Empire Online confirms commencement of legal proceedings

Tuesday, December 6th, 2005

LONDON, United Kingdom -- Empire Online (EOL.L) confirmed tody that that the Company has instituted legal proceedings against PartyGaming Plc ("PartyGaming") in the High Court of Gibraltar. The Company seeks substantial damages and injunctive relief from PartyGaming.

Empire, the brainchild of Israeli entrepreneur Noam Lanir, floated its shares in June and has since lost over half its market value.

The legal action follows PartyGaming's decision in October to ringfence its own poker players from those of four "skin sites" such as Empire -- Web sites that used PartyGaming's poker software to power their own online poker rooms.

"The company seeks substantial damages and injunctive relief from PartyGaming," Empire said on Tuesday, adding that it was currently "engaged in confidential arbitration proceedings" with a PartyGaming subsidiary.

Under PartyGaming's earlier arrangement, players on skin sites enjoyed competing against a large pool of competitors including PartyGaming's, but after the split they were confined to the smaller site with fewer players.

The split hit Empire hard. In October, it warned that profits would be 10 percent below expectations and on November 21 it said it would sue over the damage caused.

Most analysts saw PartyGaming's move as an attempt to squeeze the skins, which were both allies and competitors, and investors feared Empire's remaining players would slowly migrate to the PartyPoker site.

Empire's Lanir is seen as one of the architects of online gaming and an industry guru, but critics said he allowed his company to become too dependent on PartyGaming.