<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Alliance Entertainment Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
------------------------
NOTICE OF ANNUAL MEETING
JULY 30, 1996
------------------------
The 1996 Annual Meeting of Stockholders of Alliance Entertainment Corp., a
Delaware corporation (the "Company"), will be held at the Drake Hotel, 440 Park
Avenue, New York, New York on Tuesday, July 30, 1996 at 10:00 a.m., local time,
to consider and act on the following matters:
1. The election of five Class I directors of the Company;
2. Amendment to the 1994 Long Term Incentive and Share Award Plan (the
"1994 Plan") to increase the number of shares of Common Stock, par value
$.0001 per share ("Common Stock"), reserved for issuance upon exercise of
options from 4,600,000 shares to 7,900,000 shares;
3. A proposal to approve certain performance measures under the 1994 Plan;
4. Ratification of the reappointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors for 1996;
5. Such other business as may come before the Annual Meeting.
Stockholders of record at the close of business on June 20, 1996 are
entitled to vote at the meeting and any adjournments or postponements thereof. A
list of stockholders entitled to vote at the meeting will be available for
inspection at the Company's office at 110 East 59th Street, New York, New York
10022. You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the meeting, please sign the accompanying proxy and return it
in the enclosed postage prepaid envelope.
By Order of the Board of Directors,
ELLIOT B. NEWMAN
SECRETARY
July 2, 1996
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1996
---------------------
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Alliance
Entertainment Corp. ("Alliance" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the Annual Meeting of the Stockholders of the Company to
be held on Tuesday, July 30, 1996 at 10:00 A.M., local time, at the Drake Hotel
440 Park Avenue, New York, New York and at any adjournments or postponements
thereof (the "Annual Meeting"). This Proxy Statement and the accompanying proxy
card are first being mailed to the stockholders of the Company on or about July
2, 1996.
You are cordially invited to attend the Annual Meeting, but whether or not
you attend in person, you are urged to mark, sign and date the enclosed Proxy
Card and return it in the enclosed postage prepaid envelope. Shares represented
by proxies properly executed and returned, unless previously revoked, will be
voted at the Annual Meeting in accordance with the instructions thereon. If a
proxy is signed and returned without indicating any voting instructions, the
shares represented by the proxy will be voted FOR the proposals listed on the
Notice of Annual Meeting. If any other matters should be presented at the Annual
Meeting upon which a vote may properly be taken, the shares represented by
proxies at the Annual Meeting will be voted thereon in the discretion of the
person or persons voting such proxies. The Company knows of no specific matter
to be brought before the Annual Meeting that is not referred to in the Notice of
Annual Meeting or this Proxy Statement.
You have the right to revoke your proxy at any time prior to its use by
filing a written notice with the Secretary of the Company prior to the convening
of the Annual Meeting or by presenting another Proxy Card with a later date. If
you attend the Annual Meeting and desire to vote in person, you may request that
your previously submitted Proxy Card not be used.
The Company will pay all expenses involved in the solicitation of proxies by
the Board of Directors. The Company will request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares held of record by such persons and will reimburse such persons and the
Company's transfer agent for their reasonable out-of-pocket expenses in
forwarding such materials.
The Company's Annual Report for the fiscal year ended December 31, 1995 was
first mailed to stockholders on or about July 2, 1996. Stockholders are referred
to that report for financial and other information about the Company. The Annual
Report is not incorporated by reference into this Proxy Statement and is not to
be deemed a part hereof.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
Each outstanding share of the Company's Common Stock, par value $.0001 per
share (the "Common Stock"), entitles the holder to one vote. The Company's
Restated Certificate of Incorporation and By-laws do not provide for cumulative
voting. As of June 20, 1996, the date fixed by the Board of Directors as the
record date for determining the stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournments or postponements thereof (the
"Record Date"), there were 36,456,094 shares of Common Stock outstanding. The
presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock shall constitute a quorum for the transaction of business at the
Annual Meeting. Directors will be elected at the Annual Meeting by a plurality
of votes cast at the meeting by the holders of shares of Common Stock
represented in person or by proxy. The affirmative
<PAGE>
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting is necessary for
the approval of the other proposals specifically set forth in the Notice of
Annual Meeting and, except as otherwise required by law or by the Restated
Certificate of Incorporation, to transact any other business which may be
brought before the Annual Meeting.
Abstentions may be specified on all proposals, except the election of
directors. Abstentions will be counted as present for purposes of the item on
which the abstention is noted and, thus, have the effect of a vote against the
proposal. With regard to the election of directors, votes may be cast in favor
or withheld with respect to any or all nominees; votes that are withheld will be
excluded entirely from the vote and will have no effect. In the event of a
broker non-vote with respect to any issue coming before the Annual Meeting
arising from the absence of authorization by the beneficial owner to vote as to
that issue, the proxy will be counted as present for purposes of determining the
existence of a quorum but will not be deemed as present and entitled to vote as
to that issue for purposes of determining the total number of shares of which a
majority is required for adoption.
As of June 20, 1996, each of the following persons were the "beneficial
owners," as that term is defined by Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), of more than five percent of the
Common Stock outstanding and entitled to vote at the Annual Meeting.
<TABLE>
<CAPTION>
COMMON STOCK SHARES OF
NAME AND ADDRESS BENEFICIALLY PERCENTAGE
OF BENEFICIAL OWNERS OWNED (1)(2) OF CLASS (1)(2)
- ------------------------------------ ----------------------- ---------------
<S> <C> <C>
Joseph J. Bianco (3) 14,087,888 36%
110 East 59th Street
New York, New York 10022
BT Capital Partners, Inc. (4) 3,974,937 11%
130 Liberty Street
25th Floor
New York, New York 10006
Jerry Bassin (5) 2,035,291 5.5%
15959 N.W. 15th Avenue
Miami, Florida 33169
Bain Capital, Inc. (6) 3,306,972 9%
Two Copley Place
Boston, MA 02116
Alan Shapiro (7) 1,849,565 5%
Route 1, Box 73B
Jewell, Georgia 31045
Wanger Asset Management (8) 1,930,000 5%
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
</TABLE>
- ------------------------
(1) As used herein, beneficial ownership means the sole or shared power to vote,
or direct the voting of, a security, or the sole or shared power to dispose,
or direct the disposition of, a security. Except as otherwise indicated, all
persons named herein have (i) voting power and/or investment power with
respect to their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
2
<PAGE>
(2) With respect to each stockholder, includes any shares issuable upon exercise
of all options or warrants held by such stockholder that are currently
exercisable or will become exercisable within 60 days of June 20, 1996.
(3) Includes (i) 2,978,560 shares of Common Stock which Mr. Bianco has the right
to vote and dispose of, (ii) options to purchase 2,826,666 shares of Common
Stock held by Mr. Bianco which are exercisable within 60 days of June 20,
1996, (iii) 4,975,690 shares of Common Stock which Mr. Bianco has the right
to vote on any and all matters presented to any meeting of stockholders,
including the election of directors, which Jerry Bassin (1,768,625 shares),
Anil K. Narang (550,000 shares), Alan Shapiro (1,824,565 shares), Lawrence
Burstein (399,250 shares), Barry Goldin (433,250 shares), own and (iv)
3,306,972 shares of Common Stock which are owned by certain funds managed by
Bain Capital Inc. ("Bain") and which Mr. Bianco has the right to vote on the
election of directors. Does not include options to purchase 83,334 shares of
Common Stock held by Mr. Bianco which are not exercisable within 60 days of
June 20, 1996.
(4) Includes 3,567,034 shares of Common Stock, warrants to acquire 227,489
shares of Common Stock at an exercise price of $5.00 per share and an
additional 180,414 shares of Common Stock at an exercise price of $8.00 per
share.
(5) Includes options to purchase 266,666 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 33,334 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(6) Comprised of 3,306,972 shares of Common Stock held by certain funds managed
by Bain Capital, Inc. Does not include options to purchase 20,000 shares
issued to Robert Gay, Managing Director of Bain Capital, Inc., which are
exercisable within 60 days of June 20, 1996.
(7) Includes options to purchase 25,000 shares of Common Stock which are
exercisable within 60 days of June 20, 1996.
(8) Based on information contained in a Schedule 13G filed by Wanger Asset
Management, L.P., Wanger Asset Management Ltd. and Ralph Wanger on February
15, 1996.
PROPOSAL I. -- ELECTION OF DIRECTORS
The By-laws give the Board the authority to fix the number of directors from
time to time, provided that such number may not be fewer than three nor more
than fifteen. The Board of Directors is currently composed of fourteen members
classified into three classes, with members of each class holding office for
staggered three year terms. There are currently five Class I Directors whose
terms expire in 1996. This year, Messrs. Goldin, Gay, Kaufmann, Rothschild and
Marakovits have been nominated for election for a term which expires in 1999. If
for any reason any of these nominees becomes unable or is unwilling to serve at
the time of the Annual Meeting, the persons named in the enclosed proxy card
will have discretionary authority to vote for a substitute nominee or nominees.
It is not anticipated that any nominee will be unavailable for election.
The following sets forth information as to each nominee for election at the
Annual Meeting and each Director continuing in office, including his age,
present principal occupation, other business experience during the last five
years, directorships in other publicly held companies and period of service as a
director of Alliance.
It is the intention of the persons named as proxies to vote their proxies
for the election of directors for the nominees named below. Each nominee has
consented to serve as a director if elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED BELOW.
3
<PAGE>
CLASS I NOMINEES FOR ELECTION AT THIS MEETING
TO A THREE YEAR TERM EXPIRING IN 1999:
<TABLE>
<CAPTION>
DIRECTOR OF
THE
NAME AGE POSITION WITH THE COMPANY COMPANY SINCE
- ---------------------- --- ---------------------------------------- --------------
<S> <C> <C> <C>
Peter Kaufmann 47 Executive Vice President; Director 1996
Barry L. Goldin 58 Director 1993
Robert C. Gay 43 Director 1995
Peter Rothschild 40 Director 1996
Robert Marakovits 37 Director 1996
</TABLE>
PETER KAUFMANN has been a director of Alliance since January 1996 and an
Executive Vice President since June 1994. Mr. Kaufmann founded Disquelaser
Ltda., a Brazilian partnership engaged in the distribution of pre-recorded music
in March 1990 and acted as its President until July 1993. In August 1993, he
founded and became President of Disquemusic Comercial Importadora Ltda.
("Disquemusic"). Mr. Kaufmann joined the Company in June 1994 following the
acquisition of Disquemusic by Alliance.
BARRY L. GOLDIN served as Chairman of the Board of Trinity Capital
Opportunity Corp. ("Trinity") from its formation in November 1991 until
consummation of the merger of Trinity and Alliance on November 30, 1993, and has
been a director of Alliance since that date. Since October 1982, Mr. Goldin has
been President and a director and a principal shareholder of Trinity Capital
Corporation, which is engaged principally in managing investments in privately
held companies.
ROBERT C. GAY became a director of Alliance in May 1995. He has been a
Managing Director of Bain Capital, Inc. since April 1993, and has been a General
Partner of Bain Capital, Inc. since February 1989. Mr. Gay is also Vice Chairman
of the Board of Directors of IHF Capital, Inc., parent of ICON Health & Fitness,
Inc, a leading manufacturer and marketer of home fitness equipment. In addition,
Mr. Gay is a director of GS Technologies Corporation, a manufacturer of
specialty steel products.
PETER H. ROTHSCHILD has been a director of Alliance since January 1996. For
the past five years, Mr. Rothschild has been a Senior Managing Director of Bear,
Stearns & Co. Inc.
ROBERT MARAKOVITS has been a director of Alliance since June 1996. Mr.
Marakovits has been a Managing Director of BT Capital Partners, Inc. ("BT"), a
small business investment company and an affiliate of Bankers Trust New York
Corp. since October 1993 and a Vice President of BT since June 1988.
CONTINUING DIRECTORS -- CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1997:
<TABLE>
<CAPTION>
DIRECTOR OF THE
NAME AGE POSITION WITH THE COMPANY COMPANY SINCE
- ------------------------- --- ---------------------------------------- -----------------
<S> <C> <C> <C>
John Friedman 43 Director 1992
Richard H. Hochman 50 Director 1994
Robert O. Marx 45 Director 1991
Terence Shand 41 Executive Vice President; Director 1995
</TABLE>
JOHN H. FRIEDMAN has been a director of Alliance since September 1992. Since
mid-1991, Mr. Friedman has been a managing director of Easton Capital
Corporation, a private investment firm. From November 1989 until mid-1991, Mr.
Friedman was a managing director of Security Pacific Merchant Bank and a
managing general partner of Security Pacific Capital Investors, a venture
capital firm. In addition, Mr. Friedman is a director of Comverse Technology,
Inc. a public company engaged in electronic communications and message managing.
4
<PAGE>
RICHARD H. HOCHMAN has been a director of Alliance since February 1994.
Since April 1995, Mr. Hochman has been Chairman of Regent Capital Management
Corp. From March 1990 until March 1995, Mr. Hochman was a managing director in
the Corporate Finance Department of PaineWebber Incorporated. Mr. Hochman also
serves on the Board of Directors of Cablevision Systems Corporation, a company
engaged in the operation of cable telephone systems and programming.
ROBERT O. MARX has been a director of Alliance since September 1992. Since
January 1995, Mr. Marx has been of counsel to the New York law firm of Solovay,
Marshall & Edlin (formerly Marshall Bomser). For more than five years previous
to that he was of counsel to the New York law firm of Bernstein & Wasserman.
TERENCE SHAND has been a director and an Executive Vice President of
Alliance since September 1994. For over the past ten years, Mr. Shand has been
the Executive Chairman of Castle Communications plc ("Castle").
CONTINUING DIRECTORS -- CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 1998:
<TABLE>
<CAPTION>
DIRECTOR OF THE
NAME AGE POSITION WITH THE COMPANY COMPANY SINCE
- --------------------- --- ---------------------------------------------- -----------------
<S> <C> <C> <C>
Joseph Bianco 45 Chairman and Chief Executive Officer; Director 1990
Anil K. Narang 33 Vice Chairman and President; Director 1990
Elliot B. Newman 50 Senior Executive Vice President -- Business 1990
Affairs and Secretary; Director
Jerry Bassin 63 Vice Chairman Emeritus; Director 1990
</TABLE>
JOSEPH J. BIANCO has been the Chairman, Chief Executive Officer and a
director of Alliance since its formation in November 1990. Since May 1991, Mr.
Bianco has served as a director of Sentex Sensing Technology, Inc., a public
company engaged in the business of developing and marketing explosive detectors
and gas chromatographs. Mr. Bianco devotes substantially all of his time to the
business of the Company.
ANIL K. NARANG has been a director of Alliance since November 1990 and Vice
Chairman since December 1993. Mr. Narang was Chief Financial Officer of Alliance
from November 1990 to January 1996, Co-President from November 1994 to February
1995 and President since March 1995.
ELLIOT B. NEWMAN has been a director of Alliance since November 1990. From
December 1993 until March 1995 Mr. Newman was Executive Vice President and
General Counsel of Alliance. In February 1994, Mr. Newman was named Secretary
and in March 1995, he was named Senior Executive Vice President -- Business
Affairs. Mr. Newman was a partner with Warshaw Burstein Cohen Schlesinger & Kuh,
a New York law firm from April 1991 to September 1993.
JERRY BASSIN has been a director of Alliance since November 1990. He founded
Jerry Bassin, Inc. ("Bassin") in 1980, was the President and Chief Operating
Officer of Bassin from 1980 until January 1994. He was an Executive Vice
President of Alliance from January to September 1994, President and Chief
Operating Officer from September 1994 to November 1994, was Co-President and
Chief Operating Officer from November 1994 to March 1995, and Vice Chairman of
Alliance from March 1995, until he resigned due to disability in November 1995.
Mr. Bassin retains the title Vice Chairman Emeritus.
The Board of Directors met a total of eight times during fiscal 1995. Each
of the directors attended greater than 75% of the meetings of the Board and the
Committees on which they served except for Robert Gay.
5
<PAGE>
The Board has standing Compensation and Audit Committees. The Company does
not have a Nominating Committee of the Board.
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews the performance
of corporate officers, establishes overall employee compensation policies and
recommends to the Board of Directors compensation programs. Messrs. Friedman and
Marx comprise the Compensation Committee, which was formed in February 1994. The
Compensation Committee met three times during fiscal 1995.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors meets with the Company's
independent accountants to discuss the scope and results of their audit and to
review the adequacy of the Company's accounting and control systems. The
committee reviews the audit fee and considers issues raised by its members, the
independent accountants and management. Each year the Audit Committee recommends
to the Board an independent accounting firm to audit the financial statements of
the Company. Messrs. Friedman, Goldin and Hochman comprise the current Audit
Committee, which was formed in February 1994. The Audit Committee met once in
fiscal 1995.
OTHER EXECUTIVE OFFICERS OF THE COMPANY:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Ian McIntosh Henderson 50 Senior Executive Vice President and Chief Operating
Officer
Timothy J. Dahltorp 35 Executive Vice President, Chief Financial Officer and
Treasurer
Eric S. Weisman 34 Senior Executive Vice President
Christopher J. Joyce 32 Senior Vice President, General Counsel and Assistant
Secretary
R. Tobias Knobel 45 Senior Vice President; Director
</TABLE>
IAN MCINTOSH HENDERSON has been an Executive Vice President of Alliance
since March 1995 and Senior Executive Vice President since February 1996. In
June 1996, Mr. Henderson was named Chief Operating Officer. Mr. Henderson was
named Deputy Chief Operating Officer and Acting Chief Operating Officer of
Alliance in June and August 1995, respectively. Since June 1994, Mr. Henderson
has been President of Castle and a director since August 1994.
TIMOTHY J. DAHLTORP has been Executive Vice President and Chief Financial
Officer of Alliance since February 1996 and Treasurer since November 1993. Mr.
Dahltorp was a Senior Vice President from January 1995 to January 1996 and a
Vice President from November 1993 to December 1994. From 1983 to 1993 Mr.
Dahltorp held various positions with First Chicago Corp., most recently Vice
President/Business Development in the Asset Based Finance Group of American
National Bank & Trust Company of Chicago, a wholly-owned subsidiary of First
Chicago Corp.
ERIC S. WEISMAN has been an Executive Vice President of Alliance since April
1994 and Senior Executive Vice President since June 1996. Prior to that Mr.
Weisman was Executive Vice President and Chief Operating Officer of Premier
Artist Services, Inc. from December 1985 to April 1994 when it was acquired by
Alliance.
CHRISTOPHER J. JOYCE has been Senior Vice President, Assistant Secretary and
General Counsel of Alliance since July 1995. Prior to joining Alliance, he was
Executive Vice President of Business Affairs and General Counsel of Independent
National Distributors Inc. from February 1992 to July 1995 when it was acquired
by Alliance. From 1988 to 1992, Mr. Joyce practiced law with Willkie Farr &
Gallagher, a New York law firm.
6
<PAGE>
R. TOBIAS KNOBEL has been a Senior Vice President of Alliance since June
1994 and a Vice President since December 1992. Mr. Knobel was a founder of
Encore Distributors, Incorporated ("Encore") and acted as Encore's President,
Chief Executive Officer and a director until December 1992 when it was acquired
by Alliance. From December 1992 to the Annual Meeting Mr. Knobel also served as
a director of the Company.
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth information as of June 20, 1996, with respect
to the beneficial ownership of shares of Common Stock held by certain beneficial
owners, each current director and all executive officers and directors as a
group:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL PERCENTAGE OF
OWNERSHIP OF SHARES BENEFICIAL
OF COMMON STOCK AS OF OWNERSHIP OF SHARES
NAME JUNE 20, 1996 (1)(2) OF COMMON STOCK(1)(2)
- ------------------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Joseph J. Bianco (3)............................................... 14,087,888 36%
Anil K. Narang (4)................................................. 1,483,333 4%
Elliot B. Newman (5)............................................... 312,000 *
Peter Kaufmann (6)................................................. 415,000 1%
Terence Shand (7).................................................. 226,666 *
R. Tobias Knobel (8)............................................... 146,437 *
Jerry Bassin (9)................................................... 2,035,291 5.5%
John H. Friedman (10).............................................. 144,392 *
Robert C. Gay (11)................................................. 3,326,972 9%
Barry L. Goldin (12)............................................... 476,583 1%
Richard H. Hochman (13)............................................ 88,233 *
Robert O. Marx (14)................................................ 153,333 *
Peter Rothschild (15).............................................. 50,000 *
Robert Marakovits (16)............................................. 3,974,937 11%
All Executive Officers and Directors as a group (18 persons)
(17).............................................................. 21,228,326 51%
</TABLE>
- ------------------------
* Less than 1%.
(1) As used herein, beneficial ownership means the sole or shared power to vote,
or direct the voting of, a security, or the sole or shared power to dispose,
or direct the disposition, of a security. Except as otherwise indicated, all
persons named herein have (i) voting power and/or investment power with
respect to their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
(2) With respect to each stockholder, includes any shares issuable upon exercise
of all options or warrants held by such stockholder that are currently
exercisable or will become exercisable within 60 days of June 20, 1996.
(3) Includes (i) 2,978,560 shares of Common Stock which Mr. Bianco has the right
to vote and dispose of, (ii) options to purchase 2,826,666 shares of Common
Stock held by Mr. Bianco which are exercisable within 60 days of June 20,
1996, (iii) 4,975,690 shares of Common Stock which Mr. Bianco has the right
to vote on any and all matters presented to any meeting of stockholders,
including the election of directors, which Jerry Bassin (1,768,625 shares),
Anil K. Narang (550,000 shares), Alan Shapiro (1,824,565 shares), Lawrence
Burstein (399,250 shares), Barry Goldin (433,250 shares), own and (iv)
3,306,972 shares of Common Stock which are owned by certain funds managed by
Bain and which Mr. Bianco has the right to vote on the election of
directors. Does not include options to purchase 83,334 shares of Common
Stock held by Mr. Bianco which are not exercisable within 60 days of June
20, 1996.
7
<PAGE>
(4) Includes options to purchase 933,333 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 66,667 shares of Common Stock which are not exercisable within 60
days of June 20, 1996. Includes beneficial ownership of shares by Mr. Narang
which were transferred on August 21, 1994 to an irrevocable trust for the
primary benefit of Mr. Narang and certain members of his family.
(5) Includes options to purchase 200,000 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 40,000 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(6) Includes options to purchase 100,000 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 25,000 shares which are not exercisable within 60 days of June 20,
1996. Includes 315,000 shares owned indirectly through Corwin International,
Inc.
(7) Includes options to purchase 156,666 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 108,334 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(8) Comprised of options to purchase 146,437 shares of Common Stock which are
exercisable within days of June 20, 1996. Does not include options to
purchase 48,813 shares of Common Stock which are not, exercisable within 60
days of June 20, 1996.
(9) Includes options to purchase 266,666 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 33,334 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(10) Includes options to purchase 43,333 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 26,667 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(11) Includes 3,306,972 shares of Common Stock held by Bain. Mr. Gay is a
Managing Director of Bain Capital, Inc. Also includes options to purchase
20,000 shares of Common Stock which are exercisable within 60 days of June
20, 1996. Does not include options to purchase 30,000 shares of Common Stock
which are not exercisable within 60 days of June 20, 1996.
(12) Includes options to purchase 43,333 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 26,667 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(13) Comprised of options to purchase 88,233 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 26,667 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(14) Includes options to purchase 93,333 shares of Common Stock which are
exercisable within 60 days of June 20, 1996. Does not include options to
purchase 39,167 shares of Common Stock which are not exercisable within 60
days of June 20, 1996.
(15) Comprised of options to purchase 50,000 shares of Common Stock which are
exercisable within 60 days of June 20, 1996.
(16) Includes 3,567,034 shares of Common Stock, warrants to acquire 227,489
shares of Common Stock at an exercise price of $5.00 per share and an
additional 180,414 shares of Common Stock at an exercise price of $8.00 per
share held by BT. Does not include options to purchase 30,000 shares of
Common Stock which are exercisable within 60 days of June 20, 1996.
8
<PAGE>
(17) Includes options to purchase 5,313,333 shares of Common Stock exercisable
within 60 days of June 20, 1996. Does not include options to purchase
701,317 shares of Common Stock which are not exercisable within 60 days of
June 20, 1996. Includes warrants to purchase a total of 407,903 shares of
Common Stock.
SUMMARY COMPENSATION TABLE
The following table sets forth annual and long-term compensation paid in
each of the last three fiscal years to the Company's Chief Executive Officer,
the Company's four most highly compensated executive officers and to one
individual who ceased to be an executive officer in 1995 but whose compensation
would have placed him in this group (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS (3)
--------------------------
ANNUAL COMPENSATION (1) RESTRICTED SHARES
NAME AND ------------------------------------- STOCKS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(2) AWARDS (4) OPTIONS COMPENSATION (1)
- -------------------------------- --------- ------------ ------------ ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Bianco ............... 1995 $ 518,942 $ 119,000 $ 918,000 250,000(5) $ 12,772(9)
Chairman of the Board and Chief 1994 445,468 250,000 150,000(6) 71,950(12)
Executive Officer 1993 373,000 250,000 1,010,000(7)
Anil K. Narang ................. 1995 $ 421,077 $ 84,000 $ 306,000 200,000(5) $ 15,003(10)
Vice Chairman and President 1994 342,281 150,000 375,000(6) 2,520(11)
1993 258,158 250,000 425,000(7) 30,050(12)
Jerry Bassin* .................. 1995 $ 346,693 $ 150,000 100,000(5) $ 11,227(9)
Vice Chairman 1994 348,352 60,000 50,000(6)
1993 341,355 150,000(7)
Elliot B. Newman ............... 1995 $ 363,462 $ 43,000 90,000(5) $ 9,088(9)
Senior Executive Vice 1994 323,352 60,000 100,000(6)
President -- Business Affairs 1993 27,083 40,000(7)
and Secretary 125,000(8)
Terence Shand .................. 1995 $ 336,350(13) $ 26,350 75,000(5)
Executive Vice President 1994 113,202(14) 57,768 250,000(15)
1993
R. Tobias Knobel ............... 1995 $ 335,170 $ 65,000 75,000(16) $ 7,022(9)
Senior Vice President of 1994 291,500
Corporate Development 1993 200,000
</TABLE>
- ------------------------------
* Mr. Bassin resigned in November 1995.
(1) The aggregate total value of perquisites and other personal benefits,
securities or property did not equal $50,000 or ten percent (10%) of the
annual salary and bonus for any Named Executive Officer during either 1993,
1994 or 1995.
(2) Bonuses are determined by the Board of Directors based on, among other
things, Alliance's yearly results as compared to objectives established for
such year, and are paid after the end of the fiscal year, but only if the
participant is employed at such time.
(3) No payouts were made to any Named Executive Officer pursuant to any
long-term incentive plan during either 1993, 1994 or 1995. See "Long-Term
Incentive Plan Award Table" for a description of five-year Performance Unit
Awards granted in 1995 and payable December 31, 1999 if the performance
measures are met.
(4) Pursuant to arrangements made in 1992, an aggregate of 1,500,000 shares of
Common Stock were issued as of February 15, 1993 to Mr. Bianco (1,125,000
shares) and Mr. Narang (375,000 shares) as a bonus in recognition of such
officers' efforts during 1992 in refinancing the Company's debt and
obtaining additional financing. The shares issued were subject to the
Company's right to purchase, at a nominal price, a portion of such shares if
the holder left the employ of Alliance prior to February 15, 1996. The
market value of the shares was determined to be $.82 per share at the date
of the bonus, taking into consideration the restrictions thereon. As of
December 31, 1995, the aggregate market values of the 1,125,000 shares held
by Mr. Bianco and the 375,000 shares held by Mr. Narang were $10,687,500 and
$3,562,500, respectively, or $9.50 per share, which was the last price
quoted on the New York Stock Exchange on December 29, 1995.
(5) Represents stock options granted as of March 16, 1995 under the Company's
Long Term Incentive and Stock Option Plan (the "1994 Plan"), as amended to
purchase the stated number of shares of Common Stock at an exercise price of
$5.50 per share.
9
<PAGE>
(6) Represents stock options granted as of March 18, 1994 under the Company's
1994 Plan to purchase the stated number of shares of Common Stock at an
exercise price of $6.00 per share.
(7) Represents stock options granted as of August 16, 1993, under the Company's
1993 Incentive Plan to purchase the stated number of shares of Common Stock
at an exercise price of $5.00 per share.
(8) Represents stock options granted as of January 4, 1993 under the Company's
1993 Option Plan to purchase the stated number of shares of Common Stock at
an exercise price of $.82 per share.
(9) Represents the dollar amount of insurance premium paid by the Company for
disability insurance covering these executive officers.
(10) Includes $12,483 of insurance premiums paid by the Company for disability
insurance covering Mr. Narang and the fair market value of the interest not
charged on a $36,000 loan to Mr. Narang.
(11) Represents the fair market value of the interest not charged on a $36,000
loan to Mr. Narang.
(12) Represents profits distributed to such person from an entity which did
business with Alliance during 1993. The Company's relationship with such
entity terminated in 1993.
(13) Mr. Shand's salary and bonus are paid in British pounds. The dollar amounts
in the Table for 1995 reflect an exchange rate of $1.55 U.S. dollars per
British pound.
(14) Mr. Shand was employed by the Company in September 1994 and the dollar
amount in the Table for 1994 reflects an exchange rate of $1.565 U.S.
dollars per British pound.
(15) Represents stock options granted as of September 9, 1994, under the
Company's 1994 Plan to purchase the stated number of shares of Common Stock
at an exercise price of $5.375 per share.
(16) Represents stock options granted as of November 30, 1993, under the
Company's 1993 Incentive Plan and 1993 Option Plan to purchase the stated
number of shares of Common Stock at an exercise price of $5.00 per share.
STOCK OPTIONS GRANTED IN 1995
The following table sets forth information concerning individual grants of
stock options made during 1995 to each Named Executive Officer listed below. The
Company did not grant any stock appreciation rights during 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
OPTIONS APPRECIATION FOR OPTION
OPTIONS GRANTED TO TERM (1)
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------
NAME (SHARES) (2) 1995 (PER SHARE) DATE 5% 10%
- ---------------------------------- ----------- ------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Bianco.................. 250,000 13.2% $ 5.50 3/16/00 $ 379,887 $ 839,451
Anil K. Narang.................... 200,000 10.5% 5.50 3/16/00 303,910 671,561
Jerry Bassin...................... 100,000 5.3% 5.50 3/16/00 151,955 335,780
Elliot B. Newman.................. 90,000 5.0% 5.50 3/16/00 109,132 241,154
Terence Shand..................... 75,000 4.0% 5.50 3/16/00 86,339 190,787
R. Tobias Knobel.................. -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Based upon the $5.50 per share market price on the respective dates of grant
and an annual appreciation at the rate stated of such market price through
March 16, 2000 expiration dates of such options. Gains, if any, are
dependent upon the actual performance of the Common Stock, as well as the
continued employment of the executive officers through the vesting period.
The potential realizable values indicated have not taken into account
amounts required to be paid as income tax under the Internal Revenue Code
("Code") and any applicable state laws.
(2) The options were granted by the Compensation Committee of the Board of
Directors pursuant to the 1994 Plan. The fair market value of the Common
Stock at such time was determined by the Board of Directors to be $5.50 per
share.
10
<PAGE>
AGGREGATE OPTION EXERCISES AND STOCK OPTIONS HELD AT THE END OF 1995
The following table indicates the total number of exercisable and
nonexercisable stock options held by each Named Executive Officer on December
31, 1995, and the aggregate value thereof as of December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995 (1)
SHARES ACQUIRED VALUE -------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- -------------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Bianco............ -- -- 2,440,833 469,167 $ 17,788,581 $ 1,977,918
Anil K. Narang.............. 500,000 $ 3,003,000 672,916 377,084 2,901,539 1,557,461
Jerry Bassin................ -- -- 179,166 120,834 756,247 493,752
Elliot B. Newman............ 80,750 670,628.75 126,666 134,584 488,331 672,918
Terence Shand............... 60,000 318,750 131,666 133,334 539,997 543,752
R. Tobias Knobel............ -- -- 146,437 48,813 966,977 322,330
</TABLE>
- ------------------------
(1) The per share fair market value was determined to be $9.50, which was the
last price quoted on the New York Stock Exchange on December 29, 1995.
LONG-TERM INCENTIVE PLAN
AWARDS GRANTED IN 1995
The following table indicates the total dollar value of Performance Unit
Awards granted in 1995 to the Named Executive Officers and payable on December
31, 1999, if the performance measures are met.
<TABLE>
<CAPTION>
ESTIMATED
FUTURE PAYOUTS
UNDER NON-STOCK
PRICED-BASED PLAN
VALUE OF PERFORMANCE/ ----------------------------
PERFORMANCE MATURATION TARGET/
NAME UNIT AWARD (1) PERIOD THRESHOLD (2) MAXIMUM (3)
- ---------------------------------------------------- -------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Joseph Bianco....................................... $ 2,500,000 12/31/99 $ 625,000 $ 2,500,000
Anil Narang......................................... $ 1,500,000 12/31/99 $ 375,000 $ 1,500,000
Elliot Newman....................................... $ 750,000 12/31/99 $ 187,500 $ 750,000
Jerry Bassin*....................................... $ 335,000 12/31/99 $ 83,750 $ 335,000
</TABLE>
- ------------------------
*Mr. Bassin forfeited his Performance Unit Award upon his resignation in
November 1995 due to disability.
(1) Reflect five-year Performance Unit Awards granted in 1995. Payments are
subject to meeting the following performance measures: (i) fifty percent of
the Performance Unit Award is subject to a compound growth in Earnings Per
Share ("EPS") of 15 percent and an average annual EPS growth rate of 10
percent; and (ii) fifty percent of the Performance Unit Award is subject to
a compound growth in stock price of 12 percent. For performance between 90
and 99 percent of target under each measure, half of the award governed by
the measure will be deemed earned.
(2) Represents the minimum dollar amount of awards in the event only one of the
performance measures is met at 90 to 99 percent of target.
(3) Maximum dollar amount that may be awarded if both performance measures are
met. In June 1996, the executives named above agreed to forfeit the portion
of their Performance Unit Award relating to the EPS performance measure. See
"Proposal 3. -- Approval of Performance Measures Under The 1994 Plan."
11
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not full-time employees of the Company or its subsidiaries
have voluntarily agreed to a temporary reduction starting July 1, 1996, in their
annual retainer by $5,000 from $25,000 to $20,000 for service on the Board of
Directors and from $5,000 to $2,500 for each committee chairmanship held during
the year.
Each such director is paid a fee of $1,000 for each Board or Committee
meeting attended except, that they receive a total of $1,000 if they attend a
Board and Committee meeting on the same date. In addition, pursuant to the 1994
Plan, each non-employee director of the Company is entitled to receive, on the
date such person becomes a non-employee director of the Company, options to
acquire 30,000 shares of Common Stock at the market value on the date of the
grant. Mr. Bassin waived his right to receive options to purchase 30,000 shares
upon becoming a non-employee director after his resignation in November 1995 due
to disability. Thereafter, on each June 30, non-employee directors receive an
annual automatic grant of options to acquire 20,000 shares of Common Stock at
the market value on the date of grant provided the director has served as such
for at least one year.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
In April 1995, Alliance entered into new employment agreements with each of
Messrs. Bianco, Narang and Newman. The agreements are effective as of March 15,
1995 and run for a period of five years. Each agreement automatically extends
for an additional year unless either party gives notice to the other party that
the contract will not be extended between 210 days and 180 days prior to the
expiration of the contract. By recommendation of the Compensation Committee of
the Company's Board of Directors, the agreements provide that the executive will
receive upon termination by the Company without cause (or termination by the
executive for good reason) severance equal to three times such executive's base
salary plus the greater of such executive's prior year bonus or current year
bonus target. Each agreement provides that the respective executive will be
entitled to participate in awards under the 1994 Plan and may receive a bonus in
each fiscal year. Each agreement requires that the executive devote his best
efforts and full business time to the Company. Each agreement also contains a
covenant not to compete for a period of twelve months in the event of
termination of the executive for cause or the voluntary termination of
employment by the executive. The agreements also provide for the payment by the
Company of certain excise taxes, if any, payable in connection with compensation
paid under such agreement. Mr. Bassin entered into a contract similar to the
agreements described above which was terminated in November 1995, when he
resigned as Vice Chairman of Alliance due to disability.
Pursuant to their respective agreements, Messrs. Bianco, Narang and Newman
currently receive an annual base salary of $578,000, $484,016 and $413,010,
respectively, and each agreement provides that a luxury car will be leased for
each such officer.
Encore (now Passport Music Distribution, Inc. "Passport") entered into a
five-year employment agreement with R. Tobias Knobel as of December 31, 1992.
Mr. Knobel is employed as the Chief Executive Officer and President of Passport
at an annual base salary of $265,000 which increased to $352,716 per annum
effective January 1, 1996. The base salary increases annually beginning in
January 1994 by the greater of a fraction related to the Consumer Price Index or
ten percent (10%). The agreement also provides for certain cash bonuses payable
to Mr. Knobel and the grant of options to purchase shares of Common Stock which
are related to Passport's performance. In 1993, Mr. Knobel agreed to waive his
right to receive such options and consented to certain amendments to his
employment agreement and the Stock Purchase Agreement relating to Alliance's
acquisition of Passport in exchange for 411,250 shares of Common Stock and
options to purchase 97,000 shares of Common Stock at an exercise price of $5.00
per share and 98,250 shares of Common Stock at an exercise price of $.82 per
share. Mr. Knobel is required to devote his best efforts and full business time
to Passport. The agreement contains a covenant not to compete with Passport for
a period of twenty-
12
<PAGE>
four months after the date Mr. Knobel is no longer employed by Passport, unless
the termination of his employment is a result of expiration of the term of the
agreement, in which case such period is six months.
In September 1994, Alliance entered into a three year employment contract
with Terence Shand. The contract provides for a base salary of 233,000 per
annum, or $358,970.50 per annum based on the exchange rate for British pounds on
June 21, 1996, as reported by the WALL STREET JOURNAL.
All of the above employment agreements provide for periodic increases in
base compensation based on increases in a consumer price index.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee currently are John H. Friedman and
Robert O. Marx, each of whom is an independent director of the Company.
During 1995, the law firm of Solovay, Marshall & Edlin provided certain
legal services to and received payments for such services from the Company. Mr.
Marx is of counsel to Solovay, Marshall & Edlin. See, "Certain Relationships."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company believes that a strong link should exist between executive
compensation and management's ability to maximize shareholder value. This belief
is adhered to by developing both short-term and long-term incentive compensation
programs that provide competitive compensation and reflect Company performance.
The Compensation Committee's role and responsibilities involve overseeing and
directing the development of executive compensation policies and programs which
are consistent with, explicitly linked to, and supportive of the strategic
objectives of growing the Company's businesses and maximizing shareholder value.
COMPENSATION PHILOSOPHY
The four fundamental principles to which the Compensation Committee adheres
in discharging its responsibilities reflect the Compensation Committee's
philosophy of developing executive incentive arrangements that are
understandable to both management and the Company's shareholders. First, the
majority of the annual and long-term compensation for the Company's senior
executive officers should be at risk, with actual compensation levels
correlating with the Company's actual performance in certain key areas
determined by the Compensation Committee. Second, over time, incentive
compensation of the Company's senior executive officers should focus more
heavily on long-term rather than short-term accomplishments and results. Third,
equity-based compensation and equity ownership requirements should be used on an
increasing basis so as to provide executive officers with clear and direct links
to the shareholders' interests. Fourth, the overall executive compensation
program should be competitive, equitable and structured so as to ensure the
Company's ability to attract, retain, motivate and reward the talented
executives who are essential to the Company's continuing success. Total
compensation, rather than individual compensation elements, is the focus of the
Company's intent to provide competitive compensation opportunities.
The Compensation Committee believes that continued revenue growth as well as
continued improvement in cash flow should be recognized in considering
compensation levels along with improvements in overall effectiveness,
productivity, return on equity and investment and success of strategic alliances
and business acquisitions and combinations.
COMPENSATION ELEMENTS
The Company's compensation program for executives consists of four principal
elements, each of which is vitally important in meeting the Company's need to
attract, retain, motivate and reward highly-qualified executives.
13
<PAGE>
The four principal compensation elements are:
BASE SALARIES
Base salaries for executives are generally set at levels which reflect the
competitive marketplace for companies that are of comparable size and complexity
and would be considered competitors of the Company in attracting and retaining
quality executives. The salaries of the Company's executive officers are
reviewed and approved by the Compensation Committee based on its assessment of
each executive's experience and performance and a comparison to salaries of
peers in other companies. An independent compensation consultant advises the
Compensation Committee on these matters and has confirmed that compensation paid
in 1995 to the Company's executive officers is consistent with the Company's
compensation philosophy and objectives.
ANNUAL INCENTIVES
Annual incentive awards are made to selected executives pursuant to the
Executive Incentive Plan (EIP) on the basis of the Company's annual revenue,
EBITDA and net earnings performance, all relative to budget. Some executives
have been awarded discretionary annual incentives predicated on additional
Company, business unit and individual performance measures. The Company intends
to continue providing annual incentives in concert with other compensation
elements in order to maintain a competitive total compensation program for its
executives. The Compensation Committee reviews and approves all performance
measures and goals established under the EIP and reviews and approves all annual
incentive payments to executives.
LONG-TERM INCENTIVES
The Company has granted stock options to executive officers under several
stock option plans which were in place prior to 1994. Stock options and
performance awards have been, and will continue to be, granted under the 1994
Long-Term Incentive And Share Award Plan which was approved by shareholders in
1994 and amended with shareholder consent last year. Stock options and other
long-term incentives are intended both to join the interests of executives with
the interests of shareholders by facilitating the ownership of stock and to
provide competitive long-term incentive opportunities to executives. Performance
measures in 1995, which the Compensation Committee has reviewed and approved to
govern the earnout of performance awards, include compound growth in share price
and earnings per share. Other measures may be considered in the future.
BENEFITS
Benefits offered to executives serve a different purpose than do other
elements of the total compensation program. In general, they provide a safety
net against problems which can arise from illness, disability or death. Benefits
offered to senior executive officers are basically those offered to other
employees of the Company.
EVALUATION PROCEDURE
In determining matters regarding executive officer compensation (other than
the Chief Executive Officer), the Compensation Committee reviews with the Chief
Executive Officer, the Vice Chairman and President and the independent
compensation consultant the respective areas of authority and responsibility of
the various executive officers and the performance and contribution of each to
the efforts of the Company in meeting its goals.
CEO COMPENSATION
Joseph J. Bianco's base salary for 1994 was $518,942. Mr. Bianco was awarded
a bonus for 1995 of $119,000 which was substantially below his target bonus
level thereby reflecting the Company's lower than anticipated performance for
the year relative to its own budget and plans. Mr. Bianco also received
long-term stock option and performance award grants during the year as set forth
in the accompanying tables. In evaluating and determining Mr. Bianco's
compensation, the Compensation Committee and its compensation consultant
compared the Company's compensation practices and levels to those of other
companies involved in similar businesses, including but not limited to, the
14
<PAGE>
companies included in the Peer Group Index contained in the Stock Price
Performance Graph. Based on this review, the Compensation Committee determined
that the cash compensation, option grants and long-term performance awards to
Mr. Bianco for 1995 were appropriate.
DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION
Beginning in 1994, the Omnibus Reconciliation Act of 1993 (the Act) limits
to $1 million the amount that may be deducted by a publicly held corporation for
compensation paid to each of its Named Executive Officers in a taxable year,
unless the compensation in excess of $1 million is "qualified performance-based
compensation." The annual compensation of the Company's Named Executive Officers
does not currently exceed the $1 million limit, but the Compensation Committee
will not necessarily limit executive compensation in the future to that
deductible limit. The Compensation Committee and the Company have determined
that the Company's policy is to design its short-term and long-term compensation
plans to qualify for the exemption from the deduction limitations of Section
162(m) of the Internal Revenue Code and to be consistent with providing
appropriate compensation to executives. Shareholder approval of incentive
compensation plans and various provisions thereunder has been sought and
obtained and will be sought in the future to continue to quality
performance-based compensation for the exemption.
Members of the Compensation Committee
John H. Friedman Robert O. Marx
15
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following line graph reflects a comparison of the cumulative total
return of the Company's Common Stock from May 14, 1992 through December 31, 1995
with the NYSE Total Return Index -- U.S. Stocks(1), the S&P Consumer Products
Distribution Index(2), and a Peer Group Index(3). There is no truly comparable
published industry or line-of-business index and only one competitor of the
Company is publicly traded on a national exchange. As a result, the Company has
utilized, in addition to the S&P Distribution Index, a Peer Group Index of
distribution companies with a market capitalization comparable to that of the
Company for the purpose of comparison.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
05/14/92 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C>
Alliance Entertainment Corp. 100.00 112.50 173.45 118.75 237.50
NYSE Total Return Index - U.S. Stocks 100.00 108.25 119.54 119.52 162.02
S&P Consumer Products Distribution In-
dex 100.00 113.87 126.12 132.57 166.04
Peer Group Index 100.00 120.34 144.79 132.28 293.71
</TABLE>
<TABLE>
<CAPTION>
5/14/92 12/31/92 12/31/93 12/31/94 12/31/95
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Alliance Entertainment Corp.................. $ 100.00 $ 112.50 $ 173.45 $ 118.75 $ 237.50
NYSE Total Return Index -- U.S. Stocks....... $ 100.00 $ 108.25 $ 119.54 $ 119.52 $ 162.02
S&P Consumer Products Distribution Index..... $ 100.00 $ 113.87 $ 126.12 $ 132.57 $ 166.04
Peer Group Index............................. $ 100.00 $ 120.34 $ 144.79 $ 132.28 $ 293.71
</TABLE>
*ASSUMES $100 WAS INVESTED IN THE COMPANY'S COMMON STOCK ON MAY 14, 1992
(DATE ON WHICH THE COMPANY'S SHARES BECAME PUBLICLY TRADED), IN EACH OF THE
FOREGOING INDICES, AND ASSUMES REINVESTMENT OF DIVIDENDS, IF ANY.
- ------------------------
(1) Developed by the University of Chicago's Center for Research in Security
Prices (CRSP).
(2) Provided by Media General Financial Services.
(3) Includes all distribution companies (SIC Code 5012-5199) with a market
capitalization of $100-300 million whose common stock has traded publicly
since May 14, 1992. The index is comprised of the following companies:
Audiovox Corp., Bearings Inc., Bindley Western Industries
16
<PAGE>
Inc., A.M. Castle & Co., CompuCom Systems Inc., Custom Chrome Inc., Dimon,
Inc. (formerly Dibrell Brothers Inc.), Swiss Army Brands, Inc. (formerly
Forschner Group Inc.), FoxMeyer Health Corp. (formerly National Intergroup
Inc.), Hughes Supply Inc., Kent Electronics Corp., Nash Finch Co.,
Pioneer-Standard Electronics, Rykoff Sexton Inc., Super Food Services Inc.,
United Stationers Inc., Univar Corp., Vallen Corp., VWR Corp., Rexel, Inc.
(formerly Willcox & Gibbs Inc.), and Wyle Electronics (formerly Wyle
Laboratories).
(4) On December 29, 1995, the closing price of the Company's Common Stock was
$9.50. On April 29, 1996 the Company entered into a Termination and Release
Agreement with Metromedia International Group in which both companies
mutually agreed to terminate their previously announced merger agreement. On
June 20, 1996 the closing price of the Company's Common Stock was $5.25.
CERTAIN RELATIONSHIPS
On February 4, 1994, Alliance acquired Abbey Road, a California corporation
for $17.69 million in cash and 1,897,778 shares of Common Stock. Bruce A.
Ogilvie, a former officer and director of the Company, and one of Abbey Road's
principal shareholders, received a three-year subordinated promissory note in
the amount of $5 million with interest of 6% per annum in consideration for a
covenant not to compete, such covenant extending to the period of 24 months
after termination of employment. Upon Bruce Ogilvie's resignation in May 1995,
the Company and Mr. Ogilvie entered into a consulting agreement which will
expire in February 1999, pursuant to which Mr. Ogilvie is paid $220,000 a year
in exchange for consulting services with respect to the Company's business
including its One Stop operations. Under the consulting agreement the Company
agreed to provide health insurance to Mr. Ogilvie and his family and reimburse
him for travel and other expenses. Furthermore, Mr. Ogilvie entered into an
agreement to allow the Company to sell on his behalf approximately 1.5 million
shares of the Company's Common Stock owned by him at 7.5% below the closing
price on the New York Stock Exchange on the date of sale, but at not less than
$6.75 per share. Mr. Ogilvie's shares were purchased by Bain at $6.75 per share
on May 18, 1995. The Company has agreed to indemnify Bain in connection with the
purchase of Mr. Ogilvie's shares of Common Stock.
On May 18, 1995, Bain purchased 80,000 shares of a newly created class of
Preferred Stock of AEC Americas, Inc. a subsidiary of the Company (the
"Preferred Stock"), convertible into shares of Alliance Common Stock, for
$8,000,000. On December 4, 1995, Bain exchanged the Preferred Stock for
1,518,971 shares of the Company's Common Stock. In addition, the Company has
entered into a management consulting agreement with Bain dated May 18, 1995
("Management Agreement") which provides for the payment of an advisory fee to
Bain equal to $200,000 in year one and a minimum annual fee of $150,000
thereafter. Pursuant to the Management Agreement, Bain also received a $550,000
fee plus out-of-pocket expenses for advisory services in connection with certain
financial transactions consummated in 1995. In a series of transactions, Bain
acquired an aggregate of 2,888,000 shares of Common Stock from certain
stockholders, including certain senior executives of the Company. In connection
with Bain's investment, Robert Gay, a Managing Director of Bain, has been named
a director of the Company.
During 1995, the law firm of Solovay, Marshall & Edlin provided certain
legal services to and received payments for such services from the Company.
Robert O. Marx, a director of the Company, is of counsel to Solovay, Marshall &
Edlin. In addition, the law firm of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A. ("Greenberg Traurig") provided certain legal services to the
Company during 1995. Janice Newman, the wife of Elliot B. Newman, the Senior
Executive Vice President -- Business Affairs, Secretary and a director of the
Company, is of counsel to Greenberg Traurig.
During 1995, Mr. Newman was indebted to the Company for up to $196,938.62
which was also the amount outstanding as of December 31, 1995. As of December
31, 1995, Mr. Newman held a loan from the Company in the principal amount of
$100,000 which bears interest at prime rate plus 1%. The loan is evidenced by a
promissory note which is due November 30, 1996. Payment of this note is secured
by
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Mr. Newman's interest in the Company's Common Stock. Mr. Newman received the
loan to enable him to relocate to Florida. Mr. Newman holds a second loan from
the Company in the amount of $75,000 which bears interest at the highest rate of
interest paid by the Company on borrowing, which was 11.25% on December 31,
1995.
During 1995, Anil K. Narang, President, Vice Chairman and a director of the
Company, was indebted to the Company for up to $75,464 which was also the
balance outstanding as of December 31, 1995. Of the amount Mr. Narang owed the
Company, $36,000 was due the Company for stock options exercised and was
represented by a note bearing no interest. The remainder consists of an account
receivable balance with the Company for various expenses paid by the Company on
behalf of Mr. Narang, which bears interest at the highest rate of interest paid
by the Company on borrowings. This rate was 11.25% on December 31, 1995.
During 1995, Joseph J. Bianco, the Chief Executive Officer and Chairman of
the Board of Alliance, was indebted to the Company for up to $850,000. As of
December 31, 1995, Mr. Bianco was indebted to the Company in the amount of
$51,299 which bears interest at the highest rate of interest paid by the Company
on borrowings which was 11.25% on December 31, 1995.
Jerry Bassin, then Vice Chairman and a director of Alliance, was indebted to
the Company for up to $250,000 which was also the balance outstanding as of
December 31, 1995. This loan bears interest at the highest rate of interest paid
by the Company on borrowings. This rate was 11.25% on December 31, 1995.
Peter H. Rothschild, a director of the Company, is a managing director of
Bear, Stearns & Co. Bear, Stearns & Co. acted as the managing underwriter in the
Company's offering of 11 1/4% Senior Subordinated Notes due 2005.
Richard H. Hochman, a director of the Company, was a managing director of
PaineWebber Incorporated from March 1990 through March 1995. In 1995,
PaineWebber Incorporated received underwriting fees in connection with the
Company's offering of 11 1/4% Senior Subordinated Notes due 2005.
The Company believes that the terms of the transactions described above are
no less favorable to the Company than those that could be obtained from
non-affiliated third parties.
PROPOSAL 2. -- AMENDMENT TO THE 1994 PLAN
On June 20, 1996, the Board of Directors approved an amendment of the 1994
Plan to increase the number of shares of Common Stock authorized for the
granting of awards under the Plan by 3,300,000. This amendment to the 1994 Plan
requires stockholder approval. The summary of the proposed amendment to the 1994
Plan are qualified in its entirety to the full text of such amendment included
in Attachment A hereto.
The 1994 Plan was approved by stockholders of Alliance at the 1994 Annual
Meeting, and is intended to advance the interests of the Company and its
stockholders by providing a means to attract, retain and motivate selected
employees of the Company and its subsidiaries and affiliates ("Employees") and
non-employee directors ("Directors") of the Company. The 1994 Plan is presently
administered by the Compensation Committee as designated by the Board of
Directors of the Company consisting exclusively of directors who are
"disinterested persons" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. The Compensation Committee has the full and
final authority to select Employees to whom awards under the 1994 Plan
("Awards") may be granted, to determine the type or types of Awards to be
granted to such Employees and to make all determinations as may be required for
the administration of the 1994 Plan. The Compensation Committee also has
authority to waive conditions relating to an Award or accelerate vesting of
Awards. The 1994 Plan also provides for the automatic grant of options to
Directors upon becoming a Director and yearly each June 30, provided, the
Director has served as such for at least one year ("Director's Options"). The
Director's Options are intended to operate automatically and not require
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administration. An aggregate of 4,600,000 shares have been reserved for issuance
under the 1994 Plan, subject to adjustment in the event of certain changes. As
of June 20, 1996, options exercisable for an aggregate of 4,573,800 shares had
been granted under the 1994 Plan leaving only 26,200 shares available for new
Awards. Furthermore, there are no more options available for issuance under the
Company's other stock option plans. Shares subject to Awards and Director's
Options which are forfeited, canceled, exchanged or surrendered (other than
Awards canceled upon exercise of a tandem Award) or which are settled in cash or
otherwise terminated without a distribution of shares, will be available for
further Awards except where dividends or divided equivalents have been paid and
accrued on such Award and are not also forfeited, canceled, exchanged or
surrendered. No Awards may be granted under the 1994 Plan after March 17, 2004.
Historically, the Company sought approval of increases in the number of
shares available for issuance under stock option plans on a yearly basis. This
approach is time consuming, costly and does not give the Company sufficient
flexibility. Consequently, the Company is now seeking to increase the number of
shares available upon exercise of stock options by 3,300,000 shares which the
Company believes will be sufficient to cover stock option grants for the next
five years. The Company expects that the number of stock option Awards will
decrease substantially as compared to the previous two years. Furthermore, the
Compensation Committee has determined that future Awards will vest one-third on
each of the first three anniversaries of the date of grant.
The Board of Directors believes that approval of this proposal will enhance
the Company's ability to attract and retain talented and capable employees and
provide them with an incentive, through stock ownership of the Company, to
promote the best interests of the Company and its subsidiaries. To further this
objective, all future Awards to Employees will be subject to Employees meeting
an "ownership objective" whereby Employees who receive Awards of stock options
under the Plan would be required to own Common Stock equal to one times salary
("Ownership Objective"). Employees have five years from the later of the date of
any future Award of stock options or July 1996, to meet this Ownership
Objective. Employees who fail to meet the Ownership Objective will be restricted
from selling more than 50 percent of the shares they acquire through the
exercise of stock options (subsequent to the measurement date) for a period of
three years. Non-employee directors will be subject to an ownership objective
equal to 25 percent of the options granted to each such director. Such directors
will have five years from the date of any future grant of stock options to meet
their ownership objective. Non-employee directors who fail to meet their
ownership objective will also be restricted from selling over 50 percent of the
shares acquired throughout the exercise of stock options for a three year
period.
BENEFITS GRANTED UNDER THE 1994 PLAN
Under the 1994 Plan, all employees and directors of the Company, presently
approximately 1,750 persons, are eligible to participate. Stock options under
the Plan were granted in 1995 to 42 persons. The Compensation Committee has not
yet determined how many employees are likely ultimately to participate in the
1994 Plan. Subject to adjustments as provided in the 1994 Plan, no eligible
employee may receive options or share appreciation rights ("SARs") for more than
2,000,000 shares over the term of the 1994 Plan.
Under the 1994 Plan, the Compensation Committee has authority to grant
incentive stock options ("ISOs") and nonqualified stock options. In the case of
ISOs, the terms of such grants shall be subject to, and comply with, Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation
Committee may also grant SARs entitling the holder to receive the excess of the
fair market value (calculated as of the exercise date) of a specified number of
shares over the grant price of the SAR, with payment to be made in cash, shares
or other property as specified or determined by the Compensation Committee. The
Compensation Committee is authorized to grant restricted share units, subject to
such forfeiture conditions and other restrictions on transfer as the
Compensation Committee may determine. Upon vesting such restricted share units
will be paid in shares or cash, as determined by the Compensation Committee. The
Compensation Committee is
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authorized to grant performance shares and performance units payable to, or
exercisable by, such holder upon the achievement of certain performance
objectives during such performance periods (of one or more years) as the
Compensation Committee may determine. Dividend equivalents consist of a right to
receive cash, shares or other property equivalent to dividends with respect to a
specified number of shares determined by the Compensation Committee. Dividend
equivalents may be awarded on a free standing basis or in connection with
another Award, and may be paid currently or on a deferred basis.
The Compensation Committee also has the authority to grant share-based
Awards consisting of rights or Awards other than stock options, stock
appreciation rights, restricted shares or restricted share units, performance
shares or performance units or dividend equivalents. Such Awards shall have such
terms and conditions as the Compensation Committee shall determine.
Awards and Director's Options are not transferable except by will or the
laws of descent and distribution and are exercisable, during the lifetime of the
individual, only by such individual or by such individual's guardian or legal
representative.
The Board of Directors may amend, suspend, discontinue or terminate the 1994
Plan; PROVIDED, HOWEVER, that approval of the stockholders of the Company within
one year after such Board action must be obtained if such approval is required
by any U.S. federal law or regulation (including Rule 16b-3 under the Exchange
Act, if applicable) or the rules of any stock exchange or automated quotation
system on which the shares may then be listed or quoted; and PROVIDED FURTHER,
HOWEVER, that the provisions of the 1994 Plan applicable to Director's Options
may not be amended more than once every six months other than to comport with
changes in the Code or the Employee Retirement Income Security Act of 1974, as
amended.
FEDERAL INCOME TAX CONSEQUENCES
In general, the grant of a stock option will not be a taxable event to the
recipient and will not result in a deduction to the Company. The tax
consequences associated with the exercise of a stock option and the subsequent
disposition of shares acquired on the exercise of such option depend on whether
the option is an incentive stock option or a nonqualified stock option. Upon the
exercise of a nonqualified stock option, the participant will recognize ordinary
taxable income equal to the excess of the fair market value of the shares
received upon exercise over the exercise price. The Company will generally be
able to claim a deduction in an equivalent amount. Any gain or loss upon a
subsequent sale or exchange of the shares will be capital gain or loss,
long-term or short-term depending on the holding period for the shares.
Generally, a participant will not recognize ordinary taxable income at the time
of exercise of an incentive stock option and no deduction will be available to
the Company, provided the option is exercised while the participant is an
employee or within three months following termination of employment (longer, in
the case of termination of employment by reason of disability or death).
A participant who receives restricted shares will generally recognize
ordinary income at the time the restrictions on transferability lapse. The
amount of ordinary income so recognized will be the fair market value of the
shares at the time the income is recognized, determined without regard to any
restrictions other than restrictions which by their term will never lapse. This
amount will generally be deductible for federal income tax purposes by the
Company. Dividends paid with respect to shares that are nontransferable will be
ordinary compensation income to the participant (and generally deductible by the
Company). In lieu of the treatment described above, a participant may elect
immediate recognition of income under Section 83(b) of the Code. In such event,
the participant will recognize as income the fair market value of the restricted
stock at the time of grant (determined without regard to any restrictions other
than restrictions which by their terms will never lapse), and the Company will
generally be entitled to a corresponding deduction. Dividends paid with respect
to shares as to which a proper Section 83(b) election has been made will not be
deductible to the Company. If a Section 83(b) election is made and the
restricted stock is subsequently forfeited, the participant will not be entitled
to any offsetting tax deduction.
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With respect to stock appreciation rights and other awards under the 1994
Plan not described above, generally, when a participant receives payment with
respect to an award granted to him or her under the 1994 Plan, the amount of
cash and the fair market value of shares received will be ordinary income to
such participant and will generally be allowed as a deduction for federal income
tax purposes to the Company.
Special rules may apply to a participant who is subject to Section 16(b) of
the Securities Exchange Act of 1934 (generally directors, officers and 10%
stockholders). Certain additional special rules apply if the exercise price for
an option is paid in shares previously owned by the optionee rather than in
cash.
Section 162(m) of the Code, effective for tax years beginning after 1993,
generally limits the deductible amount of annual compensation paid (including,
unless an exception applies, compensation otherwise deductible in connection
with awards granted under the 1994 Plan) by a public company to a "covered
employee" (the chief executive officer and four other most highly compensated
executive officers of the Company) to no more than $1 million unless certain
requirements are met. Accordingly, it is possible that amounts otherwise
deductible in connection with the 1994 Plan may be subject to this deduction
limit.
The Company may withhold, or require a participant to remit to the Company,
an amount sufficient to satisfy any federal, state or local withholding tax
requirements associated with awards under the 1994 Plan.
Approval of Proposal 2 will require the affirmative vote of the holders of a
majority of shares of Common Stock present, or represented by proxy, and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3. -- APPROVAL OF PERFORMANCE MEASURES UNDER THE 1994 PLAN
The stockholders are being asked to consider and approve the material terms,
as described in the fourth paragraph under this Proposal 3 below, of the new
performance measures for performance unit awards under the 1994 Plan. Specific
performance measures consistent with the material terms described below are
established by the Compensation Committee. The performance unit awards are
intended to provide the Company's eligible employees with financial incentives
to meet and exceed predetermined goals.
Under Section 162(m) of the Code, the federal income tax deductibility of
compensation paid to each of the Company's Chief Executive Officer and its next
four most highly compensated executive officers may be limited to the extent
that it exceeds $1 million in any one year. However, the Company can continue to
deduct compensation in excess of that amount if the compensation qualifies as
"performance-based compensation" under Section 162(m). In order for payments
under the performance units to qualify as "performance-based compensation" the
material terms of the performance goals, as described below, must be approved by
stockholders. No payments will be made pursuant to the performance unit awards
unless such stockholder approval is obtained.
The Compensation Committee is authorized to make, and has made, awards of
performance units under the 1994 Plan to eligible employees of the Company. The
Compensation Committee made performance unit awards during 1995 based on
compound growth in earnings per share and compound growth in stock price over a
five year performance period. Due to changes in the Company's business, the
Compensation Committee believes that earnings per share is no longer an accurate
measure of achievement of Company goals. As a result, the 1995 awards, as they
relate to growth in earnings per share, will be terminated. The portion of the
1995 awards relating to growth in stock price will continue in accordance with
their terms. See "Long-Term Incentive Plan Awards Granted in 1995."
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The Compensation Committee has determined that performance unit awards,
granted in 1996, should be based on compound growth in the Company's earnings
per share before taxes, depreciation, and amortization ("EBTDA"). The
performance unit awards will be based on performance during performance periods
ranging from three to five years, and all key employees will be eligible for
performance unit awards. The maximum amount that can be paid to any single
eligible employee of the Company with respect to a performance unit award for
any performance period is $2.5 million. The payout of performance units may be
made in shares of the Company's stock, cash, or a combination thereof, and in a
lump sum or installments following the close of the relevant performance period,
each in the discretion of the Compensation Committee.
Subject to stockholder approval of the performance measures set forth in the
immediately preceding paragraph, in June 1996, the Compensation Committee
granted awards of $2.25 million, $1.5 million, $600,000 and $500,000 to Messrs.
Bianco, Narang, Newman and Henderson, respectively. Of these awards $1,250,000,
$750,000 and $375,000 awarded to Messrs. Bianco, Narang and Newman,
respectively, are intended to act as replacements of the portion of Performance
Unit granted to them in 1995 and forfeited by them in June of 1996. See
"Long-Term Incentive Plan Awards Granted in 1995."
Approval of this Proposal 3 will require the affirmative vote of the holders
of a majority of shares of Common Stock present, or represented by proxy, and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 4. -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as independent
public accountants of the Company for 1996. The appointment of independent
public accountants by the Board of Directors is submitted annually for approval
by the stockholders. Although stockholder ratification is not required, if the
stockholders do not approve the appointment, the Board of Directors will
reconsider the matter. A representative of Coopers & Lybrand L.L.P. will be
present at the Annual Meeting of Stockholders to respond to appropriate
questions, and will have an opportunity to make a statement if he desires to do
so.
Ratification of Proposal 4 will require the affirmative vote of holders of a
majority of shares of Common Stock present, or represented by proxy, and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next annual
meeting must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting on or before March 4, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
To the best of the Company's knowledge, based solely on its review of
reports furnished to the Company, there were no directors, officers or
beneficial owners of more than 10% of the Company's Common Stock that failed to
file on a timely basis reports required by Section 16(a) of the Exchange Act of
1934 during the Company's 1995 fiscal year except as follows: (i) Terence Shand
filed a late Form 3 to report his appointment as an Executive Vice President of
Alliance in September 1994; (ii) Eric Weisman filed a late Form 3 to report his
appointment as an Executive Vice President of Alliance in April 1994; (iii)
Peter Kaufmann filed a late Form 3 to report his appointment as an Executive
Vice President of Alliance in November 1994.
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OTHER BUSINESS
The Board of Directors does not intend to bring any other business before
the meeting and it is not aware that anyone else intends to do so. If any other
business comes before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote as proxies in accordance with their best
judgment.
PLEASE EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY COMPLETING, SIGNING AND
RETURNING THE ENCLOSED PROXY FORM. You may later revoke the proxy and, if you
are able to attend the meeting, you may vote your shares in person.
By Order of the Board of Directors,
ELLIOT B. NEWMAN
SECRETARY
July 2, 1996
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ATTACHMENT A
AMENDMENT NO. 2 TO THE
1994 LONG TERM INCENTIVE AND SHARE AWARD PLAN
The 1994 Long Term Incentive and Share Award Plan is hereby amended as
follows, effective as of June 20, 1996.
The first sentence of Section 4(a) is hereby amended so that the total
number of Shares reserved for issuance in connection with Awards and Director's
Options is increased from "4,600,000" to "7,900,000".
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ALLIANCE ENTERTAINMENT CORP.
This proxy is solicited by the Board of Directors
of Alliance Entertainment Corp.
Proxy for the Annual Meeting of Stockholders
at 10:00 A.M., local time
July 30, 1996,
The Drake Hotel
440 Park Avenue
New York, New York
The undersigned hereby appoints JOSEPH J. BIANCO, ANIL K. NARANG and ELLIOT
B. NEWMAN, and each of them, with power of substitution, as proxies of the
undersigned to vote all shares of stock which the undersigned is entitled in any
capacity to vote at the above-stated Annual Meeting, and at all adjournments and
postponements thereof on the election of directors and designated on the reverse
side, and, in their discretion, upon such other matters as may properly be
brought before the meeting. This proxy revokes all prior proxies given by the
undersigned.
ALL PROPERLY SIGNED PROXIES WILL BE VOTED AS DIRECTED. ALL ABSTAIN VOTES
WILL BE COUNTED IN DETERMINING THE EXISTENCE OF A QUORUM AT THE ANNUAL MEETING,
BUT WILL NOT BE VOTED IN FAVOR OF THE PROPOSAL AS TO WHICH SUCH ABSTAIN VOTE WAS
DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
MANAGEMENT NOMINEES TO THE BOARD OF DIRECTORS, FOR THE AMENDMENT OF THE 1994
LONG-TERM INCENTIVE AND SHARE AWARD PLAN, FOR APPROVAL OF PERFORMANCE MEASURES
UNDER THE 1994 LONG-TERM INCENTIVE AND SHARE AWARD PLAN AND FOR THE
REAPPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS INDEPENDENT AUDITORS FOR THE
COMPANY IN 1996.
RECEIPT OF THE NOTICE OF MEETING AND PROXY STATEMENT IS HEREBY ACKNOWLEDGED
[CONTINUED AND TO BE SIGNED ON REVERSE SIDE]
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
<TABLE>
<S> <C> <C>
1. Election of / / FOR all nominees listed to the / / WITHHOLD Authority to vote for
Directors right (except as to the contrary all nominees listed to the right
below)
<CAPTION>
1. Election of NOMINEES: Barry L. Goldin, Peter Rothschild, Peter Kaufmann,
Robert Gay and Robert Marakovits
You may withhold a vote or any individual nominee, by writing
that nominee's name in the space provided below:
--------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
2. Amendment to the 1994 Long-Term Incentive and Share Award Plan. / / FOR / / AGAINST / / ABSTAIN
3. Approval of performance measures under the 1994 Long Term Incentive and Share / / FOR / / AGAINST / / ABSTAIN
Award Plan.
4. Ratification of appointment of Coopers & Lybrand L.L.P. as Independent Auditors. / / FOR / / AGAINST / / ABSTAIN
</TABLE>
PLEASE SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
THE DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1, 2, 3, AND 4.
SIGNATURE(S): -----------------------------------------------
- ----------------------------------------------------------------
DATE: --------------------------------------------------------
NOTE: Joint Owners should EACH sign. Please sign EXACTLY as your
name(s) appear(s) on this card. When signing as an
attorney, trustee, executor, administrator or guardian or
corporate officer please give full name as such.
