AND OWING AND/OR MAY BECOME DUE AND OWING
AND/OR (B) IN ANY ACTION OF REPLEVIN INSTITUTED BY BANK TO OBTAIN
POSSESSION OF ANY COLLATERAL SECURING ANY OF THE OBLIGATIONS, IN
EITHER CASE WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT
STAY OF EXECUTION AND WITH REASONABLE ATTORNEYS' FEES ACTUALLY
INCURRED, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER: (1)
WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON,
VOLUNTARILY CONDEMN THE SAME, AUTHORIZE THE PROTHONOTARY OR CLERK TO
ENTER UPON THE WRIT OF EXECUTION SAID VOLUNTARY CONDEMNATION AND
AGREE THAT SAID REAL ESTATE MAY BE SOLD ON A WRIT OF EXECUTION; (2)
WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY,
EXEMPTION OR APPEAL LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED; AND (3) RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A COPY
<PAGE>
OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF BANK, SHALL
HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE
ORIGINAL OF THIS AGREEMENT AS A WARRANT OF ATTORNEY. THE AUTHORITY
AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT
BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF, AND THE SAME MAY
BE EXERCISED FROM TIME TO TIME, AS OFTEN AS BANK SHALL DEEM
NECESSARY AND DESIRABLE, AND THIS AGREEMENT SHALL BE A SUFFICIENT
WARRANT THEREFOR. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BANK MAY
ENTER ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT COUNTIES FOR ALL
OR ANY PART OF THE OBLIGATIONS WITHOUT REGARD TO WHETHER JUDGMENT
ENTERED AGAINST BORROWER HEREUNDER IS STRICKEN OR OPENED UPON
APPLICATION BY OR ON BORROWER'S BEHALF FOR ANY SUBSEQUENT ENTRY OR
ENTRIES OF JUDGMENT BY BANK MAY ONLY BE DONE TO CURE ANY ERRORS IN
PRIOR PROCEEDINGS, ONLY AND TO THE EXTENT THAT SUCH ERRORS ARE
SUBJECT TO CURE IN LATER PROCEEDINGS.
___TM___
Initial
(Borrower)
12. DAMAGES
BORROWER AGREES THAT IN ANY ACTION, SUIT OR PROCEEDING, AND IN RESPECT
OF OR ARISING OUT OF ANY LOAN DOCUMENT, BORROWER WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR
SPECIAL DAMAGES.
___TM___
Initial
(Borrower)
13. WAIVER OF AUTOMATIC STAY
IN THE EVENT THAT A PROCEEDING UNDER ANY BANKRUPTCY OR INSOLVENCY LAW
IS COMMENCED BY OR AGAINST BORROWER AND AN ORDER FOR RELIEF IS ENTERED
AS A RESULT OF SUCH PETITION, BORROWER HEREBY CONSENTS TO RELIEF FROM
THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. '362 TO ALLOW BANK TO EXERCISE
ITS RIGHTS AND REMEDIES HEREUNDER WITH RESPECT TO THE COLLATERAL.
__TM__
Initial
(Borrower)
14. REPRESENTATION BY COUNSEL
BORROWER ACKNOWLEDGES THAT BORROWER HAS BEEN REPRESENTED BY COUNSEL OF
BORROWER'S OWN CHOICE AND KNOWINGLY AND VOLUNTARILY GRANTED TO LENDER
THE RIGHTS SET FORTH IN PARAGRAPHS 10, 11, 12 AND 13 HEREOF.
__TM___
Initial
(Borrower)
15. CROSS-COLLATERAL AND CROSS- DEFAULT
The Loan shall be cross defaulted and cross collateralized with all
other loans from Bank to Borrower whether now existing or entered into
at a later date.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
to this Loan Agreement the day and year first above written.
eGames, Inc.
Attest:
/s/ Ellen Pulvar Flatt By:/s/ Thomas W. Murphy
---------------------- ---------------------
Thomas W. Murphy
VP of Finance and CFO
SUMMIT BANK
/s/ Ellen Pulvar Flatt By:/s/ David F. Ciccanti
---------------------- ---------------------------------
Witness David F. Ciccanti, Vice President
