EXHIBIT
99.31


John
Houston Pope


Allen B.
Roberts


Raymond
T. Mak


EPSTEIN
BECKER & GREEN, P.C.


250 Park
Avenue


New York,
New York 10177-1211


Phone:
(212) 351-4500


Fax:
(212) 878-8741


Attorneys
for Plaintiffs




UNITED
STATES DISTRICT COURT


SOUTHERN
DISTRICT OF NEW YORK






EDCI
HOLDINGS, INC., ENTERTAINMENT      Case No. 09 Civ. 3880
(BSJ)


DISTRIBUTION
COMPANY, LLC, and


and
ENTERTAINMENT DISTRIBUTION


COMPANY
(USA) LLC,





Plaintiffs,




-against-




MICHAEL
W. KLINGER,




Defendant.








Plaintiffs,
EDCI Holdings, Inc. (“EDCI”), Entertainment Distribution Company, LLC (“EDC
LLC”), and Entertainment Distribution Company (USA) LLC (“EDC USA”), hereby
allege as their Complaint against Defendant Michael W. Klinger (“Klinger”) as
follows:





NATURE OF
ACTION




1.This
action arises under the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1001, et seq., and the Declaratory
Judgment Act, 28 U.S.C. §§ 2201-02.  It seeks relief in two forms: (1)
a declaration of rights arising out of the termination of Defendant’s
employment, over which a real and substantial controversy has arisen; and (2)
recovery for losses occasioned by Defendant’s participation in breaches of
fiduciary duty in the course of administering the Severance Pay Policy
for











Entertainment
Distribution Company (USA) LLC (the “Policy” or the “Plan”), an employee welfare
benefits plan governed by ERISA.





JURISDICTION &
VENUE




2. This Court
has jurisdiction over this action pursuant to 28 U.S.C. § 1331 because this is a
civil action arising under the laws of the United States and pursuant to 29
U.S.C. § 1132(e)(1), which provides for jurisdiction over actions brought under
Title I of ERISA. The Court additionally has jurisdiction pursuant to 28 U.S.C.
§ 1332, because this is a civil action between the citizens of different states
with an amount in controversy exceeding $75,000, and pursuant to 28 U.S.C. §
1367 for any claims which lack an independent jurisdictional basis but which are
related to the claims properly before this Court.




3. This Court has
personal jurisdiction over the Defendant, and venue is proper in this District,
because the Plan is administered from this District and the breach took place in
this District, and because 29 U.S.C. § 1132(e)(2) authorizes the bringing of an
action of this type in the District where a plan is administered or where the
breach took place, with authority for nationwide service of process to secure
the attendance of Defendant in such a District.





PARTIES





4.
      EDCI is a Delaware corporation with its principal place of business in New
      York, New York.




5.
      EDC LLC is a Delaware Limited Liability Company with its principal place
      of business in New York, New York.


6.
      EDC USA is a Delaware Limited Liability Company with its principal place
      of business in New York, New York.





2





7.
      EDCI, indirectly through certain subsidiaries, owns 97.99% of the Limited
      Liability Company units of EDC LLC.  EDC LLC is the sole member
      of EDC USA.


8.
      Klinger is, upon information and belief, a citizen of the State of
      Indiana. He was, until on or about April 14, 2009, an officer and employee
      of EDCI, EDC LLC and EDC USA.





FACTUAL
ALLEGATIONS


Klinger’s
Employment





9.
      EDCI is a holding company which, together with its wholly owned and
      controlled majority owned subsidiaries, is seeking to enhance stockholder
      value by pursuing acquisition opportunities while continuing to oversee
      its majority investment in EDC LLC, a business that provides CD and DVD
      replication and logistics services through its wholly-owned subsidiary EDC
      USA in the United States, and through certain other wholly-owned
      subsidiaries in Western Europe.




10.
      The market for EDC LLC’s products are in a secular decline.  As
      a result, EDC USA is engaged in restructurings that include facility
      closings and the lay-off of personnel. In this environment corporate
      executives knew that preservation of cash had paramount
      importance.





11.
      Klinger was appointed Executive Vice President and Chief Financial Officer
      (“CFO”) and Treasurer of EDCI commencing on September 19,
      2008.  His responsibilities included acting as the most senior
      financial officer for all of EDCI’s wholly-owned and majority-owned
      subsidiaries, including EDC LLC and EDC
USA.








3




12. On October 3, 2008,
EDCI and Klinger entered into a "Letter Agreement" (the "Agreement") confirming
certain terms and conditions of Klinger's continued employment.


A
copy of the Agreement is annexed hereto as Exhibit 1 and incorporated by this
reference thereto.




13.
      The Agreement provides that the termination of Klinger’s employment by
      EDCI without Cause, a defined term, or by Klinger with Good Reason, also a
      defined term, will entitle Klinger to contractual severance
      payments.  Conversely, termination with Cause and resignation
      without Good Reason leave Klinger without any entitlement to such
      payments.




14.
      On or about March 15, 2009, Robert L. Chapman, Jr. (“Chapman”), the
      Chief Executive Officer of EDCI and EDC LLC, discovered that Klinger had
      authorized – and legally bound EDC USA to – severance payments under the
      Plan contrary to its terms, a clear material violation of Klinger’s
      responsibilities as an executive of EDCI and its subsidiaries which caused
      EDC USA to incur an excess expenditure of approximately $176,000
      (the “Double Severance Payments”).  (The details of Klinger’s
      misconduct are set forth infraparagraphs 25 to 26 and 33 to
36.)





15.
      EDCI investigated Klinger’s actions in connection with the unauthorized
      Double Severance Payments, to which he ultimately admitted his guilt in
      writing. Chapman informed Klinger that his conduct entitled EDCI to
      terminate Klinger’s employment for Cause and Klinger acknowledged that
      EDCI had sufficient grounds for termination of Klinger’s employment for
      Cause.





16. On or about April 2,
2009, Chapman conducted a six month review of Klinger’s performance, in which
Chapman discussed EDCI’s concern with the breach of trust


involved in the
Double Severance Payment, and identified other significant deficiencies in
Klinger’s performance. During that review session, Chapman reiterated that EDCI


had grounds for termination of Klinger’s employment for
Cause.







4





Klinger and EDCI
thereafter began negotiations for a separation of his employment, and in
connection with the negotiations, Klinger requested a mutual separation that
would


spare
him from having his termination branded as one for Cause.




17.
      EDCI and Klinger reached agreement as to the key terms of a mutual
      separation on Thursday April 9, 2009.  A key element
      of  consideration that Klinger negotiated for in such agreement
      was EDCI’s waiver of its right to terminate Klinger for Cause as a result
      of the Double Severance Payments.




18.
      While EDCI believed the parties had reached a mutually satisfactory
      agreement concerning the termination of Klinger’s employment and was
      working with Klinger on final documentation thereof  through the
      weekend, on Monday, April 13, Klinger repudiated that solution before it
      could be consummated.  Instead, he sent a letter dated April 13,
      2009, to EDCI’s Board of Directors in which he asserted his right to
      resign for Good Reason if certain changes were not made within thirty
      days.  His letter asserted, in substance, that EDCI was in
      material breach of the Agreement. Plaintiffs dispute that Klinger had Good
      Reason to resign and contest each of the assertions set forth in his April
      13th letter as either invalid, baseless, spurious or immaterial – by
      Klinger’s own descriptions.





19.
      On that same date, April 13, 2009, EDCI issued to Klinger notice of
      termination of Klinger’s employment for Cause subject to the approval of
      the Board of Directors. Upon information and belief, Klinger received that
      notice on the morning of April 14th. The Board approved such termination
      on April 14, 2009. 20. Klinger’s employment terminated as of April 14th.





5





Klinger’s
Breach of Fiduciary Duty





21.
      EDC USA adopted the Plan on or about October 3, 2008.  A copy of
      the Plan is annexed hereto as Exhibit 2 and incorporated by this reference
      thereto.




22.
      EDC USA is the administrator and named fiduciary of the
      Plan.  Individual officers of EDC USA become fiduciaries when
      they actually exercise discretion under the Plan.


23.
      Klinger became a fiduciary under the Plan when he actually exercised
      discretion under the Plan, as described infraparagraphs 25 to
      26.


24.
      The Plan provides severance benefits to employees who have lost their
      employment under certain circumstances.  An Eligible Employee
      may receive severance of “One (1) week of base pay for each complete year
      of service (based on most recent date of hire) as an Eligible Employee,
      up to a maximum of 10
      weeks’ pay.” (Section 5.1, emphasis added).


25.
      In or about December 2008, Klinger joined with and participated in a
      breach of fiduciary duty committed by the then-President of EDC USA to
      bind EDC USA to the payment of additional severance for certain employees
      operating out of EDC USA’s North Carolina manufacturing facility,
      conferring a total of twenty weeks of severance on those employees, rather
      than the ten week maximum authorized by the Plan. While the then-President
      identified only eight employees for this illegal enhanced benefit,
      Klinger, on his own, added another four employees.  Klinger
      later confessed to the misconduct and his responsibility for it, saying
      that he felt he “had the authority to make that decision” on his
      own.  His actions and statements constitute acknowledged
      fiduciary status under the Plan.





6





26.
      On January 8, 2009, Klinger signed and requested delivery of letters that
      bound EDC USA to the payment of the illegally enhanced severance for those
      twelve employees.






COUNT
I




Declaratory
Judgment




27.
      Plaintiffs repeat and incorporate the allegations set forth in the
      foregoing paragraphs as if fully set forth
  herein.




28.
      A real and substantial controversy exists between the parties concerning
      the meaning of the Agreement and the rights of Plaintiffs
      thereunder.




29.
      Plaintiffs are left with uncertainty about the status of their rights with
      respect to Klinger and need the assistance of the Court to settle the
      controversy between the parties. If Plaintiffs are correct, that Klinger
      committed acts that constitute Cause for termination, Klinger is entitled
      to no severance payments; if Klinger is correct, that he validly tendered
      his resignation for Good Reason and was not subject to termination for
      Cause, he may be entitled to substantial severance
      payments.  Alternatively, if Klinger offered his resignation for
      reasons not constituting Good Reason under the Agreement and Plaintiffs
      did not otherwise have Cause, Plaintiffs have grounds to terminate Klinger
      for Cause as a result of his resignation other than for Good
      Reason.




30.
      Accordingly, Plaintiffs seek a declaration of rights under the Agreement
      specifying that the circumstances of the termination of Klinger’s
      employment constitute Cause under the Agreement and, in the alternative,
      that Klinger resigned without Good Reason, as a result of which Plaintiffs
      may terminate Klinger for Cause.











7





COUNT
II




Breach of Fiduciary
Duty




31.
      Plaintiffs repeat and incorporate the allegations sent forth in the
      foregoing paragraphs as if fully set forth
  herein.




32.
      Under ERISA § 404(a)(1)(D), a fiduciary must discharge his duties in
      accordance with the documents and instruments governing a
      plan.




33.
      Payment of benefits to participants in excess of an express maximum
      specified by a plan constitutes a breach of fiduciary
  duty.




34.
      Klinger authorized, participated in, and executed binding agreements
      providing for the payment of benefits in excess of the express maximum
      specified in the Plan to twelve
employees.




35.
      As a result of Klinger’s actions, EDC USA became bound to pay, and paid,
      severance in the aggregate of approximately $176,000 in excess of the
      maximum authorized for those employees under the
  Plan.




36.
      EDC USA has no practical remedy to recover the overpayments to which
      Klinger legally bound EDC USA.  Participants under the Plan will
      be required to execute a release of claims in exchange for the benefits
      they receive.  Any attempt to undo the committed overpayments
      authorized by Klinger, by trying to renegotiate those overpayments with
      the participants, could result in litigation against EDC USA and
      jeopardize the ability to obtain the releases and expose EDC USA to
      excessive risk.




37.
      EDC USA funds benefits for the Plan from its general
      assets.  EDC USA suffered the loss that Klinger’s breach of
      fiduciary duty caused and is entitled to recovery of that loss as
      appropriate relief under ERISA §
502(a)(2).











8





PRAYER FOR
RELIEF




WHEREFORE,
Plaintiffs demand judgment against Defendant on each Count of the Complaint and
the following relief:




A. A
declaration of rights under the Agreement specifying that the circumstances of
the termination of Klinger’s employment constitute Cause under the Agreement


and, in
the alternative, that Klinger resigned without Good Reason, as a result of which
Plaintiffs may terminate Klinger for Cause.




B.
Recovery for the loss occasioned by the breach of fiduciary duty perpetrated by
Defendant in an amount to be determined at trial.




C. The
expenses and costs involved in the prosecution of this action, including
attorney’s fees under 29 U.S.C. § 1132(g)(1).




D. Such
other, further relief as the Court deems appropriate.






Dated:
New York, New York                 Respectfully
submitted,


April 17,
2009





EPSTEIN
BECKER & GREEN, P.C.





By:


John Houston Pope


Allen B. Roberts


Raymond T.
Mak


250 Park
Avenue


New York, New York
10177-1211


Phone: (212) 351-4500


Fax: (212)
878-8741


Attorneys for Plaintiffs













9














































EXHIBIT
1
























October
3, 2008
 
 
 Mr.
Michael W. Klinger
 22420
Crooked Creek Road
 Cicero,
IN  46034
 
 
 Dear
Mike,
 
 This
letter confirms certain terms and conditions of your continued employment in
consideration of your new title and duties effective September 19, 2008, in the
position of Executive Vice President and Chief Financial Officer and Treasurer
of EDCI Holdings, Inc. (The “Company”) and supersedes any prior offer letter or
other agreement regarding your employment by the Company or any of its
subsidiaries. This position is located in or near Fishers, Indiana and reports
directly to the Chief Executive Officer and/or Chairman of the Board of
Directors of the Company.  You are responsible for financial planning
and analysis, accounting, SEC reporting and matters related to treasury, tax,
information technology, risk management, procurement, payroll and investor
relations, as well as such duties and services as normally are associated with
such position, which may be assigned to you from time to time.
 
 Your base
compensation will be $20,800 per month (the “Base Salary”), which shall be paid
in bi-weekly installments in accordance with the Company’s normal payroll
practices.  Your Base Salary and performance will be reviewed after
your initial six months in this position and thereafter on an annual basis each
year.  Your Base Salary may be increased (but not decreased) in the
manner determined by the Company in consultation with the Company’s Board of
Directors (the “Board”) or the Compensation Committee of the Board.
 
 You will
be eligible to participate in the Company’s bonus plans or programs as shall be
established by the Board upon recommendations from management of the Company
from time to time for senior executives of the Company.  In addition,
you will be eligible to receive discretionary bonus awards as the Board may
determine in its sole discretion from time to time.
 
 During
the term of your employment, you will be entitled to four (4) weeks of vacation
in each calendar year at such times as shall be mutually convenient to you and
the Company.  Your vacation will be prorated for each partial calendar
year during the term of your employment.
 
 During
the term of your employment, you will receive a monthly car allowance of $400,
which will cover local driving and parking expenses incurred in connection with
the performance of your duties hereunder.
 
 During
the term of your employment, you may participate in all retirement plans, life,
medical/dental insurance plans and disability insurance plans of the Company, as
in effect from time to time, to the extent that you qualify under the
eligibility requirements of each plan or program.  Details of our
current benefits plan have previously been provided to you.
  You will
continue to be entitled to a “stay bonus”, previously provided in your letter
agreement dated November 26, 2007, of $60,000 payable in a lump sum if you
remain employed by the Company through October 31, 2008 or, in the event a
Change in Control (as defined below) occurs prior to October 31, 2008, you
remain employed by the Company or any successor to the Company following a
Change in Control, through the 90 day anniversary of any such Change in
Control.  If earned, the Company will pay you the stay bonus within
two days after October 31, 2008 or two days after the 90 day anniversary of a
Change in Control, as applicable.
 
 In the
event your employment is terminated by the Company without Cause (as defined
below) or by you with Good Reason (as defined below), the Company will pay you,
subject to the limitations set forth below, a lump sum severance payment equal
to the amount of your Base Salary in effect on such termination date multiplied
by 12.   You also shall be entitled to receive the sum of (1)
your accrued but unpaid Base Salary through the date of
such termination, plus (2) your accrued but unpaid vacation pay
through such date of termination, plus (3) if you are then participating in
the Company’s annual bonus plan, a pro-rated annual bonus for the bonus year in
which you are terminated, which shall be calculated and paid in accordance with
the Company’s normal practices at the end of such bonus
year,  provided  that you have been employed by the Company
for at least six months of such bonus year, plus (4) any other compensation
payments or benefits which have accrued and are payable in connection with
such termination. In addition, the Company shall continue to provide
medical and dental benefits to you and your dependents for a period of 12 months
following such date of termination at the same levels of coverage and
in the same manner as such benefits are available to you and your dependents
immediately prior to such Change in Control.  Your right to continue
medical and dental coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1995 (“COBRA”) shall begin after the expiration of the
one-year period described in the foregoing sentence.
   
  If a
Change in Control (as defined below) occurs and if your employment is terminated
within six months after such Change in Control for any reason other than
Cause (as defined below), the Company shall pay you, within 10 days
after such termination, in cash or equivalent, a lump sum severance
benefit equal to your Base Salary in effect on such termination date multiplied
by 12.  You also shall be entitled to receive the sum of (1) your accrued
but unpaid Base Salary through the date of such termination, plus (2)
your accrued but unpaid vacation pay through such date of termination, plus
(3) if you are then participating in the Company’s annual bonus plan, a
pro-rated annual bonus for the bonus year in which you are terminated, which
shall be calculated and paid in accordance with the Company’s normal practices
at the end of such bonus year,  provided  that you have been
employed by the Company for at least six months of such bonus year, plus (4) any
other compensation payments or benefits which have accrued and are payable
in connection with such termination.  In addition, the Company shall
continue to provide medical and dental benefits to you and your dependents for a
period of 12 months following such date of termination at the
same levels of coverage and in the same manner as such benefits are
available to you and your dependents immediately prior to such Change in
Control.  Your right to continue medical and dental coverage under
COBRA shall begin after the expiration of the one-year period described in the
foregoing sentence.
  Notwithstanding
the foregoing, if any benefit or amount payable to you under this letter on
account of your termination of employment constitutes “nonqualified deferred
compensation” (“Deferred Compensation”) within the meaning of Section 409A of
the Internal Revenue Code (“409A”), payment of such Deferred Compensation shall
commence when you incur a “separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h) (“Separation from
Service”).  However, if you are a “specified employee” within the
meaning of 409A at the time of your Separation from Service, any Deferred
Compensation payable to you under this letter on account of your termination of
employment shall be delayed until the first day of the seventh month following
your Separation from Service (the “409A Suspension Period”).  Within
14 calendar days after the end of the 409A Suspension Period, the Company shall
pay to you a lump sum payment in cash equal to any payments (including interest
on any such payments, at an interest rate of not less than the average prime
interest rate, as published in the Wall Street Journal, over the 409A Suspension
Period) that the Company would otherwise have been required to provide under
this letter but for the imposition of the 409A Suspension
Period.  Thereafter, you shall receive any remaining payments due
under this letter in accordance with its terms as if there had not been any
suspension period beforehand.
 
 For
purposes of this letter agreement:
 
 (1)           “Cause”
means (1) your resignation, except for Good Reason, from the office of Chief
Financial Officer of the Company; (2) dishonesty or fraud on the part of the
employee which is intended to result in the employee’s substantial
personal enrichment at the expense of the Company or its affiliates;
(3) a material violation of the employee’s responsibilities as an executive of
the Company or its subsidiaries which is willful and deliberate; or
(4) the conviction (after the exhaustion of all appeals) of the
employee of a felony involving moral turpitude or the entry of a plea
of nolo contendere for such a felony;  provided , that in no event
shall “Cause” include (i) any personal or policy disagreement between the
employee and the Company or any member of the board of directors of
the Company or (ii) any action taken by the employee in connection with the
employee’s duties if the employee acted in good faith and in a manner
the employee reasonably believed to be in the best interest
of the Company and had no reasonable cause to believe the employee’s
conduct was unlawful.
 
 (2)           “Change
in Control” means any of the following: (a) the acquisition, directly or
indirectly after the date of this letter agreement, in one or a series of
transactions, of 25% or more of the Company’s common stock by any “person” as
that term is defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended; (b) the consummation of a merger, consolidation,
share exchange or similar transaction of the Company with any
other corporation, entity or group, as a result of which the holders of
the voting capital stock of the Company immediately prior to such merger,
consolidation, share exchange or similar transaction, as a group, would receive
less than 50% of the voting capital stock of the surviving or
resulting corporation; (c) the consummation of an agreement providing
for the sale or transfer (other than as security for obligations of the Company)
of all or substantially all of the assets of the Company; or (d) individuals
who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board or pursuant to a negotiated settlement with any such
Person to avoid the threat of any such contest or
solicitation.  Notwithstanding the above, in no event shall the
liquidation of the Company or declaration or payment by the Company of a
material dividend be deemed to constitute a Change in Control.
  (3)           “Good
Reason” means the occurrence of any of the following events provided you (A)
notify the Board in writing within 90 days following the initial occurrence of
the events that are alleged to constitute good reason and specifying the events
that are alleged to constitute good reason and (B) terminate your employment
within 90 days of the date of your notice if the Company does not cure said
events within 30 days after the date of your notice: (i) any material breach by
the Company of the terms of this letter agreement or any material diminution by
the Company of your authority, duties or responsibilities with the Company as
specified in the first paragraph of this letter agreement; (ii) any relocation
of your principal office to a location which is more than 25 miles from the
Company’s Fishers, Indiana facility; or (iii) any request by the Company for you
to report to someone other than the Company’s Chief Executive Officer or the
Chairman of the Company’s Board of Directors, except where such request is
specifically approved by you.
   
  No
representation, promise or inducement has been made by the Company or you that
is not embodied in this letter agreement.
 
 This
letter agreement may not be modified or amended in any way unless in writing
signed by each of the parties hereto.
 
 Please
confirm the terms and conditions set forth herein by countersigning this letter
in the space provided below.
 
 Sincerely,
 
 /s/
Clarke Bailey
 
 Clarke
Bailey
 Chairman
of the Board
  
  Accepted
      by:
              /s/
      Michael W. Klinger
              Date:  October
      3, 2008Michael
      W. Klinger
















































EXHIBIT
2