UNITED
STATES
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): October 31,
2008
EDCI
HOLDINGS, INC.
(Exact name of registrant as
specified in its charter)
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DELAWARE
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001-34015
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26-2694280
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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825
8th Avenue, 23rd Floor
New
York, New York 10019
(Address
of Principal
Executive
Offices)
(212)
333-8400
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d- 2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
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Item
1.02 Entry into a Material Definitive Agreement
Asset Purchase
Agreement.
On
October 31, 2008, EDCI Holdings, Inc. (the “Company”) announced that its
subsidiaries Entertainment Distribution Company, LLC (“EDC”) and Entertainment
Distribution Company (USA), LLC (collectively, the “Sellers”) entered into an
Asset Purchase Agreement (the “Agreement”) with Sony DADC US Inc. (the
“Purchaser”) for the sale of Sellers’ distribution operations located in
Fishers, Indiana, U.S. supply agreements with Universal Music Group, the
equipment located in its Fishers, Indiana distribution facility and certain
manufacturing equipment located in its Kings Mountain, North Carolina facility,
as well as the transfer of U.S. customer relationships to the Purchaser
(collectively, the “Sony Sale”). Pursuant to the Agreement, the
Purchaser will pay $26 million in cash at closing and will assume certain
related liabilities. The Agreement provides for additional contingent
consideration of up to $2.0 million in cash related to the transferred
operations achieving certain additional criteria. Proceeds received
upon completion of the transaction are subject to certain post-closing working
capital adjustments and will be utilized, together with cash on hand, to reduce
EDC’s debt and to meet working capital, severance, plant decommission, facility
closing and other transaction costs. The Agreement includes customary
representations and warranties accompanied by certain limited indemnification
rights, secured by a second lien on the Sellers’ assets in favor of the
Purchaser, and pre-closing covenants regarding the operation of EDC’s U.S.
business and preparation for the closing of the transaction. The
transaction, which is subject to certain consents and closing conditions, is
expected to close on or about December 31, 2008. In connection with
the transaction, EDC and Purchaser have agreed to provide certain transition
services for up to approximately two months following the
closing. Universal Music Group’s consent to the transfer of the U.S.
supply agreements in the Sony Sale was provided on October 31,
2008.
A copy of
the Agreement is filed with this report as Exhibit 10.1 and is hereby
incorporated by reference herein. The foregoing description of the Agreement
does not purport to be complete and is qualified in its entirety by reference to
the full text of such agreement.
Amendment to Credit
Agreement. On October 31, 2008, EDC entered into a Seventh
Amendment to Credit Agreement (the “Seventh Amendment”) with Entertainment
Distribution Company (USA), LLC (the “Guarantor”), Glenayre Electronics, Inc.,
the lenders party thereto (the “Lenders”) and Wachovia Bank, National
Association, as administrative agent (the “Agent”) amending certain terms of the
Credit Agreement dated as of May 31, 2005 by and among EDC, the Guarantor,
Glenayre Electronics, Inc., the Lenders and the Agent. The Seventh Amendment
shall be effective upon the satisfaction of the conditions specified therein,
including the consummation of the Sony Sale. Pursuant to the Seventh
Amendment, (1) the Lenders consented to the Sony Sale, (2) the blanket lien on
the remaining U.S. assets and pledge of 65% of the stock our EDC’s subsidiaries
in Hannover, Germany and Blackburn, UK was continued, (3) the payment on the
term loan was modified as follows: $9.0 million remains due on December 31,
2008, $9.0 million due on closing of the Sony Sale, $2.0 million due on December
31 2009, $2.5 million due on June 30, 2009, and $4.5 million due on December 31,
2010 and (4) upon the Sony Sale, the existing revolving credit facility will be
repaid and eliminated and replaced with a new European revolving credit facility
of up to $2.5 million, which will be secured by the assets of the EDC
subsidiaries in Hannover, Germany and Blackburn, UK.
In
addition, in connection with the Seventh Amendment, certain provisions of the
Credit Agreement will be modified, including (a) the definitions of
“Consolidated EBITDA” and “Fixed Charge Coverage Ratio”, in each case to take
into account the Sony Sale, (b) the provision regarding asset dispositions will
be amended to require all of the net cash proceeds from such asset dispositions
to be used to prepay the loans under the Credit Agreement, (c) the excess cash
flow provision will be amended to require 50% of the excess cash flow earned
each year to be used to prepay the loans under the Credit Agreement (subject to
certain exceptions), (d) adding provisions which require a portion of the
proceeds from the Sony Sale to be held in escrow for use in the wind-down of
certain U.S. operations or the prepayment of loans under the Credit Agreement
and (e) certain financial covenants will be amended to require (1) the Fixed
Charge Coverage Ratio (as defined in the Credit Agreement) to be greater than or
equal to 1.0 to 1.0 for the fiscal quarter ending December 31, 2008 and 1.25 to
1.0 at each quarterly testing date thereafter and (2) Consolidated Capital
Expenditures (as defined in the Credit Agreement) as of the end of each 12-month
period to be less than or equal to $5.0 million. EDC was also
required to pay the Lenders a $50,000 fee as a condition to the Seventh
Amendment.
A copy of
the Seventh Amendment is filed with this report as Exhibit 10.2 and is hereby
incorporated by reference herein. The foregoing description of the Seventh
Amendment does not purport to be complete and is qualified in its entirety by
reference to the full text of such amendment.
Item
2.02 Results of Operations and Financial Condition.
On
October 31, 2008, the Company issued a news release providing financial results
for the quarter ended September 30, 2008 and regarding the Sony Sale and Seventh
Amendment. The news release contains forward-looking statements regarding the
Company and includes cautionary statements identifying important factors that
could cause actual results to differ.
The
Company’s news release is furnished as Exhibit 99.1 to this Current
Report.
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Item
9.01.
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Financial
Statements and Exhibits.
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(d)
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Exhibits
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Exhibit
No.
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Description
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10.1
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Asset
Purchase Agreement by and among Sony DADC US Inc., Entertainment
Distribution Company (USA), LLC and Entertainment Distribution Company,
LLC dated October 31, 2008
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10.2
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Seventh
Amendment to Credit Agreement dated as of October 31, 2008, by and among
Entertainment Distribution Company, LLC, as borrower, Glenayre
Electronics, Inc., the guarantors party thereto, the lenders party thereto
and Wachovia Bank, National Association, as administrative
agent.
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99.1
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Company
News Release dated October 31,
2008.
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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.
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EDCI
HOLDINGS, INC.
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Date:
November 3, 2008
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By:
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/s/
Michael Klinger
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Michael
Klinger
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Chief
Financial Officer
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