EXHIBIT 99.3
PROMISSORY NOTE
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Principal Loan Date Maturity Loan No. Call/Coll Account Officer Initials
$500,000.00 9-18-03 12-01-2004 ***
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References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing "***" has been omitted due to text length limitations.
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Borrower: Lender:
eGames, Inc. (TIN: 23-2694937) Hudson United Bank
2000 Cabot Boulevard West, Suite 110 Commercial Lending
Langhorne, PA 19047 Corporate Office
1845 Walnut Street, 15th floor
Philadelphia, PA 19103
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Principal Amount: Initial Rate: Date of Note:
$500,000.00 4.500% September 18, 2003
PROMISE TO PAY. eGames, Inc. ("Borrower") promises to pay to Hudson United Bank
("Lender"), or order, in lawful money of the United States of America, the
principal amount of Five Hundred Thousand & 00/100 Dollars ($500,000.00) or so
much as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, following an Event of Default,
in which event payment in full is due immediately upon Lender's demand. If no
such demand is made, Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on December 1, 2004. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning October 1, 2003, with all
subsequent interest payments to be due on the same day of each month after that.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs and any late charges, then to any unpaid
interest, and any remaining amount to principal. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Wall Street
Journal Prime Rate of Interest, which is defined as the highest "Prime Rate"
published in the "Money Rates" section of the Wall Street Journal (the "Index").
The Index is not necessarily the lowest rate charged by Lender on its loans. If
the Index becomes unavailable during the term of this loan, Lender may designate
a substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. The interest rate change will not
occur more often than each day. Borrower understands that Lender may make loans
based on other rates as well. The Index currently is 4.000% per annum. The
interest rate to be applied to the unpaid principal balance of this Note will be
at a rate of 0.500 percentage points over the Index, resulting in an initial
rate of 4.500% per annum. NOTICE: Under no circumstances will the interest rate
on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Hudson United Bank, Loan
Operations Department, 1000 MacArthur Blvd Mahwah, NJ 07430.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $20.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 2.500 percentage points over
the Index. The interest rate will not exceed the maximum rate permitted by
applicable law. If judgment is entered in connection with this Note, interest
will continue to accrue on this Note after judgment at the interest rate
applicable to this Note at the time judgment is entered.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this
Note.
Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower and such failure continues for a period of thirty (30) days
following notice from Lender.
Default in Favor of Third Parties. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the related documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower
and with respect to any such involuntary proceeding, the same is not
dismissed or otherwise discharged within ninety (90) days.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This includes
a garnishment of any of Borrower's accounts, including deposit accounts,
with Lender. However, this Event of Default shall not apply if there is a
good faith dispute by Borrower as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
Change In Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition.
Cure Provisions. If any default, other than a default in payment, is
curable and if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it may be
cured (and no event of default will have occurred) if Borrower, after
receiving written notice from Lender demanding cure of such default: (1)
cures the default within fifteen (15) days; or (2) if the cure requires
more than thirty (30) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may, after giving such notices as required
by applicable law, declare the entire unpaid principal balance on this Note and
all accrued unpaid interest immediately due, and then Borrower will pay that
amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $32.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph. All oral requests shall be confirmed in writing on
the day of the request, on forms acceptable to Lender. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender's office shown above. The following persons currently are
authorized to request advances and authorize payments under the line of credit
until Lender receives from Borrower, at Lender's address shown above, written
notice of revocation of their authority: Gerald W. Klein, President of eGames,
Inc.; and Thomas W. Murphy, Chief Financial Officer of eGames, Inc. Borrower
agrees to be liable for all sums either: (A) advanced in accordance with the
instructions of an authorized person or (B) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (A) Borrower is in default under the terms of
this Note or any agreement that Borrower has with Lender, including any
agreement made in connection with the signing of this Note; (B) Borrower or any
guarantor ceases doing business or is insolvent; or (C) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender.
FINANCIAL STATEMENTS. Borrower shall deliver to Lender annually, the
following: (i) audited financial statements of Borrower, within 120 days after
Borrower's fiscal year end; (ii) complete and signed copies of Borrower's
federal and state tax returns, within 30 days after the date on which Borrower
files such returns; and (iii) such other financial information as Lender may
reasonably request from time to time. All financial statements shall be prepared
by an independent public accounting firm approved by Lender, in accordance with
generally accepted accounting principles applied on a consistent basis, and
shall be certified as being true, accurate and complete. Such financial
statements shall include all liabilities, including, without limitation, all
indebtedness guaranteed. Failure to provide the foregoing financial statements
shall constitute a default hereunder.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the non-exclusive jurisdiction of the courts of the State of New
Jersey in any and all actions or proceedings arising hereunder or pursuant
hereto.
BORROWER'S REPRESENTATIONS. Borrower represents and warrants to Lender,
the following: (a) Borrower is not in default under any contract to which
Borrower is a party, nor will the entering into of the loan evidenced by this
Note constitute a default under any contract to which Borrower is a party; (b)
There is no action or proceeding pending or threatened against or affecting
Borrower, which, if adversely determined, would impair the validity or
enforceability of this Note or any documents related hereto, or have a material
adverse effect on the financial condition of Borrower or any guarantor; and (c)
There has not been any material adverse change in any collateral securing this
Note or in the financial condition of Borrower as reflected by any statements
submitted to Lender between the date Borrower applied for the loan and the date
hereof .
USURY LIMITS. In the event that the interest provisions hereof or in
any agreement related hereto, shall result in an effective rate of interest
which, for any period of time, exceeds the limit of usury or other law
applicable to the loan evidenced hereby, then Lender, at its sole discretion and
without notice to Borrower may: (a) apply all sums in excess of those lawfully
collectible as interest for the period in question toward repayment of
outstanding principal immediately upon receipt of such moneys by Lender with the
same force and effect as if Borrower had specifically designated such extra sums
to be so applied to principal; or (b) reduce or limit the collection of any
interest to such sums which shall not result in any payment of interest in
excess of that lawfully collectible. Borrower agrees that in determining whether
or not any interest payable under this Note exceeds the highest rate permitted
by law, any non-principal payment, including without limitation late charges,
shall be deemed, to the extent permitted by law, to be an expense, fee, premium
or penalty, rather than interest.
ADDITIONAL PROVISIONS. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note, and they agree that the liability of each of them
shall be joint and several, unconditional, without regard to the liability of
any other party, and shall not be affected in any manner by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
Lender. Borrower hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by Lender under the terms of this
Note or any agreement related to this Note, as well as all benefit that might
accrue to Borrower by virtue of any present or future laws exempting any
property, real or personal, securing this Note, or any agreement related to this
Note, or any part of the proceeds arising from any sale of such property, from
attachment, levy or sale under execution, or providing for any stay of
execution, homestead exemption, exemption from civil process, or extension of
time for payment and Borrower agrees that any real or personal property that may
be levied upon pursuant to a judgment obtained by virtue hereof, in any writ of
execution issued thereon, may be sold upon any such writ in whole or in part in
any order desired by Lender. Borrower consents to immediate execution of any
judgment.
INTERPRETATION. In all cases where there is more than one Borrower, then all
words used in the singular shall be deemed to have been used in the plural where
the context and construction so require; and where there is more than one
Borrower named in this Note or when this Note is executed by more than one
Borrower, the word "Borrower" shall mean all and any one or more of them.
Caption headings in this Note are for convenience purposes only and are not to
be used to interpret or define the provisions of this Note. If a court of
competent jurisdiction finds any provision of this Note to be invalid or
unenforceable as to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other persons or
circumstances, and all provisions of this Note in all other respects shall
remain valid and enforceable.
ACCOUNTS RECEIVABLE AND PAYABLE. Borrower covenants and agrees that it will
furnish to Lender, within fifteen (15) days of the end of each calendar quarter;
(i) Borrower's Accounts Receivable Aging Report (the "Receivables Aging")
showing the name of each client of Borrower, the balance due from the client to
Borrower, and a further breakdown of how much of each client's balance due is
between 0 and 30 days past due, 31 and 60 days past due, 61 and 90 days past
due, 91-180 days past due and over 180 days past due; and (ii) Borrower's
Accounts Payable Aging Report showing the total balance due from Borrower to
each of its creditor, and a further breakdown of how much of Borrower's balance
due is between 0 and 30 days past due, 31 and 60 days past due, 61 and 90 days
past due, 91 and 180 days past due and over 180 days past due.
BORROWING BASE. Borrower shall be able to draw funds hereunder up to an amount
equal to seventy-five percent (75%) of Borrower's Eligible Accounts Receivable.
The term "Eligible Accounts Receivable" is defined as those eligible accounts of
Borrower which are under ninety (90) days from the date of invoice, less
applicable allowances for product returns, price markdowns or bad debts
established by Borrower. If the outstanding principal balance of this Note at
any time exceeds seventy-five percent (75%) of Borrower's Eligible Accounts
Receivable, Borrower shall immediately pay down such principal balance to an
amount equal to seventy-five percent (75%) of Borrower's Eligible Accounts
Receivable.
LENDER'S LOAN FEES. In consideration for Lender holding itself ready, willing
and able to extend the loan evidenced by this Note, Borrower has paid Lender a
loan fee of $5,000.00, which represents 1.00% of the original amount of this
Note. If Lender extends the maturity date of this Note beyond its stated
maturity, Lender shall have the right, in its sole discretion to automatically
assess a fee for the extension, which fee shall be same percentage as the
original loan fee, pro-rated to account for the length of the extension.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: Hudson United
Bank Loan Operations Department 1000 MacArthur Blvd Mahwah, NJ 07430
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly stated
in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several. If
any portion of this Note is for any reason determined to be unenforceable, it
will not affect the enforceability of any other provisions of this Note.
CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY
ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF
PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR BORROWER AFTER A DEFAULT
UNDER THIS NOTE AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT
AGAINST BORROWER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE AND ALL ACCRUED
INTEREST, LATE CHARGES AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER
RELATING TO ANY COLLATERAL SECURING THIS NOTE, TOGETHER WITH COSTS OF SUIT, AND
AN ATTORNEY'S COMMISSION OF FIVE PERCENT (5%) OF THE UNPAID PRINCIPAL BALANCE
AND ACCRUED INTEREST FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE HUNDRED
DOLLARS ($500) ON WHICH JUDGMENT OR JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE
IMMEDIATELY; AND FOR SO DOING, THIS NOTE OR A COPY OF THIS NOTE VERIFIED BY
AFFIDAVIT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO
CONFESS JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE OF THAT
AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT
IN FULL OF ALL AMOUNTS DUE UNDER THIS NOTE. BORROWER HEREBY WAIVES ANY RIGHT
BORROWER MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH
CONFESSION OF JUDGMENT AND STATES THAT EITHER A REPRESENTATIVE OF LENDER
SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO BORROWER'S
ATTENTION OR BORROWER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
BORROWER:
EGAMES. INC.
By:/s/ Gerald W. Klein (Seal) By:/s/ Thomas W. Murphy (Seal)
Gerald W. Klein, Thomas W. Murphy, Chief Financial
President of eGames, Inc. Officer of eGames, Inc.
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LASER PRO Lending, Ver.5.21.00.003 Corp. Harland Solutions, Inc. 1997, 2003.
All Rights Reserved. -PA M:\APPS\CFI\C40.FC TR-2129 PR-1