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): January 16, 2003
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 5. Other Events
On January 16, 2003, eGames, Inc. (the "Company") and Fleet National Bank
("Fleet") entered into a Warrant Redemption Agreement which provides for the
redemption from Fleet of a warrant to purchase 750,000 shares of the Company's
Common Stock in exchange for a payment of $50,000, and the cancellation of all
rights set forth under the Registration Rights Agreement dated October 31, 2001
between the Company and Fleet. In conjunction with this transaction, the Company
also repaid to Fleet the entire outstanding term loan balance of $420,000, plus
interest. A copy of the press release announcing the transaction is attached to
this Form 8-K as Exhibit 99.1 and a copy of the Warrant Redemption Agreement is
attached to this Form 8-K as Exhibit 99.2.
Item 7. Exhibits
(c) Exhibits.
Exhibit Description
Number
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99.1 Press Release dated January 16, 2003
99.2 Warrant Redemption Agreement by and between eGames, Inc.
and Fleet National Bank dated January 16, 2003
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/ Thomas W. Murphy
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Thomas W. Murphy, Vice President and
Chief Financial Officer
Dated: January 17, 2003
EXHIBIT 99.1
At eGames, Inc.
Jerry Klein, President & CEO
(215) 750-6606 (Ext. 118)
Tom Murphy, Vice President & CFO
(215) 750-6606 (Ext. 113)
For Immediate Release
eGAMES REPAYS FLEET BANK TERM LOAN
Langhorne, PA - January 16, 2003 - eGames, Inc. (OTCBB: EGAM), a publisher and
developer of Family Friendly(TM), value-priced consumer entertainment PC
software games, today announced that it has repaid the entire outstanding term
loan balance to Fleet Bank prior to maturity and has redeemed the common stock
warrant issued to Fleet Bank in connection with the forbearance agreement
entered into on October 31, 2001.
Jerry Klein, President and CEO of eGames, stated "We believe this accomplishment
marks a very important milestone in our turn-around plan that we initiated a
year ago. Over the past year, we have made significant progress in strengthening
our balance sheet by: converting accounts receivable balances and certain
slow-moving inventory stock into cash, reducing trade debt, eliminating bank
debt, and achieving operational profitability as a result of strengthening our
gross profit margins and reducing operating costs. Accordingly, we intend to
continue financing the majority of our anticipated business growth through funds
generated from operations, as we have done over the past fifteen months.
However, now that we have a much stronger balance sheet, we may at some time
decide to seek a banking relationship that would include a credit facility in
order to more effectively manage normal fluctuations in working capital
requirements."
Mr. Klein further commented, "We must remain disciplined and continue to focus
our business plan on serving our core value-priced consumer and the retailers
servicing them and to gradually increase our product offering to include titles
that appeal to the higher-end game player looking for a high-value gaming
experience at an affordable price."
About the Company:
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eGames, Inc., headquartered in Langhorne, PA, develops, publishes and markets a
diversified line of Family Friendly(TM), value-priced consumer entertainment PC
software games. The Company promotes the eGames(TM), Game Master Series(TM), and
Outerbound(TM) brands in order to generate customer loyalty, encourage repeat
purchases and differentiate eGames software products to retailers and consumers.
eGames - Where the "e" is for Everybody! Additional information regarding
eGames, Inc. can be found on the Company's Web site at www.egames.com.
Forward-Looking Statement Safe Harbor:
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This press release contains certain forward-looking statements, including
without limitation, statements regarding the Company's intention to continue to
finance the majority of its anticipated business growth through funds generated
from operations; the potential for the Company to seek a future banking
relationship to include a credit facility in order to more effectively manage
normal fluctuations in working capital requirements; and the Company's plan to
gradually increase its product offering to include more higher-priced PC
software games. The actual results achieved by the Company and the factors that
could cause actual results to differ materially from those indicated by the
forward-looking statements are in many ways beyond the Company's control. The
Company cautions readers that the following important factors, among others,
could cause the Company's actual results to differ materially from those
expressed in this press release: the market acceptance and successful
sell-through results for the Company's products at retail stores, particularly
new titles that are priced higher than those that the Company has historically
sold; the market acceptance of increased pricing of the Company's products; the
amount of unsold product that is returned to the Company by retail stores; the
Company's ability to accurately predict the amount of product returns that will
occur and the adequacy of the reserves established for such returns; the success
of the Company's distribution strategy, including its ability to enter into new
distribution and direct sales relationships on commercially acceptable terms;
the continued allocation of adequate shelf space for the Company's products in
major retail chain stores; the Company's ability to collect outstanding accounts
receivable and establish adequate reserves for uncollectible receivables; the
ability to deliver products in response to orders within a commercially
acceptable time frame; downward pricing pressure; fluctuating costs of
developing, producing and marketing the Company's products; the Company's
ability to license or develop quality content for its products; consumers'
continued demand for value-priced software; increased competition in the
value-priced software category; and various other factors, many of which are
beyond the Company's control. Risks and uncertainties that may affect the
Company's future results and performance also include, but are not limited to,
those discussed under the heading "Risk Factors" in the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2002 and Quarterly Report on
Form 10-QSB for the quarter ended September 30, 2002 filed with the Securities
and Exchange Commission.
#
Exhibit 99.2
WARRANT REDEMPTION AGREEMENT
THIS AGREEMENT is made and dated this 16th day of January, 2003, by
and between EGAMES, INC., a corporation organized and existing under and by
virtue of the laws of the Commonwealth of Pennsylvania (hereinafter referred to
as the "Corporation"); and FLEET NATIONAL BANK, successor in interest to Summit
Bank, a state banking corporation (hereinafter referred to as the "Seller").
W I T N E S S E T H :
WHEREAS, the Seller is presently the owner and holder of a warrant,
issued by the Corporation to the Seller on October 31, 2001 (the "Warrant"), to
acquire up to 750,000 fully paid and nonassessable shares of Common Stock of the
Corporation, no par value per share (the "Common Stock");
WHEREAS, the parties hereto believe it to be in their best interests
that the Warrant should be sold by it and purchased by the Corporation; and
WHEREAS, the parties hereto wish to reduce to a written instrument
their mutual understanding and agreement with respect to the provisions, terms
and conditions relating to the sale of the Seller's stock of the Corporation;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and promises hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged by each party hereto to the other, the Corporation and the Seller,
each intending to be legally bound hereby, covenant, represent, warrant,
promise, indemnify and agree as follows:
1. Sale and Redemption of Warrant. The Seller hereby sells, transfers,
assigns and sets over unto the Corporation, and the Corporation hereby
purchases, acquires and redeems from the Seller, the Warrant and all rights
appurtenant thereto, including those rights set forth under the Registration
Rights Agreement, dated October 31, 2001, by and between the Corporation and the
Seller.
2. Purchase Price. In consideration of the sale of the Warrant, and
for which the Seller's signature hereon shall be deemed a full and satisfactory
receipt for all purposes, the Corporation shall pay to the Seller the sum of
$50,000.00 by certified, cashier's or bank teller's check, or by electronic
funds transfer from a bank account of the Corporation maintained with the
Seller.
3. Release.
(a) The Corporation hereby unconditionally releases and forever
discharges the Seller and each of the Seller's stockholders, directors,
officers, agents, employees, heirs, personal representatives, successors and
assigns from each and every action, charge, claim, right, liability or demand of
any kind or nature, known or unknown, that it had, has now or might hereafter
have or claim to have against the Seller and/or against the Seller's
stockholders, directors, officers, agents, employees, heirs, personal
representatives, successors and assigns, which have arisen, or may arise, in
connection with the status of the Seller as a warrantholder, or in connection
with the entering into and the circumstances surrounding the negotiation,
signing and delivery of this Agreement. Any action, charge, claim, right,
liability, demand or other legal proceeding released and discharged under the
provisions of this paragraph 3(a) is referred to in paragraph 3(b) below as a
"Claim".
(b) The Corporation hereby agrees to indemnify and hold harmless
the Seller and each of Seller's stockholders, directors, officers, agents,
employees, heirs, personal representatives, successors and assigns from, for,
against and in respect of any and all losses, liabilities, costs, claims,
cross-claims, counterclaims, set-offs, damages, demands, actions, arbitrations,
proceedings, obligations and expenses, including, without limitation, reasonable
attorneys' fees and costs, arising from or in connection with any Claim.
4. Representations and Warranties of the Seller. The Seller hereby
makes the following representations and warranties to the Corporation:
(a) Ownership of Warrant. The Seller is the sole owner of the
Warrant sold hereunder.
(b) Right to Sell. The Seller has the full power, authority and
legal right to make, execute, deliver and perform this Agreement, and to sell,
transfer and assign to the Corporation the Warrant in accordance with the
provisions, terms and conditions hereof.
(c) No Liens. The Warrant sold by the Seller hereunder is free
and clear of and from any and all liens, pledges, debts, encumbrances, claims,
demands and rights of others whatsoever.
(d) No Consent Required. No consent of any party is required in
connection with the making, execution, delivery or performance of this Agreement
by the Seller, or in connection with the validity of or enforceability against
him of the provisions, terms and conditions of this Agreement.
(e) Agreement Binding. This Agreement has been duly made,
executed and delivered by the Seller and constitutes the valid, legal and
binding obligation of the Seller, enforceable against him in accordance with its
provisions, terms and conditions.
(f) Full Disclosures. No representation or warranty of the Seller
herein made contains any untrue, incorrect, incomplete or inaccurate statement
of any material fact, or fails to state any fact necessary to make the
representations and warranties herein made not materially misleading.
5. Representations and Warranties of the Corporation. The Corporation
hereby makes the following representations and warranties to the Seller:
(a) Right to Purchase. The Corporation has the full power,
authority and legal right to make, execute, deliver and perform this Agreement
and to purchase from the Seller the Warrant in accordance with the provisions,
terms and conditions hereof.
(b) No Consent Required. No consent of any party is required in
connection with the making, execution, delivery or performance of this Agreement
by the Corporation, or in connection with the validity of or enforceability
against the Corporation of the provisions, terms and conditions of this
Agreement.
(c) Agreement Binding. This Agreement has been duly made,
executed and delivered by the Corporation and constitutes the valid, legal and
binding obligation of the Corporation, enforceable against it in accordance with
its provisions, terms and conditions.
(d) Other Agreements. The making, execution, delivery and
performance of this Agreement does not and will not violate any provision, term
or condition of, or constitute a default under, any mortgage, indenture,
contract or other agreement, document or instrument to which the Corporation is
a party or which is binding upon it or upon any of its assets, joint or
separate.
(e) Full Disclosures. No representation or warranty of the
Corporation herein made contains any untrue, incorrect, incomplete or inaccurate
statement of any material fact, or fails to state any fact necessary to make the
representations and warranties herein made not materially misleading.
6. Acts to Effectuate Agreement. Each of the parties hereto
hereby covenants and agrees to do and perform any and all acts, matters and
things, and make, execute, acknowledge and deliver any and all agreements,
documents and instruments, as may, from time to time, be required to effectuate
the intents and purposes of this Agreement or the consummation of the
transaction herein contemplated.
7. Mutual Indemnification. Each of the parties hereto hereby covenants
and agrees to indemnify and hold harmless the other party from, for, against and
in respect of any and all demands, damages, losses, obligations, liabilities,
claims, costs, actions, proceedings, arbitrations and expenses, including,
without limitation, reasonable attorneys' fees, incurred by or asserted against
such other party by reason of any breach or failure of observance or performance
of any promise, covenant, representation, warranty or other agreement made by
the indemnifying party hereunder.
8. Closing. The closing with respect to the transaction contemplated
by this Agreement shall occur simultaneously with the execution hereof on
January 16th, 2003 at the time and place mutually agreed upon by the parties
hereto.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without regard
to its principles of conflict of laws.
10. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
11. Survival of Terms. The parties hereto hereby agree that the
agreements, promises, covenants, representations, warranties and indemnities
herein contained shall survive the closing hereunder and shall not, in any
respect, merge herein or in any agreement, document or other instrument made,
executed and delivered hereunder or in connection herewith.
12. Amendments. This Agreement may not be modified, altered, amended,
changed, waived or terminated, except pursuant to a writing signed by the party
to be charged with such modification, alteration, amendment, change, waiver or
termination.
13. Entire Agreement. This writing contains the entire agreement of
the parties hereto with respect to the subject matter hereof, and no agreements,
promises, covenants, representations, warranties or indemnities have been made
or relied upon by any of the parties hereto, other than those that are expressly
herein set forth.
14. No Waiver. The failure by any of the parties hereto to object to
or take affirmative action with respect to any conduct of any of the other
parties hereto which constitutes a breach or other violation of this Agreement
shall not constitute, nor be construed as, a waiver thereof, or of any future
breach, violation or subsequent wrongful conduct.
15. Captions. All paragraph headings used herein are for convenience
of reference purposes only and shall be given no significance in the
interpretation of the provisions, terms or conditions hereof.
16. Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original hereof, but
all of which shall constitute one and the same instrument.
17. Interpretation. As used herein, words connoting a particular
gender shall, where the context so requires, be deemed to mean and include the
other genders, and words importing the plural number shall, where the context so
requires, be deemed to mean and include the singular and vice versa.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or caused this Agreement to be signed on their behalf by their duly authorized
corporate officers and their proper corporate seal to hereunto affixed, on the
date first hereinabove written.
ATTEST: EGAMES, INC.
/s/ John Longman By: /s/ Thomas W. Murphy
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Vice President and Chief
Financial Officer
ATTEST: FLEET NATIONAL BANK
/s/ John Longman By: /s/ Kenneth R. Geiger
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Assistant Vice President,
Managed Assets Division