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SED International Holdings Issues Letter To Shareholders

SED International Holdings, Inc. (NYSE MKT: SED), today announced that Chairman Samuel A. Kidston issued the following open letter to shareholders discussing the company’s response to a request for inclusion on the Board of Directors:

SED Shareholders,

Shortly after SED’s Annual Meeting of Shareholders, I was contacted by Hesham M. Gad (“Sham”) who demanded that he and Sam Weiser be immediately added to the Board of Directors of SED. While noting that the appointment of additional directors so soon after the election of a new Board by Shareholders appeared unseemly, I nonetheless questioned Mr. Gad as to why he believed SED should make these board appointments. His reasons were that Gad Partners Fund (an entity that he controlled as the Managing Partner of Gad Capital Management, its investment advisor) and Paragon Technologies, Inc. (Pink Sheets: PGNT) (an entity for which he was Chairman of the Board and the person “responsible for investments in businesses and securities” and of which Mr. Weiser was a director) had become the owners of 8.8% of SED’s shares and were entitled to be on SED’s Board. When I pressed him for details on what he hoped to accomplish as an SED Board member, Mr. Gad vaguely alluded to the need to change the composition of SED’s Board and to improve its corporate governance. He also stated that he would bring “credibility” to the Board. On the other hand, Mr. Gad complimented the SED Board on the quality of SED’s recently reorganized management team and on the strategic steps SED is initiating. I thanked Mr. Gad and pointed out that SED had overhauled its governance practices in recent years and had practices fully compliant with all requirements of Sarbanes Oxley and the NYSE-Amex, including some from which SED is exempt because of its small size.

Despite misgivings about the contribution that Mr. Gad could make to the Board, I advised him that I would refer his candidacy to the Nominating Committee and send him our standard form of Officer and Director Questionnaire, a form completed by all our directors. Mr. Gad seemed surprised that we would not just immediately appoint him to the Board, despite the fact that the use of Nominating Committees is an integral part of good governance practices. Reluctantly Mr. Gad completed and returned the Questionnaire which contained the following question and answer:

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