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): May 11, 2001
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eGames, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-27102 23-2694937
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(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)
Item 2. Acquisition or Disposition of Assets.
On May 11, 2001, eGames, Inc. (the "Company") sold its United Kingdom
subsidiary, eGames Europe Limited, to Greenstreet Software Limited, a United
Kingdom-based software publisher and distributor. The Company will receive
$300,000 in net proceeds from this sale over a twelve month period as follows:
$150,000 was received at closing; $120,000 will be paid in twelve monthly
payments of $10,000 over a one-year period; and $30,000 will be paid in six
months, subject to set-off for warranty claims. The $300,000 in net proceeds
approximates the Company's net book value (excluding inventory and cash) and
related goodwill attributed to eGames Europe Limited as of April 30, 2001.
Simultaneously with the closing of this transaction, the Company and Greenstreet
Software Limited entered into mutual comprehensive distribution and licensing
agreements, whereby Greenstreet Software Limited will continue to sell the
Company's products in the United Kingdom, most of Europe, and other key
international territories, and the Company will begin to distribute select
Greenstreet Software Limited software titles in North America.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. None.
b. Pro forma financial information.
c. Exhibits.
2.1 Share Purchase Agreement dated May 11, 2001 by and
between eGames, Inc. and Greenstreet Software Limited
99.1 Unaudited Pro Forma Consolidated Financial Statements
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
------------------------------
Gerald W. Klein, President and
Chief Executive Officer
Dated: May 24, 2001
Exhibit 2.1
DATED May 11, 2001
(1) GREENSTREET SOFTWARE LIMITED
(2) eGAMES, Inc
AGREEMENT FOR THE PURCHASE OF SHARES IN eGAMES EUROPE LIMITED
Philip Speer & Co
51 Cambridge Place
Cambridge
CB2 1NS
Tel: 01223 347820
Fax: 01223 400520
Ref: PRS/ML
Index of Schedules
Schedule 1 - Particulars of the Company
Schedule 2 - Warranties
Schedule 3 - Tax Covenants
Schedule 4 - The Property
Schedule 5 - Arrangements for stock of eGames titles
Schedule 6 - Completion Statement
THIS AGREEMENT is made on May 11, 2001
BETWEEN:
(1) "The Vendor"
eGAMES, Inc, a corporation incorporated in the State of Pennsylvania,
USA, having its principal office at 2000 Cabot Boulevard West,
Langhorne, PA 19047-1811
(2) "The Purchaser"
GREENSTREET SOFTWARE LIMITED (Company Number 3598054) whose
registered office is at Peppercorn House, 8 Huntingdon Street, St
Neots, Huntingdon, Cambs PE19 1BH
WHEREBY IT IS AGREED as follows:
1. Definitions and Interpretation
------------------------------
(1) In this Agreement, where it makes sense -
"the Companies Act" means the Companies Act 1985;
"the Company" means eGames Europe Limited, particulars
of which are in Schedule 1;
"Completion" means completion of the sale and
purchase of the Shares in accordance
with this Agreement;
"Completion Statement" means the completion statement as at
the 30th April 2001 and set out in
Schedule 6;
"the Disclosure Letter" means the letter, of the same date as
this Agreement, from the Vendor to the
Purchaser qualifying the Warranties;
"Intellectual Property Rights" means
any patent, patent
application, know-how,
trademark, trademark
application, trade name,
registered design,
design-right, copyright
or other similar
industrial or commercial
property rights;
"Last Accounts" means the
audited balance sheet of
the Company as at the
Last Accounts Date and
the audited profit and
loss account for the
accounting year ended on
the last Accounts Date;
"the Last Accounts Date" means 30th June 2000;
"the Property" means the leasehold property owned by
the Company as described in Schedule 4;
"the Purchaser's Solicitors" are Philip Speer & Co of 51 Cambridge
Place, Cambridge CB2 1NS
"the Shares" means the 176,319 issued ordinary shares
of(pound)1 each in the Company;
"Taxation" means (a) all forms of
taxation whatsoever, and
wherever or whenever
imposed, (b) any fine,
penalty, surcharge,
interest or other like
change in relation to
any taxation, and (c)
national insurance or
other social security
contributions;
"Tax Covenants" means the covenants in Schedule 3;
"Tax Covenant Claim" means any claim by the Purchaser for
breach of any of the Tax Covenants;
"the Vendor' Solicitors" are Taylor Vinters of Merlin Place,
Milton Road, Cambridge, CB4 0DP;
"the Warranties" means the warranties and representations
by the Vendor in Clause 5 and
Schedule 2;
"Warranty Claim" means any claim by the Purchaser for
breach of any of the Warranties.
(2) All references in this Agreement to a statutory provision shall be
construed as including references to:
(a) any statutory consolidation or re-enactment (whether
before or after the date of this Agreement) for the time
being in force;
(b) all statutory instruments or orders made pursuant to the
statutory provision; and
(c) any statutory provisions of which a statutory provision is
a consolidation, re-enactment or modification
but not including any re-enactment or modification to the extent that
its effect would be to increase the liability of any party under this
Agreement.
(3) Words and expressions defined in the Companies Act have the same
meanings in this Agreement.
(4) Any reference in this Agreement to any individual includes his
personal representatives.
(5) In this Agreement wherever it makes sense:
(a) words denoting the singular include the plural, and vice
versa;
(b) words denoting any gender include all genders; and
(c) words denoting natural persons include unincorporated
firms and associations, and corporations.
(6) Where any party to this Agreement comprises two or more persons,
their obligations and liabilities are (unless otherwise expressly
stated) joint and several obligations and liabilities.
(7) References in this Agreement to an "SSAP" or to a "FRS" is a
reference to a Statement of Standard Accounting Practice or to a
Financial Reporting Standard adopted by The Accounting Standards
Board Limited.
(8) References to clauses, sub-clauses or schedules by number are
references to the clauses or sub-clauses of or the schedules
to this Agreement so numbered.
(9) The headings to clauses in this Agreement are for ease of reference
only, and shall not affect the construction of its provisions.
2. Agreement for Sale
-------------------
(1) Subject to the terms and conditions of this Agreement the Vendor
shall sell with full title guarantee and the Purchaser shall purchase
the Shares, free from all liens, charges and encumbrances and with
all rights attaching to them at the date of this Agreement.
(2) Neither the Purchaser nor the Vendor shall be obliged to complete
the purchase of any of the Shares unless the purchase of all the
Shares is completed at the same time.
3. Purchase Consideration
----------------------
(1) The purchase price for the Shares shall be US$300,000, being the
agreed value of the net assets of the Company at 30th April 2001 as
determined by reference to the Completion Statement plus US$150,000.
(2) The purchase price shall be paid and satisfied -
(a) as to US$ 180,000 on Completion, of which US$30,000 shall be
held on deposit in accordance with clause 6; and
(b) as to the balance by the issue of a promissory note by the
Purchaser at Completion, in agreed terms, for payment by twelve
equal monthly installments commencing one month from Completion.
(3) The stock of titles manufactured by the Vendor and located at the
Property on Completion shall be held and dealt with in accordance
with Schedule 5.
4. Completion
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(1) Completion of the purchase of the Shares shall take place at the
offices of the Vendor's solicitors immediately after the
signing of this Agreement.
(2) At completion, the Vendor shall deliver to the Purchaser -
(a) duly completed and signed transfers in favour of
the Purchaser of the Shares, together with the Share
Certificates relating to them;
(b) a Power of Attorney in favour of the Purchaser (to enable
the Purchaser to exercise the rights attaching to the
Shares pending its registration as their holder) in the
form required by the Purchaser;
(c) the resignation of Gerald Klein as a Director of the
Company, with a written acknowledgement by deed that he
has no claim against the Company on any grounds whatsoever
in respect of the termination of his office as a Director;
and
(d) the resignation of the existing Auditors of the Company,
with a written acknowledgement that they have no
outstanding claims against the Company on any grounds
whatsoever, and containing a statement that there are no
circumstances connected with their ceasing to hold office
as Auditors which they consider should be brought to the
attention of the members or creditors of the Company.
(3) At completion, there shall be delivered or made available to the
Purchaser:
(a) a copy of the Certificate of Incorporation of the Company;
(b) the statutory registers of the Company.
(4) On completion, the Vendor will deliver to the Purchaser an
acknowledgement by deed that the Company has no liability to it or
any other company controlled by it on any account whatsoever.
(5) A meeting of the Directors of the Company will be held on completion
at which:-
(a) such person(s) as the Purchaser nominates will be
appointed additional directors of the Company;
(b) the transfer of the Shares shall be approved, subject to
stamping and resolutions passed for the registration of
the Purchaser as the holder of the Shares and for the
issue of a share certificate to the Purchaser in respect
of the Shares and the execution of that certificate by the
Company;
(c) the bank mandates of the Company shall be altered as the
Purchaser requires;
(d) the resignation of Gerald Klein as a director of the
Company shall be submitted and accepted; and
(e) Hugill & Company shall be appointed as auditors of the
Company.
(6) At Completion the Vendor and the Purchaser will enter into
mutual distribution agreements in the terms of the draft agreements
attached to this Agreement.
(7) On completion of the matters referred to above in this clause, the
Purchaser will -
(a) pay to the Vendor's Solicitors (whose receipt shall
be a valid discharge for the Purchaser) the sum of
US$150,000 on account of the purchase price for the
Shares;
(b) deposit with the Vendor's solicitors the sum of US$30,000
to be held in accordance with clause 6; and
(c) issue to the Vendor a promissory note in agreed terms in
respect of the balance of the purchase price.
(8) The Purchaser will, no later than six months after Completion, change
the name of the Company to a name not including the word "eGames". At
Completion, the Purchaser will lodge with the Vendor's solicitors a
duly certified copy of a special resolution changing the name of the
Company to "Greenstreet Sales Limited" and the Vendor's solicitors
are hereby authorised to lodge such resolution with the Registrar of
Companies on 12th November 2001 unless, before that date, the
Purchaser produces to the Vendor's solicitors evidence that the name
of the Company has been changed in accordance with the Purchaser's
obligation under this clause 4(9).
5. Warranties
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(1) The Vendor warrants to the Purchaser -
(a) that the Vendor is the beneficial owner of the Shares
registered in its name, and is entitled to transfer the
full legal and beneficial ownership of those Shares on the
terms of this Agreement, free from any lien, charge or
other encumbrance, and without the consent of any third
party; and
(b) that, save as set out in the Disclosure Letter, the
Warranties set out in Schedule 2 are true and in all
respects.
(2) Where any warranty refers to the knowledge, information, awareness or
belief of the Vendor, the Vendor undertakes that it has made careful
enquiry of the Company's auditors, the Vendor's Solicitors, Paul Ward
and Ivan Cracknell only in connection with all relevant matters, and
acknowledges that it will for the purposes of this Agreement be
deemed to be aware of all matters which would have been revealed to
it or any of its professional advisers as a result of those
enquiries.
(3) The Warranties set out in Schedule 2 are given subject to the facts
and circumstances fairly disclosed in the Disclosure Letter.
(4) If there is any breach of any Warranty and:-
(a) the value of any asset of the Company is less than it
would have been at Completion in the absence of the
breach; or
(b) the Company has incurred or will incur any liability which
it would not have incurred, or which exceeds the liability
it would have incurred, had matters been as warranted
then, if required to do so by the Purchaser, the Vendor will pay to
the Purchaser or to the Company (as the Purchaser requires) the
amount necessary to put the Company into the position it would have
been in had the Warranty not been breached or (as the case may be)
had matters been as warranted, such payment to be in full and final
settlement of all claims by the Purchaser arising out of such breach
of Warranty.
(5) No information supplied by the Company or its professional advisers
to any of the Vendor or their advisers in connection with the
Warranties and/or the contents of the Disclosure Letter, or otherwise
relating to the business or affairs of the Company, shall be deemed
to be a representation, warranty or guarantee of its accuracy by the
Company to the Vendor, and the Vendor waives any claims against the
Company which they might otherwise have in respect of it.
(6) The Warranties shall remain in full force and effect after and
notwithstanding Completion.
(7) The rights and remedies of the Purchaser in respect of any breach of
the Warranties shall not be affected by any failure to exercise or
delay in exercising any right or remedy.
6. Retention
---------
(1) The provisions of this clause 6 are subject always to the provisions
of clause 8.
(2) From Completion, the sum of US$30,000 out of the purchase price shall
be held by the Vendor's Solicitors in a designated account with
Lloyds TSB Bank plc ("the Retention Account").
(3) The funds standing to the credit of the Retention Account shall be
paid to the Vendor six months after Completion, or as soon as
practicable thereafter and in any event no later than 14 days
following the expiration of six months from the date of Completion,
unless at that date the Purchaser has given notice to the Vendor of a
Warranty Claim and/or a Tax Covenant Claim (either "a Claim")
together with an opinion from experienced commercial counsel of not
less than 7 years standing stating that, in his opinion, the Claim is
a prima facie valid Claim.
(4) If such notice is duly given, the funds in the Retention Account
shall be retained in the Retention Account until the notified Claim
has been finally determined, by agreement between the parties or by
binding decision of a court or arbitrator. To the extent that the
Claim is admitted by the Vendor or is upheld by a court or
arbitrator, the Purchaser shall be entitled to be paid out of the
Retention Account the amount of the Claim together with all
professional costs and expenses reasonably incurred by the Purchaser
in connection with the Claim. Any balance remaining shall be paid to
the Vendor.
(5) If such notice as is mentioned in clause 6(2) is duly given, but the
amount of the Claim is less than the sum standing to the credit of
the Retention Account, a sum equal to the amount of the Claim shall
be retained in the Retention Account and dealt with in accordance
with clause 6(3) and the balance shall be paid to the Vendor six
months after Completion.
(6) For the avoidance of doubt, the Purchaser shall be entitled to serve
notice in respect of more than one Claim, or successive notices in
respect of more than one Claim, and clauses 6(2) and 6(3) shall apply
to all such notices.
(7) Interest earned on the Retention Account shall be paid to the
parties in the same proportions as they are entitled to the
principal sum deposited.
7. Tax Covenants
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The provisions of Schedule 3 shall have effect.
8. Vendor's Protection
-------------------
(1) The liability of the Vendor in relation to the Warranties and the
Tax Covenants shall (in the absence of fraud) cease on:-
(a) in the case of any liability relating to Taxation, the
seventh anniversary of Completion; and
(b) in the case of any other liability, the second anniversary
of Completion
except as regards any specific alleged Warranty Claim and/or Tax
Covenant Claim of which written notice (containing sufficient
information so as to identify the nature and substance of the Claim)
has been given to the Vendor prior to the relevant expiry date.
(2) The Vendor shall not be liable for any Warranty Claim unless the
total of all Warranty Claims exceeds US$22,000, but in that event the
Vendor shall be liable for the total amount and not merely the
excess.
(3) The total liability of the Vendor for Warranty Claims and/or Tax
Covenant Claims shall not exceed US$300,000 or (if less) the actual
amount of the Consideration received by the Vendor at the date of any
judgment or award in respect of the Claim.
(4) Notwithstanding clause 8 (2) above, the Vendors shall not be liable
for any individual Warranty Claim or Tax Covenant Claim unless the
amount thereof shall exceed US$1000 and for the avoidance of doubt
any claim which does not exceed US$1000 shall not count towards the
figure of US$22,000 referred to in clause 8 (2) above nor shall it be
enforceable in the event that the Warranty Claims and/or Tax Covenant
Claims exceed US$22,000.
(5) The Vendor shall not be liable for any Warranty Claim or Tax Covenant
Claim to the extent that it arises out of circumstances which arose
or an event which occurred prior to 14th August 1998.
(6) The Purchaser shall not be entitled to recover more than once in
respect of any one matter giving rise to a Warranty Claim or Tax
Covenant Claim.
(7) Any Warranty Claim and/or Tax Covenant Claim made in accordance with
clause 8 (1) above if not previously settled, satisfied or withdrawn
shall be wholly unenforceable unless legal proceedings in respect of
it have been issued and served on the Vendor within 12 months of the
date on which the Purchaser gave notice to the Vendor under clause 8
(1) above.
(8) The Vendor shall have no liability under the Warranties or the Tax
Covenants to the extent that:
(a) specific provision or reserve in respect of the
matter giving rise to the claim was made in the Last
Accounts or was specifically referred to in the notes to
the Last Accounts;
(b) the claim arises out of or is increased by any change in
the accounting principles or practices or the accounting
period of the Company after Completion;
(c) the Company recovers an amount in respect of a claim under
any insurance policy in force immediately prior to
Completion or any insurance policy of the Company in force
after Completion which provides cover on terms
substantially the same as those contained in the relevant
insurance policy in force immediately prior to Completion
and for the avoidance of doubt the Vendors' liability
shall be reduced by the amount recovered by the Company in
respect of such claim under any such insurance policy;
(d) the claim would not have arisen but for the winding up
after the Completion Date of the Company by its members;
(e) the matter giving rise to the Warranty Claim and/or Tax
Covenant Claim is remediable unless within sixty days of
the Purchaser having become aware of such matter the
Purchaser has given written notice to the Vendor and such
matter has not been fully remedied by the Vendor without
cost to the Purchaser or the Company within 30 days of the
service of such notice;
(f) the amount claimed has been taken into account in the
Completion Statement and accordingly reflected in the
price of the Shares.
9. Restrictive Agreements
----------------------
(1) For the purpose of assuring to the Purchaser the full benefit of the
business and goodwill of the Company, the Vendor undertakes with the
Purchaser that it will not (and will procure that no Associated
Company will):-
(a) at any time after Completion disclose to any person or
itself use for any purpose (and will take all reasonable
precautions to prevent the publication or disclosure by
any other person of) any information of a confidential or
commercially sensitive nature concerning the business,
accounts or finances of the Company, or any of its
customers' transactions or affairs;
(b) at any time during the period of 18 months from
Completion, either on its own account or on behalf of any
other person, in competition with the Company directly or
indirectly solicit or do business with or interfere with
or endeavour to entice away from dealing with the Company
any person having a place of business in the "Exclusive
Territory" (as defined in the distribution agreement
intended to be made between the Vendor and the Purchaser
annexed to this Agreement) and who has, during the period
of one year up to Completion, been a customer of the
Company;
(c) at any time during the period of two years from
Completion, either on its own account or on behalf of any
other person, directly or indirectly, solicit or entice
away or endeavour to entice away from the Company any
person who is employed by the Company at Completion in a
managerial or sales capacity, whether or not that person
would commit a breach of his/her contract of employment by
leaving the Company's employ; or
(d) at any time during the period of 18 months from Completion
interfere, or seek to interfere, with the continuance of
supplies to the Company from any third party who has been
supplying goods to the Company during the period of one
year up to Completion, if such interference causes or
would cause that supplier to cease supplying, or
materially reduce its supply of those goods to the
Company.
(2) Each of the undertakings set out in clause 9(1) shall be construed as
separate and severable undertakings; and the undertakings set out in
clause 9(1)(b) and 9(1)(c) shall be construed as separate and
severable undertakings in respect of each customer or (as the case
may be) employee of the Company.
(3) The restrictions on the disclosure of information contained in Clause
9(1)(a) shall not apply:-
(a) to information which after Completion comes into the public
domain through no fault of the Vendor;
(b) to the disclosure of such information on a confidential basis to
the legal or tax advisers of the Vendor; or
(c) to the disclosure of such information to a Court, public
official or regulatory body having legal authority to
compel such disclosure.
(4) For the purposes of clause 9(1), "Associated Company" means a
subsidiary company of the Vendor.
(5) For the avoidance of doubt, information concerning the Company's
current business activities which is within the Vendor's knowledge as
a result of its carrying on business in the same territories as the
Company shall not be regarded as "Confidential or commercially
sensitive information" for the purposes of clause 9(1)(a).
10. Publicity
---------
(1) No announcement or disclosure shall be made by the Vendor to any
third party (other than the Vendor's professional advisers, or to the
relevant tax authorities) in respect of the subject matter or the
contents of this Agreement, unless such announcement or disclosure is
specifically approved and its terms agreed by the Purchaser in
advance.
(2) Clause 10(1) shall be subject to any legal or regulatory requirements
in the US relating to announcements that the Vendor is required to
comply with, in which case the Vendor shall not be required to seek
the Purchaser's approval but shall deliver a copy of the announcement
to the Purchaser as soon as practicable after its publication.
11. Costs
-----
Each party shall pay his or its own costs in relation to the
negotiation, preparation and completion of this Agreement, and all
other documents referred to in this Agreement.
12. Successors and Assignment
-------------------------
(1) Subject to clause 12(2) below, this Agreement shall be binding
upon each party's successors and assigns and personal
representatives.
(2) If any of the Shares shall at any time be sold or transferred to a
company which is the holding company, or a subsidiary company of the
Company or another subsidiary of such holding company, the benefit of
each of the Warranties and the benefit of the Tax Covenants may be
assigned to the purchaser or transferee of the Shares, who shall
accordingly be entitled to enforce each of the Warranties and the Tax
Covenants against the Vendor as if he were a party to this Agreement,
but the liability of the Vendor to such purchaser or transferee shall
be no greater than its liability would have been to the Purchaser. On
such assignee ceasing to be a company, which is the holding company,
or a subsidiary company of the Company, or another subsidiary of such
holding company, the Warranties and Covenants shall lapse. The
Purchaser shall not otherwise be entitled to assign the benefit of
this Agreement, without the prior consent of the Vendor.
13. Notices
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(1) Any notice given under this Agreement must be in writing, which
includes fax.
(2) Any notice may be served at (in the case of an individual) his home
address or (in the case of a Company) to its registered office or its
principal place of business and at the offices of the addressee's
Solicitors named in this Agreement, either by:
- leaving it there; or
- sending it there by courier; or
- sending it there by fax;
(3) Notices will be deemed to have been received:
- by personal delivery, at the time of delivery;
- by courier, on the recorded date of delivery ; and
- by fax, immediately on transmission provided a confirmatory
copy is sent by courier or delivered by hand by the end
of the next working day.
(4) The provisions of this clause shall not have effect to the extent
they are inconsistent with the Civil Procedure Rules.
(5) The Vendor appoints Taylor Vinters of Merlin Place, Milton Road,
Cambridge, CB4 0DP as its agent to accept service of any proceedings
arising out of this Agreement, and such appointment shall be
irrevocable for a period of two years from Completion.
14. Entire Agreement Clause
-----------------------
(1) This Agreement together with the agreed documents referred to in it
constitutes the entire agreement and understanding of the parties and
supersedes any previous agreement between the parties relating to the
subject matter of the Agreement.
(2) Each of the parties acknowledges and agrees that, in entering into
this Agreement together with the agreed documents referred to in it,
it does not rely on and shall have no remedy in respect of any
statement, representation, warranty or understanding (whether
innocently or negligently made) of any person (whether party to this
Agreement or not) other than as expressly set out in this Agreement
or any agreed documents referred to in it as a Warranty.
(3) The only remedy available to any of the parties for any breach of any
Warranty in this Agreement or any agreed documents referred to in it
shall be for breach of contract in accordance with the terms of this
Agreement.
(4) Nothing in this clause 14 shall operate to exclude or limit
any liability of any party for fraud or fraudulent
misrepresentation.
(5) Each of the parties acknowledges and agrees that insofar as this
clause 14 operates to exclude or limit any liability of any party
under the Misrepresentation Act 1967, such exclusion or limitation is
reasonable.
15. General
-------
(1) Except to the extent that they have been fully performed at Completion,
the provisions of this Agreement shall remain in full force and effect
notwithstanding Completion.
(2) The parties will take any further action and sign or execute any
further documents or deeds which may reasonably be required after
Completion to vest in the Purchaser the legal and beneficial ownership
of the Shares, or otherwise to give effect to this Agreement.
(3) The fact that any party may not strictly enforce its rights on a breach
by the other party of this Agreement shall not prevent such party
enforcing its rights if the breach is repeated or a different breach is
committed.
(4) No term of this Agreement is enforceable under the Contracts
(Rights of Third Parties) Act 1999 by any person who is not a
party to this Agreement.
13. Applicable law and jurisdiction
-------------------------------
This Agreement shall be governed by and construed in accordance with English
law, and the parties agree that, on the balance of convenience, the English
Courts shall have exclusive jurisdiction in any dispute arising out of this
Agreement.
EXECUTED as a deed by the parties and delivered by them on the date this
Agreement is dated.
Executed as a deed and delivered by)
GREENSTREET SOFTWARE LIMITED )
acting by two officers:) /s/ Jeffrey Fenton.
- ------------------------ -------------------
Director
/s/ Philip Speer
-------------------
Director/Secretary
Executed as a deed and delivered by)
eGAMES, INC acting by a proper officer)
eGAMES, INC
a Pennsylvania corporation
By: /s/ Thomas W. Murphy
--------------------
Thomas W Murphy
Vice President & CFO
EXHIBIT 99.1
Unaudited Pro Forma Consolidated Financial Statements
On May 11, 2001, eGames, Inc. (the "Company") sold its wholly-owned United
Kingdom subsidiary, eGames Europe Limited ("eGames Europe"), to Greenstreet
Software Limited ("GSL"). The purchase price was based on the net asset value,
excluding cash and inventory, of eGames Europe as of April 30, 2001, plus
$150,000. The Company did not sell eGames Europe's cash and inventory that was
on hand as of April 30, 2001. eGames Europe's inventory as of April 30, 2001
will continue to be owned by the Company and will be held on consignment by GSL
for future sales on behalf of the Company. GSL agreed to pay the Company the
purchase price as follows: (1) fifty percent in cash on the closing date; (2)
ten percent to be held in escrow for six months; and, (3) the remaining forty
percent to be paid in twelve even monthly amounts over a one year period,
commencing one month from the closing date.
The unaudited pro forma consolidated statements of operations for the nine
months ended March 31, 2001 and for the year ended June 30, 2000 have been
prepared to give effect of the sale by the Company of eGames Europe to GSL as if
it had occurred on July 1, 1999. The unaudited pro forma consolidated balance
sheet as of March 31, 2001 has been prepared to give effect to the disposition
as if it had occurred on such date. The unaudited pro forma consolidated
financial statements are not necessarily indicative of the results that would
have been obtained had the disposition been completed as of the dates presented
or for any future period. The purchase price that was used in the unaudited
consolidated pro forma balance sheet was based on the net assets, excluding
inventory and cash, of eGames Europe as of March 31, 2001. The actual purchase
price realized by the Company was $300,000. The unaudited pro forma consolidated
financial statements should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included in the Company's
Form 10-KSB for the year ending June 30, 2000 and the Company's Form 10-QSB for
the quarter and nine months ended March 31, 2001 that have been filed with the
Securities and Exchange Commission.
EXHIBIT 99.1 (continued)
eGames, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2001
(1)
Pro Forma
ASSETS Historical Adjustments Notes Pro Forma
----------------------------------------------
Current assets:
Cash and cash equivalents $ 115,981 $ 187,659 2 $ 303,640
Restricted cash - 0 - 37,532 2 37,532
Accounts receivable, net of allowances 3,828,549 (236,155) 3 3,592,394
Inventory 2,890,013 - 0 - 2,890,013
Note receivable - 0 - 150,127 2 150,127
Prepaid expenses and other current assets 256,793 (50,057) 3 206,736
---------- ---------- ----------
Total current assets 7,091,336 89,106 7,180,442
Furniture and equipment, net 245,976 (65,788) 4 180,188
Intangibles and other assets, net 194,200 (149,419) 5 44,781
---------- ---------- ----------
Total assets $7,531,512 ($ 126,101) 7,405,411
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 64,766 ($4,150) 6 $ 60,616
Accounts payable 2,403,239 (35,590) 6 2,367,649
Revolving credit facilities 1,000,000 - 0 - 1,000,000
Accrued expenses 1,105,135 (66,863) 6 1,038,272
Capital lease obligations 217,194 (10,587) 6 206,607
---------- ---------- ----------
Total current liabilities 4,790,334 (117,190) 4,673,144
Capital lease obligations, net of current portion 4,209 (4,209) 7 - 0 -
Notes payable, net of current portion 78,267 (4,702) 7 73,565
---------- ----------- ----------
Total liabilities 4,872,810 (126,101) 4,746,709
Stockholders' equity:
Common stock, no par value (40,000,000 shares authorized;
9,981,875 issued and 9,749,975 outstanding) 9,134,234 - 0 - 9,134,234
Additional paid-in capital 1,155,479 - 0 - 1,155,479
Accumulated deficit (7,055,605) - 0 - (7,055,605)
Treasury stock, at cost - 231,900 shares (501,417) - 0 - (501,417)
Accumulated other comprehensive loss (73,989) - 0 - (73,989)
----------- ----------- ----------
Total stockholders' equity 2,658,702 - 0 - 2,658,702
----------- ----------- ----------
Total liabilities and stockholders' equity $7,531,512 ($126,101) $7,405,411
=========== =========== ==========
See accompanying notes to Unaudited Pro Forma Consolidated Financial Statements
EXHIBIT 99.1 (continued)
eGames, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended March 31, 2001
(8)
Pro Forma
Historical Adjustments Notes Pro Forma
--------------------------------------------------
Net sales $ 10,677,955 ($ 1,731,582) 9 $ 8,946,373
Cost of sales 5,792,651 (841,222) 10 4,951,429
------------ ------------ -----------
Gross profit 4,885,304 (890,360) 3,994,944
Operating expenses:
Product development 552,445 - 0 - 552,445
Selling, general and administrative 5,366,064 (941,715) 11 4,424,349
------------ ------------ -----------
Total operating expenses 5,918,509 (941,715) 4,976,794
------------ ------------ -----------
Operating income (loss) (1,033,205) 51,355 (981,850)
Interest expense, net 65,266 (1,167) 12 64,099
------------ ------------ -----------
Income (loss) before income taxes (1,098,471) 52,522 (1,045,949)
Provision (benefit) for income taxes (58,454) 19,356 13 (39,098)
------------ ------------ -----------
Net income (loss) ($ 1,040,017) $ 33,166 ($1,006,851)
============ ============ ===========
Net income (loss) per common share:
- Basic ($ 0.11) ($ 0.10)
============ ===========
- Diluted ($ 0.11) ($ 0.10)
============ ===========
Weighted average common shares
outstanding - Basic 9,749,975 9,749,975
Dilutive effect of common stock equivalents - 0 - - 0 -
Weighted average common shares
outstanding - Diluted 9,749,975 9,749,975
========= =========
See accompanying notes to Unaudited Pro Forma Consolidated Financial Statements
EXHIBIT 99.1 (continued)
eGames, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended June 30, 2000
(8)
Pro Forma
Historical Adjustments Notes Pro Forma
------------------------------------------------
Net sales $13,640,160 ($2,302,587) 9 $11,337,573
Cost of sales 5,301,828 (1,022,637) 10 4,279,191
----------- ----------- -----------
Gross profit 8,338,332 (1,279,950) 7,058,382
Operating expenses:
Product development 860,330 - 0 - 860,330
Selling, general and administrative 6,772,136 (1,072,571) 11 5,699,565
Legal settlement and related costs 360,568 - 0 - 360,568
----------- ----------- -----------
Total operating expenses 7,993,034 (1,072,571) 6,920,463
----------- ----------- -----------
Operating income (loss) 345,298 (207,379) 137,919
Interest expense, net 11,967 24 12 11,991
----------- ----------- -----------
Income (loss) before income taxes 333,331 (207,403) 125,928
Provision (benefit) for income taxes 80,750 3,615 13 84,365
----------- ----------- ----------
Net income (loss) $ 252,581 ($ 211,018) $ 41,563
=========== =========== ==========
Net income (loss) per common share:
- Basic $ 0.03 $ 0.00
====== ======
- Diluted $ 0.03 $ 0.00
====== ======
Weighted average common shares
outstanding - Basic 9,706,813 9,706,813
Dilutive effect of common stock equivalents 290,200 290,200
--------- ---------
Weighted average common shares
outstanding - Diluted 9,997,013 9,997,013
========= =========
See accompanying notes to Unaudited Pro Forma Consolidated Financial Statements
EXHIBIT 99.1 (continued)
Notes To The Unaudited Pro Forma Consolidated Financial Statements
1 - All pro forma information contained in the March 31, 2001 consolidated
balance sheet assumes that the sale by the Company of eGames Europe
occurred on March 31, 2001. The actual valuation date used in computing
the sales price for this transaction was April 30, 2001 and
accordingly, the actual amounts to be recorded in the Company's fourth
quarter results will vary from these pro forma amounts based on any
change in the valuation of eGames Europe's net book value from
March 31, 2001 to April 30, 2001.
2 - These adjustments represent the amount of cash received at closing,
restricted cash to be held in escrow for six months following closing
and cash to be received through monthly payments pursuant to a one-year
promissory note.
3 - These adjustments represent the accounts receivable and prepaid
expenses that were purchased by GSL.
4 - This adjustment represents the net book value of the furniture and
equipment that was purchased by GSL.
5 - This adjustment represents the net book value of the goodwill related
to eGames Europe.
6 - These adjustments represent the accounts payable, accrued expenses and
the short-term portions of a note payable and capital lease obligations
that were assumed by GSL.
7 - These adjustments represent the long-term portions of a note payable
and capital lease obligations that were assumed by GSL.
8 - All pro forma information contained in the June 30, 2000 and March 31,
2001 consolidated statements of operations assumes that the sale by the
Company of eGames Europe occurred on July 1, 1999.
9 - These adjustments reflect the elimination of net sales that would have
resulted had the Company consummated the sale of eGames Europe.
10 - These adjustments reflect the elimination of cost of sales associated
with the elimination of net sales that would have resulted had the
Company consummated the sale of eGames Europe.
11 - These adjustments reflect the reduction of selling, general and
administrative costs that would have resulted had the Company
consummated the sale of eGames Europe. This reduction is primarily
related to the decrease in headcount costs, marketing costs and
goodwill amortization costs related to eGames Europe.
12 - These adjustments reflect the effect on net interest expense that would
have resulted had the Company consummated the sale of eGames Europe.
13 - These adjustments reflect the effect on the provision (benefit) for
United Kingdom income taxes that would have resulted had the Company
consummated the sale of eGames Europe.