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): December 5, 2005
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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.03
On December 5, 2005, eGames, Inc. (the "Company") renewed its Business Loan
Agreement with Hudson United Bank ("HUB") that permits the Company to borrow the
lesser of $750,000 or seventy-five percent of qualified accounts receivable,
which are defined as invoices less than ninety days old and net of any
allowances for product returns, price markdowns and customer bad debts. This
credit facility was established to provide working capital for the Company's
operations. Amounts outstanding under the credit facility will be charged
interest at one-half of one percent above HUB's current prime rate and interest
will be due monthly. The renewed credit facility matures on December 1, 2006. It
is secured by all of the Company's assets and requires the Company, among other
things, to maintain the following financial covenants to be tested quarterly: a
total liabilities to tangible net worth ratio of 1.25 to 1.00 and a minimum
tangible net worth requirement of $2 million.
The terms and conditions of the renewal of this credit facility are described in
the Note and Loan Modification Agreement attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
The following document is filed as an exhibit to this report.
99.1 Note and Loan Modification Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eGames, Inc.
By: /s/ Thomas W. Murphy
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Thomas W. Murphy, Vice President
and Chief Financial Officer
Dated: December 7, 2005
EXHIBIT 99.1
NOTE AND LOAN MODIFICATION AGREEMENT
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This Note and Loan Modification Agreement (the "Agreement"), made this
5th day of December, 2005, is by and among eGames, Inc., a Pennsylvania
corporation with an address of 2000 Cabot Boulevard West, Suite 110, Langhorne,
Pa. 19047 ("Borrower"), and Hudson United Bank, a New Jersey chartered banking
institution with offices at 1845 Walnut Street, 15th Floor, Philadelphia,
Pennsylvania ("Lender").
R E C I T A L S
WHEREAS, on September 18, 2003, Lender made a loan to Borrower in the
amount of $500,000.00 (the "Loan"); and on November 23, 2004, Lender increased
the Loan to $750,000.00.
WHEREAS, to evidence the Loan, on September 18, 2003 Borrower executed
a Note in the amount of $500,000.00, which Note was later replaced with a Note
in the amount of $750,000.00 signed on November 23, 2004 (as amended from time
to time, the "Note"); and
WHEREAS, to secure payment of the Note, Borrower granted Lender, inter
alia, a first priority security interest (the "Security Interest") in Borrower's
business assets, including but not limited to any and all inventory, accounts
receivable, instruments, chattel paper, general intangibles, furniture,
fixtures, and equipment (the "Collateral"), and as more fully described in a
Commercial Security Agreement on even date therewith which Security Interest is
perfected by the filing of UCC-1 financing statements;
WHEREAS, the Note section titled "LINE OF CREDIT" will be omitted and
replaced with the following:
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note, as well as directions for payment from
Borrower's accounts, must be requested in WRITING, such request maybe
by facsimile by Borrower or by an authorized person. Lender may, but
need not, require that all requests be confirmed in writing. The
following party or parties are authorized to request advances or
pay-downs under the line of credit until Lender receives from Borrower
at Lender's address shown above, written notice of revocation of their
authority:
PRINT NAME PRINT TITLE PARTY SIGNATURES
Gerald W. Klein President /s/ Gerald W. Klein
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Thomas W. Murphy CFO /s/ Thomas W. Murphy
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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 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.
WHEREAS, Borrower has asked Lender to extend the maturity date of the
Note and Loan (the "Modifications"); and
WHEREAS, Lender has agreed to make the Modifications, pursuant to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending to be legally bound, the parties hereby agree as
follows:
1. The parties hereby acknowledge and affirm the truthfulness and
accuracy of the foregoing recitals.
2. The Note and Loan are hereby amended as follows:
(a) The entire principal balance of the Loan, plus all
interest accrued thereon, plus any other sums payable under the Note,
shall be due and payable on demand, following an Event of Default, but
if no demand is made, then on December 1, 2006. In addition, monthly
payments of interest only shall be payable monthly on the first day of
each month.
b) Interest shall continue to be due and payable on the first
day of each month at the rate and in the manner set forth in the Note.
3. This Agreement shall not become effective until this Agreement is
fully executed by all parties to this Agreement and returned to Lender.
4. Nothing contained herein shall be deemed to nullify, discharge or
extinguish: (a) the contractual relationship between the parties as it existed
before the date hereof; or (b) the obligation of Borrower under any of the Loan
documents.
5. The parties intend this Agreement to operate only as a modification
of the Note and Loan and do not intend that a new loan or new indebtedness be
created hereby or that this Agreement be construed as a novation. Nothing
contained in this Agreement is intended to affect the lien priority of the
Collateral or to impair the security of any other lienholder.
6. The Borrower acknowledges that the CONFESSION OF JUDGMENT provision
agreed to on 11/23/04 remains in force and that nothing contained in this
modification alters or modifies the confession of judgment provision, or the
rights provided to the Lender thereby, in any respect.
7. The terms, conditions and obligations of the Note, and all other
executed documents, instruments, representations and assurances not herein
modified, including but not limited to any and all CONFESSION OF JUDGMENT
clauses:
(a) remain unchanged;
(b) are hereby ratified and affirmed in their entirety; and
(c) are legally valid, binding and enforceable in accordance with
their respective terms.
8. Borrower hereby ratifies and affirms that its liability shall
continue in full force and effect through and including the Note's now extended
maturity date. Borrower acknowledges that as of the date of this Agreement the
indebtedness evidenced by the Note is validly due and owing and that Borrower
has no defenses or setoffs against the Note, or other claims against Lender.
9. All expenses in connection with this transaction incurred by Lender,
including all legal and filing fees, are to be paid by Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this Note and Loan
Modification Agreement to be executed as of the day and year first
above-written.
BORROWER:
eGames, Inc.
By: /s/ Gerald W. Klein
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Gerald W. Klein, President
By: /s/ Thomas W. Murphy
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Thomas W. Murphy, Chief Financial Officer
LENDER:
Hudson United Bank
By: /s/ David Ciccanti
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David Ciccanti, Vice President
Date: 12/5/05
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