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Potential Sale of EDC GmbH Terminated

EDCI Holdings, Inc. announced that the potential purchaser of Entertainment Distribution Company, LLC’s (EDC) Entertainment Distribution Company GmbH (EDC GmbH) subsidiary and certain related assets and entities (German EDC Business) has terminated further negotiations.

According to the statement, the cooperation of Universal Music Group (UMG) was critical to any such transaction. However, the potential purchaser has now advised EDCI that UMG conditioned such cooperation on demands for significant contractual modifications that it believes are “unbridgeable.”

As part of the plan of dissolution approved by EDCI’s stockholders, the Company’s Board of Directors reserved $10 million of the proceeds available for the initial distribution to effect a tender offer, but deemed it advisable to delay the contemplated tender offer given the discussions related to the German EDC Business. As those discussions have ceased, EDCI intends to resume implementation of the tender offer and expects to provide updates as to the timing thereof in the coming weeks. The tender is designed to afford additional flexibility to stockholders who prefer a fixed amount of cash and immediate recognition of any tax-losses to so elect, for a portion of their shares. The total of up to $10 million would be reduced pro rata if the result of the tender would put EDCI’s net operating losses at risk, as EDCI believes it is prudent to continue to protect those tax-loss carryforwards at this time. Any amount not successfully tendered would be subsequently distributed as a dissolution distribution payment.

EDCI reminds stockholders that the range of estimated liquidation distributions as set forth in its definitive proxy statement filed with the Securities and Exchange Commission on November 16, 2009 did not include any value for EDCI’s investment in EDC as EDCI was, and continues to be, unable to provide any assurance that its efforts to seek value for that investment will result in any additional proceeds. Based on the latest negotiations related to a potential sale of the German EDC Business, EDCI believes that no transaction involving the sale of the German EDC Business is likely in the near future. However, during EDCI’s three-year dissolution period required under Delaware law, EDCI will continue its efforts to seek value for its investment in EDC by exploring strategic alternatives and seeking, as appropriate, cash distributions, subject to applicable legal requirements. If EDCI continues to own any interest in EDC at the end of the three year dissolution period, EDCI anticipates transferring such interests to a liquidating trust, for the benefit of its stockholders.

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