-----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, UU+HegStjEz3xc3SrlgO6k9VOv1M/vvMGU4vpssTVg47o5MU14wCE+eIAvW7utDz MHDh3mME7sRe91qmKe/eNQ== 0000948703-01-500006.txt : 20020410 0000948703-01-500006.hdr.sgml : 20020410 ACCESSION NUMBER: 0000948703-01-500006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011113 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011113 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: 1934 Act SEC FILE NUMBER: 000-27102 FILM NUMBER: 1784850 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 bankagrmnt8k.txt FORM 8K ANNOUNCING BANK AGREEMENT 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): November 2, 2001 ----------------- 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 November 2, 2001, eGames, Inc. (the "Company") and Fleet National Bank ("Fleet") entered into an agreement to pay off the outstanding balance owed to Fleet over a twenty-two month period. The agreement also provides that, despite the Company's defaults under the loan documents which had previously provided the Company with a $2 million secured line of credit, the bank will not enforce it's rights and remedies under those loan documents as long as the Company remains in compliance with the terms of the agreement. The terms of the agreement provide, among other things, that the remaining outstanding balance owed under the credit facility will be repaid in monthly installments, with interest at prime plus three percent. The Company has also issued warrants to the bank for the purchase of 750,000 shares of the Company's Common Stock. The warrants are exercisable until October 31, 2006 at an exercise price of $.09 per share, and a separate registration rights agreement provides that the bank will have demand registration rights beginning on November 1, 2002. Item 7. Exhibits. Exhibit 10.1 Forbearance Agreement by and between Fleet National Bank and eGames, Inc. dated October 31, 2001. Exhibit 10.2 Common Stock Purchase Warrant of eGames, Inc. dated October 31, 2001. Exhibit 10.3 Registration Rights Agreement by and between Fleet National Bank and eGames, Inc. dated October 31, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. eGames, Inc. By: /s/ Gerald W. Klein ------------------------------ Gerald W. Klein, President and Chief Executive Officer Dated: November 13, 2001 EX-10 3 ex10-1forbrnc.txt FOREBEARANCE AGREEMENT - FLEET BANK EXHIBIT 10.1 F O R B E A R A N C E A G R E E M E N T By and Between FLEET NATIONAL BANK successor in interest to SUMMIT BANK and eGAMES, INC. Index of Schedules and exhibits Schedule A - Loan Documents Schedule B - Principal Payments Schedule C - EBITDA Covenant Requirements Schedule D - Litigation Exhibit 6(f)(ii) - Form of Monthly Cash Flow Forecast FORBEARANCE AGREEMENT --------------------- THIS FORBEARANCE AGREEMENT ("Agreement") made this 31st day of October, 2001, by and between FLEET NATIONAL BANK, successor in interest to Summit Bank, a state banking corporation (the "Lender"), and eGAMES, INC., a Pennsylvania corporation ("eGames" or the "Borrower"). W I T N E S S E T H: -------------------- WHEREAS, on or about August 9, 2000, the Lender extended a credit facility (the "Loan") to the Borrower in the total commitment amount of $2,000,000; and WHEREAS, the present outstanding principal balance of the Loan is $1,400,000, together with all interest and other sums accrued in accordance with the loan documents. WHEREAS, in connection with the Loan, the Borrower executed and delivered to the Lender the documents listed on Schedule A annexed hereto (said documents, together with any and all other documents, instruments and agreements executed and/or delivered by the Borrower or any other persons in any way related to and/or in connection with the Loan, individually and collectively referred to as the "Loan Documents"); WHEREAS, any and all capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Documents. WHEREAS, pursuant to the Loan Documents, the Lender has a valid and perfected first priority lien upon all of the personal property described in the Loan Documents (the "Collateral") as security for the obligations of the Borrower to the Lender under the Loan Documents; WHEREAS, the Loan is in material default and Events of Default under the Loan Documents have occurred, which include but are not limited to the following: 1. Violation of Section 3.1.9 of the Loan Agreement for failure to timely file the Borrower's Form 10-KSB with the Securities and Exchange Commission within 90 days after the end of the fiscal year ended June 30, 2001; 2. Violation of Section 3.1.9 of the Loan Agreement for the occurrence of a material adverse change in the financial condition of the Corporation's business; 3. Violation of Section 3.1.10 of the Loan Agreement for failure to provide to the Lender financial statements in compliance with GAAP; 4. Violation of Section 4.1.6.1 of the Loan Agreement for failure to furnish the Lender with annual financial statements prepared in accordance with the requirements set forth therein within 90 days of the end of the fiscal year ended June 30, 2001; 5. Violation of Section 4.1.6.2 of the Loan Agreement for failure to furnish to Lender the Borrower's annual 10-KSB report within 90 days after the fiscal year ended June 30, 2001; 6. Violation of Section 4.1.7 of the Loan Agreement for failure to file the Borrower's Form 10-KSB with the Securities and Exchange Commission within 90 days after the end of the fiscal year ended June 30, 2001; 7. Violation of Section 5 of the Loan Agreement for failure to comply with the financial covenants contained in Sections 5.1.1., 5.1.2. and 5.1.3. and anticipated continued failure to attain the financial covenants set forth in Sections 5.1.2 and 5.1.3 of the Loan Agreement; 8. Violation of Sections 6.1.2, 6.1.3, 6.1.11 and 6.1.13 of the Loan Agreement for failure to comply with the representations, warranties and covenants described above; and WHEREAS, the foregoing events of default (the "Existing Defaults") constitute material defaults under the Loan and entitle the Lender to accelerate the Loan and demand immediate and full payment of all principal, interest and other sums due under the Loan Documents; WHEREAS, on or about July 27, 2001, by virtue of the aforesaid occurrence of said Existing Defaults, the Lender advised the Borrower, that the Existing Defaults had occurred, and advised the Borrower that the Lender reserved its right to assess interest at the Default Rate (as defined in the Loan Documents) and accelerate and demand payment of the Loan; WHEREAS, the occurrence of said Existing Defaults permits the Lender to exercise the remedies provided in the Loan Documents and under applicable law; WHEREAS, the Borrower acknowledges that (1) it is in default under the Loan Documents; (2) the Existing Defaults are material "Events of Default" which have occurred and exist under the aforesaid Loan Documents as of the date hereof; (3) any and all cure and rehabilitation periods as set forth in the aforesaid Loan Documents have expired; and (4) by virtue thereof Borrower is presently obligated to pay all of the obligations due to the Lender under the Loan Documents all without setoff, defenses or counterclaim; WHEREAS, the Borrower requested that the Lender forbear from exercising the Lender's rights and remedies under the Loan Documents and applicable law and commence negotiations for an arrangement under which its obligations to the Lender under the Loan Documents would be satisfied; WHEREAS, the Lender agreed to forbear from exercising and enforcing its rights and remedies in order to provide the Borrower with sufficient opportunity for payment and/or satisfaction of its obligations under the Loan Documents to the Lender; WHEREAS, over the course of several months, in accordance with the request of the Borrower and without prejudice to the rights of the Lender, the parties have been negotiating concerning the obligations owed to the Lender by the Borrower and various courses of action that the parties believed might be in their mutual interests; WHEREAS, the Lender has not taken action to collect all obligations due the Lender under the Loan Documents, and the Borrower has continued to operate its business and conduct its financial affairs in its sole discretion, all without any disruption or interference whatsoever by the Lender and/or any of its affiliates, representatives, officers, employees and/or agents; WHEREAS, the Borrower submitted a proposal to the Lender, supported by financial statements, various business projections and cash flow projections prepared and submitted by the Borrower, which the Borrower represents will result in the payment and satisfaction of all obligations due to the Lender under the Loan Documents pursuant to the terms of this Agreement and which proposal has served as the basis for this Agreement; WHEREAS, the Borrower represented to the Lender that it will be able to continue to operate its business and satisfy its obligations to the Lender, without the need for further financing or extension of credit from the Lender and without the current need for any financial reorganization; WHEREAS, the Lender has agreed to cooperate with the Borrower to allow it to rehabilitate its business and pay the obligations due the Lender, provided that the Borrower performs in accordance with this Agreement; NOW, THEREFORE, in consideration of the mutual promises, terms and provisions contained herein, the parties, intending to be legally bound, hereby agree as follows: 1. RECITALS. The parties agree that the recitals set forth hereinabove are incorporated by reference as if fully set forth herein and are hereby made a part of this Agreement. 2. RELATED DOCUMENTS. In this Agreement, the term "Related Documents" shall mean and include any and all agreements, letters, powers of attorney, pleadings, deeds, assignments, documents and instruments referred to in this Agreement, or executed and/or delivered in accordance with, pursuant to, or in connection with this Agreement, or which are necessary or proper to carry out the transactions required or contemplated under this Agreement. 3. LOAN DOCUMENTS STILL IN FORCE. (a) Notwithstanding any other provisions of this Agreement or any claims of the parties to the contrary, the Loan Documents shall and do hereby remain in full force and effect, and nothing in this Agreement shall change or affect the terms, provisions or conditions of the Loan Documents which are hereby ratified and confirmed, except as expressly and specifically modified by this Agreement and/or by the Related Documents. (b) This Agreement is intended to supplement the Loan Documents and is not intended to modify, amend or replace the Loan Documents other than as specifically and expressly set forth herein and in the Related Documents. (c) In the event any provision of this Agreement or in any Related Document in any way appears to conflicts with or creates any ambiguity with respect to any term or provisions of any of the Loan Documents, the terms and provisions of this Agreement and such Related Document shall prevail. (d) Except as expressly and specifically modified by this Agreement and/or the Related Documents, all parties shall perform and continue to perform all of their respective obligations under the Loan Documents and shall continue to be bound by all of the terms and provisions of the Loan Documents. 4. COLLATERAL DOCUMENTS. It is hereby expressly acknowledged, ratified, confirmed and agreed that the Loan Documents secure the Obligations (as defined in Section 5 hereof), notwithstanding any claims of any of the parties to the contrary. The Borrower acknowledges and agrees that the security interests in Borrower's personal property granted to the Lender by the Borrower under the Loan Documents remain valid, perfected, first priority security interests therein, and the Borrower represents and warrants that, as of the date of this Agreement, there are no claims, setoffs or defenses to the Lender's exercise of any rights or remedies available to the Lender under the terms and provisions of the Loan Documents. 5. DEBT AND DEFAULT ACKNOWLEDGMENT. The Borrower acknowledges and agrees as to the Loan as follows: (a) As of October 31, 2001, the sum of $1,400,233.33 is immediately due and owing in full under the Loan Documents, which amount is calculated as follows: (i) Principal: $1,400,000.00 (ii) Interest to October 31, 2001: $233.33 (b) As hereinafter used in this Agreement, the term "Obligations" shall mean and include a sum of money equal to the following: (i) The sum of $1,400,233.33, which is the total, as of October 31, 2001 of the obligations due and owing the Lender under the Loan Documents; plus ii) All interest accruing under the Loan Documents after October 31, 2001; plus (iii) All other costs, expenses (including, but not limited to reasonable attorneys' fees and costs incurred by the Lender), claims, default rate interest, if applicable, and charges to which the Lender is entitled under the Loan Documents either due as of or accruing after October 31, 2001; plus (iv) Any and all advances made by the Lender under the Loan Documents, this Agreement, or Related Documents from and after October 31, 2001 and interest on all such amounts advanced; plus (v) Service charges and loan administration expenses incurred prior to October 31, 2001 in the amount of $15,000 (payable in accordance with Section 6(i)) and after October 31, 2001, including, but not limited to, reasonable fees and expenses paid or incurred to counsel to the Lender; plus (vi) Any and all liabilities and obligations of the Borrower under this Agreement and/or any Related Documents; (c) As of the date hereof, any and all notice provisions contained in the Loan Documents have been satisfied; (d) As of the date hereof, any and all grace periods contained in the Loan Documents have expired; (e) The Borrower acknowledges that the Borrower is in default in performance of the Obligations; (f) The Obligations are the valid obligations of the Borrower, and the Borrower is liable for immediate payment to the Lender of the Obligations; (g) As of the date hereof, there are no claims, setoffs, defenses, counterclaims, or objections to the payment of the Obligations by the Borrower; and (h) The Lender has the absolute right to pursue its remedies and enforce the payment of the Obligations as set forth in the Loan Documents. 6. SETTLEMENT OF OBLIGATIONS. (a) Payment and Performance. (i) The Obligations shall be paid and satisfied and the parties hereto shall perform in accordance with all the terms and provisions of the Loan Documents as modified, amended, supplemented and extended by this Agreement and the Related Documents. (ii) Future administration of the financing arrangements between Borrower and Lender shall continue to be governed by all of the terms and conditions of the Loan Documents, except to the extent that the same have been amended and supplemented by this Agreement. To the extent that any provision of this Agreement and the Related Documents conflicts with any term or condition set forth in the Loan Documents, the provisions of this Agreement shall supersede and control. (b) Term. The term of the Loan (the "Term") shall be extended to July 31, 2003, at which time all principal, interest and other sums, claims and charges due under the Loan shall be fully paid and satisfied. Thus, the Obligations will be fully due and payable on July 31, 2003 (the "Payoff Date"). (c) Interest Rate. The principal sum outstanding from time to time under the Loan shall bear interest at a floating rate equal to the Prime Rate (as defined in the Loan Documents) plus 3%. The interest rate shall change automatically as of the effective date of each change in the Prime Rate. (d) Commitment. The commitment of the Lender under the Loan is hereby permanently reduced to ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($1,400,000). The Borrower may no longer borrow, repay and re-borrow sums under the Loan. (e) Payments to Lender. (i) The Borrower shall make monthly payments of interest on the Loan, at the interest rate set forth herein, on the first day of each month during the Term. (ii) The Borrower shall make monthly payments of principal as set forth on Schedule B annexed hereto and incorporated herein. (iii) The Borrower shall perform in all respects in accordance with all terms and provisions of the Loan Documents as modified herein, this Agreement and Related Documents, and all Obligations shall be fully paid and satisfied on or before the Payoff Date. (f) Additional Covenants. The Borrower hereby agrees to perform in accordance with the following covenants which are in addition to, and not in lieu of, all covenants contained in the Loan Documents: (i) The Borrower shall deliver to the Lender, in form and substance satisfactory to the Lender, on or before the fifteenth (15th) of each month for the preceding month the following: (1) a management prepared profit and loss statement and balance sheet, using the Borrower's historically applied revenue recognition policy that records revenue based upon the shipment date of its products; (2) accounts receivable agings; and (3) accounts payable agings; (ii) The Borrower shall deliver to the Lender on or before the twentieth day of each month a monthly cash flow forecast for the succeeding month substantially in the form attached hereto as Exhibit 6(f)(ii) and incorporated herein. (iii) The Borrower shall cooperate with the performance of a collateral audit for the period ending December 31, 2001 and following each six-month period thereafter for the Term of this Agreement. (iv) The Borrower shall deliver to the Lender within five (5) days of filing with the Securities and Exchange Commission each quarterly 10-QSB Report and Annual 10-KSB Report. (v) The Borrower shall deliver to the Lender within five (5) days of filing with the Internal Revenue Service each Corporate Tax Return. (vi) The Borrower covenants and agrees, from and after the date hereof, maintain the accumulating monthly EBITDA levels as set forth on Schedule C annexed hereto and incorporated herein, based on the application of a revenue recognition policy that records revenues based upon the shipment of products, notwithstanding the Borrower's adoption of a revenue recognition policy that records revenues based on product sell-through. (g) Warrants. The Borrower shall grant to Lender warrants for the purchase of 750,000 shares of common stock of the Borrower. Said warrants shall have the demand registration rights and terms as set forth in the Warrants and Registration Rights Agreement between the Borrower and Lender to be executed simultaneously with this Agreement. (h) Removal of Liens. The Borrower shall have the financing statements of Sovereign Bank currently of record with the Department of State and Bucks County Prothonotary removed of record within thirty (30) days of the date of Closing. (i) Restructuring Fee. A restructuring fee of $15,000 shall be due to Lender at Closing with $5,000 payable at the time of Closing (as defined herein) and the remaining $10,000 payable on December 31, 2001. 7. FORBEARANCE BY THE LENDER. (a) Provided that there has not been an Event of Default under this Agreement by the Borrower, the Lender shall refrain from exercising its rights and remedies under the Loan Documents, Related Documents, this Agreement, and under applicable law, including, without limitation, refraining from exercising rights and remedies available to the Lender under the Loan Documents as a result of the Existing Defaults, charging the Default Rate (as defined in the Secured Line of Credit Note) and taking any and all available actions to collect the Obligations until such time (the "Forbearance Termination Date") as either (i) there is an occurrence of an Event of Default hereunder or (ii) such time as the Loan shall mature without the Borrower paying the Obligations and all other sums required to be made under this Agreement, the Loan Documents (as modified by the terms of this Agreement) or Related Documents. (b) Upon the Forbearance Termination Date, the Lender shall be permitted, at its option and in its sole and absolute discretion, to declare the Obligations to be immediately due and payable, all without demand, presentment or other notice of any kind, all of which are hereby expressly waived. (c) Upon the Forbearance Termination Date, the Lender shall be entitled to immediately exercise any and/or all rights and remedies and take any and all actions against the Borrower available to the Lender under this Agreement, the Loan Documents, the Related Documents, and under any applicable law, which actions shall not be opposed by the Borrower and shall include, but not be limited to: (i) Commencing and completing legal action and the entry of monetary judgments against the Borrower; (ii) The immediate appointment of a statutory receiver or any other type of receiver for the Borrower; (iii) Obtaining an order from the Court for the immediate turnover of all personal property in which the Lender was granted a security interest pursuant to the Loan Documents and Related Documents for immediate liquidation by the Lender under the Uniform Commercial Code as in effect in Pennsylvania (the "UCC") or other applicable law; and (iv) Commencing and/or completing execution on any monetary judgments obtained against the Borrower and its property and all other actions related thereto to collect the entire Obligations. (d) Effectuating Orders and Consent to Relief. (i) The parties agree that to compensate the Lender for any loss of time it has suffered in collecting the Obligations by virtue of the forbearance and compromise granted to the Borrower hereunder, the Borrower hereby consents to the entry of any order by a court of competent jurisdiction which may be necessary, in the Lender's sole opinion, to effectuate and carry out the terms and provisions of this Agreement and to give the Lender the relief afforded the Lender under this Agreement upon the occurrence of the Forbearance Termination Date. (ii) This Agreement shall serve as conclusive evidence of the consent of the Borrower to the entry of any order to which the Lender is entitled under this Agreement and to such further orders as may be required or necessary to effectuate the terms and provisions of this Agreement. iii) The Borrower hereby consents to and agrees not to oppose the taking or exercising of any and all of the rights and remedies of the Lender under this Agreement, including, but not limited to, all of the actions specified in Section 10(a). The Borrower hereby authorizes the Lender to affix a copy of this Agreement to any pleadings or orders submitted to the Court or otherwise submit a copy of this Agreement to the Court to evidence the Borrower's consent to the granting by the Court of all such relief sought. 8. CLOSING. Execution and delivery of all documentation and the consummation of all transactions contemplated hereby ("Closing") shall take place at the offices of Lender's counsel located at Princeton Pike Corporate Center, 997 Lenox Drive, Building 3, Lawrenceville, New Jersey on October 31, 2001 at 10:00 a.m., or at such place and time as mutually agreed to by the parties. It is understood and agreed that time is of the essence with regard to Closing. If Closing does not occur on or before 5:00 p.m. October 31, 2001, the Lender shall have no obligations hereunder, and all transactions contemplated hereunder automatically, without notice or demand of any kind whatsoever, shall be void and of no force and effect whatsoever. 9. EVENTS OF DEFAULT. An "Event of Default" shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefore and whether voluntary, involuntary or effected by operation of law): (a) Failure by the Borrower to make a payment when due pursuant to this Agreement, the Loan Documents (as modified by the terms of this Agreement) or the Related Documents, including, without limitation, failure to timely pay the Obligations on or before the Payoff Date; (b) The Borrower breaches or fails to perform, observe or meet any of the covenants, terms, provisions or conditions of this Agreement, the Loan Documents (as modified by the terms of this Agreement) or the Related Documents; (c) Any default or event of default under, and as said quoted term is defined in, any of the Loan Documents (as modified by the terms of this Agreement) or the Related Documents, or the Borrower shall breach or fail to perform, observe or meet any covenant, term, provision or condition made in any of the Loan Documents (as modified by the terms of this Agreement) or the Related Documents, and such default, event of default, breach or failure shall not have been cured prior to the expiration of any applicable cure period expressly provided in any of the Loan Documents or the Related Documents; (d) Any of the following shall occur: (i) a petition in bankruptcy or for reorganization or for arrangement under any bankruptcy or insolvency law is filed by the Borrower; (ii) a petition in bankruptcy or for reorganization or for an arrangement under any bankruptcy or insolvency law or for a receiver or trustee of any of the property of the Borrower is filed against it which is not dismissed within sixty (60) calendar days; (iii) a receiver or trustee of any property of the Borrower is appointed and not discharged within sixty (60) calendar days; (iv) the Borrower makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts, other than disclosures required or deemed reasonably necessary in any federal or state securities filings made by the Borrower after the date hereof; (v) the Borrower is adjudged insolvent by any state or federal court of competent jurisdiction; or (vi) an attachment or execution is levied against a substantial portion of the property of the Borrower which is not discharged within sixty (60) calendar days; (e) At any time any representation, warranty or agreement made by the Borrower in this Agreement, any of the Loan Documents (as modified by the terms of this Agreement) or the Related Documents, or in any documents submitted to the Lender by any of them prior to the entry of this Agreement shall be incorrect or misleading in any material respect; and (f) The occurrence of any "default" or "Event of Default" which is mentioned or set forth in any Section of this Agreement. It is hereby agreed that the occurrence of any default or Event of Default under this Agreement shall constitute a default or "Event of Default" under each of the Loan Documents and Related Documents. 10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, the Lender shall have the following rights and remedies, any or all of which the Lender may exercise at any time, at its option in its sole and absolute discretion: (a) The Lender may declare the full and entire amount of all of the Obligations then outstanding to be immediately due and payable, all without demand, presentment or other notice of any kind, all of which are hereby expressly waived; (b) The Lender may exercise any or all of those rights and remedies set forth in Section 10 of this Agreement; (c) The Lender may immediately exercise any or all rights and remedies available to it under this Agreement, the Loan Documents, any Related Documents, the UCC and under other applicable federal or state law; and (d) The Lender may obtain an order of a court of competent jurisdiction that provides relief required to enforce the terms and provisions of this Agreement, without opposition of the Borrower, whose consent thereto shall be deemed and shall be conclusively evidenced by this Agreement. 11. RIGHTS AND REMEDIES CUMULATIVE. (a) The Events of Default, rights, remedies, warranties, representations, covenants and provisions set forth in this Agreement, the Loan Documents and the Related Documents or as provided by applicable law, shall be cumulative and not alternative or exclusive, and the Lender's rights and remedies under this Agreement, the Loan Documents and the Related Documents or applicable law may be exercised by the Lender at such time or times, in such order of preference, as the Lender, in its sole and absolute discretion, may determine. (b)The Lender shall be under no duty or obligation to: (i) preserve, protect or marshal any of its Collateral; (ii) preserve or protect the rights of the Borrower against any person claiming an interest in any of the Collateral adverse to that of the Borrower; (iii) realize upon the Collateral in any particular order or manner or seek repayment of the Obligations, from any particular source; or (iv) permit any substitution or exchange of all or any part of any of the Collateral or release any part of any of the Collateral from any lien, even if that substitution or release would leave the Lender inadequately secured. 12. NO WAIVERS, AMENDMENTS. (a) No course of dealing or negotiations between the parties or actions taken or not taken prior to the entry of this Agreement (including, but not limited to, the Lender's receipt of any payments from the Borrower at any time after the occurrence of any of the Existing Defaults), shall constitute a waiver of any of the Lender's rights or remedies by virtue of the occurrence of any or all of the Existing Defaults or of the Lender's rights under the Loan Documents (all of which rights and remedies are reserved unto the Lender and remain in full force and effect). The delay or failure of the Lender to exercise in one or more instances, any right, power, remedy, privilege or option given under this Agreement, the Related Documents, or under the Loan Documents, either before or after the entry of this Agreement, shall not be construed as a waiver or relinquishment of such right or option, nor shall any single or partial exercise thereof or any discontinuance of steps to enforce such right, power, remedy, privilege or option preclude any further exercise thereof or any other right, power, remedy, privilege or option. Except as otherwise specifically provided in this Agreement, the Lender does not hereby waive any rights or remedies which it has or may now or hereafter have under the Loan Documents or under any other existing agreements by and between the undersigned parties to this Agreement, and all terms and provisions of such agreements and instruments shall remain in full force and effect. (b) Any waiver, permit, consent, modification or approval of any kind or character on the part of the Lender of any breach or default under this Agreement, the Loan Documents, and the Related Documents or any such waiver of any provisions or condition of the aforementioned must be in writing signed by the Lender and shall be effective only to the extent specifically set forth in such writing. 13. NO FURTHER FINANCING, PRIOR UNDERSTANDINGS. (a) There is no agreement or expectation on the part of the Borrower that the Lender will agree to any additional workout or forbearance or to any further extension of the Loan if an Event of Default occurs or the Loan shall mature without the payment by the Borrower of the Obligations. The Lender shall not be obligated to provide any further loans or financing to the Borrower and makes absolutely no commitment or promises to provide any further loans or financing to the Borrower. (b) The Borrower hereby acknowledges and agrees that this Agreement and any other Related Documents contain the entire agreement between the Lender and the Borrower concerning the subject matter hereof and supersede any prior or contemporaneous representations or agreements concerning the subject matter hereof not contained herein or therein. 14. RELEASE OF THE LENDER. (a) The Borrower does hereby release, waive, and forever discharge any and all claims, rights, demands, and causes of action, known or unknown, fixed or contingent, which it has or may have, or claim to have against the Lender and/or any of its affiliates and/or any of their employees, officers, directors, agents, or representatives, (hereinafter collectively referred to as "Releasees") arising at any time from the beginning of the world to the date of this Agreement, with respect to (i) the Loan; (ii) any or all of the Loan Documents; (iii) the administration and enforcement of the Loan; (iv) the conduct of the Lender or any or all of the Releasees with respect to the Loan; and (v) the lending and/or business relationship between the Borrower and any and/or all of the Releases. (b) Without limiting the generality of the foregoing paragraph, the Borrower hereby waives and affirmatively agrees not to allege or otherwise pursue any or all defenses, affirmative defenses, counterclaims, claims, causes of action, setoffs or other rights that it may have, as of the date hereof, to contest (i) the Existing Defaults and/or any other defaults or events of default under any or all of the Loan Documents which could be declared by the Lender as of the date hereof; (ii) any provision of the Loan Documents, this Agreement, or the Related Documents; (iii) the right of the Lender to exercise any and all of its rights and remedies; (iv) the right of the Lender to receive full and immediate payment of the Loan; (v) the security interest of the Lender in the personal property of the Borrower, whether tangible or intangible, now existing or hereafter arising; or (vi) the conduct of the Lender in administering or enforcing the Loan, the Loan Documents, the Related Documents and/or the financing arrangements by and between the Borrower and the Lender. 15. RESERVATION OF RIGHTS AS TO OTHER OBLIGATIONS. (a) The Borrower acknowledges and agrees that to the extent it has loans or obligations to the Lender, other than the Obligations which are the subject of this Agreement (hereinafter, the "Other Obligations"), such Other Obligations are in no way affected by this Agreement and remain fully due, payable and enforceable in accordance with their own terms and provisions. (b) The Borrower hereby agrees that the Lender, by entering this Agreement, in no way waives, discharges, releases, or compromises any claims, causes of action, or rights it has or may have with respect to such Other Obligations and may proceed to enforce such rights and remedies as if this Agreement were never negotiated or entered. 16. REPRESENTATIONS AND WARRANTIES. (a) As a material inducement to the Lender to enter into this Agreement, the Borrower hereby represents and warrants to the Lender that: (i) The Borrower is a corporation of the Commonwealth of Pennsylvania duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania; (ii) The Borrower has all the power and authority to execute, deliver and perform this Agreement and the Related Documents and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the Related Documents; (iii) Except as set forth in Schedule D annexed hereto and incorporated herein, there is no action, suit, or proceeding pending, or to the best of the Borrower's knowledge threatened against or affecting the Borrower in any court or before or by any governmental instrumentality, whether federal, state, county or municipal; (iv) The consummation of the transactions herein contemplated and the performance or observance of the Borrower's obligations under the Loan Documents, this Agreement, and the Related Documents, or the transactions required or contemplated herein and therein to which the Borrower is a party: (1) have been duly authorized by all necessary action on the part of the Borrower; (2) will not conflict with or result in a breach of or default under any injunction, or decree of any court or governmental instrumentality, or any agreement or instrument to which the Borrower is now a party or is subject; and (3) will not (except to the extent provided in this Agreement) result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower pursuant to the terms of any such agreement or instrument; and (v) To the extent any consent, approval, order, or authorization or registration, declaration, or filing with any governmental authority or other person or legal entity is required in connection with the valid execution and delivery of this Agreement or any of the Related Documents, or the carrying out or performance of any of the transactions required or contemplated herein or therein, all such consents, approvals, orders or authorizations shall have been obtained or all such registrations, declaration, or filings shall have been accomplished prior to the entry of this Agreement. (b) If any of the foregoing representations and warranties should be false or misleading in any way, same shall constitute an Event of Default under this Agreement. 17. FINANCIAL STATEMENTS AND PROJECTIONS, TRUE AND COMPLETE STATEMENTS AND REPRESENTATIONS. (a) As a material inducement to the Lender to enter into this Agreement, the Borrower has provided the Lender with financial statements, business projections and cash flow projections that have been prepared by or on behalf of the Borrower (hereinafter referred to as the "Financial Documents"). The Lender, in agreeing to enter into this Agreement and the Related Documents and granting the forbearances herein provided, has relied on the Financial Document, and upon the Borrower's additional representation that, with the considerations provided to the Borrower under this Agreement, the Borrower will be able to operate its business and derive revenues from which it will be able to perform all of its obligations under this Agreement. (b) The Borrower represents and warrants that all of the statements herein and in the Financial Documents heretofore, concurrently, or hereafter delivered by or on behalf of the Borrower to the Lender, including, but not limited to any business projections, cash flow projections, and financial statements, are and shall be true, complete and correct in all material respects as of the date each such Financial Document was prepared (provided, that, with regard to projections provided to Lender, they are true, complete and correct to the best of Borrower's knowledge and belief), and the Borrower has not omitted from its disclosures any facts necessary in order to keep the statements made or delivered by the Borrowers from being misleading. 18. ADVICE FROM INDEPENDENT COUNSEL. The Borrower understands that this is a legally binding agreement that may affect its rights. The Borrower has consulted in-house counsel about the meaning and import of this Agreement and Related Documents and represents to the Lender that it received legal advice from such counsel with respect to the negotiation of and entry into this Agreement and the Related Documents. 19. NOTICES. All notices, requests, demands or other communications given to or to be made upon any party hereto shall be in writing either by letter (delivered by hand or commercial messenger service, sent certified mail, return receipt requested or delivered by nationally recognized overnight courier service) or telegram or telecopy, addressed as follows: If to Borrower: --------------- eGames, Inc. 2000 Cabot Boulevard West Suite 110 Langhorne, PA 19034-2209 Attention: Thomas W. Murphy, CFO With a copy to: --------------- Ellen Pulver Flatt, Esq. 2000 Cabot Boulevard West Suite 110 Langhorne, PA 19034-2209 If to the Lender: ----------------- Fleet National Bank 301 Carnegie Center Princeton, NJ 08534 Attn: Ken Geiger, VP with copy to: ------------- Fox Rothschild O'Brien & Frankel 997 Lenox Drive, Bldg. 3 Lawrenceville, New Jersey 08648 Attn: Allison M. Berger, Esq. or, at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery to the terms of this Section. Any notices hereunder shall be deemed to have been given (a) three (3) days after its deposit in the mails, postage prepaid; (b) twelve noon local time on the first business day following timely deposit thereof with a nationally recognized overnight courier service with effective instructions to such courier to make delivery on the next business day; or (c) in all other cases upon receipt by the party to whom such notice is directed. 20. AMBIGUITIES CONSTRUED. This Agreement and the Related Documents shall be given a fair and reasonable construction in accordance with the intentions of the parties and without regard to or aid of any maxim or principle of contract interpretation that would require construction against the drafter. The parties acknowledge that they have had equal bargaining power with respect to the review and revision of the various provisions of this Agreement and the Related Documents and hereby knowingly waive the maxim of contract interpretation which would require a disputed provision to be construed against the party drafting same. 21. CONSENT TO FORUM, WAIVER OF JURY TRIAL. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA AND THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL SERVICE OF PROCESS UPON IT AND CONSENTS, TO THE EXTENT THE BORROWER MAY LAWFULLY DO SO, TO SERVICE OF PROCESS BY MAILING A COPY OF THE SUMMONS TO THE BORROWER BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS SPECIFIED HEREIN, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER HEREBY WAIVES ANY OBJECTIONS TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AND AGREES NOT TO ASSERT OR INTERPOSE ANY CLAIM, DEFENSE, OBJECTION, OFFSET OR COUNTERCLAIM OF ANY KIND OR NATURE OTHER THAN A DEFENSE OF PAYMENT OF THE OBLIGATIONS IN ANY ACTION OR LEGAL PROCEEDINGS BETWEEN OR AMONG THE LENDER OR ANY OF ITS AFFILIATES AND ANY OTHER PARTY OR PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OR ALL OF THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS AND ANY TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR ANY RIGHT OR REMEDY THE LENDER MAY EXERCISE HEREUNDER OR THEREUNDER OR PERMITTED BY LAW. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, AND RELATED DOCUMENTS OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW. ______ (Borrower Initial) 22. WARRANT OF ATTORNEY FOR CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ANY CLERK OF ANY COURT OF RECORD UPON THE OCCURRENCE OF AN EVENT OF DEFAULT TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER (A) FOR SUCH OF THE OBLIGATIONS AS ARE DUE AND OWING AND/OR MAY BECOME DUE AND OWING AND/OR (B) IN ANY ACTION OF REPLEVIN INSTITUTED BY LENDER TO OBTAIN POSSESSION OF ANY COLLATERAL SECURING ANY OF THE OBLIGATIONS, IN EITHER CASE WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH REASONABLE ATTORNEYS' FEES ACTUALLY INCURRED. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER: (1) WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON, VOLUNTARILY CONDEMN THE SAME, AUTHORIZE THE PROTHONOTARY OR CLERK TO ENTER UPON THE WRIT OF EXECUTION SAID VOLUNTARY CONDEMNATION AND AGREE THAT SAID REAL ESTATE MAY BE SOLD ON A WRIT OF EXECUTION; (2) WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY, EXEMPTION OR APPEALS LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED; AND (3) RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A COPY OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF THE LENDER, SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL OF THIS AGREEMENT AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF, AND THE SAME MAY BE EXERCISED FROM TIME TO TIME, AS OFTEN AS LENDER SHALL DEEM NECESSARY AND DESIRABLE, AND THIS AGREEMENT SHALL BE A SUFFICIENT WARRANT THEREFORE. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LENDER MAY ENTER ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT COUNTIES FOR ALL OR ANY PART OF THE OBLIGATIONS WITHOUT REGARD TO WHETHER JUDGMENT ENTERED AGAINST BORROWER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON BORROWER'S BEHALF FOR ANY SUBSEQUENT ENTRY OR ENTRIES OF JUDGMENT BY BANK MAY ONLY BE DONE TO CURE ANY ERRORS IN PRIOR PROCEEDINGS, ONLY AND TO THE EXTENT THAT SUCH ERRORS ARE SUBJECT TO CURE IN LATER PROCEEDINGS. ______ (Borrower Initial) 23. PAYMENT OF ATTORNEYS' FEES. At Closing, the Borrower will pay all reasonable attorneys' fees and costs with respect to modifying the Loan, including, without limitation, preparation of this Agreement and the Related Documents. 24. ADDITIONAL DOCUMENTS. The parties hereto will at any time after the date hereof sign, execute and deliver, or cause others to so sign, execute and deliver, all such agreements, letters, powers of attorney, pleadings, assignments, documents and instruments and do or cause to be done all such other acts and things as may be reasonably necessary or proper to carry out the transactions required or contemplated by this Agreement, and to effectuate the purposes and intent of this Agreement. 25. SURVIVAL. This Agreement, and all of its terms and provisions, shall and does hereby survive the closing and the consummation of any transactions provided for herein. 26. WAIVER OF AUTOMATIC STAY. The Borrower hereby represents and warrants that if it cannot perform in accordance with this Agreement, with the forbearances and consideration afforded it under this Agreement, then it will never be able to perform this Agreement, nor will it be able to reorganize under Chapter 11 of the Bankruptcy Code or under any other law. Accordingly, in consideration of the forbearances granted hereunder and the opportunity to reorganize afforded thereby and under this Agreement, the Borrower agrees that if a petition under title 11 of United States Code (the "Bankruptcy Code") is filed by or against it, Borrower in its capacity as Debtor and Debtor-in-Possession (where applicable) under the Bankruptcy Code, does hereby agree to consent to the vacation of the Automatic Stay of 11 U.S.C. 362 ("Stay"). The Borrower hereby waives the benefits of the Stay and its right to oppose a motion to lift such Stay, and does hereby admit and agree that the grounds to vacate the Stay to permit the Lender to enforce its rights and remedies hereunder exist and shall continue to exist, which grounds include, without limitation, the fact the Borrower hereby represents and admits that it, as Debtor, has no equity in its property and such property is not necessary to an effective reorganization. 27. MISCELLANEOUS. (a) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. (b) Governing Law. This Agreement and the respective rights and obligations of the parties hereto shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. (c) Assignment. The Borrower may not assign this Agreement or any rights hereunder without the Lender's prior written consent, and any prohibited assignment shall be absolutely void. No consent to an assignment shall release the Borrower from its liabilities to the Lender. The Lender may assign this Agreement and its rights and duties hereunder. (d) Confidentiality Waiver. The Borrower hereby waives any rights of confidentiality with respect to this Agreement, the Loan Documents and the Lender's files and records regarding the Loan and consents to the Lender permitting same to be inspected or copied by any persons or entities interested in purchasing the Loan. (e) Attorneys' Fees. In the event of any dispute hereunder, the prevailing party(ies) shall be entitled to recover all costs and attorneys' fees from the non-prevailing party(ies). (f) Headings. Paragraph or section headings used herein are for convenience only and shall not be used to interpret any term hereof. (g) Counterparts and Facsimile Signatures. This Agreement may be executed in any number of counterparts each of which when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. This Agreement and the Related Documents may be initially executed by facsimile signature and shall be effective and binding upon execution by facsimile signature; provided that originally executed copies are provided by the Borrower to the Lender within ten days of execution. (h) Severability. The provisions of this Agreement are severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity or unenforceability shall not in any manner affect the validity or enforceability of such provision in any other jurisdiction or any other provisions of this Agreement in any jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal as of the date first above written. FLEET NATIONAL BANK By: /s/ Kenneth Geiger -------------------------------- Name: Ken Geiger Title: Assistant Vice President ATTEST: eGames, INC. /s/ Arthur E. Rountree By: /s/ Thomas W. Murphy - ------------------------------ -------------------------------- Arthur E. Rountree, Controller Name: Thomas W. Murphy Title: Vice President and Chief Financial Officer EX-10 4 ex10-2warrant.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 10.2 THIS WARRANT AND THE SHARES OF COMMON STOCK OF EGAMES, INC. THAT MAY BE PURCHASED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT, UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT. Issue Date: October 31, 2001 Void After: October 31, 2006 EGAMES, INC. COMMON STOCK PURCHASE WARRANT This Warrant Agreement (this "Warrant Agreement") and the related Registration Rights Agreement have been entered into in connection with the execution of the Forbearance Agreement dated as of October 31, 2001, the terms of which are incorporated herein by reference as if set forth in full herein (the "Forbearance Agreement"), by and between, eGames, Inc., a Pennsylvania corporation (who together with any successor shall be referred to as the "Company") and Fleet National Bank, successor in interest to Summit Bank, a state banking corporation (the "Holder"). THIS CERTIFIES that, for value received, the Holder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase from the Company, at the Exercise Price provided herein, up to 750,000 fully paid and nonassessable shares (the "Warrant Shares") of Common Stock, no par value per share, of the Company (the "Common Stock"). Such number of Warrant Shares shall be subject to adjustment as provided for elsewhere herein. 1. Exercise Period - The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, at any time from time to time during the "Exercise Period," which shall commence on October 31, 2001 (the "Issue Date") and shall end at 5:00 p.m. Philadelphia, Pennsylvania time on October 31, 2006 (the "Expiration Date"), subject to the provisions of Section 3 hereof. 2. Exercise Price - The price per share of Common Stock at which this Warrant may be exercised (the "Exercise Price") shall be nine cents ($0.09), subject to adjustment as provided herein. 3. Exercise of Warrant. (a) During the Exercise Period, this Warrant shall be exercisable from time to time in the discretion of the Holder to the following extent: (a) to the extent of 250,000 of the Warrant Shares, commencing upon the Issue Date; (b) to the extent of an additional 250,000 of the Warrant Shares, commencing April 1, 2002 unless the Company shall have fulfilled all of its obligations and paid all amounts due and owing to the Holder under the Forbearance Agreement prior to such date; and (c) to the extent of an additional 250,000 of the Warrant Shares, commencing October 1, 2002 unless the Company shall have fulfilled all of its obligations and paid all amounts due and owing to the Holder under the Forbearance Agreement after March 31, 2002 but prior to October 1, 2002. Accordingly, (x) to the extent to which the Company shall have fulfilled all of its obligations and paid all amounts due and owing to the Holder under the Forbearance Agreement prior to April 1, 2002, 500,000 of the Warrant Shares shall never be exercisable by the Holder, and (y) to the extent to which the Company shall have fulfilled all of its obligations and paid all amounts due and owing to the Holder under the Forbearance Agreement after March 31, 2002 but prior to October 1, 2002, 250,000 of the Warrant Shares shall never be exercisable by the Holder. (b) Notwithstanding anything in Section 3 (a) to the contrary, all of the Warrant Shares shall be immediately exercisable upon any Event of Default as defined by the Forbearance Agreement. (c) During the Exercise Period, this Warrant may be exercised from time to time in accordance with Section 3(a) hereof by the surrender of this Warrant and the Notice of Exercise annexed hereto (the "Notice of Exercise") and upon payment of the Exercise Price of the shares of Common Stock thereby purchased (the "Exercised Shares"). Payment of the Exercise Price for the Exercised Shares may be made (i) by certified check payable to the order of the Company, (ii) by wire transfer of immediately-available funds to the account of the Company, or (iii) by delivery of this Warrant with instructions that the Company retain as payment of the Exercise Price such number of shares of Common Stock as shall be determined under the next sentence (a "Cashless Exercise") or (iv) by any combination of the foregoing. In the event of a Cashless Exercise, the Holder, in lieu of paying the Exercise Price by certified check or wire transfer as provided for above, shall receive that number of shares of Common Stock determined by multiplying the number of Exercised Shares for which the Cashless Exercise is made by a fraction, the numerator of which shall be the positive difference between the then Current Market Price (as defined blow) per Warrant Share (on the date the Company receives the Notice of Exercise) and the Exercise Price, and the denominator of which shall be the then Current Market Price per Warrant Share (on the date the Company receives the Notice of Exercise), and the remaining Exercised Shares for which the Cashless Exercise has been made for which shares of Common Stock shall not have been issued shall be deemed to have been paid to the Company as the Exercise Price and all Warrants related thereto shall be thereby deemed exercised and canceled. Upon exercise, the Holder shall be entitled to receive, promptly after payment in full, one or more certificates, issued in the Holder's name or in such name or names as the Holder may direct for the number of Warrant Shares so purchased. The Warrant Shares so purchased shall be deemed to be issued as of the close of business on the date on which the Company receives a duly executed and completed Notice of Exercise and, if applicable, the Exercise Price. The Company covenants that all Warrant Shares that are issued upon the exercise of rights represented by this Warrant will be fully paid, nonassessable, and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). To the extent to which this Warrant shall have been partially exercised by the Holder, the Company upon the surrender of this Warrant shall issue a new Warrant certificate to the Holder, identical to the terms hereof except to the extent of a reduction in the number of shares for which this Warrant may be exercised. (d) "Current Market Price" is defined as the arithmetic mean of the highest and lowest selling prices of the shares of Common Stock of the Company quoted on the OTC Bulletin Board* Service provided by NASD, Inc., or as reported by a nationally recognized broker/dealer which makes a market in the shares of Common Stock, or as reported by equivalent exchanges or markets as may heretofore or hereafter be utilized by the Company, during the ten days prior to such valuation date during which trading occurred (but no more than 30 calendar days prior to such valuation date). If there were no sales of shares of Common Stock during the 30 calendar days prior to the valuation date but there were sales within 60 calendar days before the valuation date, Current Market Value is determined by taking the mean between the highest and lowest selling prices of the shares of Common Stock during the ten days during which trading occurred that are closest in time to the valuation date. If actual sales are not available during such 60-day period before the valuation date, and the Board of Directors of the Company (the "Board") determines that the Current Market Value of the shares of Common Stock cannot be determined on the basis of the selling or bid and asked prices pursuant to any of the methods set forth above, then the Current Market Value of the shares of Common Stock shall be established by the Board acting in good faith and using all available financial data and other current factors affecting Current Market Value. 4. Fractional Warrant Shares - Fractional shares of Common Stock will not be issued upon exercise of the Warrants and will instead be rounded off to the nearest whole number of shares. 5. Charges, Taxes and Expenses - Issuance of certificates for the shares of Common Stock shall be made by the Company without charge to the Holder for any incidental expense in respect of the issuance of such certificate; provided, however, that the Holder shall be responsible for any issue or transfer tax associated with such issuance. 6. Holder Representations - The Holder represents and warrants to the Company as of the date hereof, and at the time of exercise of this Warrant shall be deemed to represent to the Company, with the understanding that the Company shall rely on such representations and warranties, that it (i) is an "Accredited Investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act; (ii) has the ability to bear the economic risks of such Holder's prospective investment, including a complete loss of Holder's investment in this Warrant and the shares of Common Stock issuable upon exercise thereof; (iii) has been furnished with and has had access to such information as such Holder has considered necessary to make a determination as to acquire this Warrant and to purchase of the shares of Common Stock upon exercise of this Warrant, together with such additional information as is necessary to verify the accuracy of the information supplied; (iv) has had the opportunity to ask questions concerning the Company and had all questions which have been asked by such Holder satisfactorily answered by the Company; and (v) has not been offered this Warrant or shares of Common Stock subject thereto by any form of advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any such media. The Holder, by acceptance of this Warrant, represents and warrants to the Company that this Warrant and all securities acquired upon any and all exercises of this Warrant are purchased for the Holder's own account for investment, and not with view to distribution of either this Warrant or any securities purchasable upon exercise hereof. 7. Organization and Standing - The Company hereby represents and warrants to the Holder that the Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to carry on its businesses as now conducted and as proposed to be conducted. The Company hereby represents and warrants to the Holder that the Company is duly qualified or licensed to do business as a corporation and is in good standing in all jurisdictions where such qualification or licensing is required, except where the failure to so qualify would not have a material adverse effect upon the business, assets, liabilities, condition (financial or otherwise) or operations of the Company. 8. Company Power - The Company hereby represents and warrants to the Holder that the Company has all corporate power necessary for the authorization, execution and delivery of this Warrant and this Warrant constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, moratorium, and other laws of general application affecting the enforcement of creditors' rights. 9. Adjustments - The Exercise Price and the number and kind of securities purchasable hereunder are subject to adjustment from time to time, as follows: (a) Merger Events. If at any time there shall be a capital reorganization of the shares of the Company's Common Stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation when the Company is not the surviving corporation, the sale of all or substantially all of the Company's properties and assets to any other person, or the spin off of all or substantially all of the Company's assets into another entity that must be approved, in whole or in part, by the Company's stockholders (hereinafter collectively referred to as a 'Merger Event'), then, as a part of such Merger Event, lawful provision shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of Common Stock or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if the Holder had exercised this Warrant immediately prior to the Merger Event to the full extent of the Warrant Shares. In any such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions of the Warrant Agreement with respect to the rights and interest of the Holder after the Merger event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price of shares of Common Stock purchasable) shall be applicable to the greatest extent possible. (b) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. (c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Common Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination, and the number of shares available for purchase in effect immediately prior to such subdivision or combination shall be proportionately adjusted. (d) Stock Dividends. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing Sections 9(a) or 9(b)) of, the Company's stock, then the Exercise Price shall be adjusted, from and after the record date of such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of all shares of the Company's stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of all shares of the Company's stock outstanding immediately after such dividend or distribution. The Holder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (e) Antidilution Rights. If and whenever after the Issue Date and prior to November 1, 2004, the Company shall issue or sell any (i) shares of its Common Stock, (ii) option, warrant or right to purchase Common Stock or securities convertible into or exchangeable for Common Stock, or (iii) securities convertible into or exchangeable for Common Stock, for consideration per share or at an exercise price or at a conversion price per share that is less than the Exercise Price (any of the foregoing, a "Diluting Issuance"), the Exercise Price under this Warrant Agreement shall be reduced to the amount of consideration per share received by the Company in such issuance or sale; provided, however, that the foregoing shall not apply to the issuance or sale during this time period of Excepted Securities (as hereafter defined) or to the exercise or conversion of such Excepted Securities, as applicable. If and whenever after October 31, 2004, there shall be a Diluting Issuance, the Exercise Price under this Warrant Agreement shall be adjusted from time to time pursuant to the weighted average antidilution method set forth below (the "Weighted Average Method"), provided, however, that the foregoing shall not apply to the issuance or sale during this time period of Excepted Securities: If the Company shall issue or sell any shares of its Common Stock for consideration per share less than the Exercise Price in effect immediately prior to the time of such issue or sale, then, the Exercise Price shall be reduced to a price (calculated to the nearest cent) equal to the price determined by dividing (i) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Exercise Price and (B) the consideration, if any, received by the Company upon such issue or sale by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale. For purposes of this paragraph, the following Subsections (i) - (iii) shall also be applicable: (i) In the event that the Company shall in any manner grant (directly, by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of (x) Common Stock or (y) any stock or securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), or shall fix a record date for determination of holders of any class of securities entitled to receive any such Options, whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and whether or not the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities (determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of any such Options that relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (B) the total number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Exercise Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options (as of the date of granting such Options) shall be deemed to be outstanding and to have been issued for such price per share. Except as otherwise provided in Section 9(e)(iii) below, no further adjustment of the Exercise Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) In the event that the Company shall in any manner issue (directly, by assumption in a merger or otherwise) or sell any Convertible Securities (other than pursuant to the exercise of Options to purchase such Convertible Securities covered by Section 9(e)(i) above, or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and whether or not the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Exercise Price in effect immediately prior to the time of such issue, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share, provided that, except as otherwise provided in Section 9(e)(iii), no further adjustment of the Exercise Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (iii) In connection with any change in, or the expiration or termination of, the purchase rights under any Option or the conversion or exchange rights under any Convertible Securities, the following provisions shall apply: (A) If the purchase price provided for in any Option referred to in Section 9(e)(i), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in Section 9(e)(i) or 9(e)(ii), or the rate at which any Convertible Securities referred to in Section 9(e)(i) or 9(e)(ii) are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution), then the Exercise Price in effect at the time of such change shall forthwith be increased or decreased to the Exercise Price that would be in effect immediately after such change if (a) the adjustments that were made upon the issuance of such Options or Convertible Securities had been made upon the basis of (and taking into account the total consideration received for) (i) the issuance at that time of the Common Stock, if any, actually issued upon the exercise of any such Options or upon the conversion or exchange of any such Convertible Securities before such change, and (ii) the issuance at that time of all such Options or Convertible Securities, with terms and provisions reflecting such change that are still outstanding after such change, and (b) the Exercise Price as adjusted pursuant to clause (a) preceding had been used as the basis for the adjustments required hereunder in connection with all other issues or sales of Common Stock, Options or Convertible Securities by the Company subsequent to the issuance of such Options or Convertible Securities. (B) On the partial or complete expiration of any Options or termination of any right to convert or exchange Convertible Securities which have not been fully exercised, the Exercise Price then in effect hereunder shall be forthwith increased or decreased to the Exercise Price that would be in effect at the time of such expiration or termination if (a) the adjustments that were made upon the issuance of such Options or Convertible Securities had been made upon the basis of (and taking into account the total consideration received for) (i) the issuance at that time of the Common Stock, if any, actually issued upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities before such expiration or termination, and (ii) the issuance at that time of only those such Options or Convertible Securities that remain outstanding after such expiration or termination, and (b) the Exercise Price as adjusted pursuant to clause (a) preceding had been used as the basis for adjustments required hereunder in connection with all other issues or sales of Common Stock, Options or Convertible Securities by the Company subsequent to the issuance of such Options or Convertible Securities. (C) If the purchase price provided for in any Option referred to in Section 9(e)(i) or the rate at which any Convertible Securities referred to in Section 9(e)(i) or 9(e)(ii) are convertible into or exchangeable for Common Stock shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, and the event causing the reduction is one that did not also require an adjustment in the Exercise Price under other provisions of this Section 9(e), then in case of the delivery of shares of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be adjusted to such amount as would have obtained if such Option or Convertible Securities had never been issued and if the adjustments made upon the issuance of such Option or Convertible Securities had been made upon the basis of the issuance of (and taking into account the total consideration received for) the shares of Common Stock delivered as aforesaid; provided that no such adjustment shall be made unless the Exercise Price then in effect would be reduced thereby. (D) If a record date for the issuance of any Options or Convertible Securities shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefore, the adjustment previously made as provided in Section 9(e)(i) and 9(e)(ii) above to the relevant Exercise Price which becomes effective on such record date shall be cancelled as of the close of business on such record date, and thereafter such Exercise Price shall be adjusted pursuant to Section 9(e)(i) or 9(e)(ii), as the case may be, as of the actual date of their issuance. Notwithstanding anything in subsections (i) - (iii) to the contrary, the terms "Options" and "Convertible Securities" shall not include the issuance or sale of Common Stock or securities convertible or exchangeable into Common Stock upon the exercise of any option, warrant or right issued and outstanding as of the Issue Date or upon the conversion or exchange of any convertible or exchangeable security issued and outstanding as of the Issue Date, all of which shall be deemed to be "Excepted Securities." The following shall also not be deemed to be "Options" and "Convertible Securities" and shall be deemed to be "Excepted Securities": (A) the issuance or sale of stock options to (x) members of the Company's Board of Directors or (y) Company employees and consultants who provide bona fide services under an agreement or arrangement approved by the Board of Directors (collectively "Excepted Stock Options"); (B) any issuance or sale of shares of the Company's Common Stock, options, warrants or rights to purchase Common Stock or securities convertible or exchangeable for Common Stock to any entity or individual in connection with, directly or indirectly, the obtaining of funds used in whole or in part for the purpose of paying amounts due and owing to the Holder under the Forbearance Agreement (collectively "Take-Out Lender Securities"; and (C) the issuance of securities upon conversion or exchange of securities in connection with (A) or (B) of this paragraph; provided, however, that if and whenever, from the Issue Date through the Expiration Date, the Company shall issue or sell Excepted Stock Options or Take-Out Lender Securities for a consideration per share or at an exercise price or at a conversion price per share that is less than the Exercise Price under this Warrant Agreement, the Exercise Price shall be adjusted pursuant to the Weighted Average Method set forth above. Notwithstanding anything herein to the contrary, Excepted Securities shall not include, and the anti-dilution protections set forth in this Section 9(e) shall not apply to, the first 750,000 Excepted Stock Options issued or sold during the Exercise Period. (f) Notice of Adjustment - In each case of any adjustment or readjustment in the Common Stock issuable upon the exercise of this Warrant, the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon such adjustment or readjustment is based. The Company shall forthwith mail a copy of each such report to the Holder. 10. No Rights as Stockholder - This Warrant does not entitle the Holder to any voting rights, the right to receive cash dividends or other rights as a stockholder of the Company prior to the exercise of the Warrant. 11. Reservation of Stock Issuable on Exercise of Warrant - The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, all shares of Common Stock from time to time issuable upon the exercise of this Warrant. 12. Loss, Theft, Destruction or Mutilation of Warrant - Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, and in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new warrant of like tenor and dated as of such cancellation in lieu of this Warrant. 13. Remedies - The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not adequate and may be enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 14. Notices, etc. - All notices and other communications from the Company to the Holder of this Warrant shall be mailed, by first class mail or nationally recognized overnight courier such as Federal Express, to such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last holder of this Warrant who has so furnished an address to the Company. All communications from the holder of this Warrant to the Company shall be mailed by first class mail or nationally recognized overnight courier such as Federal Express to the Company at it principal business address, or such other address as may have been furnished to the Holder in writing by the Company. 15. Miscellaneous - This Warrant shall be construed and enforced in accordance with and governed by the laws of the Commonwealth of Pennsylvania without giving effect to the choice of law provisions thereof. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant, or any portion hereof may, without the prior consent of the Company, be assigned to any entity controlled by, controlling, or under common control with the Holder or to any successor of the Holder, provided that the Company has received notice of such transfer. Until the Warrant is transferred on the Company's books, the Company shall treat the registered holder as the holder of this Warrant. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its corporate name by its duly authorized officer and to be dated as of the issue date set forth on the first page of this Warrant. ATTEST EGAMES, INC. /s/ Arthur E. Rountree BY: /s/ Thomas W. Murphy - ------------------------------ ------------------------ Arthur E. Rountree, Controller Thomas W. Murphy, VP Finance, CFO NOTICE OF EXERCISE OF WARRANT TO: eGames, Inc. Pursuant to the terms of the attached Warrant, the undersigned hereby elects to purchase ____________ shares of the Common Stock of eGames, Inc. (the "Company"), and tenders herewith payment of the Exercise Price of such shares in full. Pursuant to the terms of the attached Warrant, the undersigned hereby elects to make a Cashless Exercise as provided for in Section 3(c) of such Warrant with respect to ____________ shares of Common Stock. (Check and complete the appropriate paragraph) Please issue a certificate or certificates representing said shares of Common Stock, in the name of the undersigned or in such other name(s) as is/are specified immediately below or, if necessary, on an attachment hereto: Name Address ---- ------- DATE: HOLDER: EX-10 5 ex10-3regright.txt REGISTRATION RIGHTS AGREEMENT Exhibit 10.3 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made on this 31st day of October, 2001, by and among eGames, Inc., a Pennsylvania corporation (the "Company"), and Fleet National Bank, successor in interest to Summit Bank, a state banking corporation ("Fleet") RECITALS WHEREAS, on even date herewith, Fleet and the Company entered into a Forbearance Agreement (the "Forbearance Agreement"), the terms of which are incorporated herein by reference as if set forth in full herein, pursuant to which Fleet agreed to temporarily forebear from exercising and enforcing certain rights which Fleet has against the Company as the result of the Company's default on a certain loan, the terms of which are more specifically set forth in the Forbearance Agreement and the loan documents; WHEREAS, in order to induce Fleet to enter into the Forbearance Agreement, the Company is granting Fleet a warrant (the "Warrant") permitting Fleet to acquire shares of the Company's Common Stock (the "Common Stock") under the terms of the Warrant Agreement, a copy of which is attached hereto as Exhibit A; WHEREAS, Fleet and the Company hereby agree that this Agreement shall govern the rights of Fleet to cause the Company to register the Common Stock issuable upon exercise of the Warrants and certain other matters as set forth herein; and WHEREAS, Fleet and the Company have agreed, pursuant to the Warrant Agreement, to enter into this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the foregoing premises, the covenants and conditions set forth herein, and certain other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Definitions. All terms used but not defined herein shall have such meaning as is ascribed by the Warrant Agreement. In addition, the following terms shall have the following respective meanings: (a) "Commission" means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. (b) "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. (c) "Registration Statement" means a registration statement filed by the Company with the Commission for a public offering and sale of Common Stock or securities exercisable for or convertible into Common Stock (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a similar limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation). (d) "Registration Expenses" means the expenses described in Section 5 below. (e) "Registrable Shares" means (i) the Common Stock and (ii) any other securities issued or issuable in respect of such Common Stock (because of stock splits (whether forward or reverse), split-ups, recapitalization, mergers, consolidations, combinations, exchanges of Common Stock, separations, reclassifications, reorganizations or liquidations); provided, however, that Registrable Shares shall cease to be Registrable Shares upon any sale of such shares pursuant to a Registration Statement or pursuant to Rule 144 under the Securities Act where all transfer restrictions with respect thereto are removed upon consummation of such Rule 144 sale; and further provided that Registrable Shares shall cease to be Registrable Shares on the date that is seven (7) years after the date of this Agreement or such earlier date as elsewhere provided in this Agreement. (f) "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission issued under such Act, as they each may, from time to time, be in effect. 2. Required Registrations. (a) Except as provided below, at any time after November 1, 2002, Fleet may request, in writing, that the Company effect the registration on Form S-1 or Form S-2 (or any successor form) of Registrable Shares owned by Fleet. Thereupon, the Company shall effect, as expeditiously as possible and in any event not later than 60 days after receipt of such notice, the filing of a Registration Statement on Form S-1 or Form S-2 (or any successor form) of all Registrable Shares which the Company has been requested to so register, and thereafter use its best efforts to effect as soon as practicable thereafter the registration of such requested Registrable Shares. If Fleet intends to distribute the Registrable Shares by means of an underwriting, it shall so advise the Company in its request. (b) At such time as the Company is eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings), Fleet's rights under paragraph 2(a) above shall become null and void and of no further effect, and Fleet may thereafter request the Company, in writing, to effect the registration on Form S-3 (or such successor form), of Registrable Shares. Thereupon, the Company shall, as expeditiously as possible and in any event not later than 60 days after receipt of such notice, effect the filing of a Registration Statement on Form S-3 (or any successor form) of all Registrable Shares which the Company has been requested to so register, and thereafter use its best efforts to effect as soon as practicable thereafter the registration of such requested Registrable Shares. The Company shall advise Fleet in writing from time to time whenever it is eligible to file a Registration Statement on Form S-3. (c) While the Company is not eligible to file a Registration Statement on Form S-3, Fleet shall be entitled to demand one registration pursuant to paragraph 2(a) above. At such time as the Company is eligible to file a Registration Statement on Form S-3 (an any successor form relating to a secondary offering), Fleet shall be entitled to demand one registration per 12-month period pursuant to paragraph 2(b) above; provided, however, that the Company shall not be required to file any registration pursuant to paragraph 2(a) or (b) above unless Fleet requests registration of 100% of the Registrable Shares; and provided further, that the Company may defer making such filing for a reasonable period after the date of any such request for registration (but not in excess of 90 days) if in the good faith judgment of the Company's Board of Directors such filing would, at such time, (i) require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, (ii) require the providing of information required by the Commission that at such time the Company would be unable to provide, or (iii) adversely affect active negotiations or planning for a proposed or pending merger or acquisition. The Company's obligations with respect to paragraphs 2(a) and 2(b) above shall be deemed satisfied only when a registration statement covering the applicable Registrable Shares shall have (A) become effective or (B) been withdrawn at the request of Fleet (other than as a result of information concerning the business or financial condition of the Company which is made known to Fleet after the date on which such registration was requested). (d) Not later than fifteen (15) days after receipt of a demand for a registration pursuant to paragraph 2(a) above, the Company may in its sole discretion elect to purchase from Fleet all of the Registrable Shares which the Company has been requested to so register, at a price per share equal to the Current Market Price of the Company's Common Stock on the date of the Company's receipt of such demand, in which event Fleet shall be obligated to sell such Registrable Shares to the Company and whereupon the Company shall have no further obligation under paragraph 2(a) hereof. 3. Incidental Registration. (a) Whenever the Company proposes to file a Registration Statement at any time and from time to time, it will, prior to such filing, give written notice to Fleet of its intention to do so and, upon the written request of Fleet, given within 10 business days after the Company provides such notice (which request shall state the intended method of disposition of such Registrable Shares), the Company shall use its best efforts to cause all Registrable Shares specified by Fleet to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of Fleet; provided, however, that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 3(a) without obligation to Fleet. (b) In connection with any registration under paragraph 3(a) above that shall involve an underwriting, the Company shall not be required to include any Registrable Shares in such registration unless Fleet accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it. If in the opinion of the managing underwriter it is desirable because of marketing or other factors to limit the number of Registrable Shares to be included in the offering, then the Company shall be required to include in the registration only that number of Registrable Shares, if any, which the managing underwriter believes should be included therein. 4. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall: (a) file with the Commission a Registration Statement with respect to such Registrable Shares and use its best efforts to cause that Registration Statement to become effective; (b) in accordance with the requirements and in the time periods set forth in the Securities Act prepare and file with the Commission any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to keep the Registration Statement effective; (c) promptly furnish to Fleet a copy of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as Fleet may reasonably request in order to facilitate the public sale or other disposition of the Registrable Shares owned by Fleet; and (d) use its best efforts to register or qualify the Registrable Shares covered by the Registration Statement under the securities or Blue Sky laws of such states as Fleet shall reasonably request in writing; provided, however, that the Company shall not be required in connection with this Section 4 to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction. (e) The Company shall not be required to maintain the effectiveness of any registration statement effected pursuant to this Agreement beyond the date that is two (2) years after the date of filing of the registration statement. If the Company has delivered a preliminary or final prospectus to Fleet and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify Fleet and, if requested, Fleet shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide Fleet with a revised prospectus and, following receipt of the revised prospectus, Fleet shall be free to resume making offers of the Registrable Shares. If, after a registration statement becomes effective, the Company becomes engaged in any activity which in the good faith determination of the Company's Board of Directors, involves information that would have to be disclosed in the Registration Statement but which the Company desires to keep confidential for valid business reasons, then the Company may at its option, by notice to Fleet, require that Fleet cease sales of such Registrable Shares under such Registration Statement for a period not in excess of three months from the date of such notice, such right to be exercised by the Company not more than twice in any 12-month period. If, in connection therewith, the Company considers it appropriate for such Registration Statement to be amended, the Company shall so amend such Registration Statement as promptly as practicable and Fleet shall suspend any further sales of its Registrable Shares until the Company advises it that such Registration Statement has been amended. The time periods referred to herein during which such Registration Statement must be kept effective shall be extended for an additional number of days equal to the number of days during which the right to sell Registrable Shares was suspended pursuant to this paragraph. 5. Allocation of Expenses. The Company will pay all Registration Expenses of all registrations under this Agreement. For purposes of this Section 5, the term "Registration Expenses" shall mean all expenses incurred by the Company in complying with Section 4 hereof, including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and expenses of counsel for the Company, state Blue Sky fees and expenses, and the expense of any special audits incident to or required by any such registration, but excluding underwriting discounts, selling commissions and the fees and expenses of Fleet's own counsel. 6. Indemnification and Contribution. (a) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless Fleet, each underwriter of Registrable Shares sold by Fleet, and each other person, if any, who controls Fleet or such underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which Fleet, such underwriter or such controlling person may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse Fleet, such underwriter and each such controlling person for any legal or any other expense reasonably incurred by Fleet, such underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to Fleet, such underwriter or such controlling person to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or final prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of Fleet, such underwriter or such controlling person specifically for use in the preparation thereof. (b) In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, Fleet will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors and officers, underwriter or controlling person may become subject under the Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity with information relating to such seller furnished in writing to the Company by or on behalf of Fleet specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement, provided, however, that the obligations of Fleet hereunder shall be limited to an amount equal to the gross proceeds to Fleet from the Registrable Shares sold in connection with such registration. (c) Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim of litigation, shall be reasonably satisfactory to the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6, unless and except to the extent that the Indemnifying Party is prejudiced by the failure of the Indemnified Party to provide timely notice. The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall pay such reasonable expenses if there would be a conflict of interest (and counsel for the Indemnified Party has advised the Indemnified Party in writing of such conflict) if counsel retained by the Indemnifying Party represented both the Indemnified Party and the Indemnifying Party in such proceeding.. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (A) Fleet or any controlling person of Fleet, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined (A) by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (B) contribution under the Securities Act may be required on the part of Fleet or any such controlling person in circumstances for which indemnification is provided under this Section 6; then, in each such case, the Company and Fleet will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportions so that Fleet are responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the Registration Statement bears to the public offering price of all securities offered by such Registration Statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (x) Fleet shall not be required to contribute any amount in excess of the gross proceeds to it of all Registrable Shares sold by it pursuant to such Registration Statement, and (y) no person or entity guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of the Securities Act, shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation. 7. Information by Fleet. Fleet shall furnish to the Company in writing such information regarding Fleet and the distribution proposed by Fleet as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. 8. Rule 144 Requirements. The Company agrees commencing no later than November 1, 2002 and thereafter during the Exercise Period and for so long as Fleet beneficially owns any Registrable Shares to: (a) Comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company; (b) Use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) Furnish to Fleet upon request (i) a written statement by the Company as to its compliance with the requirements of said Rule 144(c), and the reporting requirements of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as Fleet may reasonably request to avail itself of any similar rule or regulation of the Commission allowing it to sell any such securities without registration. 9. Assignment. These provisions shall be binding upon and inure to the benefit of the Company, Fleet and their respective successors. This agreement may only be assigned by Fleet to a permitted assignee of the Warrants as permitted under the Warrant Agreement, and any such assignee must agree in writing to be subject to the terms and conditions of this Agreement. 10. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written. EGAMES, INC. By: /s/ Thomas W. Murphy --------------------------------- Thomas W. Murphy, VP Finance, CFO FLEET NATIONAL BANK By: /s/ Kenneth Geiger, AVP ----------------------- -----END PRIVACY-ENHANCED MESSAGE-----