NEW YORK, Aug. 23 /PRNewswire-FirstCall/ -- EDCI Holdings,
Inc. (Nasdaq: EDCI) ("the Company" or "EDCI"), the majority
shareholder of Entertainment Distribution Company, LLC ("EDC"), a
European provider of supply chain services to the optical disc
market, today announced the following update with regard to the
previously disclosed interim injunction proceedings related to
Universal International Music B.V. ("UIM"), EDC's largest
customer.
As previously disclosed, in April
2010, UIM indicated to EDC's Hannover, Germany subsidiary ("EDC Hannover")
its intent to procure the distribution of certain units currently
serviced in accordance with the EDC / UIM Distribution Agreement,
from third parties before the end of 2010 (the "NDU
Plan"). EDC Hannover believes UIM's plans would result
in the removal of approximately 40% of the annual distribution
volume EDC Hannover previously has provided to
UIM. However, based on correspondence from UIM citing
their legal grounds for their plan, and after consultation with
counsel, EDC Hannover believes that substantially all of such units
are part of the contractually committed volumes under the
appropriate agreements, and thus EDC Hannover determined to pursue
legal remedies should UIM order such units from third parties,
including seeking injunctive relief as well as by pursuing
arbitration. In addition, EDC Hannover engaged in
discussions with UIM to determine if there is a commercial
solution, but those discussions were unsuccessful. As the
removal of 40% of UIM's distribution volume constitutes
approximately 37% of EDC Hannover's (and thus EDC's) overall
distribution volume, if UIM began to order such volumes from third
parties, and based on the high fixed cost nature of EDC's
operations, UIM's actions could have a material adverse effect on
EDC's profitability.
On August 4, 2010, EDC Hannover
initiated interim injunction proceedings before the District Court
in Utrecht, the Netherlands,
requesting an order to prohibit UIM from procuring any
International NDU Units from a third party pending arbitration on
the matter in accordance with the relevant supply agreements. The
hearing was set for August 18,
2010.
However, on August 18, 2010,
shortly before the hearing, UIM and EDC entered into an interim
settlement agreement initiated by UIM pursuant to which both
parties agreed to expedited arbitration on the matter, UIM agreed
not to implement its NDU Plan pending the conclusion of arbitration
on the matter, and EDC has therefore withdrawn the interim
injunction proceedings and agreed to expedited arbitration.
Notwithstanding the interim settlement agreement, both parties have
reserved all rights with regard to final resolution in the
arbitration. In particular, UIM reserved the right to seek as
damages in arbitration any fees paid to EDC during the interim
period for the contested volume.
The parties are currently establishing a schedule for the
arbitration. EDC does not believe UIM's claim has merit and
intends to vigorously defend its position in arbitration but at
this early stage in these matters, EDC is not able to assess the
likelihood of a favorable outcome.
About EDCI Holdings, Inc.
EDCI Holdings, Inc. (Nasdaq: EDCI) is engaged in carrying-out
its Plan of Complete Liquidation and Dissolution ("Plan of
Dissolution") that was approved by EDCI's shareholders on
January 7, 2010. EDCI is also the
majority equity-holder of Entertainment Distribution Company, LLC
("EDC"), a European provider of supply chain services to the
optical disc market. For more information, please visit
www.edcih.com.
Cautionary Statement About Forward Looking Statements
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 in regards to future sales volumes and operating results, and
are based upon EDCI's current forecasts, expectations and
assumptions, which are subject to a number of risks and
uncertainties that could cause the actual outcomes and results to
differ materially. Actual results may differ materially from
the results predicted. EDCI assumes no obligation to update
any forward-looking statements and does not intend to do so except
where legally required.
SOURCE EDCI Holdings, Inc.
Copyright . 23 PR Newswire