-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SWxlCHDObi8x9qMnbjZudXbjZnaKEUacFY17Azu+VyzfelzsQnEcmWWO9Ajz5csb 17/rRkqA0OfVHLy7/behPA== 0000891554-99-000557.txt : 19990323 0000891554-99-000557.hdr.sgml : 19990323 ACCESSION NUMBER: 0000891554-99-000557 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990310 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EGAMES INC CENTRAL INDEX KEY: 0000948703 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 232694937 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27102 FILM NUMBER: 99569752 BUSINESS ADDRESS: STREET 1: 2000 CABOT BLVD STREET 2: SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 BUSINESS PHONE: 2157506606 MAIL ADDRESS: STREET 1: 2000 CABOT BLVD SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 8-K 1 CURRENT REPORT 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): March 10, 1999 EGAMES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 0-27102 23-2694937 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 750-6606 ------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events. On March 10, 1999, eGames, Inc. (the "Company") entered into a $1 million revolving credit facility with Sovereign Bank, as described in the press release, Line of Credit Note and Line of Credit Loan and Security Agreement, attached hereto as Exhibits 99.1, 99.2 and 99.3, and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. a. None. b. None. c. Exhibits. 99.1 Press Release dated March 18, 1999. 99.2 Line of Credit Note. 99.3 Line of Credit Loan and Security 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/ Gerald W. Klein --------------------------- Gerald W. Klein, President, Chief Executive Officer and Chief Financial Officer Dated: March 22, 1999 EX-99.1 2 PRESS RELEASE DATED MARCH 18, 1999 EXHIBIT 99.1 At eGames, Inc.: At Financial Relations Board: - ---------------- ----------------------------- Jerry Klein Glenn Sapadin (212) 661-8030 (General Inquiries) President and CEO Elisa Mailman (212) 661-8030 (Investor Inquiries) (215) 750-6606 ext. 118 Deanne Eagle (212) 661-8030 (Media Inquiries) jklein@eGames.com For Immediate Release eGames, Inc. Announces Revolving Line of Credit LANGHORNE, Pa., March 18, 1999 --eGames, Inc. (Nasdaq: EGAM), a leading provider of Family Friendly(TM), value-priced computer software games for players of all ages, today announced that it has entered into a $1 million revolving credit facility with Sovereign Bank. According to Jerry Klein, president and CEO of eGames, "In addition to strengthening our balance sheet, this new credit facility will provide eGames with additional financial flexibility as we continue to pursue our growth strategies, including our enhanced ecommerce initiatives and our plans to expand our retail presence. "We presently sell our software through chains such as KMart, WalMart, Target, and Best Buy as well as in computer and office superstores such as CompUSA, Computer City, Staples and Office Depot. We believe that in the future we will be well positioned to not only further penetrate these existing chains with new software titles, but also to build significant relationships with other retailers. In addition, our recently launched ecommerce web site, www.egames.com, is a one-stop shopping location for family-friendly, value-priced software." eGames, Inc. is headquartered in Langhorne, PA. In addition to software games, the Company publishes a diversified line of PC software for small business and home office applications. The Company is best known for its Galaxy of Games(TM), Galaxy of Home Office Help(TM), Game Master Series(TM) and Galaxy of Arcade(TM) brand names. Under the Galaxy Series(TM) brand banner, the Company strives to differentiate its products in the marketplace, generate customer and retailer loyalty and encourage repeat purchases. Additional information regarding eGames, Inc. can be found on the Company's Web Site at http:/www.egames.com. -more- This press release contains certain forward-looking statements, including without limitation, statements regarding increased future sales of eGames' software to retail stores, establishing relationships with additional retail store chains for the sale of eGames' products, eGames' business strategy relating to internet marketing and the success of eGames' Galaxy branding strategy. The actual results achieved by eGames, and the factors that could cause actual results to differ materially from those indicated by the forward-looking statements, are in many ways beyond eGames' control. eGames cautions readers that the following important factors, among others, could cause eGames' actual results to differ materially from those expressed in this press release: eGames' ability to continue to sell software to retail stores with which it has existing relationships, eGames ability to establish sales relationships with additional retail store chains; eGames' ability to implement its Internet strategy; the allocation of adequate shelf space for eGames' products in major chain retail stores; successful sell-through results for eGames' products at retail stores; downward pricing pressure; the timeliness and success of developing and selling products; the acceptance by the market of eGames' products; access to and control over distribution channels; consumers' continuing demand for value-priced software; competition; the ability to create successful strategic partnerships; and various other factors, described in the Company's reports, including Form 10-KSB, dated June 30, 1998 and Form 10-QSB dated December 31, 1998, filed by the Company with the Securities and Exchange Commission. # # # EX-99.2 3 LINE OF CREDIT NOTE EXHIBIT 99.2 LINE OF CREDIT NOTE $1,000,000.00 Villanova, Pennsylvania Date: March 10, 1999 FOR VALUE RECEIVED, without defalcation, demand or setoff, eGAMES, INC, a Pennsylvania corporation ("Maker"), in accordance with the terms and conditions set forth below, hereby promises to pay to the order of SOVEREIGN BANK (the "Bank"), the principal sum of One Million Dollars ($1,000,000) or such lesser amount as may be advanced to Maker pursuant to the Loan Agreement (which is hereinafter defined), in lawful money of the United States of America, together with interest thereon at an annual rate equal to the "Prime Rate" (as defined below) plus .50%. I. The "Prime Rate" is the floating annual rate of interest that is announced from time to time by the Bank as the Prime Rate and is used by the Bank as a reference base with respect to different rates charged to borrowers. The Prime Rate shall change simultaneously and automatically upon the Bank's designation of any change in such Prime Rate. The Bank's determination and designation from time to time of the referenced rate shall not in any way preclude the Bank from making loans to other borrowers at a rate which is higher or lower than or different from the Prime Rate. II. Interest shall be due and payable monthly in arrears commencing March 30, 1999 and continuing on the thirtieth day of each month thereafter until the Bank's credit availability evidenced by this Note has expired or been terminated, and the principal amount of and all accrued interest with regard to this Note have been paid in full (it being understood that interest shall again accrue upon any subsequent borrowing under the Loan Agreement). III. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed (365/360 or 366/360 as appropriate). IV. Principal shall be due and payable on the earlier to occur of (i) an Event of Default (as defined in the Loan Agreement), or (ii) October 31, 1999. V. Upon the occurrence of a default hereunder, the rate of interest shall be increased to a rate equal to two percent (2%) above the Prime Rate, payable on the date of default (the "Default Rate"). Interest at the rate provided for herein, or the Default Rate, shall continue to accrue at such rate, and continue to be paid even after default, maturity, acceleration, recovery of judgment, bankruptcy or insolvency proceeding of any kind until such monetary default has been owed. VI. If any of the aforesaid payments of interest shall become overdue for a period in excess of ten (10) days, Maker shall pay the Bank a "late charge" of five percent (5%) of the monthly interest payment then past due. VII. All payments of principal and interest with regard to this Note shall be made in lawful money of the United States of America in immediately available funds at the Bank's office at Two Aldwyn Center, Lancaster Avenue and Route 320, Villanova, Pennsylvania 19085 or at such other place as the Bank shall designate in writing. VIII. Maker shall not be obligated to pay and the Bank shall not collect interest at a rate in excess of the maximum permitted by law or the maximum that will not subject the Bank to any civil or criminal penalties. If, because of the acceleration of maturity, the payment of interest in advance or any other reason, Maker is required, under the provisions of the Line of Credit Loan and Security Agreement of even date herewith between Maker and the Bank (the "Loan Agreement"), to pay interest at a rate in excess of such maximum rate, the rate of interest under such provisions shall immediately and automatically be reduced to such maximum rate, and any payment made in excess of such maximum rate, together with interest thereon at a rate provided herein from the date of such payment, shall be immediately and automatically applied to the reduction of the unpaid principal balance of this Note as of the date on which such excess payment is made. If the amount to be so applied to reduction of the unpaid principal balance exceeds the unpaid principal balance, the amount of such excess shall be refunded by the Bank to Maker. IX. Notwithstanding the face amount of this Note, the liability of the Maker under this Note shall be limited at all times to the unpaid principal amount of, all accrued unpaid interest on, all late charges with respect to, and all costs incurred in the collection of any sum due under and in connection with the Line of Credit Facility (as provided in Article 2 of the Loan Agreement) and as reflected on the records of the Bank and all other amounts due under this Note or the Loan Agreement. X. This Note is the Note referred to in Article 2 of the Loan Agreement and is entitled to all the benefits of such Loan Agreement and all the security referred to therein. In the event of a conflict between the terms of this Note and the terms of the Loan Agreement, the terms of the Loan Agreement shall control. XI. All of the agreements, conditions, covenants, provisions and stipulations contained in the Loan Agreement which are to be kept and performed by Maker are hereby made a part of this Note to the same extent and with the same force and effect as if they were fully set forth herein, and Maker covenants and agrees to keep and perform them, or cause them to be kept and performed, strictly in accordance with their terms. XII. Upon the occurrence of an Event of Default as that term is defined in Article 8 of the Loan Agreement, then, and in such event, the Bank may declare this Note to be due and payable, whereupon the entire unpaid balance of principal, together with all accrued interest thereon, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything herein or in the Loan Agreement to the contrary notwithstanding. XIII. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AS THAT TERM IS DEFINED IN ARTICLE 8 OF THE LOAN AGREEMENT, MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE TO APPEAR AT ANY TIME FOR MAKER IN ANY ACTION BROUGHT AGAINST SUCH MAKER ON THIS NOTE AT THE SUIT OF THE BANK, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM, AND THEREIN TO CONFESS OR ENTER JUDGMENT AGAINST MAKER FOR THE ENTIRE UNPAID PRINCIPAL OF THIS NOTE AND ALL OTHER SUMS PAYABLE BY OR ON BEHALF OF MAKER PURSUANT TO THE TERMS OF THIS NOTE OR THE LOAN AGREEMENT, AND ALL ARREARAGES OF INTEREST THEREON, TOGETHER WITH COSTS OF SUIT, ATTORNEY'S COMMISSION FOR COLLECTION OF TEN PERCENT (10%) OF THE TOTAL AMOUNT THEN DUE BY MAKER TO THE BANK (BUT IN ANY EVENT NOT LESS THAN TWO THOUSAND DOLLARS ($2,000.00)), AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER. XIV. The remedies of the Bank as provided herein or in the Loan Agreement, and the warranties contained herein or in the Loan Agreement, shall be cumulative and concurrent, and may be pursued singly, successively, or together at the sole discretion of the Bank, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. XV. Maker hereby waives and releases all errors, defects and imperfections in any proceedings instituted by the Bank under the terms of this Note or of the Loan Agreement, as well as all benefit that might accrue to Maker by virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy, or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment; and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued thereon, may be sold upon any such writ in whole or in part in any order desired by the Bank. XVI. Maker and all endorsers, sureties and guarantors hereby jointly and severally waive presentment for payment, demand, notice of demand, protest and notice of protest of this Note, and 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 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 consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by the Bank with respect to the payment or other provisions of this Note, and to the release of the collateral or any part thereof, with or without substitution, and agree that additional makers, endorsers, guarantors, or sureties may become parties hereto without notice to them or affecting their liability hereunder. XVII. The Bank shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Bank, and then only to the extent specifically set forth in the writing. A waiver on one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event. XVIII. This instrument shall be governed by and construed according to the domestic internal laws (but not the law of conflict of laws) of the Commonwealth of Pennsylvania. XIX. Whenever used, the singular number shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders, and the words the "Bank" and "Maker" shall be deemed to include the respective successors and assigns of the Bank and Maker. XX. Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by its authorized officers, and its corporate seal to be affixed and attested, the day and year first above written. eGAMES, INC By: /s/ Gerald W. Klein (SEAL) -------------------- EX-99.3 4 LINE OF CREDIT LOAN & SECURITY AGREEMENT EXHIBIT 99.3 LINE OF CREDIT LOAN AND SECURITY AGREEMENT between SOVEREIGN BANK and eGAMES, INC. ================================================================================ LINE OF CREDIT LOAN AND SECURITY AGREEMENT (the "Agreement") dated March 10, 1999, between SOVEREIGN BANK (the "Bank"), with offices at Two Aldwyn Center, Lancaster Avenue and Route 320, Villanova, Pennsylvania 19085, and eGAMES, INC., a Pennsylvania corporation ("Borrower"), with an office at 2000 Cabot Boulevard, Suite 110, Langhorne, Pennsylvania 19047. Borrower and Bank, intending to be legally bound, hereby agree as follows. ARTICLE 1. DEFINITIONS 1.1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: Account Debtor. The party who is obligated on or under any Account. Advances. "Advances" shall have the meaning given to such term in Section 2.1(a) hereof. Affiliate. With respect to any Person, another Person directly or indirectly Controlling, Controlled by or under common Control with any such Person. Agreement. This Line of Credit Loan and Security Agreement and all amendments, modifications and supplements hereto and restatements hereof. Assets. All of Borrower's presently owned and hereafter acquired assets including, but not limited to, Accounts, Chattel Paper, Contracts, Documents, General Intangibles, Instruments, present and future Inventory, Equipment, Machinery, Goods, Fixtures, and all accessions thereto, replacements thereof, and all products and Proceeds thereof. Bank. Sovereign Bank, a federally-chartered, SAIF-insured savings institution, or any successor bank. Bankruptcy Code. The Bankruptcy Reform Act of 1994 and all similar or successor statutes, and all rules and regulations of Federal agencies and authorities promulgated under those statutes, all as they have been and may be amended from time to time. Borrowing Date. Each date upon which the Bank makes an Advance to Borrower. Business Day. A day other than a Saturday, Sunday or Holiday on which the Bank is open for the transaction of banking business. Code. The Internal Revenue Code of 1986, as amended. Collateral. "Collateral" shall have the meaning given to such term in Section 3.1 hereof. Control. The possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Controlled Group. "Controlled Group" shall have the meaning set forth for "Controlled group of corporations" at Section 1563 of the Code. Debt. (a) All items of indebtedness or liability which, in accordance with generally accepted accounting principles consistently applied, would be included in determining total liabilities as shown on a balance sheet as of the date as of which the Debt is to be determined, (b) all indebtedness secured by any mortgage, pledge, lien or security interest existing on property owned by the Person whose Debt is being determined, whether or not the indebtedness secured thereby is an obligation of such entity, and (c) guaranties, endorsements (other than for purposes of collection in the ordinary course of business), other contingent obligations in respect of, or to purchase or to otherwise acquire, indebtedness of others, and other contingent obligations of a type described in Section 7.7 hereof. Default. Any event specified in Section 8.1 of this Agreement, whether or not any requirement for notice or passage of time or any other condition has been satisfied. ERISA. The Employee Retirement Income Security Act of 1974, as amended, together with the rules and regulations promulgated thereunder. Event of Default. Any event specified in Section 8.1 of this Agreement, provided that any requirement for notice or passage of time or any other condition has been satisfied. Liabilities. The obligations of Borrower to the Bank: 1.0.0.1. To pay the principal of and all interest on the Note in accordance with the terms thereof, to pay all other amounts due by Borrower in accordance with the terms hereof, and to satisfy all of Borrower's liabilities to the Bank, whether hereunder or otherwise, whether now existing or hereafter incurred, matured or unmatured, direct or contingent, primary or secondary, joint or several, including any extensions, modifications, renewals thereof and substitutions therefor and liabilities of Borrower which the Bank may have obtained by assignment, subrogation, or otherwise, and all liabilities of Borrower as guarantor, surety or endorser of the obligations of any third party or parties to the Bank; 1.0.0.2. To repay the Bank all amounts advanced by the Bank hereunder or otherwise on behalf of Borrower, including, but without limitation, advances for principal or interest, payments to prior secured parties, mortgagees, or lienors, or for taxes, levies, insurance, securities, registration fees, or agency fees for any of the Collateral; 1.0.0.3. To reimburse the Bank, on demand, for all of the Bank's expenses and costs, including the reasonable fees and expenses of its counsel, in connection with the preparation of and closing under this Agreement and the amendment, modification, renewal or enforcement of this Agreement and the documents required hereunder, including, without limitation, any proceeding brought or threatened to enforce payment of any of the obligations referred to in the foregoing paragraphs (a) and (b), unless any of the foregoing are occasioned as a result of the Bank's willful misconduct or gross negligence. Line of Credit. The meaning provided at Article 2 hereof. Line of Credit Note. The line of credit note executed by Borrower in the principal amount specified in Article 2 hereof and in the form of Exhibit "A" attached hereto and made a part hereof. Loan. The Line of Credit Facility provided for in Article 2 hereof. Loan Account. "Loan Account" shall mean the account of Borrower on the books of the Bank in which is recorded, inter alia, the Advances and the payments of principal and interest made by Borrower to the Bank. Loan Documents. Individually and collectively, this Agreement, the Note, and all other existing and future agreements, pledges, instruments, documents, assignments, leases, guarantees and contracts (including amendments, modifications, extensions, renewals and supplements to and restatements of any of the foregoing) delivered by or on behalf of the Borrower in connection with this Agreement. Net Tangible Assets.At any time, the amount by which all of Borrower's Assets exceeds: (a) good will and (b) Total Liabilities, all as determined in accordance with generally accepted accounting principals applies on a consistent basis from period to period. Note. The Line of Credit Note. PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. Person. Any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, court or government or political subdivision or agency thereof. Plan. Any plan subject to Title IV of ERISA and maintained for employees of Borrower, any of its subsidiaries or any members of a Controlled Group of which Borrower is a part. Prime Rate. "Prime Rate" shall mean the prime rate announced by the Bank, from time to time, which may not represent the lowest rate charged by the Bank to borrowers at any time or from time to time. Reportable Event. "Reportable Event" has the meaning assigned to such term in Section 4043(b) of ERISA or regulations issued thereunder. Total Liabilities. The aggregate amount which, in accordance with generally accepted accounting principles consistently applied, is carried as total liabilities on the books of Borrower, or should be so carried. 1.2. Undefined Terms; Accounting Terms. Unless expressly provided in this Agreement, or unless the context requires otherwise: 1.2.0.1. terms used in this Agreement without definition including, but not limited to, Accounts, Assets, Contracts, Chattel Paper, Documents, Equipment, Machinery, Goods, Fixtures, General Intangibles, Goods, Instruments, Inventory, and Proceeds, which are defined in the Pennsylvania Uniform Commercial Code shall have the meanings assigned to them in the Pennsylvania Uniform Commercial Code as amended from time to time, and 1.2.0.2. all accounting terms not specifically defined herein shall be construed, and all financial data submitted pursuant to this Agreement shall be prepared, in accordance with generally accepted accounting principles, as applied in the preparation of the latest audited financial statements delivered to the Bank pursuant to Section 6.1 of this Agreement. ARTICLE 2. AMOUNTS, TERMS AND CONDITIONS OF LINE OF CREDIT LOAN 2.1 Line of Credit Facility. 2.1.0.1. Subject to, and in accordance with, the terms and conditions of this Agreement, the Bank agrees to make advances in integral multiples of $1,000.00 (the "Advances") not to exceed One Million ($1,000,000.00) Dollars less the sum of the then unpaid principal amount of all previous Advances, to Borrower upon request at any time and from time to time during the period commencing on the date hereof and ending on the earlier of (i) the occurrence of an Event of Default, or (ii) October 31, 1999. 2.1.0.2. Borrower may request on Advance by notice to the Bank not later than 2:00 P.M., Philadelphia, Pennsylvania time, on the Business Day on which Borrower wishes the Bank to make the Advance. 2.1.0.3. Borrower, subject to the terms and conditions of this Agreement, may reborrow any amount repaid by Borrower at any time and from time to time on or before the termination of the Bank's commitment under this Article 2. 2.1.0.4. The term of this Line of Credit shall commence on the date hereof and, unless earlier terminated, shall terminate on the earlier to occur of (i) an Event of Default (as defined herein), or (ii) October 31, 1999. Bank at its sole discretion may extend or continue the term of this Line of Credit pursuant to terms and conditions set forth by the Bank in its sole discretion and based, in Bank's sole discretion and interpretation, on the Borrower's Financial Statements (as required in Article 6 herein) for the year end of June 30, 1999 and any other information available to Bank or which Bank may reasonably request. 2.2. Line of Credit Note. The obligation of Borrower to pay the principal of, and accrued interest on, the Line of Credit shall be evidenced by its promissory note dated this date (the "Line of Credit Note"): 2.2.0.1. payable to the order of the Bank in the face amount of One Million ($1,000,000.00) Dollars; 2.2.0.2. bearing interest on its unpaid principal amount of all Advances at an annual rate equal to the Prime Rate plus .50%. Interest shall fluctuate with changes in the Prime Rate, shall be computed on the actual number of days elapsed on the basis of a 360-day year and shall be payable monthly on the thirtieth (30th) day of the month; 2.2.0.3. payable as to interest monthly in arrears on the thirtieth (30th) day of each calendar month commencing March 30, 1999 through and including the first day on which: 2.2.0.3.1. the Line of Credit shall have been terminated, and 2.2.0.3.2. Borrower shall have repaid in full the Line of Credit (it being understood that interest shall again accrue upon any subsequent borrowing under this Line of Credit); 2.2.0.4. payable as to principal on the earlier to occur of: (i) an Event of Default, or (ii) October 31, 1999; 2.2.0.5. secured by the Collateral; 2.2.0.6. prepayable by Borrower without penalty or premium but with accrued interest to the date of such prepayment on the amount prepaid, at any time and from time to time, in whole or in part, upon notification to the Bank of such prepayment not later than 10:00 a.m. on the date of such prepayment; and 2.2.0.7. substantially in the form of Exhibit "A" attached hereto and made a part hereof. 2.3. Payments 2.3.0.1.All payments by Borrower under the Loan Documents shall be made to the Bank at its office described in the heading of this Agreement, or such other place or places as the Bank may direct in writing, prior to 2:00 P.M., Philadelphia, Pennsylvania time, on the date of payment (or, if the date of payment is not a Business Day, the next Business Day) in funds which are immediately available to the Bank. 2.3.0.2. All payments received by the Bank in immediately available funds prior to 2:00 P.M., Philadelphia, Pennsylvania time, on any Business Day will be credited to Borrower's Loan Account on the date of receipt. All payments received by the Bank in immediately available funds after 2:00 P.M., Philadelphia, Pennsylvania time, on any Business Day will be credited to Borrower's Loan Account on the next Business Day. 2.3.0.3. All payments received by the Bank which are not in immediately available funds shall be subject to a clearance of three (3) Business Days. 2.3.0.4. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed (365/360 or 366/360, as the case may be). Interest for each month shall be added to principal as of the close of each month. 2.3.0.5. Any change in interest rate resulting from a change in the Prime Rate shall be effective as of the opening of business on the day on which the Bank announces the change. 2.3.0.6. Except as otherwise expressly provided in this Agreement, whenever a payment of principal becomes due on a day which is not a Business Day, the maturity of the Liabilities shall be extended to the next succeeding Business Day and interest shall accrue on such Liabilities at the applicable rate during the extension. 2.4. Confirmation of Borrower's Liabilities. Each and every statement of account transmitted by Bank to Borrower hereunder, whether in person, or by ordinary mail or otherwise, shall be final, conclusive and binding upon Borrower in all respects as to all loans, fees, interest, charges, payments, receipts, balances, Collateral and all other matters reflected therein unless Borrower, within fifteen (15) days after the mailing thereof, shall give notice to Bank in writing of all objections to any such statement of account specifying those items considered by Borrower to be in dispute. Borrower agrees that its failure to specify items in dispute within the foregoing fifteen (15) day period shall operate as a waiver of its rights to do so at a later time. 2.5. Late Charge. If any of the payments under the Note shall become overdue for a period of ten (10) days, Borrower shall pay the Bank a "late charge" of five percent (5%) of the monthly interest payment then past due. ARTICLE 3. SECURITY INTEREST 3.1. Grant of Security Interest and Assignment of Accounts. 3.1.0.1. To secure the payment to the Bank of Borrower's Liabilities, and to secure performance of all of its obligations under this Agreement, Borrower hereby grants to the Bank a security interest in all of Borrower's presently owned and hereafter acquired Accounts, Chattel Paper, Contracts, Contract Rights, Documents, Equipment (including, but not limited to, machinery, equipment, fixtures, office equipment and furniture, and motor vehicles), Assets, General Intangibles (including, but not limited to, goodwill, trademarks, tradenames, trade styles, patents, copyrights and telephone numbers and listings), Goods, Instruments and Inventory and all accessions thereto, replacements thereof, all products and cash and non-cash Proceeds of the same (collectively, the "Collateral"), and Borrower hereby assigns, transfers and sets over to the Bank all of its presently owned and hereafter acquired Accounts and Proceeds thereof. The security interest of the Bank in all Collateral shall be a first lien security interest. Borrower agrees that the aforesaid grant of security interest is intended as a contemporaneous exchange for value given to Borrower. 3.1.0.2. The right to Proceeds provided for above does not, and shall not be interpreted to, constitute authorization or consent by the Bank to any disposition of any Collateral. This Agreement and the security interest granted herein shall stand as general and continuing security for all Liabilities and may be retained by the Bank until all Liabilities have been satisfied in full; provided, however, that this Agreement shall not be rendered void by the fact that no commitment by the Bank to make Advances to Borrower exists as of any particular date, but shall continue in full force and effect until all Liabilities have been satisfied in full and neither party hereto has any obligation to the other under any of the Loan Documents. 3.1.0.3. As additional security for the Liabilities, Borrower conveys, assigns and grants a security interest to the Bank in and to all present and future files, books, ledgers, records, bills, invoices, receipts, deeds, certificates or documents of ownership, warranties, bills of sale and all other data and data storage systems and media pertaining to any of the Collateral. 3.2. Future Advances. The Liabilities secured hereby include all future advances, including payments on guarantees, made by the Bank at any time or times to or for the benefit of Borrower, whether obligatory or optional, including all costs, expenses, court costs and reasonable attorneys' fees incurred in the collection of the Liabilities and/or the Collateral, or for the establishment, maintenance or enforcement of the Bank's security interest therein. 3.3. Additional Security. As additional Collateral to secure the Liabilities, Borrower grants to the Bank a security interest in all of Borrower's present and future deposits or other monies due from instruments, documents, policies and certificates of insurance, securities, goods, accounts receivable, chooses in action, chattel paper, currency, property and the proceeds thereof, owned by Borrower or in which it has an interest, now or hereafter in the possession or control of the Bank or in transit by mail or carrier to or from the Bank or in the possession of any other person acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether the Bank has conditionally released the same. The property described in this paragraph shall constitute part of the Collateral for all purposes under this Agreement. 3.4. Perfection of Security Interest. Borrower shall execute and deliver to the Bank concurrently with the execution of this Agreement, and at any time or times hereafter at the request of Bank all assignments, certificates of title, conveyances, assignment statements, financing statements, renewal financing statements, security agreements, affidavits, notices and all other agreements, instruments and documents that the Bank may reasonably request, in form satisfactory to the Bank, and shall take any and all other steps reasonably requested by the Bank, in order to perfect and maintain the security interests and liens granted herein by Borrower to the Bank and in order to fully consummate all of the transactions contemplated herein and under this Agreement. 3.5. Power of Attorney. Borrower does hereby irrevocably make, constitute and appoint the Bank and any of its officers, employees or agents as the true and lawful attorneys of Borrower with power to 3.5.0.1. sign the name of Borrower on any financing statement, renewal financing statement, notice or other similar document which, in the Bank's opinion, must be filed in order to perfect or continue perfected the security interests granted in this Agreement; 3.5.0.2. upon an Event of Default, receive, endorse, assign and deliver, in the name of Borrower or in the name of the Bank, all checks, notes, drafts and other instruments relating to any Collateral including but not limited to receiving, opening and properly disposing of all mail addressed to Borrower concerning Accounts; 3.5.0.3. upon an Event of Default, sign the name of Borrower on any invoice or bill of lading relating to any Account, drafts against Account Debtors, schedules and assignments of Accounts, notices of assignment, verifications of Accounts and notices to Account Debtors, including, but not limited to, notices to Account Debtors advising them to make payments on Accounts directly to the Bank; 3.5.0.4. upon an Event of Default, take or bring at Borrower's cost, in its name or in the name of the Bank, all steps, actions and suits deemed by Bank necessary or desirable to effect collections of Accounts, to enforce payment of any Account, to settle, compromise, sell, assign, discharge or release, in whole or in part, any amounts owing on Accounts, to prosecute any action or proceeding with respect to Accounts, to extend the time of payment of any and all Accounts, and to make allowances and adjustments with respect thereto; 3.5.0.5. upon an Event of Default, secure credit in the name of Borrower or in the name of the Bank; and 3.5.0.6. do all other things necessary to carry out this Agreement. Neither the Bank nor any attorney will be liable for any act of commission (other than an act of willful misconduct by the Bank) or omission nor for any error of judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any of the Liabilities remain unpaid. ARTICLE 4. REPRESENTATIONS AND WARRANTIES To induce the Bank to enter into this Agreement, and to make the Loan provided for herein, Borrower represents and warrants to the Bank that: 4.1. Organization, Qualification of Borrower. 4.1.0.1. Borrower is a Pennsylvania corporation duly organized, validly subsisting and in good standing under the laws of the Commonwealth of Pennsylvania. 4.1.0.2. Borrower is duly licensed or qualified as a foreign corporation and in good standing under the laws of each jurisdiction in which the nature of the business transacted by it and the character of the property owned or leased by it make such licensing or qualification necessary and where the failure to be so licensed or qualified is material to the business of Borrower. 4.1.0.3. Borrower has no subsidiaries. 4.1.0.4. Borrower is not a member of any partnership or joint venture. 4.1.0.5. Borrower is not affiliated, by stock ownership or otherwise, with any business entity. 4.1.0.6. Except as set forth on Schedule 4.1.0.6 hereof, Borrower has never conducted business under or otherwise used any fictitious names or trade names. 4.2. Authority, Authorization 4.2.0.1. Borrower has the power to execute, deliver and perform the Loan Documents to which it is a party, and to borrow under this Agreement and the Note. 4.2.0.2. Borrower has taken all necessary action to authorize the borrowings provided for in this Agreement and the execution, delivery and performance of the Loan Documents to which Borrower is a party. 4.2.0.3. No consent of any other party (including stockholders of Borrower) and no consent, license, approval or authorization of, or registration or declaration with, any governmental authority, bureau or agency is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement or any Loan Documents to which Borrower is a party. 4.3. Enforceability 4.3.0.1. This Agreement has been duly and validly executed by Borrower and constitutes a legal, valid and binding contract of Borrower, enforceable in accordance with its terms, except as its enforceability may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights. 4.3.0.2. All other Loan Documents, when executed and delivered to the Bank pursuant to the terms of this Agreement or those Loan Documents, will be legal, valid and binding obligations enforceable in accordance with their terms and the terms of this Agreement, except as the enforcement of any of them may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights. 4.4. Conflicts. The execution, delivery and performance of the Loan Documents to which Borrower is a party will not conflict with, result in a breach of, or constitute a default under any provision of: 4.4.0.1. to the knowledge of Borrower, any existing law or regulation or order of any court, governmental authority, bureau or agency having jurisdiction; 4.4.0.2. the Articles of Incorporation of Borrower; or 4.4.0.3. any agreement or instrument to which Borrower is a party or which purports to be binding upon it or any of its assets. 4.5. Liens. The execution, delivery and performance of the Loan Documents to which Borrower is a party will not result in the creation or imposition of any lien on any of its assets pursuant to the provisions of any agreement or instrument to which Borrower is a party or which purports to be binding upon it or any of its assets other than such liens as are created by the Loan Documents themselves. 4.6. Litigation. 4.6.0.1. There is no litigation or governmental proceeding pending or, to the knowledge of Borrower, threatened which is reasonably likely to: 4.6.0.1.1. have a material adverse effect on the financial condition or business of Borrower so as to impair the ability of Borrower to perform this Agreement or any of the Loan Documents; or 4.6.0.1.2. prohibit, restrict or limit payment of the Note or performance of this Agreement by Borrower. 4.6.0.2. Borrower is not in default with regard to any order of any court or governmental authority. 4.7. Compliance with Laws. To the best of Borrower's knowledge, Borrower's business is in compliance in all material respects with all laws, ordinances and other governmental regulations; there is no outstanding notice of any uncorrected violation of any such law, ordinance or governmental regulation; Borrower has all permits, licenses, approvals and other authorizations from federal, state and local authorities that are necessary for the conduct of its business as now conducted or intended to be conducted in the future, and, to the best of Borrower's knowledge, no claim is pending or threatened to revoke any of said permits, licenses, approvals and other authorizations or to declare them invalid in any respect. 4.8. Taxes 4.8.0.1. Borrower has filed or caused to be filed all tax returns (including, without limitation, those relating to Federal and state income taxes) required to be filed and has paid all taxes shown to be due and payable on those returns or on any assessments made against it (other than those being contested in good faith by appropriate proceedings for which adequate reserves have been provided on its books). Borrower does not know of any proposed additional tax assessment against it not adequately covered by reserves. 4.8.0.2. The reserves and provisions for taxes on the books of Borrower are adequate for all open years and for its current fiscal period. 4.8.0.3. No tax liens have been filed against the assets of Borrower, and no claims are being asserted with respect to such taxes which, if adversely determined, would have a material adverse effect upon the financial condition, business or operations of Borrower. 4.9. Financial Condition. All balance sheets, profit and loss statements, and other financial statements of Borrower which have heretofore been delivered to the Bank, and all financial statements and data of Borrower which will hereafter be furnished to Bank, are or will be (when furnished) true and correct and do or will (when furnished) present fairly, accurately and completely the financial position of Borrower and the results of its operations as of the dates and for the periods for which the same are furnished. All such financial statements of Borrower have been and will be prepared in accordance with generally accepted accounting principles and practices applied on a consistent basis. Borrower does not possess and will not possess any "loss contingency" (as that term is defined in Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 5 - "FASB 5") which is not accrued, reflected, or reserved against in its audited balance sheet or disclosed in the footnotes to such audited balance sheet. There has been no material adverse change in the business, properties, operations or condition (financial or otherwise) of Borrower since the date of the financial statements which were most recently furnished by Borrower to the Bank. No event has occurred which could reasonably be expected to interfere with the normal business operations of Borrower, except as disclosed in writing to Bank heretofore or concurrently herewith. 4.10. Accounts. Borrower represents and warrants that: 4.10.0.1. it is now and at all times hereafter shall be the absolute owner, free and clear of all liens, encumbrances and security interests, except the liens and security interests granted or permitted herein and the potential liens of any state government to enforce possible sales tax liabilities, of indefeasible title to its Accounts; and 4.10.0.2. every Account described in the certifications delivered in accordance with Section 6.1(a)(iii) hereof will be a good and valid Account representing an undisputed bona fide indebtedness of a debtor to Borrower and there are and will be no defenses, setoffs, contraclaims, or counterclaims of any nature whatsoever against any such Account; and no agreement under which any deduction, discount, allowance or special terms of payment may be claimed, has been or will be made with any Account Debtor except as shown on the statement or invoice furnished to the Bank with reference thereto. 4.11. Assets. Borrower represents and warrants that; 4.11.0.1. it is now, and at all times hereafter shall be, the sole owner, free and clear of all liens, encumbrances and security interests, except the liens and security interests granted or permitted herein, of indefeasible title to its Assets; and 4.11.0.2. except for depreciation and obsolescence, Borrower will keep its Assets in good repair and maintained in a state of good operating efficiency, and will make all necessary repairs, replacements of and renewals so that the value and operating efficiency thereof shall at all times be maintained and preserved in a manner consistent with good management. 4.12. Collateral. Borrower represents and warrants that: 4.12.0.1. it is the lawful owner of all Collateral and has the right to pledge, sell, assign and transfer the same and grant a security interest therein; no Collateral has been or will be pledged, sold, assigned or transferred to any person, firm or corporation, other than the Bank or in any way encumbered and Borrower will warrant and defend all Collateral against the claims and demands of all persons, firms or corporations; 4.12.0.2. all representations made by Borrower to the Bank with reference to the description, content or valuation of any and all of the Collateral are true and correct; the sale of all merchandise which gives rise to an Account is an absolute sale and not on consignment or approval and all such merchandise shall have been the absolute property of Borrower, free of lien, and Borrower does not have the same on consignment or approval; all services which give rise to an Account have actually been performed; all invoices, records, notes, documents of title, shipping, and delivery receipts and any and all other instruments, memoranda and documents presented or delivered to the Bank shall be valid, genuine and not subject to any dispute or defense; 4.12.0.3. as of the execution of this Agreement, no other financing agreements are in force and no claim of any security interest, lien or encumbrance in or on the Collateral is on file in any public office; 4.12.0.4. there is no fact that Borrower has not disclosed to the Bank in writing that could materially adversely affect the properties, business or financial condition of Borrower or of the Collateral or the Loan provided for in this Agreement; 4.12.0.5. this Agreement, upon the filing of financing statements in the appropriate governmental offices and payment of all fees associated therewith, will create in favor of the Bank valid and perfected first lien security interests in the Collateral; and 4.12.0.6. the Collateral and all of the records, ledger sheets, correspondence and invoice documents and instruments, relating to or evidencing the Collateral shall be kept on the premises described in Section 9.14 of this Agreement, such records to be kept in appropriate containers in safe places. The Bank at all reasonable times shall have full access to and the right to audit the Borrower's books and records. 4.13. Contingent Liabilities. There are no suretyship agreements, guarantees or other contingent liabilities of Borrower that are not disclosed in the financial statements described in Article 6, except such liabilities as are created by the Loan Documents. 4.14. Trademarks, Tradenames, Patents and Copyrights. All trademarks, tradenames, patents and copyrights owned by Borrower, as well as all applications for any of the foregoing, are described in Schedule 4.8 attached hereto and made a part hereof. 4.15. ERISA. No Reportable Event has occurred with respect to any Plan. Each Plan has been maintained, in all material respects, in accordance with its terms and with all provisions of ERISA applicable thereto. Borrower has not incurred any liability to the PBGC. 4.16. Operations of Borrower. All operations of Borrower have been carried on in accordance with all applicable laws, statutes, ordinances, rules and regulations, including, but not limited to, those relating to degradation of the environment. No investigation by any governmental authority, federal, state or local, is pending to the knowledge of Borrower, or threatened against Borrower. 4.17. Labor. Borrower is not involved in any strike, lock-out, boycott or any other labor trouble, similar or dissimilar, nor is it involved in labor negotiations. Borrower is not a party to any collective bargaining agreement. 4.18. COBRA Continuation Coverage. Borrower provides COBRA Continuation Coverage under group health plans (if any) for separating employees in accordance with the provisions of Section 162(k) of the Code. 4.19. Environmental Representations, Obligations and Covenants. 4.19.0.1. Borrower represents and warrants that it has conducted all appropriate inquiry and does not know or have reason to know of any activity at any real property leased by Borrower (collectively, the "Real Property") which has been conducted, or is being conducted, except in compliance with all statutes, ordinances, regulations, orders and requirements of common law concerning (i) those activities, (ii) repairs or construction of any improvements, (iii) handling of any materials, (iv) discharges to the air, soil, surface water or ground water, and (v) storage treatment or disposal of any waste at or connected with any activity at the Real Property ("Environmental Statutes"). 4.19.0.2. Borrower shall cause all activities at the Real Property to be conducted in compliance with all Environmental Statutes. Borrower shall cause all permits, licenses or approvals to be obtained, and shall cause all notifications to be made, as required by Environmental Statutes. Borrower shall, at all times, cause compliance with the terms and conditions of any such approvals or notifications. 4.19.0.3. Borrower represents and warrants that, to the best of its knowledge, no contamination is present at the Real Property. Borrower shall not permit contamination of the Real Property by hazardous substances. Borrower shall cause hazardous substances to be handled on the Real Property in a manner which will not cause an undue risk of the contamination of the Real Property. 4.19.0.4. For purposes of this section, the term "contamination" shall mean the uncontained presence of hazardous substances at the Real Property, or arising from the Real Property, which may require remediation under any applicable law. 4.19.0.5. For purposes of this section, "hazardous substances" shall mean "hazardous substances" or "contaminants" as defined pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601-9657, as amended by the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), "regulated substances" within the meaning of subtitle I of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6991-699li, as amended by the Superfund Amendments and Reauthorization Act of 1986 Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), and "hazardous substances" or "contaminants" as defined pursuant to the Pennsylvania Hazardous Sites Cleanup Act, Pa. Stat. Ann. tit. 35, Section 6020.101 to .1305 (Purdon Supp. 1989), or any other substances which may be the subject of liability pursuant to Sections 316 or 401 of the Pennsylvania Clean Streams Law, Pa. Stat. Ann. tit. 35, Section 691.1 to .1001 (Purdon 1977 and Supp. 1989). 4.19.0.6. Borrower represents and warrants that it has conducted all appropriate inquiry and does not know or have any reason to know of any: 4.19.0.6.1. polychlorinated biphenyls or substances containing polychlorinated biphenyls present on the Real Property, 4.19.0.6.2. asbestos or materials containing asbestos present on the Real Property, or 4.19.0.6.3. urea formaldehyde foam insulation on the Real Property. 4.19.0.7. Borrower represents and warrants that it does not know or have reason to know of any investigation of the Real Property for presence of radon gas or the presence of the radioactive decay products of radon. 4.19.0.8. Borrower represents and warrants that no tanks presently or formerly used for the storage of any gas, chemical or petroleum product above or below ground are present at the Real Property. Borrower shall neither install nor permit to be installed any temporary or permanent tanks for the storage of any liquid or gas above or below ground except as in compliance with the other provisions of this Section. 4.19.0.9. Upon the occurrence of an Event of Default and acceleration of payment of all obligations of Borrower under Article 8 hereof, the Bank may, at its discretion, commission an investigation at Borrower's expense of (i) compliance at the Real Property with Environmental Statutes, (ii) the presence of hazardous substances or contamination at the Real Property, (iii) the presence at the Real Property of material which is the subject of subparagraph 4.19.06 of this section, (iv) the presence at the Real Property of radon, or (v) the presence at the Real Property of tanks which are the subject of subparagraph 4.19.0.8 of this Section. 4.19.0.10. In connection with any investigation pursuant to subparagraph 4.19.0 of this paragraph, Borrower shall comply with any reasonable request for information made by the Bank or its agents in connection with any such investigation. Borrower represents and warrants that any response to any such request for information will be full and complete. 4.19.0.11. Borrower will assist the Bank and its agents to obtain any records pertaining to the Real Property or to Borrower in connection with an investigation pursuant to subparagraph 4.19.0.9 of this Section. 4.19.0.12. Borrower will afford the Bank and its agents access to all areas of the Real Property at reasonable times and in reasonable manners in connection with any investigation pursuant to subparagraph 4.19.0.9 of this Section. 4.19.0.13. No investigation commissioned pursuant to subparagraph 4.19.0.9 shall have any effect upon the representations or warranties made by Borrower to the Bank under this Section. 4.19.0.14. Borrower hereby agrees to indemnify and to hold harmless the Bank of, from and against any and all expenses, loss or liability suffered by the Bank by reason of Borrower's breach of any of the provisions of this Section including (but not limited to) (i) any and all expenses that the Bank may incur in complying with the Environmental Statutes; (ii) any and all costs that the Bank may incur in studying or remedying any contamination of the Real Property; (iii) any and all fines, penalties or other sanctions (including a voiding of any transfer of the Real Property) assessed upon the Bank by reason of failure of Borrower to have complied with Environmental Statutes; (iv) any and all loss of value of the Real Property by reason of: (A) failure to comply with Environmental Statutes; (B) the presence on the Real Property of any hazardous substances; (C) the presence on the Real Property of any materials which are the subject of this section; (D) the presence on the Real Property of radon; or (E) the presence on the Real Property of any tank; and (v) any and all legal and professional fees and costs incurred by the Bank in connection with the foregoing. This indemnification shall survive payment of the Note. ARTICLE 5 CONDITIONS OF LENDING The obligation of the Bank to make any Advances is subject to the accuracy of the representations and warranties in Article 4 of this Agreement as of the date of this Agreement, the performance by Borrower of its obligations to be performed under this Agreement before the date of each of the Advances, and the satisfaction of the following conditions: 5.1. Loan Documents. Borrower shall have executed and delivered or caused to be executed and delivered to the Bank all Loan Documents. 5.2. Representations, Warranties. The representations and warranties contained in Article 4 of this Agreement shall be true at and as of the date of the making of any Advance with the same effect as if made at and as of such time, except to the extent that the facts upon which such representations and warranties are based may be changed in the ordinary course by the transactions permitted or contemplated by this Agreement. 5.3. Defaults. There shall exist no Default or condition which, with the giving of notice or the passage of time or both, would result in an Event of Default upon consummation of any Advance. 5.4. Certificates, Supporting Documents. The Bank shall have received: 5.4.0.1. Articles of Incorporation and By-Laws of Borrower; 5.4.0.2. resolutions and incumbency certificate from the Borrower authorizing the execution, delivery and performance of the Loan Documents; 5.4.0.3. a certificate of the Secretary of State of the jurisdiction of incorporation of Borrower as to the good standing of Borrower dated no more than ten (10) days prior to the date of this Agreement; and 5.5. Collateral Security Documents. Borrower shall have delivered or shall have caused to be delivered to the Bank all Collateral security documents as shall be required by the Bank. Financing statements describing the Collateral shall have been filed or readied for filing in each jurisdiction and in each office as shall have been required by the Bank. 5.6. Insurance. Borrower shall have provided the Bank with certificates of insurance evidencing Borrower's compliance with the requirements of Section 6.8 hereof. 5.7. Landlord's Waiver. Borrower shall have delivered or caused to be delivered to the Bank a Landlord's Waiver in form and substance satisfactory to Bank and its counsel duly executed by the landlord for the location listed in Section 9.13 of this Agreement; provided, however, that it shall not be an event of default hereunder or otherwise limit Borrower's ability to receive Advances hereunder if Borrower uses its commercially reasonable efforts to obtain same and is unable to as a result of the landlord's refusal to execute same. ARTICLE 6. AFFIRMATIVE COVENANTS On and after the date of this Agreement and so long as the Note remains outstanding and unpaid in whole or in part, or so long as the credit availability evidenced thereby remains in effect, whichever is longer, Borrower will observe the following covenants unless the Bank shall otherwise consent in writing: 6.1. Financial Statements. 6.1.1. Borrower will furnish to the Bank the financial information described below: 6.1.1.1. Annual Statements. As soon as available, and in any event not later than 90 days after the close of each fiscal year of Borrower beginning with the fiscal year ending June 30, 1999, the annual audited financial report of Borrower containing a balance sheet of Borrower as of the end of such fiscal year and related statements of income, shareholders' equity and changes in financial position of Borrower for such fiscal year, setting forth in each case in comparative form the corresponding figures of the previous annual audit report, all in reasonable detail, prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved, and audited without exception or qualification by independent certified public accountants selected by Borrower and satisfactory to the Bank. 6.1.1.2. Quarterly Statements. As soon as available, and in any event not later than 45 days after the close of each three-month period of each fiscal year of Borrower, a 10-Q Report including, balance sheet and profit and loss statement of Borrower as of the end of such quarter and related statements of income, shareholders' equity and changes in financial position of Borrower for such three-month period and for the period from the beginning of the current fiscal year to the end of such three-month period, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the preceding fiscal year, all in reasonable detail, prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved, and compiled by an independent certified public accountant or the chief financial officer of Borrower. 6.1.1.3. Tax Returns of Borrower. As soon as available, and in any event not later than 30 days after the filing thereof, Borrower shall furnish copies of its tax return, if any, to the Bank during each year of the Loan. 6.1.1.4. Borrower's Certificate. Concurrently with the delivery of the financial statements referred to in Section 6.1 a certificate of the principal financial officer of Borrower, to the effect that: (A) no Event of Default or Default has occurred and is continuing under this Agreement, or, if any such Event of Default or Default exists, specifying its nature, the period of its existence and the curative action Borrower has taken or proposes to take, and (B) Borrower is not in default under any material agreement to which it is a party, and (C) from time to time, such additional financial and other information as the Bank may request, and (D) to the best of his knowledge that the certification is valid, accurate and prepared in accordance with all Bank requirements. 6.2. Maximum Debt to Net Tangible Assets. During the term of the Loan, Borrower will maintain a ratio of Maximum Debt to Net Tangible Assets not to exceed 1.5:1.00. Borrower's compliance with this covenant shall be verified at the close of each fiscal quarter of Borrower in accordance with generally accepted accounting principles consistently applied. 6.3 Minimum Working Capital. During the terms of the Loan, Borrower will maintain a minimum working capital of $1,500,000.00. Borrower's compliance with this covenant shall be verified at the close of each fiscal quarter of Borrower in accordance with generally accepted accounting principles consistently applied. 6.4 Liabilities and Total Liabilities. Borrower will pay and discharge, at or before their maturity, all of its respective obligations and liabilities (including, without limitation, tax liabilities), except those which may be contested in good faith, and maintain in accordance with generally accepted accounting principles and practices adequate reserves for any of the same. 6.5 ERISA. Borrower will comply in all material respects with ERISA. Borrower will furnish to the Bank, as soon as possible and in any event within thirty (30) days after Borrower knows or has reason to know that any Reportable Event has occurred with respect to any Plan or that the PBGC or Borrower has instituted or will institute proceedings under Title IV of ERISA to terminate any Plan, a certificate of the chief financial officer of Borrower setting forth details as to such Reportable Event and the action which Borrower proposes to take with respect thereto, together with a copy of any notice of such Reportable Event that may be required to be filed with the PBGC, or any notice delivered by the PBGC evidencing its intent to institute such proceedings or any notice to the PBGC that such Plan is to be terminated, as the case may be. For all purposes of this Section 6.5, Borrower shall be deemed to have all knowledge or knowledge of all facts attributable to the administrator of such Plan. 6.6. Notice of Default, Labor Troubles, Litigation. Borrower will promptly give notice in writing to the Bank of the occurrence of any Event of Default or Default under this Agreement, or of any event of default under any instrument or other agreement of Borrower, or of the occurrence of any strike, lock-out, boycott or any other labor dispute affecting Borrower and any dispute between Borrower or any other party, if such litigation, proceeding or dispute might substantially interfere with the normal business operations of Borrower or, if resolved other than in the favor of Borrower, such litigation, proceeding or dispute would have a material adverse effect on Borrower's financial condition. 6.7. Corporate Existence, Properties. Borrower will maintain, (a) its corporate existence, its qualification to do business and its good standing in each jurisdiction in which qualification is necessary for the proper conduct of its businesses, (b) all licenses, permits and other authorizations necessary for the ownership and operation of its properties and businesses, and (c) its properties in good repair, working order and condition and to make all necessary or appropriate repairs, renewals, replacements and substitutions, so that the efficiency of all such property shall at all times be properly preserved and maintained. 6.8. Insurance. Borrower will maintain, with respect to all its properties, Assets and businesses, insurance with financially sound and reputable insurers against loss or damage of the kinds customarily insured against by corporations or other business entities of established reputation engaged in the same or similar business and similarly constituted, in such types and amounts as are customarily carried under similar circumstances by such other corporations or other business entities, and/or as are required by the Bank, including fire and extended coverage insurance on all insurable assets which will contain standard loss payee clauses in favor of the Bank, will be in an amount not less than 80% of the insurable value of such assets or 100% of the Loan, whichever is greater, and will provide for thirty-days' notice of cancellation to the Bank. Borrower shall provide the Bank with a certificate of insurance prior to settlement. 6.9. Policies; Proceeds. Borrower shall deliver to the Bank on demand certified copies of all such insurance policies (or, at the option of the Bank, certificates evidencing coverage) covering the risks set forth in Section 6.8 above, with loss payable clauses in a form satisfactory to the Bank naming the Bank as payee and co-insured. All proceeds payable under any of said policies shall be payable in all events to the Bank, but at the option of the Bank any such proceeds may be released to Borrower. Borrower hereby grants to the Bank a continuing security interest in and to all of said policies and the proceeds thereof to secure the repayment of the Liabilities and agrees that the Bank shall have the right, in the name of Borrower or in the name of the Bank, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be made thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any such claims under any such insurance policies. 6.10. Books, Records, Audits. Borrower will maintain accurate and complete records and books of account with respect to all its operations in accordance with generally accepted accounting principles consistently applied. Borrower will permit, at all reasonable times and upon reasonable prior notice, officers and representatives of the Bank to examine and make copies from its books and records, and to discuss the affairs, finances and accounts of Borrower with its officers and public accountants, to visit and inspect its real and personal property. Upon the occurrence of an Event of Default and so long as the same remains uncured, the Bank may perform audits at any time upon reasonable notice. 6.11. Intentionally Deleted. 6.12. Taxes, Etc. Borrower will pay when due all taxes, assessments and charges imposed upon it or its property or that it is required to withhold and pay over, except where contested in good faith and where adequate reserves have been set aside. Upon the Bank's request, Borrower shall furnish the Bank with proof satisfactory to the Bank of the making of the payment or deposit of all Federal, state and local withholding taxes required of Borrower by applicable law; such proof shall be furnished within five (5) days after the due date of each such payment or deposit established by law. 6.13. Compliance with Laws. Borrower will comply with all laws and regulations applicable to it in the operation of its business. Borrower will comply with all of its obligations under Article 4. 6.14. Banking Relationship. Borrower, at all times when the Note remains outstanding in whole or in part, will maintain the Bank as its primary bank of account. 6.15. Financial Condition. Borrower and Guarantor will immediately give the Bank written notice of any material adverse change in its financial condition, operations or collateral from that described in the most recent financial statements of Borrower and Guarantor previously delivered to the Bank. 6.16. Use of Proceeds. Borrower shall use the proceeds of the Loan for working capital and short-term borrowing purposes. 6.17. Intentionally Deleted. 6.18. Expenses. Borrower shall pay all costs and expenses including but not limited to attorney's fees and other costs of preparation and filing concerning the Loan and other documents as required by law or deemed necessary by the Bank and shall reimburse the Bank for any costs or expenses incurred by Bank in relation to the above. Such costs, expenses and reimbursements shall be paid simultaneously with the execution of this Agreement and expenses thereafter incurred shall be paid within fifteen (15) days after notice by the Bank. ARTICLE 7. NEGATIVE COVENANTS On and after the date of this Agreement and so long as the Note remains outstanding and unpaid, in whole or in part, or so long as the credit availability evidenced thereby remains in effect, whichever is longer, Borrower will observe the following covenants unless the Bank shall otherwise consent in writing: 7.1. Debt. Borrower will not create, incur, assume, guarantee or in any manner become or remain liable with regard to any debt, except: 7.1.0.1. Debt existing on the date of this Agreement and disclosed in writing to Bank (excluding debt evidenced by the Note); 7.1.0.2. The Note; and 7.1.0.3. Debt with regard to accounts payable and other extensions of trade credit incurred in the ordinary course of business and which is not more than 60 days overdue, unless Borrower is contesting, in good faith and by appropriate proceedings, its obligation to make payment, and has established such reserve with regard to the contested obligation as its certified public accountants shall consider adequate. 7.2. Liens. Borrower will not create, incur, assume or suffer to exist any lien upon any of its existing or future, tangible or intangible, real, personal or mixed property, except: 7.2.0.1. Pledges or deposits under workmen's compensation laws, unemployment compensation laws or other similar laws; 7.2.0.2. Good faith deposits in connection with bids, tenders, contracts (other than for the purpose of borrowing money or obtaining credit) and leases to which Borrower is a party, including rent security deposits; 7.2.0.3. Deposits to secure public or statutory obligations of Borrower, surety or appeal bonds to which Borrower is a party, payment of contested taxes of Borrower, or payment of import duties of Borrower; 7.2.0.4. Any lien which is imposed by law, e.g., those of carriers, materialmen, mechanics and warehousemen, if payment secured by that lien is not yet due, or if the validity or the amount of payment is being contested in good faith by appropriate proceedings for which adequate reserves have been established; 7.2.0.5. Any lien arising from a judgment or award against Borrower with regard to which Borrower is prosecuting an appeal or proceedings for review, and has obtained a stay of execution pending such appeal or proceedings for review; 7.2.0.6. Any lien for taxes, assessments or other governmental charges or levies not yet subject to penalties for nonpayment, or the validity or amount of which is being contested by appropriate legal proceedings, and with regard to which adequate reserves have been established; and 7.2.0.7. Any lien created for the sole purpose of extending, renewing or refunding any lien permitted under paragraphs 7.2.0.1. through 7.2.0.6., if such lien is limited to all or part of the same property covered by the original lien, and if the amount of the debt secured by the lien does not exceed the amount of debt secured by the lien at the time of extension, renewal or refunding. 7.3. Endorsements, Etc. Borrower shall not endorse, guarantee or become surety for the obligations of any person, firm or corporation, except Borrower may endorse checks in the ordinary course of business. 7.4. Change in Business; Mergers, Consolidations. Borrower will not make any substantial change in the nature of the business of Borrower, or merge or consolidate with any other corporation. 7.5 Intentionally Deleted. 7.6. Subsidiaries. Borrower will not create any new subsidiaries. 7.7. Contingent Liabilities. Borrower will not become or remain liable, directly or indirectly, in connection with the obligations, stock or dividends of any person, firm, corporation or other entity, whether by guarantee, endorsement, agreement to supply or advance funds, agreement to maintain working capital or net worth, agreement to purchase or repurchase goods or services whether or not such goods or services are actually acquired, or otherwise, other than in connection with the Loan, except that Borrower may endorse negotiable instruments for collection in the ordinary course of its business. 7.8. Sales and Lease-Backs. Borrower will not enter into any arrangement, directly or indirectly, with any Person, firm, corporation or other entity, whereby any of them shall sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which the lessee intends to use for substantially the same purpose or purposes as the property being sold or transferred. 7.9. Limitation of Leases. Borrower will not incur, create or assume any commitment to make any direct or indirect payment, whether as rent or otherwise, under any lease, rental or other arrangement for the use or hire of property of any person, firm, corporation or other entity, if, after giving effect thereto, the aggregate amount of such payments to be made by Borrower under all such leases, rentals or other arrangements would be in excess of $200,000 (excluding leases required to be capitalized under Financial Accounting Standards Board, Statement of Accounting Standards No. 13) during any fiscal year of Borrower. 7.10. Voluntary Prepayments, Modification of Debt Instruments. Except in the ordinary course of business, Borrower will not (a) prepay, purchase, redeem or otherwise acquire for value prior to the stated maturity thereof all or any part of any indebtedness for borrowed money (other than indebtedness evidenced by the Note, or any other indebtedness to the Bank, subject to any applicable prepayment penalty) or (b) amend, modify or supplement in any way, or request any waiver of the provisions of, any instrument providing for or evidencing any indebtedness for borrowed money or constituting the deferred purchase price of property or assets. 7.11. Removal and Protection of Property. Except as otherwise expressly permitted herein, Borrower will not remove (other than in the ordinary course of business) any Assets, Equipment, Goods, Inventory, or General Intangibles (as defined in the Pennsylvania Uniform Commercial Code) from the place of business where presently located, nor permit the value of any property to be impaired. 7.12. Transactions with Affiliates. Borrower shall not, except as otherwise expressly permitted by this Agreement, directly or indirectly enter into any transaction or modify any existing transaction with any Affiliate including, without limitation, (a) investments in, or loans or advances to, an Affiliate, (b) the transfer, sale, lease, assignment or other disposition of any assets to an Affiliate, (c) the merger into or consolidation with or purchase or acquisition of assets from an Affiliate, or (d) any other transaction directly or indirectly with or for the benefit of any Affiliate (including, without limitation, any guarantees or assumptions of obligations of an Affiliate by Borrower or of Borrower by an Affiliate). The Bank may withhold its consent to any such transaction with an Affiliate if (i) an Event of Default has occurred and is continuing, or (ii) such transaction, based upon the reasonable assumptions of the Bank, could (A) result in a material adverse change in the business, operations, financial condition or prospects of Borrower, (B) affect Borrower's ability to repay the indebtedness evidenced by the Note or any other indebtedness of Borrower to the Bank, (C) prejudice or impair, or result in the diminution of, any rights of the Bank with respect to the indebtedness evidenced by the Note or any other indebtedness of Borrower to the Bank or any collateral pledged to secure such indebtedness, or (D) result in a Default or an Event of Default hereunder or under the Loan Documents or a default under or with respect to any other document or instrument evidencing and/or securing the Loan or any other material obligation of Borrower to any Person. 7.13. Disposition of Assets. Borrower will not liquidate or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, pledge, or otherwise transfer or dispose of all or any substantial part of its property, Assets or business other than in the ordinary course of business. 7.14. Disposition of Accounts. Borrower will not sell, discount or otherwise dispose of its notes, Accounts, Chattel Paper, Documents, General Intangibles or Instruments (all as defined in the Pennsylvania Uniform Commercial Code) except to, or with, the Bank. ARTICLE 8 EVENTS OF DEFAULT, REMEDIES 8.1. Events of Default. Each of the following shall constitute an Event of Default: 8.1.0.1. Payment. Failure by Borrower to pay the principal of, or accrued interest on, the Note or any other instrument or obligation of Borrower to the Bank when such amounts become due, or the failure of Borrower to pay any other amount payable to the Bank under the Loan Documents within five (5) days of the date, when such amount becomes due. 8.1.0.2. Representations, Warranties. Any representation or warranty made by Borrower in the Loan Documents shall prove to be false or misleading in any material respect as of the date when made. 8.1.0.3. Covenants. Failure by Borrower to observe or perform any covenants, conditions or provisions applicable to it contained in the Loan Documents [other than those described in paragraphs 8.1.0.1 and 8.1.0.2 above] provided that such failure shall continue for a period of thirty (30) days after written notice from the Bank to Borrower. 8.1.0.4. Other Obligations. Borrower defaults in: 8.1.0.4.1. any payment of principal of, or interest on, any obligations for borrowed money (other than the Note or any such obligation payable to the Bank), or for the deferred purchase price of property beyond any grace period provided with regard to such payment, 8.1.0.4.2. the performance of any other material agreement, term or condition contained in any such obligation or in any agreement relating to such obligation, or 8.1.0.4.3. the performance of any lease of other contract material to Borrower's business, if the effect of such default is to cause, or to permit the holder or holders of such obligation or the other party to such lease of contract (or trustee on behalf of such holder or holders or parties) to then cause such obligation to become due or such lease or contract to be terminated prior to its stated maturity. 8.1.0.5. Voluntary Bankruptcy. Filing by Borrower of a voluntary petition in bankruptcy or a voluntary petition or any answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under the Bankruptcy Code, or under any other existing or future federal or state insolvency act or law, or any formal written consent to, approval of, or acquiescence in, any such petition or proceeding by Borrower, the application by Borrower for, or the appointment by consent or acquiescence of, a receiver or trustee of, Borrower or for all or a substantial part of its property; the making by Borrower of an assignment for the benefit of creditors. 8.1.0.6. Involuntary Bankruptcy. Filing of any involuntary petition against Borrower in bankruptcy or seeking reorganization, arrangement or readjustment of its debts or for any other relief under the Bankruptcy Code, or under any other existing or future federal or state insolvency act or law; or the involuntary appointment of a receiver or trustee of Borrower, or for all or a substantial part of the property of Borrower; and the continuance of any of such events for a period of sixty (60) days undismissed, unbonded or undischarged. 8.1.0.7. Reportable Event. If (1) any Reportable Event that the Bank reasonably determines in good faith creates a reasonable possibility of the termination of any Plan or of the appointment by the appropriate United States district court of a trustee to administer any Plan shall have occurred and be continuing 30 days after written notice to such effect shall have been given to Borrower by the Bank, or (2) any Plan shall be terminated, or (3) the plan administrator of any Plan shall file with the PBGC a notice of intention to terminate such Plan, or (4) the PBGC shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan and such proceedings shall remain undismissed or unstayed for three (3) business days and if, in any of the cases described in the foregoing clauses (1) to (4), the Bank further reasonably determines in good faith that the amount of the unfunded guaranteed benefits (within the meaning of Title IV of ERISA) resulting upon termination of such Plan would have a material adverse effect on the financial condition, properties or operations of Borrower if a lien against the assets of Borrower were to result under ERISA. 8.1.0.8. Intentionally Deleted. 8.1.0.9. Insecurity. Borrower fails to maintain, in the reasonable judgment of the Bank, a satisfactory financial condition. 8.2. Acceleration and Termination of Commitments. (a) Upon the occurrence of an Event of Default specified in Sections 8.1.0.1. through 8.1.0.4. and 8.1.0.7.through 8.1.0.9. of this Agreement, the Bank may: (i) terminate immediately and irrevocably the unused portions of the credit availability evidenced by the Note; (ii) declare the unpaid principal balance of, all accrued, unpaid interest on, and all other sums payable with regard to, the Note and all other Liabilities from Borrower to the Bank to be immediately due and payable whereupon the Note, all such accrued interest and all such Liabilities shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower; and (iii) pursue all other remedies of the Bank provided for in the Loan Documents as well as those available at law and in equity. 8.2.0.1. Upon the occurrence of an Event of Default specified in Sections 8.1.0.5. and 8.1.0.6. of this Agreement, the unused portions of the credit availability evidenced by the Note shall automatically and immediately terminate and the unpaid principal balance of, all accrued, unpaid interest on, and all other sums payable with regard to, the Note and all other instruments of obligation of Borrower to the Bank shall automatically and immediately become due and payable, in all cases without any action on the part of the Bank. 8.2.0.2. Upon the occurrence of a monetary default hereunder, the rate of interest on all of the Note shall be increased to a rate equal to two percent (2%) above the interest rate payable on the date of default (the "Default Rate"). Interest at the rates provided for in the Note, or at the Default Rate, shall continue to accrue at such rate, and continue to be paid even after default, maturity, acceleration, recovery of judgment, bankruptcy or insolvency proceeding of any kind until such monetary default has been cured. 8.3. Right of Set-Off. Upon the occurrence of an Event of Default, the Bank shall have the right, in addition to all other rights and remedies available to it, to set-off against the unpaid balance of the Note, any debt owing to Borrower by the Bank and any funds in any deposit account maintained by Borrower with the Bank. 8.4. Marshalling. 8.4.0.1. If an Event of Default shall have occurred and be continuing, the Bank shall not be required to marshal any present or future security for, or guarantees of, the Liabilities or to resort to any such security or guarantees in any particular order. 8.4.0.2. Borrower waives, to the fullest extent it lawfully can, any right it might have to require the Bank to pursue any particular remedy before proceeding against it, and any right to the benefit of, or to direct the application of the proceeds of, any Collateral until the Note and all other Liabilities have been paid in full. 8.5. Cumulative Remedies. The rights and remedies provided in the Loan Documents are cumulative and not exclusive of any rights or remedies provided by law or in equity. ARTICLE 9 MISCELLANEOUS 9.1. Waivers. 9.1.0.1. No failure or delay on the part of the Bank in exercising any right, power or privilege under the Loan Documents shall operate as a waiver of any right, power or privilege, except as and to the extent that the assertion of such right, power or privilege shall be barred by an applicable statute of limitations. 9.1.0.2. No single or partial exercise of, or abandonment or discontinuance of steps to enforce, any right, power or privilege under the Loan Documents shall preclude any other or further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. 9.1.0.3. BORROWER AND BANK BY THEIR EXECUTION HEREOF DO HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND WHETHER ARISING OUT OF, UNDER OR BY REASON OF THE LOAN DOCUMENTS OR ANY ASSIGNMENT OR TRANSACTION THEREUNDER. BORROWER UNDERSTANDS THAT THE BANK IS RELYING ON THIS WAIVER IN MAKING THE LOAN PROVIDED FOR HEREIN. 9.2. Notices. All notices, requests and demands to or upon the parties shall be deemed to have been given or made on the day of personal service or on the day they are deposited in the mails, postage prepaid, registered or certified mail, return receipt requested, or sent by mutually-recognized overnight courier providing proof of delivery or, in the case of telegraphic notice, when delivered to the telegraph company, charges prepaid, addressed to the parties at the addresses set forth below or to such other address as may be hereafter designated in writing in accordance herewith: Borrower: eGAMES, INC. 2000 Cabot Boulevard Suite 110 Langhorne, Pennsylvania 19047 Attention: Gerald W. Klein, President with a copy to its counsel: McCausland, Keen, Buckman Radnor Court, Suite 160 259 North Radnor Chester Road Radnor, Pennsylvania 19087-5240 Attention: James G. Logue, Esquire The Bank: Sovereign Bank Two Aldwyn Center Lancaster Avenue and Route 320 Villanova, Pennsylvania 19085 Attention: David F. Ciccanti, Vice President with a copy to its counsel: Edward J. Hollin, Esquire Riley, Riper, Hollin & Colagreco 240 Daylesford Plaza Post Office Box 568 Paoli, Pennsylvania 19301 9.3. Legal Costs; Filing Costs. If at any time or times hereafter the Bank employs counsel to prepare or consider approvals, waivers or consents, or to intervene, file a petition, answer, motion or other pleading in any suit or proceeding relating to this Agreement or relating to any Collateral, or to protect, take possession of, or liquidate any Collateral, or to attempt to enforce any security interest or lien in any Collateral, or to enforce any rights of the Bank or liabilities of Borrower's Account Debtors, or any other person, firm or corporation which may be obligated to the Bank by virtue of the Loan Documents, then in any of such events, all of the reasonable attorneys' fees arising from such services, and any expenses, costs and charges relating thereto, shall become a part of Borrower's Liabilities secured by the Collateral, payable on demand. Borrower further agrees to reimburse the Bank for its out-of-pocket expenses, including but not limited to attorneys' fees and other costs of preparation and filing of the Loan Documents and other documents as required by law or deemed necessary by the Bank including but not limited to the cost of all lien searches deemed necessary by the Bank. Such costs and expenses shall be paid simultaneously with the execution of this Agreement and all such expenses hereafter incurred shall be paid within fifteen (15) days after notice by the Bank. 9.4. Right of Entry. Upon the occurrence of an Event of Default, the Bank shall have the right to enter and remain upon the premises of Borrower without cost or charge to the Bank, and to use the same, together with materials, supplies, books and records of Borrower, for the purpose of liquidating or collecting the Collateral, or for the purpose of preparing for and conducting the sale of Collateral, whether by foreclosure, auction or otherwise. 9.5. Intentionally Deleted. 9.6. No Waiver. The Bank's failure at any time or times hereafter to require strict performance by Borrower of any of the provisions, warranties, terms and conditions contained in this Agreement shall not waive, affect or diminish any right of the Bank at any time or times hereafter to demand strict performance therewith and with respect to any other provisions, warranties, terms and conditions contained in this Agreement and any waiver of any Event of Default shall not waive or affect any other Event of Default, whether prior or subsequent thereto, and whether of the same or a different type. None of the warranties, conditions, provisions and terms contained in this Agreement shall be deemed to have been waived by any act or knowledge of the Bank, its agents, officers or employees except by an instrument in writing signed by an officer of the Bank and directed to Borrower specifying such waiver. 9.7. Application of Proceeds. 9.7.0.1. On and after the date, if any, on which the Borrower's Liabilities to the Bank are accelerated pursuant to Section 8.2 of this Agreement, Borrower irrevocably waives the right to direct the application of all subsequent payments (including proceeds of Collateral) which the Bank receives from or for the benefit of Borrower. 9.7.0.2. The proceeds of any sale or other disposition of any Collateral shall be applied by the Bank in the following order: 9.7.0.2.1. first, to the payment of all costs and expenses due under the Loan Documents, including without limitation all costs and expenses of collecting Borrower's Liabilities and reasonable attorneys' fees; 9.7.0.2.2. second, to the payment in full of all accrued and unpaid interest on Borrower's Liabilities; 9.7.0.2.3. third, to the payment in full of the principal balance of Borrower's Liabilities; and 9.7.0.2.4. fourth, to Borrower to the extent of any surplus. 9.7.0.3. Borrower shall remain liable to the Bank for any deficiency in payment of Borrower's Liabilities after application of the proceeds in accordance with paragraph 9.7.0.2. 9.8. Representation, Warranties. 9.8.0.1. All representations, warranties, covenants and agreements made in the Loan Documents shall survive the execution and delivery of this Agreement, the making of the Advances under this Agreement and the issuance of the Note. 9.8.0.2. The provisions of Section 9.3 of this Agreement shall survive payment of the Note and all other liabilities of Borrower to the Bank. 9.9. Successors. This Agreement shall be binding upon and inure to the benefit of Borrower and the Bank and their respective successors and assigns, except that Borrower may not assign or transfer its rights under this Agreement without the prior written consent of the Bank. 9.10. Governing Law. The Loan Documents, and the rights and obligations of the parties under the Loan Documents, shall be governed by, and construed and interpreted in accordance with, the domestic, internal laws, but not the law of conflict of laws, of the Commonwealth of Pennsylvania. 9.11. Headings. The section, subsection, paragraph and other headings in this Agreement are for reference purposes only and shall not control or affect the construction or interpretation of this Agreement in any respect. 9.12. Severability. The parties intend the provisions of this Agreement to be severable. If any provision of this Agreement is held to be invalid or unenforceable in whole or in part in any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of that provision in any other jurisdiction, or the remaining provisions of this Agreement in any jurisdiction. 9.13. Entire Agreement. This Agreement and the Loan Documents represent the entire agreement and understanding of the parties, and may not be amended subsequently by oral statements of, or courses of dealing between, the parties. 9.14. Location of Business; Inventory; Records. Borrower maintains its only place of business and substantially all of its records and assets at the following location: 2000 Cabot Boulevard Suite 110 Langhorne, Pennsylvania 19047 Borrower will notify the Bank in advance of any change in the location of any business of Borrower, including any change in the location of records and inventory, whether by reason of the establishment of a new place of business or the discontinuance of a present place of business. 9.15. Conflicting Provisions. In the event of any direct conflict between the provisions of this Agreement and the provisions of other Loan Documents, the provisions of this Agreement shall control. 9.16. Submission to Jurisdiction. Borrower hereby irrevocably and unconditionally waives any right to claim immunity in respect of itself or any of its property or assets, including immunity from jurisdiction, immunity from attachment prior to entry of judgment, immunity from attachment in aid of execution of judgment, in any suit, action or proceeding arising out of or relating to this Agreement. In addition, Borrower and the Bank agree that any suit, action or proceeding may be instituted in the Court of Common Pleas of Delaware County, Pennsylvania or in the United States District Court of the Eastern District of Pennsylvania, and irrevocably and unconditionally submit to the jurisdiction of any such court for such purpose. 9.17. Further Assurances. From time to time Borrower shall execute and deliver to the Bank such additional documents and will provide such additional information as the Bank may reasonably request to carry out the intent of this Agreement. 9.18. Seal. This Agreement is intended to take effect as an instrument under seal. IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, have caused this Agreement to be duly executed on the day and year first above written. eGAMES, INC. By: /s/ Gerald W. Klein (SEAL) -------------------- SOVEREIGN BANK By: /s/ David F. Ciccanti ------------------------------------- David F. Ciccanti, Vice President -----END PRIVACY-ENHANCED MESSAGE-----