**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-K/A**
| **x**      | **ANNUAL REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                               |
| ** ** | **For the fiscal year ended January 31, 2007**                                                                                                                                                                                                                                                                                                                                           |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                               |
| **or**     |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                               |
| **o**      | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                            |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                               |
| ** ** | **For the transition period from                               to                             ** |

 

**Commissionfile number 001-13437**

**[SOURCEINTERLINK COMPANIES LOGO]**

**SOURCEINTERLINK COMPANIES, INC.**

(Exact name of registrantas specified in its charter)

| **Delaware**                              |   | **20-2428299**                        |
|-------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer  Identification No.) |
| incorporation or  organization)           |   |                                  |
|                                      |   |                                  |
| **27500  Riverview Center Blvd.,**        |   |                                  |
| **Suite  400, Bonita Springs, Florida**   |   | **34134**                             |
| (Address of  principal executive offices) |   | (Zip Code)                            |

 

**(239) 949-4450**

(Registrant’s telephonenumber, including area code)

Securitiesregistered pursuant to section 12(b) of the Act:

**COMMON STOCK$0.01 PAR VALUE**

Securitiesregistered pursuant to section 12(g) of the Act:

**NONE**

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.

o Yes x No

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act.

o Yes x No

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

x Yes o No

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(Section 229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

£Large accelerated filer                    x Acceleratedfiler                             o Non-acceleratedfiler

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct).

o Yes x No

The aggregate marketvalue of the voting and non-voting common equity held by non-affiliates of theregistrant as of July 31, 2006 was approximately $374.6 million computed byreference to the price at which the common equity was sold on July 31, 2006,the last day of the registrant’s most recently completed second fiscal quarter,as reported by The Nasdaq National Market.

At April 9, 2007the Company had 52,183,852 shares of common stock $0.01 par value outstanding.

DOCUMENTSINCORPORATED BY REFERENCE

NONE.

 

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**EXPLANATORYNOTE**

     ThisAmendment No. 1 on Form 10-K/A (this “Amendment”) amends our Annual Reporton Form 10-K for the fiscal year ended January 31, 2007, originally filed onApril 25, 2007 (the “Original Filing”). We are filing this Amendment toinclude the information required by Part III and not included in theOriginal Filing as we will not file our definitive proxy statement within120 days of the end of our fiscal year ended January 31, 2007 (“Fiscal2007”).

     Inaddition, this Amendment updates Item 15 - Exhibits and Financial StatementSchedules to include certain exhibits that were inadvertently omitted from Item15 - Exhibits and Financial Statement Schedules in the Original Filing.

     Exceptas described above, no other changes have been made to the Original Filing. TheOriginal Filing continues to speak as of the date of the Original Filing, andwe have not updated the disclosures contained therein to reflect any eventswhich occurred at a date subsequent to the filing of the Original Filing.

**TABLEOF CONTENTS**
| **Item**   |                                                                                             |   |
|------------|--------------------------------------------------------------------------------------------------|--------|
|       |                                                                                             |   |
| PART III.  |                                                                                             |   |
|       |                                                                                             |   |
| Item  10.  | Directors,  Executive Officers and Corporate Governance                                          |   |
| Item  11.  | Executive  Compensation                                                                          |   |
| Item 12.   | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters |   |
| Item 13.   | Certain  Relationships, Related Transactions and Director Independence                           |   |
| Item 14.   | Principal  Accounting Fees and Services                                                          |   |
|       |                                                                                             |   |
| PART IV.   |                                                                                             |   |
|       |                                                                                             |   |
| Item 15.   | Exhibits,  Financial Statement Schedules                                                         |   |
|       |                                                                                             |   |
| Signatures |                                                                                             |   |

 

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**PART III.**

**ITEM10.  DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE.**

#### **INFORMATION ABOUT THEBOARD OF DIRECTORS**

Our board of directors isdivided into three classes of directors with the classes to be nearly equal innumber as possible. One class of directors is elected each year at our annualmeeting to serve for a three-year term. The terms of the Class I directors,Class II directors and Class III directors expire at the 2008 annual meeting,the 2009 annual meeting and the 2007 annual meeting, respectively.  Our amended and restated bylaws, as amended,provide that the board shall consist of not less than three and not more than11 members.  The board currently consistsof nine individuals.

In connection with themerger with Alliance in February 2005, we entered into that certain Stockholder’sAgreement, as amended by letter agreement dated November 30, 2006, with AECAssociates pursuant to which we agreed that through our 2007 annual meeting,AEC Associates will (i) vote for all director candidates nominated by theboard, (ii) be present at all meetings, in person or by proxy and (iii) not,without supermajority board approval, take any action, directly or indirectly,intended to remove or that will result in removing any director from the board.

*Class I Directors Serving UntilOur 2008 Annual Meeting Of Stockholders:*

***DavidR. Jessick, 53.*** Mr. Jessick has served as one of ourdirectors since February 2005 and is a member of our board’s audit committeeand our board’s Nominating and Corporate Governance committee. He served as aconsultant to the chief executive and senior financial staff at Rite AidCorporation where he previously served as a Senior Executive Vice President andChief Administrative Officer from July 2002 to February 2005. Mr. Jessickserved as Rite Aid’s Senior Executive Vice President and Chief AdministrativeOfficer from December 1999 to June 2002. Prior to that, from February 1997 toJune 1999, Mr. Jessick was the Chief Financial Officer and Executive VicePresident of Finance and Investor Relations for Fred Meyer, Inc. From 1979 to1996, he was Executive Vice President and Chief Financial Officer at ThriftyPayless Holdings, Inc. Mr. Jessick began his career as a Certified PublicAccountant for Peat, Marwick, Mitchell & Co. He is currently non-executiveChairman of Pathmark Stores, Inc. (member of the audit committee), a directorof Big 5 Sporting Goods, Inc. (member of the audit committee), a director ofWKI Holding Company, Inc. (chairman of the audit and the compensationcommittees), Pinnacle Foods Group, Inc. and Dollar Financial Corp. (chairman ofthe audit committee).

***GregoryMays, 60.*** Mr. Mays has served as one of our directorssince February 2005 and is the Chairman of our board’s Compensation Committeeand a member of our board’s Audit Committee. He has been a consultant andprivate investor from February 1999 to present. Throughout his career, Mr. Mayshas held numerous executive and financial positions primarily in thesupermarket industry, most recently, from 1995 to 1999, as Executive VicePresident of Ralph’s Grocery. Prior to that, from 1992 to 1995, he wasExecutive Vice President of Food4Less Inc. From 1990 to 1992, Mr. Mays wasChief Executive Officer and President of Almacs Supermarkets. Mr. Mays iscurrently a director and Chief Financial Officer of Simon Marketing.

***GeorgeA. Schnug, 62.*** Mr. Schnug has served as one of ourdirectors since February 2005. He is the Chief Executive Officer of AmericoldRealty Trust. Prior to that, Mr. Schnug had been affiliated with The YucaipaCompanies, an entity affiliated with AEC Associates, for more than 12 years.Mr. Schnug served as Executive Vice President of Corporate Operations at FredMeyer from 1997 to 1998. From 1995 to 1997, he was at Ralph’s Grocery Companyand oversaw post-merger integrations for both the Ralphs-Food4Less acquisitionin 1995 and the Fred Meyer-Ralph’s merger in 1997. He also served as SeniorVice President of Administration at Food4Less from 1990 to 1995. Prior to that,Mr. Schnug was the Managing Partner for Sage Worldwide, a wholly ownedsubsidiary of advertising giant, Ogilvy & Mather. Mr. Schnug is a directorof Digital On-Demand, Inc., and Americold Realty Trust. He is a former directorof Alliance.

*Class II Directors Serving Until Our 2009 AnnualMeeting Of Stockholders:*

***James R. Gillis, 54.***Mr. Gillis became our President in December 1998, was appointed as a member ofour board in March 2000 and became our Chief Operating Officer in August2000.  In November 2006 he was alsoappointed as an Interim Co-Chief Executive Officer.  Prior to his service with our Company, heserved as the President and Chief Executive Officer of Brand ManufacturingCorp., which we acquired in January 1999.

***GrayDavis, 64.*** Mr. Davis has served as one of our directorssince February 2005 and is a member of our board’s nominating and corporategovernance committee. Mr. Davis is Of Counsel in the Los Angeles office of Loeb& Loeb LLP, a multi-service national law firm. Before joining Loeb &Loeb, Mr. Davis served as Governor of California (1998-2003), LieutenantGovernor of California (1995-1999), California

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State Controller(1987-1995), California State Assembly Representative for Los Angeles County(1983-1987) and Chief of Staff to California Governor Edmund G. Brown, Jr.(1975-1981).

***AllanR. Lyons, 66.*** Mr. Lyons has served as one of ourdirectors since March 2003. He is currently chairman of our board’s auditcommittee and a member of our board’s compensation committee. From January 2000to the present, he has been the managing member of 21st Century StrategicInvestment Planning, LLC, a money management firm with more than $20.0 millionunder management. He is a director and is currently chairman of the auditcommittee of Franklin Credit Management Corp., a specialty consumer finance andasset management company based in New York, NY. In late 1999, Mr. Lyons retiredfrom Piaker & Lyons, a diversified certified public accounting firm wherehe specialized in taxes, estate and financial planning. Before becomingChairman and Chief Executive Officer of Piaker & Lyons in 1994, Mr. Lyonshad been a partner of the firm since 1968.

*Class III Directors Serving UntilOur 2007 Annual Meeting Of Stockholders:*

***MichaelR. Duckworth, 46.*** Mr. Duckworth has served as theChairman of our board since November 2006 and as one of our directors sinceFebruary 2005 and is currently the chairman of the board’s capital marketscommittee. He is a partner of Yucaipa Companies, a Los Angeles-based privateinvestment firm specializing in acquiring and operating companies in theretail, distribution, logistics and technology areas. From 2000-2003, Mr.Duckworth was head of West Coast Financial Sponsor Coverage for Merrill Lynch& Co. where he managed client relationships with private equity firmsthroughout the western region. He was responsible for all client activityincluding idea generation, public and private debt, equity and merger andacquisition origination, and private equity fund raising. From 1988-2000, Mr.Duckworth served as Managing Director at Bankers Trust/Deutsche Bank where hemaintained a similar emphasis on working with Financial Sponsors and onLeveraged Finance.

***ArielZ. Emanuel, 46.*** Mr. Emanuel has served as one of ourdirectors since November 2004. At present, he is a member of The EndeavorAgency LLC, a California-based talent agency which he founded in 1995. Mr.Emanuel is active in P.S. Arts, an entertainment industry sponsoredorganization working to bring arts education to public schools in SouthernCalifornia and served as co-chair of the 2002 Earth to LA biennial fund-raisingevent for the Natural Resources Defense Council.

***Terrence Wallock, 63.*** Mr. Wallock has served as one of our directors since February 2007.  He currently serves as Chairman of our Nominating and Corporate Governance committee and as a member of our Compensation committee. Previous thereto, Mr. Wallock served as a senior executive officer and general counsel to a number of large grocery and foodservice chains, including Ralph’s Grocery Company, the Vons Companies, and Denny’s, Inc. Most recently, Mr. Wallock has been engaged providing legal and consulting services in connection with merger, acquisition and restructuring situations, as well as advising companies that provide services to the retail grocery business.

#### **INFORMATION ABOUT EXECUTIVE OFFICERS**

The following is asummary of information about our executive officers that do not serve asmembers of our Board of Directors.

***DouglasJ. Bates****, **49*****.** joined us in 2003 as Senior Vice President and GeneralCounsel.  In 2004, he was named Secretaryof the Company.  Prior thereto, he wasengaged in the private practice of law (2001—2003); co-founded a boutiqueinvestment banking firm (1999—2001) and practiced law at the firm of Gallop,Johnson & Neuman, L.C. (1989—1999).

***MarcFierman, 46.*** Mr. Fierman has served as our Chief FinancialOfficer since November 2002. Prior thereto, he served as Vice President ofFinance (July 2001 to November 2002) and Vice President of Finance—DisplayDivision (March 1999 to June 2001). From April 1997 to February 1999, Mr.Fierman served as the chief financial officer of Brand Manufacturing Corp.,which we acquired in January 1999.

***JasonS. Flegel, 41.*** Mr. Flegel has served as one of ourExecutive Vice Presidents since June 1996. Prior thereto, and since ourinception in March 1995, he served as Vice President— Western Region. For morethan two years prior thereto, Mr. Flegel was an owner and the Chief FinancialOfficer of Display Information Systems Company, one of our predecessors.

***AlanTuchman, 48.*** Mr. Tuchman became one of our Executive VicePresidents in February 2005 upon our acquisition of Alliance EntertainmentCorp. and was also appointed an Interim Co-Chief Executive Officer of ourCompany in November 2006.  Prior to hisservice with our Company, he had served as President and Chief OperatingOfficer of Alliance since 2003. Mr. Tuchman joined Alliance in 1991 and wasVice President from that time until 1996, when he became Senior Vice Presidentof Strategic Planning. Mr. Tuchman held this position until 1997 when hebecame President of AEC One Stop Group, Inc., a subsidiary of Alliance.

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#### **BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**

Section 16(a) of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), requires ourdirectors and certain of our officers, as well as other persons who own morethan ten percent of a registered class of our equity securities, to file withthe SEC and The Nasdaq Stock Market reports of ownership of our securities andchanges in reported ownership. Officers, directors and greater than ten percentstockholders are required by SEC rules to furnish us with copies of all Section16(a) reports they file.

Based solely on a reviewof the reports furnished to us, or written representations from reportingpersons that all reportable transactions were reported, we believe that duringthe 2007 fiscal year, our officers, directors and greater than ten percentowners timely filed all reports they were required to file under Section 16(a),except:

·                  Each of Messrs. Davis, Duckworth, Emanuel, Jessick, Lyons, Mays and Schnug failed to timely file a Statement of Changes in Beneficial ownership of Securities to reflect the issuance of 4,575 options to purchase shares of common stock received as compensation for service as a director. These omissions were corrected by filing a Form 4 for each of these individuals in February 2007.

·                  Eachof Messrs. Davis, Duckworth, Emanuel, Jessick, Lyons, Mays and Schnug failed totimely file a Statement of Changes in Beneficial ownership of Securities toreflect the issuance of 5,425 options to purchase shares of common stockreceived as compensation for service as a director. These omissions werecorrected by filing a Form 4 for each of these individuals in February 2007.

·                  Eachof Messrs. Katzman and Allen failed to timely file a Statement of Changes inBeneficial ownership of Securities to reflect the issuance of 4,575 options topurchase shares of common stock received as compensation as a director.  These omissions were not corrected for theseindividuals prior to the termination of service on our Board of Directors.

·                  Mr.Katzman failed to timely file a Statement of Changes in Beneficial ownership ofSecurities to reflect the issuance of 5,425 options to purchase shares ofcommon stock received as compensation as a director.  This omission was not corrected for Mr.Katzman prior to his termination of service on our Board of Directors.

#### **CODES OF ETHICS**

We have a long-standingcommitment to conduct our business in accordance with the highest ethicalprinciples. Our Code of Business Conduct and Ethics is applicable to allrepresentatives of our enterprise, including our executive officers and allother employees and agents of our company and our subsidiary companies, as wellas to our directors. A copy of our Code of Business Conduct and Ethics isavailable in the Corporate Governance section of the Investor Relations page ofour website. In addition, our board has adopted a Code of Ethics for the ChiefExecutive Officer and Financial Executives and a Code of Conduct for Directorsand Executive Officers which supplement our Code of Business Conduct andEthics. A copy of each of these codes is available on the Corporate Governancesection of the Investor Relations page of our website. We will disclose anyamendments to, or waivers from, our Codes of Ethics on our website atwww.sourceinterlink.com.

CHANGES TO NOMINATINGCOMMITTEE PROCEDURE

During the fiscal yearended January 31, 2007, there were no changes to the procedure by whichshareholders may nominate candidates for election to our Board of Directors.

AUDIT COMMITTEE

Our Board of Directors has a standing AuditCommittee.  The current members of theAudit Committee are Allan R. Lyons (chairman), David R. Jessick and GregoryMays, each of whom is “independent” as defined in rules adopted by The NasdaqStock Market, as well as under Rule 10A-3 promulgated under the Exchange Act.The Board of Directors has determined that all members of the Audit Committee,Messrs. Lyons, Jessick and Mays, qualify as audit committee financial expertsunder the standards issued by the SEC.

The Audit Committeeappoints, evaluates, retains, terminates, compensates and oversees the work ofany public accounting firm engaged by us to audit our financial statements orperforming other audit, review or attest services for us. The Audit Committeealso supervises and monitors the establishment and implementation of a systemof financial control processes and internal controls and procedures designed toprovide reasonable assurance of the reliability of our financial reports.

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**ITEM11. EXECUTIVE COMPENSATION.**

#### **COMPENSATION DISCUSSION AND ANALYSIS**

# **Overview**

The CompensationCommittee, composed entirely of independent directors, is responsible to ourBoard of Directors, and indirectly to our stockholders, for formulating ourcompensation philosophies and monitoring and implementing our executivecompensation program.  The duties,responsibilities and authority of the Compensation Committee are prescribed ina Compensation Committee Charter adopted by our Board of Directors.  Pursuant to its Charter, the CompensationCommittee reviews and recommends executive compensation levels and cash andequity incentives for our executive officers.

In fulfilling its duties,the Compensation Committee may retain outside advisors or consultants or otherexperts to provide the Committee with the information, advice or expertise asthe Committee may deem necessary.  Inconnection with our acquisitions of Alliance Entertainment Corp. and Chas. LevyCirculating Co., LLC in 2005, the Compensation Committee engaged Pearl Meyer& Partners, a Clark Consulting practice, to conduct a review and analysisof our executive compensation program. During its engagement, Pearl Meyer compared the competitiveness of ourtotal reward package and the provisions and design of current executivecontracts by comparison to a group of public and private companies ofcomparable complexity and size with particular focus on comparable companieswithin the various industries in which we compete.  Based on Pearl Meyer’s research and report,the Compensation Committee revised our approach to executive compensation toinclude sufficient retention incentives for our executive officers that rewardlong-term growth more than short-term results.

In making compensationdeterminations, the Compensation Committee may also utilize certain resources,references and industry benchmarks to determine competitive market ranges andreasonable levels of compensation.  Inaddition, the Compensation Committee may consult or rely on the recommendationsof our principal executive officer with respect to all of our executiveofficers (other than the principal executive officer himself), particularlywith regard to the assessment of the individual performance of each of ourother executive officers.

# **Our Executive Compensation Philosophy**

The CompensationCommittee believes that our executive compensation program should be designedto provide a competitive compensation program that will enable us to attract,motivate, reward and retain executives who have the skills, education,experience and capabilities required to discharge their duties in a competentand efficient manner. In addition, the Compensation Committee believes thatexecutive compensation should be driven primarily by the long-term interests ofthe Company and its stockholders.

The CompensationCommittee believes that the quality of executive leadership significantlyaffects long-term performance and that it is in the best interest of thestockholders to fairly compensate executive leadership for achievements thatmeet or exceed the high standards set by the Compensation Committee, so long asthere is corresponding risk when performance falls short of such standards.

The CompensationCommittee’s general executive compensation philosophy is based on the followingthree principles:

·                  CompensationShould Relate to Performance. Executive compensation should reward performanceand be competitive with pay for positions of similar responsibility at othercompanies of comparable complexity and size, or comparable companies within thevarious industries in which we compete.

·                  IncentiveCompensation Should Be a Greater Part of Total Direct Compensation For MoreSenior Positions. As employees assume greater responsibilities and have theopportunity to create more stockholder value, an increasing share of theirtotal compensation package will be derived from variable incentive compensation(both of a long and short-term nature) generated by achievement of objectivesproducing long-term improvement in corporate performance.

·                  EmployeeInterests Should Be Aligned with Stockholders. Executive compensation shouldreward contribution to long-term stockholder value.

# **Elements of Compensation**

Our executivecompensation program consists of the following general elements: base salary;discretionary cash incentive bonuses; long-term stock-based incentives; andperformance-based cash incentives.

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**Base Salary**

The base annual salaryfor our executive officers is based upon the level and scope of theresponsibility of the executive officer, pay levels of similarly positionedexecutive officers among companies competing for the services of suchexecutives and a consideration of the level of experience and performanceprofile of the particular executive officer. Based upon its review andevaluation, the Compensation Committee establishes the base salary to be paidto each executive officer.  Historically,it has been our practice to enter into multi-year employment agreements witheach of our named executive officers that include pre-determined annualincreases in base salary.

### **DiscretionaryCash Incentive Bonuses**

The CompensationCommittee has the discretion and authority to make individual cash bonus awardsto executive officers for meritorious service to our long-term interests thatin some cases may include the individual executive’s performanceobjectives.  At the conclusion of eachfiscal year, the Compensation Committee reviews the individual executive’sperformance and, when deemed appropriate, authorizes payment for achievement.

### **Long-TermStock-Based Incentive Compensation**

The CompensationCommittee for many years used stock options as long-term incentives forexecutives and other key employees. Stock options were historically usedbecause they directly related the amounts earned by executives and other keyemployees to the amount of appreciation realized by our stockholders overcomparable periods. Recent changes in the accounting treatment of stockoptions, however, have caused the Compensation Committee to deemphasize the useof stock options as a long-term incentive mechanism. In lieu of stock options,the Compensation Committee has established cash-based incentive programs,including a supplemental executive retirement plan and a challenge grant plan(each as discussed below), and intends to explore additional plans and programsdesigned to reward contributions to increase long-term stockholder value.

### **Performance-Based Cash Incentives**

On February 28, 2005, the Compensation Committeeapproved the Source Interlink Companies, Inc. Challenge Grant Program,effective as of March 1, 2005 (the “Challenge Grant Program”). The ChallengeGrant Program provides that any member of our management and other highlycompensated employees (within the meaning of the Employment Retirement IncomeSecurity Act of 1974, as amended) that the Compensation Committee (whenrequired under the Challenge Grant Program) designates as eligible toparticipate in the Challenge Grant Program (“Eligible Challenge GrantParticipants”) are entitled to share an aggregate payout (the “Aggregate Payout”)tied to the attainment by us of certain specified consolidated net operatingincome targets over the period commencing March 1, 2005 and ending January 31,2008 (the “Challenge Period”).

The AggregatePayout under the Program shall be equal to that amount set forth in thefollowing table opposite the applicable range which encompasses the cumulativeoperating income, as defined, over the three year period:
| Greater Than | ** ** | **Less Than or Equal to** | ** **    | **Aggregate Payout** | ** **    |
|-------------------|------------|-----------------------------------------------|---------------|---------------------------|---------------|
| $0                |       | $                                             | 195.2 million |                      | $             | 0 |   |
| $195.2 million    |       | $                                             | 202.8 million |                      | $             | 2.50 million |   |
| $202.8 million    |       | $                                             | 210.4 million |                      | $             | 5.00 million |   |
| $210.4 million    |       | $                                             | 218.0 million |                      | $             | 7.50 million |   |
| $218.0 million    |       | $                                             | 227.2 million |                      | $             | 10.00 million |   |
| $227.2 million    |       | $                                             | 236.4 million |                      | $             | 11.00 million |   |
| $236.4 million    |       | $                                             | 245.6 million |                      | $             | 12.00 million |   |
| $245.6 million    |       | $                                             | 254.8 million |                      | $             | 13.00 million |   |
| $254.8 million    |       | $                                             | 264.0 million |                      | $             | 14.00 million |   |
| $264.0 million    |       | Unlimited                                     |          | $                         | 15.00 million |   |

 

The Aggregate Payout,if any, shall be allocated among the Eligible Challenge Grant Participants insuch amounts and proportions as may be determined by the Chief ExecutiveOfficer with, in the case of Executives that are also officers of theCorporation subject to the reporting requirements of Section 16promulgated under the Securities Exchange Act of 1934, as amended, the approvalof the Compensation Committee of the Board of Directors. Based on currentperformance and projected performance levels, the Company has not accrued anyaggregate payout related to the Challenge Grant Program at January 31,2007 and does not expect any payments to be made under this program.

If a Change ofControl, as defined, shall occur during the Challenge Period, the AggregatePayout under the Program shall be equal to that amount set forth in thefollowing table opposite the applicable period in which the Change of Controloccurs.
| Twelve Month Period Ending | ** ** | **Aggregate Payout** | ** **   |
|-------------------------------------------|------------|---------------------------|--------------|
| January 31, 2006                     |       | $                         | 10.0 million |   |
| January 31, 2007                     |       | $                         | 12.5 million |   |
| January 31, 2008                     |       | $                         | 15.0 million |   |

 

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The CompensationCommittee reserves the right, but has no obligation, to adjust upward ordownward the consolidated net operating income targets under the ChallengeGrant Program if, during the Challenge Period, we complete the acquisition ordisposition of a significant amount of assets otherwise than in the ordinarycourse of business.  Any such adjustmentduring the Challenge Period will be reasonably related to any increase ordecrease in our net income expected to result from the completion of suchacquisition or disposition.

# **OtherBenefits**

### **General Benefits and Perquisites**

Our executives are eligible to participate in all ofour employee benefit plans that are generally available to all of ouremployees, including our 401(k) retirement savings plan, medical, dental,vision, long and short-term disability and group term life insurance.  In addition, we have historically providedcertain perquisites to our executive officers. During the 2007 fiscal year,these perquisites included:

·                  supplementalmedical expense reimbursement;

·                  personaluse of company-leased motor vehicles;

·                  personaluse of company-leased aircraft;

·                  specialcommuting and housing benefits for Mr. Duckworth; and

·                  reimbursementof country club dues.

# **2007 Named Executive Officer Base Salary andIncentive Compensation Determinations**

### **PrincipalExecutive Officer**

On November 10, 2006, weentered into that certain Separation, Consulting and General Release Agreement(the “Separation Agreement”) with S. Leslie Flegel that provided for Mr. Flegel’simmediate resignation as Chairman of the Board, Chief Executive Officer anddirector of the Company.  The SeparationAgreement provided that Mr. Flegel receive $900,000 for his fiscal 2007 bonusand a lump sum severance of $4.6 million, in lieu of any claim to benefits orcompensation under his employment agreement with the Company.  In addition, the Separation Agreementcontemplates the provision of certain consulting services by Mr. Flegel over athree-year period, for which services Mr. Flegel will receive an annual paymentof $1 million and aggregate bonuses of up to $4 million upon the occurrence ofany of the following events:  (i) ifprior to May 10, 2008 we enter into a definitive agreement with certainparties, Mr. Flegel shall receive a payment of $1,000,000; (ii) if prior toNovember 10, 2007 we enter into certain definitive agreements in connectionwith our magazine division, then Mr. Flegel shall receive a payment of$1,000,000; and (iii) if within a pre-determined period we enter into certaindefinitive agreements in connection with our music division, then Mr. Flegelshall receive a payment of $2,000,000. Mr. Flegel received a payment of $1,000,000 on May 25, 2007 inconnection with (i) above.

In connection with Mr.Flegel’s resignation, Mr. Duckworth was appointed as our Chairman of the Boardby the Board of Directors and was granted the power as our principal executiveofficer to exercise direct general supervision, direction and control over thebusiness and affairs of the Company and our officers.  The Compensation Committee, at a meeting heldon March 22, 2007, retroactively determined effective as of November 1, 2006that Mr. Duckworth be paid a base salary of $75,000 per month in considerationof his service as our principal executive officer.  Such salary will be paid until Mr. Duckworth’ssuccessor is identified and elected.  TheCompensation Committee also determined that Mr. Duckworth will not participatein any of our employee benefit plans however, he will continue to receive hiscompensation for services as a director. At the Compensation Committee’s discretion, Mr. Duckworth may be awardedcash bonuses.

### **Other NamedExecutive Officers**

Concurrent with Mr.Duckworth’s appointment, the Board of Directors appointed Mr. Gillis and Mr.Tuchman as Interim Co-Chief Executive Officers to oversee Company operationsuntil a new Chief Executive Officer is identified and elected.  The Compensation Committee

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determined that as each ofMessrs. Gillis and Tuchman are party to an employment agreement with theCompany that provides for his compensation, no additional compensation forservice as an Interim Co-Chief Executive Officer was warranted.

We are party toemployment agreements with each of the other executive officers named in theSummary Compensation Table, which employment agreements provide for the basesalaries of such named executive officers through 2009.

### **DiscretionaryCash Incentive Bonuses**

As an award formeritorious service for the 2007 fiscal year, the Compensation Committeedetermined that each of our named executive officers receive a cash bonus insuch amount that the executive’s total base salary and cash bonus paid (notearned) in fiscal 2008 would equal the amount of such executive’s total basesalary and cash incentive paid (not earned) in fiscal 2007.

# **Tax and Accounting Implications**

Section 162(m) of theInternal Revenue Code of 1986, as amended (the “Code”), disallows any federalincome tax deductions by us for compensation paid to our executive officers inexcess of $1 million each in any taxable year. Compensation above $1,000,000may be deducted if it meets certain technical requirements to be classified as “performance-basedcompensation.” The Compensation Committee believes that it is in the bestinterests of our company and its stockholders to pay compensation to itsexecutive officers that is deductible by the company for federal income taxpurposes. Our stock option plans have been structured to permit grants of stockoptions to be eligible for this performance-based exception (so thatcompensation upon exercise of such options or receipt of such awards, as thecase may be, should be deductible under the Code). The Compensation Committeehas taken and intends to continue to take whatever actions are necessary tominimize our non-deductible compensation expense, while maintaining, to theextent possible, the flexibility which the Compensation Committee believes tobe an important element of our executive compensation program.

# SUMMARYCOMPENSATION

The following table summarizes the total compensationpaid or earned by the Company’s Principal Executive Officer, PrincipalFinancial Officer and each of the three other most highly compensated executiveofficers, whose 2007 total compensation exceeded $100,000 in each instance, aswell as the Company’s former Chief Executive Officer (together the “namedexecutive officers”), for the fiscal year ended January 31, 2007.

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| **Name and Principal Position**                                                | ** ** | **Fiscal  Year** | ** ** | **Salary** | ** ** | **Bonus** | ** ** | **Stock  Awards (1)** | ** ** | **Option  Awards (2)** | ** ** | **Non-Equity  Incentive Plan  Compensation** | ** ** | **Change in  Pension Value  and Deferred  Compensation  Earnings** | ** ** | **All Other  Compensation(5)(6)** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|-----------|------------|----------------------------|------------|-----------------------------|------------|---------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|----------------------------------------|------------|-----------|------------|
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| Michael  R. Duckworth (3)*Chairman of Board and  Principal Executive Officer*                 |       | 2007             |       | $          | 225,000    |      | $          | —                     |       | $                           | —     |                                              | $          | —                                                                            |       | $                                      | —     |      | $          | — |   | $ | 12,361 |   | $ | 237,361 |   |
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| James  R. Gillis*President, Chief Operating  Officer and Interim  Co-Chief Executive Officer* |       | 2007             |       | $          | 524,616    |      | $          | 340,000                    |       | $                           | —     |                                              | $          | —                                                                            |       | $                                      | —     |      | $          | 176,813 |   | $ | 41,967 |   | $ | 1,083,396 |   |
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| Alan  Tuchman*Executive Vice President  and Interim Co-Chief  Executive Officer*              |       | 2007             |       | $          | 500,000    |      | $          | 340,000                    |       | $                           | —     |                                              | $          | —                                                                            |       | $                                      | —     |      | $          | 128,584 |   | $ | 3,806 |   | $ | 972,390 |   |
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| Jason  S. Flegel*Executive Vice President*                                                    |       | 2007             |       | $          | 449,617    |      | $          | 285,000                    |       | $                           | —     |                                              | $          | —                                                                            |       | $                                      | —     |      | $          | 64,327 |   | $ | 30,931 |   | $ | 829,875 |   |
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| Marc  Fierman*Executive Vice President  and Chief Financial Officer*                          |       | 2007             |       | $          | 349,809    |      | $          | 150,000                    |       | $                           | —     |                                              | $          | —                                                                            |       | $                                      | —     |      | $          | 74,591 |   | $ | 16,029 |   | $ | 590,429 |   |
|                                                                                          |       |             |       |       |       |      |       |                       |       |                        |       |                                              |       |                                                                              |       |                                   |       |      |       |
| S. Leslie Flegel (4)*Former Chairman of the Board  and Chief Executive Officer*               |       | 2007             |       | $          | 721,443    |      | $          | 5,500,000                  |       | $                           | —     |                                              | $          | 1,296,183                                                                         |       | $                                      | —     |      | $          | — |   | $ | 28,211 |   | $ | 7,545,837 |   |

 

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(1)   This columnrepresents the dollar amount recognized for financial statement reportingpurposes with respect to the fair value of shares of restricted stock for the2007 fiscal year, in accordance with SFAS No. 123R. Pursuant to SEC rules,the amounts shown exclude the impact of estimated forfeitures related toservice-based vesting conditions. The fair value is calculated using the fairmarket value on the date of grant, taken ratably over the stated vestingperiod. These amounts reflect the Company’s accounting expense for these awards,and do not necessarily correspond to the actual value that will be realized bythe Named Executive Officers. See Note 12 of the Company’s Annual Report onForm 10-K for additional discussion on SFAS No. 123R valuation methodology.

(2)   This column representsthe dollar amount recognized for financial statement reporting purposes withrespect to the fair value of stock options for the 2007 fiscal year, inaccordance with SFAS No. 123R. Pursuant to SEC rules, the amounts shownexclude the impact of estimated forfeitures related to service-based vestingconditions. The fair value is calculated using the fair market value on thedate of grant, taken ratably over the stated vesting period. These amountsreflect the Company’s accounting expense for these awards, and do notnecessarily correspond to the actual value that will be realized by the NamedExecutive Officers. See Note 12 of the Company’s Annual Report on Form 10-K foradditional discussion on SFAS No. 123R valuation methodology.

(3)   Mr. Duckworthbecame Chairman of the Board and Principal Executive Officer on November 10,2006.  Prior to that date, he was adirector of the Company.  Compensationpaid to Mr. Duckworth prior to November 10, 2006 is presented in the DirectorCompensation table below.  Mr. Duckworthdid not receive a salary and bonus during fiscal 2007.  As discussed above, the CompensationCommittee of the Board of Directors approved compensation for Mr. Duckworth’sservice as Chairman of the Board subsequent to the end of fiscal 2007.

(4)   Mr. Flegelresigned his position as Chairman of the Board and Chief Executive Officer onNovember 10, 2006.  Compensationpresented in this table includes only compensation paid between February 1,2006 and November 10, 2006.  The Companymodified certain fully vested and outstanding stock options on November 10,2006 to extend the expiration date for three and one-half months.  As a result of this modification, the Companyrecorded stock compensation expense of $1.3 million, as presented above.  In addition, the Company agreed to pay Mr.Flegel a bonus of $0.9 million related to service in fiscal 2007 and a $4.6million severance payment, which are set forth in the bonus column above.

(5)   Allother compensation includes the following:

·                  For Mr. Duckworth, special commutingand housing benefits.

·                  For Mr. Gillis, company-leasedautomobile lease payments of $20,520, reimbursement of country-club dues of$15,023 and supplemental medical expense reimbursement.

·                  For Mr. Tuchman, supplemental medicalexpense reimbursement.

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·                  For Mr. J. Flegel, company-leasedautomobile lease payments of $13,147, reimbursement of country-club dues of$12,864 and supplemental medical expense reimbursement.

·                  For Mr. Fierman, company-leasedautomobile lease payments and supplemental medical expense reimbursement.

·                  For Mr. S. Flegel, company-leasedautomobile lease payments of $14,422, reimbursement of country-club dues of$11,481 and supplemental medical expense reimbursement.

(6)   Duringfiscal 2007, the Company leased an aircraft.  All flights were for primarily businesspurposes.  However, companions of theNamed Executive Officers did, from time to time, accompany the Named ExecutiveOfficers.  The Company has determinedthat there is no incremental cost of permitting Named Executive Officers tobring companions on business flights. Therefore, the Company has attributed no value to this perquisite.

# GRANTS OF PLAN-BASED AWARDS

No stock grants wereissued to Named Executive Officers during fiscal 2007.

# DISCUSSION OFSUMMARY COMPENSATION AND PLAN-BASED AWARDS TABLES

***JamesR. Gillis.***  Ourcurrent employment agreement with Mr. Gillis was entered into on February 28,2005.  Pursuant to this agreement, Mr.Gillis serves as our president and chief operating officer for a five-year termthat commenced on February 28, 2005.  Mr.Gillis was also appointed as an Interim Co-Chief Executive Officer on November10, 2006.  Mr. Gillis has the usual andcustomary duties, responsibilities and authority of president and chiefoperating officer and performs such other and additional duties andresponsibilities as are consistent with that position and as our board ofdirectors may reasonably require, including the oversight of Company operationsuntil a new Chief Executive Officer is identified and elected.  In accordance with his agreement, Mr. Gillisreceived a base salary of $525,000 during fiscal year 2007and will receive abase salary of (i) $600,000 during fiscal year 2008, (ii) $624,000 duringfiscal year 2009 and (iii) $649,000 from the beginning of fiscal year 2010through the expiration of the employment agreement.  In addition, Mr. Gillis is entitled toreceive a guaranteed bonus each year during his employment with us in an amountequal to the greater of 50% of his base salary in effect in a given year(payable in equal quarterly installments), or such other amount as theCompensation Committee may approve in its sole discretion.  Mr. Gillis is also entitled to participate inany equity-based incentive, healthcare, retirement, life insurance, disabilityincome and other benefits plans offered by us with respect to our executiveofficers generally.

***JasonS. Flegel.***   Ourcurrent employment agreement with Mr. Flegel was entered into on February 28,2005.  Pursuant to this agreement, Mr.Flegel serves as our executive vice president for a five-year term thatcommenced February 28, 2005.  Mr. Flegelhas the usual and customary duties, responsibilities and authority of anexecutive vice president and performs such other and additional duties andresponsibilities as are consistent with that position and as our board ofdirectors may reasonably require. In accordance with his agreement, Mr. Flegelreceived a base salary of $450,000 during fiscal year 2007 and will receive abase salary of (i) $475,000 during fiscal year 2008, (ii) $500,000 duringfiscal year 2009 and (iii) $520,000 from the beginning of fiscal year 2010through the expiration of the employment agreement. In addition, Mr. Flegel maybe awarded an annual bonus in an amount not to exceed 75% of Mr. Flegel’s basesalary in effect in a given year, as determined by the Compensation Committeein its sole discretion. Mr. Flegel is also entitled to participate in anyequity-based incentive, healthcare, retirement, life insurance, disabilityincome and other benefits plans offered by us with respect to our executiveofficers generally.

***MarcFierman.***   Ourcurrent employment agreement with Mr. Fierman was entered into on February 28,2005.  Pursuant to this agreement, Mr.Fierman serves as our executive vice president and chief financial officer fora five-year term that commenced February 28, 2005.  Mr. Fierman has the usual and customaryduties, responsibilities and authority of executive vice president and chieffinancial officer and performs such other and additional duties andresponsibilities as are consistent with that position and as our board ofdirectors may reasonably require.  Inaccordance with his agreement, Mr. Fierman received a base salary of $350,000during fiscal year 2007 and will receive a base salary of (i) $375,000 duringfiscal year 2008, (ii) $400,000 during fiscal year 2009 and (iii) $425,000 fromthe beginning of fiscal year 2010 through the expiration of the employmentagreement.  In addition, Mr. Fierman maybe awarded an annual bonus in an amount not to exceed 50% of Mr. Fierman’s basesalary in effect in a given year, as determined by the Compensation Committeein its sole discretion.  Mr. Fierman isalso entitled to participate in any equity-based incentive, healthcare, retirement,life insurance, disability income and other benefits plans offered by us withrespect to our executive officers generally.

***AlanE. Tuchman.***  OnFebruary 28, 2005, we entered into an employment agreement with Mr. Tuchman.Pursuant to his agreement, Mr. Tuchman serves as our executive vice presidentfor a five-year term that commenced February 28, 2005. Mr. Tuchman has theusual and customary duties, responsibilities and authority of an executive vicepresident and performs such other and additional duties and responsibilities asare consistent with that position and as our board of directors may reasonablyrequire. In accordance with his agreement, Mr. Tuchman received a base salaryof $500,000 during fiscal year 2007 and will receive a base salary of (i)$520,000 during fiscal year 2008,

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(ii) $540,800 duringfiscal year 2009 and (iii) $562,432 from the beginning of fiscal year 2010through the expiration of the employment agreement. In addition, Mr. Tuchmanmay be awarded an annual bonus in an amount not to exceed 75% of Mr. Tuchman’sbase salary in effect in a given year, as determined by the CompensationCommittee in its sole discretion. Mr. Tuchman is also entitled to participatein any equity-based incentive, healthcare, retirement, life insurance,disability income and other benefits plans offered by us with respect to ourexecutive officers generally.

# **OUTSTANDING EQUITY AWARDS AT FISCALYEAR END**

The following tableprovides information on unexercised stock options granted to the namedexecutive officers that were outstanding as of January 31, 2007:
| **Name**             | ** ** | **Number of   Securities   Underlying   Unexercised   Options (#)   Exercisable** | ** ** | **Number of   Securities   Underlying   Unexercised   Options (#)   Unexercisable** | ** ** | **Equity   Incentive Plan   Awards:   Number of   Securities   Underlying   Unexercised   Unearned   Options (#)** | ** ** | **Option   Exercise   Price ($)** | ** ** | **Option   Expiration   Date** | ** ** | **Number of   Shares or   Units of   Stock That   Have Not   Vested (#)** | ** ** | **Market   Value of   Shares or   Units of   Stock That   Have Not   Vested ($)** | ** ** | **Equity   Incentive   Plan   Awards:   Number of   Unearned   Shares,   Units or   Other Rights   That Have   Not Vested   (#)** | ** ** | **Equity   Incentive   Plan   Awards:   Market or   Payout   Value of   Unearned   Shares,   Units or   Other Rights   That Have   Not Vested   (#)** | ** ** |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                 |       |                                                                                                                 |       |                                                                                                                   |       |                                                                                                                                                                      |       |                                             |       |                                     |       |                                                                                                                             |       |                                                                                                                                          |       |                                                                                                                                                                                                              |       |                                                                                                                                                                                                                                                 |       |
| Michael R. Duckworth |       | 10,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 11.00      |                                     | 2/28/2015  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 4,575                                                                                                                |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 11.15      |                                     | 2/1/2016   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 5,425                                                                                                                |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 8.97       |                                     | 11/29/2016 |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
| James R. Gillis      |       | 134,667                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 7.81       |                                     | 12/14/2008 |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 200,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 7.84       |                                     | 8/4/2010   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 40,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 5.00       |                                     | 2/7/2011   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 50,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.56       |                                     | 2/1/2013   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
| Alan Tuchman         |       | 14,175                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 2.30       |                                     | 5/19/2009  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 98,871                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 9.21       |                                     | 12/8/2009  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 150,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 11.00      |                                     | 2/28/2015  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
| Jason S. Flegel      |       | 50,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 13.25      |                                     | 8/23/2009  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 50,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 3.69       |                                     | 1/4/2011   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 50,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 5.00       |                                     | 2/7/2011   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 11,500                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.21       |                                     | 12/7/2011  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 50,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.56       |                                     | 2/1/2013   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
| Marc Fierman         |       | 20,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 7.84       |                                     | 8/4/2010   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 5,356                                                                                                                |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 5.00       |                                     | 2/7/2011   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 5,000                                                                                                                |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 5.02       |                                     | 3/27/2012  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 30,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.48       |                                     | 5/20/2012  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 25,000                                                                                                               |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.56       |                                     | 2/1/2013   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
| S. Leslie Flegel     |       | 125,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 11.41      |                                     | 2/25/2007  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 120,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.35       |                                     | 2/25/2007  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 150,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 4.56       |                                     | 2/25/2007  |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |
|                 |       | 360,000                                                                                                              |       | —                                                                                                                 |       | —                                                                                                                                                                    |       | $                                                | 5.13       |                                     | 2/3/2008   |                                                                                                                             | —     |                                                                                                                                          | —     |                                                                                                                                                                                                              | —     |                                                                                                                                                                                                                                                 | —     |   |

 

# OPTIONS EXERCISED AND STOCKVESTED

Noneof the Company’s Named Executive Officers exercised stock options or hadrestricted stock units vest during fiscal 2007.

# PENSION BENEFITS

## ***Supplemental Executive RetirementPlan***

On February 28, 2005, theCompensation Committee of the board of directors approved the Source Interlink Companies,Inc. Supplemental Executive Retirement Plan, effective as of March 1, 2005 (the“SERP”). The SERP is a nonqualified defined benefit plan. The SERP provides 

11

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that certain members ofour management and other highly compensated employees (within the meaning ofthe Employment Retirement Income Security Act of 1974, as amended) (“ELIGIBLESERP PARTICIPANTS”) are entitled to be selected to receive certain retirementbenefits from us pursuant to an executive participation agreement entered intoin connection with the SERP. Under the SERP, an Eligible SERP Participant whoterminates employment with us and retires will be eligible to receiveretirement benefits as follows:

1.               Upon theTermination for Cause (as defined in the SERP) of the Eligible SERP Participantby us, the participant will not be entitled to receive any retirement benefits;

2.               If the EligibleSERP Participant resigns, the participant will be entitled to receive aretirement benefit commencing at the age of 65; provided, that the participanthas served with us for a period of more than five years from the effective dateof the executive participation agreement and is at least 55 years old at thetime of resignation;

3.               If we terminate theemployment of the Eligible SERP Participant for Disability (as defined in theSERP), the participant will be entitled to receive a retirement benefitcommencing at the age of 65;

4.               If the EligibleSERP Participant terminates employment with us and retires at or after the ageof 65, the participant will be entitled to receive a Normal Retirement Benefit(as defined in the SERP) commencing at the age of retirement;

5.               If the EligibleSERP Participant terminates employment with us and retires at or after the ageof 55, but before the age of 65, the participant will be entitled to receive anEarly Retirement Benefit (as defined in the SERP) commencing at the age ofearly retirement; and

6.               If we terminate theemployment of the Eligible SERP Participant prior to the age of 55 withoutcause for reasons other than death or Disability (as defined in the SERP), theparticipant will be entitled to receive a retirement benefit commencing at theage of 65.

If the Eligible SERPParticipant is entitled to receive retirement benefits from us, the amount ofretirement benefits will be calculated in accordance with such participant’sexecutive participation agreement. The Eligible SERP Participant’s retirementbenefits will be offset by retirement benefits payable under any definedbenefit plans (as defined under the Employee Retirement Income Security Act of1974, as amended) sponsored by us.

Benefits under the SERPare to be paid monthly for the Eligible SERP Participant’s lifetime, but fornot less than 60 months. If an Eligible SERP Participant dies before the end ofsuch 60-month period, monthly payments will continue for the remainder of such60-month period to the participant’s surviving spouse or estate, as applicable.In the event of a change of control while the SERP is in effect, there will beno acceleration of any benefits under the SERP or any other additionalbenefits.

## ***Executive Participation Agreements With Named Executive Officers***

On March 1, 2005, inconnection with participation in the SERP, we entered into executiveparticipation agreements with the following named executive officers, otherthan Mr. Gillis, selected as Eligible SERP Participants:  Mr. Tuchman, Mr. Flegel and Mr. Fierman.Pursuant to the executive participation agreements, upon an Eligible SERPParticipant’s retirement at the age of 65, we will pay to the Eligible SERPParticipant a monthly Normal Retirement Benefit of: (i) 25% of the average ofthe three highest annual base salaries during the five year period precedingthe retirement of the Eligible SERP Participant (the “SERP BASE AMOUNT”) afterfive years of service with us; (ii) 50% of the SERP Base Amount after ten yearsof service with us; or (iii) 75% of the SERP Base Amount after 15 years ofservice with us. The maximum payout to an Eligible SERP Participant under theexecutive participation agreement is 75% of the SERP Base Amount. If anEligible SERP Participant elects to delay receipt of retirement benefitpayments until after the age of 65, we will pay the Eligible SERP Participant amonthly retirement benefit for his or her lifetime calculated on a presentvalue basis as actuarially discounted at 6.25% or the then current One YearTreasury Rate, whichever is higher.

At any time after anEligible SERP Participant reaches age 55 and has been eligible to participatefor a minimum of five full years, the Eligible SERP Participant may retire orresign and choose to either (i) delay payments until age 65, at which time theEligible SERP Participant would receive the full current benefit amount at thetime of resignation as calculated payable for the remainder of his or her lifefrom age 65 or (ii) begin receiving Early Retirement Benefits immediately atthe time of retirement, which amounts would be actuarially discounted on apresent value basis as actuarially discounted at 6.25% or the then current OneYear Treasury Rate, whichever is higher.

Upon Termination forCause (as defined in the SERP), no benefit is payable to the Eligible SERPParticipant. Upon termination for other than cause, death or Disability (asdefined in the SERP), we will pay to the Eligible SERP Participant, commencingat age 65, a the Normal 

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Retirement Benefitdescribed above but with the following adjustments: (i) 5% of the SERP BaseAmount payable at age 65 after one year of service; (ii) 10% of the SERP BaseAmount payable at age 65 after two years of service; (iii)15% of the SERP BaseAmount payable at age 65 after three years of service; or (iv) 20% of the SERPBase Amount payable at age 65 after four years of service.

## ***Executive Participation Agreement with James R. Gillis***

On March 1, 2005, weentered into an executive participation agreement with James R. Gillis inconnection with his participation in the SERP. The terms of Mr. Gillis’executive participation agreement are substantially similar to the terms of theform of executive participation agreement described above, except that theschedule of Normal Retirement Benefit payments is altered in light of Mr.Gillis’ age relative to other younger Eligible SERP Participants. Pursuant toMr. Gillis’ executive participation agreement, Mr. Gillis is entitled toreceive his full benefit paid, without discount, immediately upon hisretirement based on the following schedule of payments: (i) 25% of the SERPBase Amount payable immediately after five years of service; (ii) 30% of theSERP Base Amount payable immediately after six years of service; (iii) 35% ofthe SERP Base Amount payable immediately after seven years of service; (iv) 40%of the SERP Base Amount payable immediately after eight years of service; (v)45% of the SERP Base Amount payable immediately after nine years of service;(vi) 50% of the SERP Base Amount payable immediately after ten years ofservice; (vii) 55% of the SERP Base Amount payable immediately after 11 yearsof service; (viii) 60% of the SERP Base Amount payable immediately after 12years of service; (ix) 65% of the SERP Base Amount payable immediately after 13years of service; (x) 70% of the SERP Base Amount payable immediately after 14years of service; or (xi) 75% of the SERP Base Amount payable immediately after15 years of service. The maximum payout to Mr. Gillis under his executiveparticipation agreement is 75% of the SERP Base Amount.
| Name                  | ** ** | **Executive  Contributions** | ** ** | **Company  Contributions** | ** ** | **Aggregate  Earnings** | ** ** | **Aggregate  Distributions** | ** ** | **Aggregate  Balance at  1/31/2007** | ** ** |
|-----------------------|------------|------------------------------|------------|----------------------------|------------|-------------------------|------------|------------------------------|------------|--------------------------------------|------------|
| Michael R.  Duckworth |       | $                            | —     |                       | $          | —                  |       | $                            | —     |                                 | $          | — |   | $ | — |   |
| James R. Gillis       |       | $                            | —     |                       | $          | 175,780                 |       | $                            | 1,033      |                                 | $          | — |   | $ | 331,912 |   |
| Alan Tuchman          |       | $                            | —     |                       | $          | 128,003                 |       | $                            | 581        |                                 | $          | — |   | $ | 215,859 |   |
| Jason S. Flegel       |       | $                            | —     |                       | $          | 63,951                  |       | $                            | 376        |                                 | $          | — |   | $ | 120,754 |   |
| Marc Fierman          |       | $                            | —     |                       | $          | 74,161                  |       | $                            | 436        |                                 | $          | — |   | $ | 140,033 |   |

 

**NON-QUALIFIED DEFERREDCOMPENSATION**

None.

# POTENTIAL PAYMENTS UPONTERMINATION OR CHANGE-IN-CONTROL

Each of the employmentagreements with our named executive officers require certain payments if suchexecutive if terminated by the Company without cause or upon the determinationof disability or if the executive terminates his agreement for good reason.  Each of such employment agreements aresubject to earlier termination by:  (i)the Company at its election with or without cause; (ii) upon the Company’sdetermination of the disability of the executive; (iii) upon the death of theexecutive; or (iv) the executive voluntarily upon 30 days’ advance writtennotice, with or without good reason.

Upon a termination priorto the expiration of the employment period by the Company without proper causeor by the executive upon a change in control or for other good reason, the executiveshall receive his annual base compensation for the remainder of the employmentperiod and shall retain medical insurance coverage for the same period.  In addition, Mr. Gillis shall receive aguaranteed annual bonus equal to 12.5% of his annual base compensation.  In each case, if the employment agreement isterminated early by the Company with cause, upon the executive’s death or bythe executive without good reason, the Company shall be released of all of itsobligations for payment of any compensation or benefits under theagreement.  If, however, the Companyterminates the agreement upon the determination of the disability of theexecutive, the executive shall receive a disability income benefit, payable inmonthly installments, equal to 50% of his base compensation for the first 24months after the early termination and then shall receive a supplementaldisability income of $12,000 per month. The supplemental disability income shall cease upon the earlier of theexecutive’s death or January 4, 2018 in the case of Mr. Gillis; September 30,2030 in the case of Jason S. Flegel; November 22, 2025 in the case of Mr.Fierman; and March 24, 2024 in the case of Mr. Tuchman.

13

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In addition, certain ofour named executive officers may receive payments under our SupplementalExecutive Retirement Plan, as described above. In no event, however, are payments under the Supplemental ExecutiveRetirement Plan accelerated.  Therefore,payments under the Supplemental Executive Retirement Plan have been excludedfrom the below table.

The following tableindicates the potential payments that would have been received by our NamedExecutive Officers upon the occurrence of one of the above-referenced events asof January 31, 2007:
| **Name**            | ** ** | **Benefit** | ** ** | **Termination   by Company   Without   Cause** | ** ** | **Termination   by Company   With Cause** | ** ** | **Termination   by Company   Upon   Disability of   Executive   (1)** | ** ** | **Termination   Upon Death   of Executive** | ** ** | **Termination   by Executive   Upon Change   of Control or   Other Good   Reason** | ** ** | **Termination   by Executive   Without   Good Reason** | ** ** |
|---------------------|------------|-------------|------------|--------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| **James R. Gillis** |       | Severance   |       | $                                                                  | 2,172,750  |                                                          | $          | 0                                                                                                        |       | $                                                               | 3,205,600  |                                                                                                                                 | $          | 0                                                                               |       | $ | 2,172,750 |   | $ | 0 |   |
| **Jason S. Flegel** |       | Severance   |       | $                                                                  | 1,495,000  |                                                          | $          | 0                                                                                                        |       | $                                                               | 3,907,500  |                                                                                                                                 | $          | 0                                                                               |       | $ | 1,495,000 |   | $ | 0 |   |
| **Marc Fierman**    |       | Severance   |       | $                                                                  | 1,200,000  |                                                          | $          | 0                                                                                                        |       | $                                                               | 3,109,500  |                                                                                                                                 | $          | 0                                                                               |       | $ | 1,200,000 |   | $ | 0 |   |
| **Alan Tuchman**    |       | Severance   |       | $                                                                  | 1,623,232  |                                                          | $          | 0                                                                                                        |       | $                                                               | 3,282,000  |                                                                                                                                 | $          | 0                                                                               |       | $ | 1,623,232 |   | $ | 0 |   |

 

----

(1)          Assumespayment for entire supplemental disability income period and no earlier deathof executive.

# COMPENSATION OF DIRECTORS

Under our current policy,each of our directors who is not also one of our employees receives (i) anannual retainer of $35,000, (ii) an additional $3,000 for each quarterly boardmeeting attended in person, (iii) an additional $1,000 for each committeemeeting attended either in person or via telephone, and (iv) an additional$1,000 for each board meeting attended via telephone. Chairmen of committeesreceive an additional retainer ranging from $10,000 to $25,000 per yeardepending on the committee chaired. Each committee member, other than thechairman, receives an additional $5,000 per year for each committee on which heserves. All director fees are payable in cash. Directors are also entitled tobe reimbursed for expenses incurred by them in attending meetings of the boardand its committees.

Our directors alsoreceive an annual grant of stock options for the purchase of 10,000 shares ofour stock at an exercise price equal to the last reported sale price on thelast day of a fiscal year. These options are fully vested on the date of issuance.
| Name                      | ** ** | **Fees Earned  or Paid in   Cash ($)** | ** ** | **Option   Awards ($)** | ** ** | **Total ($)** | ** ** |
|---------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------|------------|--------------------|------------|
|                      |       |                                                            |       |                              |       |               |       |
| David R. Jessick          |       | $                                                               | 52,000     |                              | $          | 32,914             |       | $ | 84,914 |   |
| Gregory Mays              |       | $                                                               | 53,000     |                              | $          | 32,914             |       | $ | 85,914 |   |
| George A. Schnug          |       | $                                                               | 48,000     |                              | $          | 32,914             |       | $ | 80,914 |   |
| James R. Gillis           |       | $                                                               | —     |                              | $          | —             |       | $ | — |   |
| Gray Davis                |       | $                                                               | 57,000     |                              | $          | 32,914             |       | $ | 89,914 |   |
| Allan R. Lyons  (4)       |       | $                                                               | 78,000     |                              | $          | 32,914             |       | $ | 110,914 |   |
| Michael R.  Duckworth (1) |       | $                                                               | 58,000     |                              | $          | 32,914             |       | $ | 90,914 |   |
| Ariel Z. Emanuel          |       | $                                                               | 41,000     |                              | $          | 32,914             |       | $ | 73,914 |   |
| Terrence Wallock          |       | $                                                               | —     |                              | $          | —             |       | $ | — |   |
| A. Clinton Allen  (2)     |       | $                                                               | 74,250     |                              | $          | 17,353             |       | $ | 91,603 |   |
| Aron Katzman (3)          |       | $                                                               | 73,000     |                              | $          | 32,914             |       | $ | 105,914 |   |

 

----

(1)                                  Mr.Duckworth was elected our Chairman of the Board of Directors and PrincipalExecutive Officer on November 10, 2007. Compensation paid after that date is presented in the SummaryCompensation Table, above.

(2)                                  Mr.Allen resigned from our Board of Directors on November 29, 2006.

(3)                                  Mr.Katzman resigned from our Board of Directors on February 14, 2007.

14

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(4)           Mr.Lyons elected to have all of his fees that would otherwise have been paid incash during fiscal 2007 deferred in the Company’s deferred compensationplan.  Compensation presented includesonly compensation that would have been paid if he had not made this election.

#### **COMPENSATION COMMITTEE INTERLOCKS AND INSIDERPARTICIPATION**

None*.*

# COMPENSATION COMMITTEEREPORT

We have reviewedand discussed the foregoing Compensation Discussion and Analysis withmanagement.  Based on our review anddiscussion with management, we have recommended to the Board of Directors thatthe Compensation Discussion and Analysis be included in the Source InterlinkCompanies, Inc. Annual Report on Form 10-K, as amended, for the year endedJanuary 31, 2007.
| Respectfully submitted,                                                                   |
|-------------------------------------------------------------------------------------------|
|                                                                                      |
| THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS  OF SOURCE INTERLINK COMPANIES, INC. |
|                                                                                      |
| Gregory Mays, *Chairman*                                                                  |
|                                                                                      |
| Allan Lyons,*Member*                                                                      |
|                                                                                      |
| Terrence Wallock,*Member*                                                                 |

 

**ITEM12.  SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**

#### **SECURITIES AUTHORIZED FOR ISSUANCE UNDEREQUITY COMPENSATION PLANS**

The information requiredby this item is included in Item 5. “Market for Registrant’s Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities” of ourannual report on Form 10-K filed with the Securities and Exchange Commission onApril 25, 2007.

SECURITY OWNERSHIP OFDIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL STOCKHOLDERS

The following table setsforth as of May 23, 2007 certain information concerning the ownership of ourcommon stock by:

·                   each person who is known to us toown beneficially 5% or more of our outstanding common stock;

·                   each of our directors, our chiefexecutive officer and our four other most highly paid executive officers infiscal year 2006; and

·                   all directors and executive officersas a group.

The information presentedbelow is based on information supplied by our officers and directors andSchedules 13D and 13G filed with the SEC. Unless otherwise indicated, thepersons named below have sole voting and investment power with respect to allshares shown as beneficially owned by them, except to the extent authority isshared by spouses under applicable community property laws.

15

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| Name of Beneficial Owner                                                               | ** ** | **Number of Shares  Beneficially   Owned** | ** ** | **Percent of Shares   Beneficially   Owned** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------------------------------------------------------------|------------|
|                                                                                                  |       |                                                      |       |                                                             |       |
|  AEC Associates, L.L.C. (1)                                                                      |       | 17,685,568                                                |       | 33.8                                                             | %          |
|  New Mountain Vantage Advisers, L.L.C. (2)                                                       |       | 4,630,100                                                 |       | 8.9                                                              | %          |
|  Dimensional Fund Advisors, L.P. (3)                                                             |       | 4,212,754                                                 |       | 8.1                                                              | %          |
|  Wells Fargo & Company (4)                                                                   |       | 3,327,823                                                 |       | 6.4                                                              | %          |
|  Peninusla Capital Management, L.P. (5)                                                          |       | 2,931,667                                                 |       | 5.6                                                              | %          |
|  S. Leslie Flegel (6)                                                                            |       | 1,174,835                                                 |       | 2.2                                                              | %          |
|  James R. Gillis (7)                                                                             |       | 533,418                                                   |       | 1.0                                                              | %          |
|  Jason S. Flegel (7)                                                                             |       | 381,860                                                   |       |                                                             | *          |
|  Alan E. Tuchman (7)                                                                             |       | 263,046                                                   |       |                                                             | *          |
|  Marc Fierman (7)                                                                                |       | 86,356                                                    |       |                                                             | *          |
|  Michael R. Duckworth (7)                                                                        |       | 30,000                                                    |       |                                                             | *          |
|  Douglas J. Bates (7)                                                                            |       | —                                                    |       |                                                             | *          |
|  Allan R. Lyons (7)(8)                                                                           |       | 384,037                                                   |       |                                                             | *          |
|  Aron S. Katzman (7)(9)                                                                          |       | 319,467                                                   |       |                                                             | *          |
|  George A. Schnug (7)                                                                            |       | 31,000                                                    |       |                                                             | *          |
|  Ariel Z. Emanuel (7)                                                                            |       | 30,000                                                    |       |                                                             | *          |
|  David R. Jessick (7)                                                                            |       | 30,000                                                    |       |                                                             | *          |
|  Gregory Mays (7)                                                                                |       | 30,000                                                    |       |                                                             | *          |
|  Terrence J. Wallock (7)                                                                         |       | 10,000                                                    |       |                                                             | *          |
|  A. Clinton Allen (7)(10)                                                                        |       | —                                                    |       |                                                             | *          |
|                                                                                                  |       |                                                      |       |                                                             |       |
|  All Directors and named executive officers,  as  a group (as of May 23, 2007, 12  persons) |       | 1,809,717                                                 |       | 3.5                                                              | %          |

 

----

(1)           Thebusiness address for AEC Associates, L.L.C. is: c/o The Yucaipa Companies, 9130West Sunset Boulevard, Los Angeles, California 90069.

(2)           Thebusiness address for New Mountain Vantage Advisors, L.L.C. is 787 SeventhAvenue, 49th Floor, New York, NY 10019. The shares reported include shares heldby New Mountain Vantage Advisors, L.L.C. and its subsidiaries and affiliates.

(3)           Thebusiness address for Dimensional Fund Advisors, L.P. is 1299 Ocean Avenue,Santa Monica, CA 90401.

(4)           Thebusiness address for Wells Fargo & Company is 420 Montgomery Street, SanFrancisco, CA 94104. The shares reported include shares held by Wells Fargo& Company and its subsidiaries and affiliates.

(5)           Thebusiness address for Peninsula Capital Management, L.P. is 235 Pine Street,Suite 1818, San Fransico, CA 94104.

(6)           Mr.Flegel resigned the position of Chairman of the Board and Chief ExecutiveOfficer on November 10, 2006. The business address for S. Leslie Flegel remainsc/o Source Interlink Companies, Inc., 27500 Riverview Center Boulevard, Suite400, Bonita Springs, FL 34134.

(7)           Thebusiness address of our officers and directors is c/o Source InterlinkCompanies, Inc., 27500 Riverview Center Boulevard, Suite 400, Bonita Springs,FL 34134.

(8)           Ofthe reported shares, 116,010 shares are held by Mr. Lyons’ spouse. Mr. Lyonsdisclaims beneficial ownership of these securities, and this statement shallnot be deemed an admission that he is the beneficial owner of the securitiesfor any purpose.

(9)           Mr.Katzman resigned from the Company’s Board of Directors on February 14, 2007.

(10)         Mr.Allen resigned from the Company’s Board of Directors on November 29, 2006.

Included in the sharesreported above are the following shares to be issued upon exercise of optionsto purchase the Company’s common stock:

16

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| Name of Beneficial Owner | ** ** | **Number of   Options   Exercisable Within  60 Days** | ** ** |
|-----------------------------------------|------------|--------------------------------------------------------------------------------|------------|
|                                    |       |                                                                           |       |
|  James R. Gillis                   |       | 424,667                                                                        |       |
|  Jason S. Flegel                   |       | 211,500                                                                        |       |
|  Alan E. Tuchman                   |       | 263,046                                                                        |       |
|  Marc Fierman                      |       | 85,356                                                                         |       |
|  Michael R. Duckworth              |       | 30,000                                                                         |       |
|  Allan R. Lyons                    |       | 50,000                                                                         |       |
|  Aron S. Katzman                   |       | 20,000                                                                         |       |
|  George A. Schnug                  |       | 30,000                                                                         |       |
|  Ariel Z. Emanuel                  |       | 30,000                                                                         |       |
|  David R. Jessick                  |       | 30,000                                                                         |       |
|  Gregory Mays                      |       | 30,000                                                                         |       |
|  Terrence J. Wallock               |       | 10,000                                                                         |       |

 

Beneficial ownership ofshares has been determined in accordance with Rule 13d-3 of the SecuritiesExchange Act of 1934, as amended, under which a person is deemed to be thebeneficial owner of securities if he or she has or shares voting or investmentpower with respect to such securities or has the right to acquire ownershipthereof within 60 days.   Shares ofcommon stock subject to options that are currently exercisable within 60 daysof the date of this report are treated as outstanding for the purpose ofcomputing the percentage ownership of the subject individual.  These shares, however, are not consideredoutstanding when computing the percentage ownership of any other person.

As of May 23, 2007, therewere 52,310,837 shares of our common stock outstanding.

**ITEM13.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE.**

In connection with themerger with Alliance, we and The Yucaipa Companies, an entity affiliated withAEC Associates, entered into a consulting agreement. Pursuant to the consultingagreement and subject to certain conditions specified therein, Yucaipa agreedto provide the Registrant, upon request, with consulting and financial servicesfor an annual fee of $1 million, plus out-of-pocket expenses, however, noadditional services are required. The term of the consulting agreement is for aperiod of five years. Either party may terminate the consulting agreement atany time; however, if we terminate the consulting agreement then we will berequired to pay Yucaipa a cash termination payment equal to the remainingunpaid portion of the fees owed for the term in which the termination occursplus $1 million. Yucaipa agrees, during the term of the consulting agreementand for one year thereafter, not to solicit any employees or consultants ofours or Alliance. In February 2006, in accordance with the terms of theagreement, we engaged Yucaipa to perform certain special services related toour strategic alternatives process.

AEC Associates is themajority stockholder of Digital On-Demand, Inc. In connection with the spin-offof certain assets by Alliance to Digital On-Demand, Inc. which occurred priorto the merger, Alliance and Digital On-Demand, Inc. entered into a number ofagreements including a distribution and separation agreement, licensing andco-marketing agreement, transition/shared services agreement and tax-sharingand indemnification agreement. We assumed the rights and obligations ofAlliance under these agreements upon consummation of our merger with Alliance.

Carol Kloster, one of ourexecutive officers who resigned in October 2006, is a director of Chas. LevyCompany, LLC, formerly the sole member of Chas. Levy Circulating Co. LLC.Concurrent with our acquisition of Chas. Levy Circulating Co. LLC, we enteredinto an agreement with Levy Home Entertainment, LLC, a wholly owned subsidiaryof Chas. Levy Company, LLC to purchase book product for distribution to ourcustomers. During the fiscal year ended January 31, 2007, we purchased $39.5million in book product from Levy Home Entertainment, net of returns.

In connection with theCompany’s expected acquisition of Primedia Enthusiast Media, Inc, The YucaipaCompanies agreed to make an additional investment in the Company’s securitiesof up to $100 million under certain circumstances. The terms of the securitiesto be purchased will be established by a committee of independent directors.The obligations of the Company and Yucaipa under the agreement terminate at theclosing of the acquisition or the termination of the purchase agreementgoverning the transaction, whichever occurs first. Primedia, Inc, the parentcompany of Primedia Enthusiast Media, Inc and Primedia Enthusiast Media, Incare third party beneficiaries of the agreement.

17

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DIRECTOR INDEPENDENCE

Our board has determinedthat Messrs. Davis, Schnug, Jessick, Lyons, Wallock and Mays are “independent”within the meaning of the rules of The Nasdaq Stock Market, based on itsapplication of the standards set forth in the Corporate Governance Guidelines.Each member of the board’s audit, compensation, nominating and corporate governanceand capital markets committees is independent within the meaning of those rulesand standards.

**ITEM14.  PRINCIPAL ACCOUNTANT FEES ANDSERVICES.**

The following tablesummarizes fees billed to us by our principal accounting firm and independentregistered public accounting firm BDO Seidman, LLP for professional servicesrendered as of and for the years ended January 31, 2007, 2006 and 2005:

|                         | ** ** | **Year ended January 31,** | ** ** |
|-------------------------|------------|-------------------------------------------|------------|
| **(in thousands)** | ** ** | **2007**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
|                    |       |                                      |       |   |   |   |   |
| Audit fees              |       | $                                         | 1,500      |   | $ | 1,357 |   | $ | 1,122 |   |
| Audit related  fees     |       | 69                                        |       | 23 |   | 175 |   |
| Tax fees                |       | 76                                        |       | 39 |   | 24 |   |
| All other fees          |       | —                                    |       | — |   | — |   |
|                    |       |                                      |       |   |   |   |   |
| Total fees              |       | $                                         | 1,645      |   | $ | 1,419 |   | $ | 1,321 |   |

 

Audit Fees

These fees compriseprofessional services rendered in connection with the audit of our consolidatedfinancial statements on Form 10-K and the review of our quarterly consolidatedfinancial statements on Form 10-Qs that are customary under auditing standardsgenerally accepted in the United States of America. Audit fees also includeconsultations regarding accounting issues and consents for other SEC filings.

Audit Related Fees

These fees result fromassurance and related services that are reasonably related to the performanceof the audits and reviews of our financial statements and are not includedunder “Audit Fees” in the foregoing table. In 2007, these fees relatedprimarily to the Company’s 401(k) plan audits and certain SAS 70 reports.

Tax Fees

These fees compriseprofessional services relating to tax compliance, tax planning and tax advice.

All Other Fees

These fees comprise allother services other than those reported above. Our intent is to minimizeservices in this category.

Policy Regarding Audit Committee Pre-Approval And Permitted Non-AuditServices Of Independent Registered Public Accounting Firm

The audit committee hasadopted a policy for pre-approval of audit and permitted non-audit services byour independent registered public accounting firm. The full audit committeeapproves annually projected services and fee estimates for these services andestablishes budgets for major categories of services. The audit committeechairman has been designated by the audit committee to approve any servicesarising during the year that were not pre-approved by the audit committee andservices that were pre-approved but for which the associated fees willmaterially exceed the budget established for the type of service at issue.Services approved by the chairman are communicated to the full audit committeeat its next regular meeting. For each proposed service, the independentregistered public accounting firm is required to provide back-up documentationdetailing said service. The audit committee will regularly review summaryreports detailing all services being provided to us by our independentregistered public accounting firm. During our 2007 fiscal year, all servicesperformed by the independent registered public accounting firm werepre-approved.

18

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ITEM 15. EXHIBITS,FINANCIAL STATEMENT SCHEDULES.

(A)      1. FINANCIAL STATEMENTS:

The Financial Statementshave been omitted because the required information was filed with our OriginalFiling.

2. FINANCIAL STATEMENTSCHEDULES

The Financial Statement Schedule has been omittedbecause the required information was filed with our Original Filing

3. EXHIBITS
| EXHIBIT  NO. | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                              |
|--------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1          |       | Agreement and Plan of Merger, dated November 18,  2004, by and among Source Interlink Companies, Inc., Alliance Entertainment  Corp. and Alligator Acquisition, LLC , incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on November 24, 2004 (File No.  001-13437).                                                            |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 2.2          |       | Agreement and Plan of Merger dated February 28,  2005, between Source Interlink Companies, Inc., a Missouri corporation and  Source Interlink Companies, Inc., a Delaware corporation, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on March 4,  2005 (File No. 001-13437).                                               |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 2.3          |       | Unit Purchase Agreement dated May 10, 2005 between  the Registrant and Chas. Levy Company LLC, incorporated by reference to  Current Report on Form 8-K, as filed with the SEC on May 16, 2005 (File No.  001-13437).                                                                                                                                        |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 2.4          |       | Unit Purchase Agreement dated March 30, 2006 between  the Registrant and Anderson News, LLC, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on April 5, 2006 (File No.  001-13437).                                                                                                                                         |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 2.5          |       | Unit Purchase Agreement dated March 30, 2006 between  the Registrant and Anderson News, LLC, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on April 5, 2006 (File No.  001-13437).                                                                                                                                         |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.9          |       | Certificate of Incorporation of Source Interlink  Companies, Inc., a Delaware corporation, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                                           |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.10         |       | Amended and Restated Bylaws of Source Interlink  Companies, Inc., a Delaware corporation, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                                            |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.10.1       |       | Amendment to Company Bylaws, incorporate by  reference to Current Report on Form 8-K, as filed with the SEC on December  22, 2006 (File No. 001-13437)                                                                                                                                                                                                       |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 4.1          |       | Form of Common Stock Certificate of Source Interlink  Companies, Inc., a Delaware corporation, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                                       |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 4.2          |       | Form of Warrant issued pursuant to a Loan Agreement  dated as of October 30, 2003, by and between Source Interlink Companies,  Inc., its subsidiaries and Hilco Capital, LP, as agent, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on November 5,  2003. (File No. 001-13437).                                           |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 4.3          |       | Form of Warrant Agreement issued pursuant to a Loan  Agreement dated as of October 30, 2003, by and between Source Interlink  Companies, Inc., its subsidiaries and Hilco Capital, LP, as agent, as amended  and restated, incorporated by reference to Registration Statement on Form  S-3, as filed with the SEC on August 30, 2004 (File No. 333-118655). |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 4.4          |       | Warrantholders Rights Agreement dated as of October  30, 2003 by and between Source Interlink Companies, Inc. and Hilco Capital  LP, incorporated by reference to Current Report on Form 8-K, as filed with  the SEC on November 5, 2003 (File No. 001-13437).                                                                                               |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 4.5          |       | Stockholder’s Agreement dated February 28, 2005,  between the Registrant and AEC Associates, LLC, incorporated by reference to  Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                               |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.3**       |       | The Source Information Management Company Amended  and Restated 1995 Incentive Stock Option Plan, incorporated by reference to  Annual Report on Form 10-K, as filed with the SEC on May 1, 2001 (File No.  001-13437).                                                                                                                                      |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.6**       |       | Employment Agreement dated February 28, 2005 between  the Registrant and James R. Gillis, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                                            |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.20**      |       | The Source Information Management Company Amended  and Restated 1998 Omnibus Plan, incorporated by reference to Annual Report on  Form 10-K, as filed with the SEC on May 1, 2001 (File No. 001-13437).                                                                                                                                                      |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.22**      |       | Employment Agreement dated February 28, 2005 between  the Registrant and Jason S. Flegel, incorporated by reference to Current  Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                                                                            |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.31        |       | Lease Agreement by and between Riverview Associates  Limited Partnership and Source Interlink Companies, Inc. dated August 9,  2001, incorporated by reference to Annual Report on Form 10-K, as filed with  the SEC on May 16, 2002 (File No. 001-13437).                                                                                                   |
|         |       |                                                                                                                                                                                                                                                                                                                                                         |
| 10.31.1      |       | Lease Amendment by and between Riverview Associates  Limited Partnership and Source Interlink Companies, Inc. dated August 27,  2003, incorporated by reference to Quarterly Report on Form 10-Q, as filed  with the SEC on September 15, 2003 (File No. 001-13437).                                                                                         |

19

----

 
| 10.31.2  |   | Second Lease Amendment dated April 20, 2005 between  Riverview Associates Limited Partnership and Source Interlink Companies, Inc.  incorporated by reference to Quarterly Report on Form 8-K, as filed with the  SEC on April 21, 2005 (File No. 001-13437).                                                                                                                                                                                                                 |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.32    |   | Industrial Lease between Broadway Properties LTD and  Innovative Metal Fixtures, Inc. dated for reference June 1, 2001, and  Assignment and Assumption Agreement between Innovative Metal Fixtures, Inc.,  Aaron Wire & Metal Products LTD and Broadway Properties LTD dated May 3,  2002, incorporated by reference to Annual Report on Form 10-K, as filed with  the SEC on May 1, 2003 (File No. 001-13437).                                                           |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.33    |   | Net Lease between Conewago Contractors, Inc. and  Pennsylvania International Distribution Services, Inc. dated as of May 1,  2000, incorporated by reference to Annual Report on Form 10-K, as filed with  the SEC on May 1, 2003 (File No. 001-13437).                                                                                                                                                                                                                       |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.33.1  |   | First Amendment to Net Lease between Conewago  Contractors, Inc. and International Periodical Distributors, Inc. effective  September 1, 2003, incorporated by reference to Quarterly Report on Form  10-Q, as filed with the SEC on December 15, 2003 (File No. 001-13437).                                                                                                                                                                                                  |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.33.2  |   | Second Amendment to Net Lease between Conewago  Contractors, Inc. and International Periodical Distributors, Inc. effective  December 1, 2004, incorporated by reference to Quarterly Report on Form 10-Q,  as filed with the SEC on December 10, 2004 (File No. 001-13437).                                                                                                                                                                                                  |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.34    |   | Lease Agreement between Regal Business Center, Inc  and Publisher Distribution Services, Inc. dated as of September 1, 1998, as  amended by First Modification and Ratification of Lease Agreement dated as of  October __, 1998 and Second Modification and Ratification of Lease Agreement  dated as of October __, 2001 (dates omitted in original), incorporated by  reference to Annual Report on Form 10-K, as filed with the SEC on May 1, 2003  (File No. 001-13437). |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.36    |   | Commercial Lease Agreement between NCSC Properties  LLC and Huck Store Fixture Company of North Carolina dated July 1, 2002,  incorporated by reference to Annual Report on Form 10-K, as filed with the  SEC on May 1, 2003 (File No. 001-13437).                                                                                                                                                                                                                            |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.37    |   | Agreement between Louis Nathan Wank, Irving Wank,  Murray Wank, Sylvia Goshen, Anna Godel, Sylvia Thorne and/or Wank Brothers  and Brand Manufacturing Corp. dated June 1, 1989, as amended by Extension of  Lease dated October 22, 1999, incorporated by reference to Annual Report on  Form 10-K, as filed with the SEC on May 1, 2003 (File No. 001-13437).                                                                                                               |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.38    |   | Agreement between Louis Nathan Wank, Irving Wank,  Murray Wank, Sylvia Goshen, Steven Godel, Sylvia Thorne and/or Wank Brothers  and Brand Manufacturing Corporation dated November 1, 1995, as amended by  Extension of Lease dated October 22, 1999, incorporated by reference to  Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No.  001-13437).                                                                                                  |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.39    |   | Agreement between Louis Nathan Wank, Irving Wank,  Murray Wank, Sylvia Goshen, Anna Godel, Sylvia Thorne and/or Wank Brothers  and Brand Manufacturing Corp. dated September 1, 1984, as amended by  Extension of Lease dated October 22, 1999, incorporated by reference to  Annual Report on Form 10-K, as filed with the SEC on May 1, 2003 (File No.  001-13437).                                                                                                         |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.41**  |   | Employment Agreement dated February 28, 2005 between  the Registrant and Marc Fierman, incorporated by reference to Current Report  on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).                                                                                                                                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.44    |   | Amended and Restated Loan Agreement dated February  28, 2005 by and among the Registrant, its subsidiaries, and Wells Fargo  Foothill, Inc., as arranger and administrative agent, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on March 4,  2005 (File No. 001-13437).                                                                                                                                                                    |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.44.1  |   | First Amendment to Amended and Restated Loan  Agreement dated April 18, 2005 by and among Source Interlink Companies, Inc.,  its subsidiaries, Wells Fargo Foothill, Inc., as arranger, administrative  agent and collateral agent, and Wachovia Bank, N.A., as documentation agent,  incorporated by reference to Quarterly Report on Form 8-K, as filed with the  SEC on April 21, 2005 (File No. 001-13437).                                                               |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.44.2  |   | Second Amendment to Amended and Restated Loan  Agreement dated as of October 31, 2006 by and among Source Interlink  Companies, Inc., its subsidiaries, Wells Fargo Foothill, Inc., as arranger,  administrative agent and collateral agent, and Wachovia Bank, N.A., as  documentation agent, incorporated by reference to Current Report on Form 8-K,  as filed with the SEC on December 21, 2006 (File No. 001-13437).                                                     |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.48+   |   | Retail Magazine Supply Agreement between Barnes  & Noble, Inc. and International Periodical Distributors, Inc. dated as of  August 6, 2004, incorporated by reference to Quarterly Report on Form 10-Q,  as filed with the SEC on December 10, 2004 (File No. 001-13437).                                                                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.48.1+ |   | First Amendment to Retail Magazine Supply Agreement  effective as of April 1, 2006 between Barnes & Noble, Inc. and  International Periodical Distributors, Inc. , incorporated by reference to  Current Report on Form 8-K, as filed with the SEC on February 14, 2006 (File  No. 001-13437).                                                                                                                                                                            |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.48.2  |   | Second Amendment to Retail Magazine Supply Agreement  made and entered into as of April 6, 2007 by and between Barnes & Noble,  Inc. and International Periodical Distributors, Inc, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on April 18,  2007 (File No. 001-13437).                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.49**  |   | Employment Agreement dated February 28, 2005 between  the Registrant and Alan Tuchman, incorporated by reference to Current Report  on Form 8-K, as filed with the SEC on March 4, 2005 (File No. 001-13437).                                                                                                                                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.50**  |   | The 1999 Equity Participation Plan of Alliance  Entertainment Corp., incorporated by reference to Exhibit 10.2 to Amendment  No. 1 to Registration Statement on Form S-4, as filed with the SEC on January  18, 2005 (File No. 333-121656).                                                                                                                                                                                                                                   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.51**  |   | The 1999 Employee Equity Participation and Incentive  Plan of Alliance Entertainment Corp., incorporated by reference to Exhibit  10.3 to Amendment No. 1 to Registration Statement on Form S-4, as filed with  the SEC on January 18, 2005 (File No. 333-121656).                                                                                                                                                                                                            |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.52**  |   | Amended and Restated Digital On-Demand, Inc. 1998  Executive Stock Incentive Plan, incorporated by reference to Exhibit 10.4 to  Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC  on January 18, 2005 (File No. 333-121656).                                                                                                                                                                                                                     |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.53**  |   | Amended and Restated Digital On-Demand, Inc. 1998  General Stock Incentive Plan, incorporated by reference to Exhibit 10.5 to  Amendment No. 1 to Registration Statement on Form S-4, as filed with the SEC  on January 18, 2005 (File No. 333-121656).                                                                                                                                                                                                                       |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.54    |   | Multi-Tenant Industrial Triple Net Lease, dated as  of September 5, 2003, between Catellus Development Corporation and AEC One  Stop Group, Inc., incorporated by reference to Exhibit 10.6 to Amendment No.  1 to Registration Statement on Form S-4, as filed with the SEC on January 18,  2005 (File No. 333-121656).                                                                                                                                                      |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.55**  |   | Source Interlink Companies, Inc. Supplemental  Executive Retirement Plan, effective as of March 1, 2005, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on March 4,  2005 (File No. 001-13437).                                                                                                                                                                                                                                              |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.56**  |   | Source Interlink Companies, Inc. Challenge Grant  Program, incorporated by reference to Current Report                                                                                                                                                                                                                                                                                                                                                                        |

 

20

----

 
|         |   | on Form 8-K, as filed with the SEC on March 4, 2005  (File No. 001-13437).                                                                                                                                                                                                                                  |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.57** |   | Executive Participation Agreement dated February 28,  2005 between the Registrant and James R. Gillis, incorporated by reference to  Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                              |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.58** |   | Form of Executive Participation Agreement,  incorporated by reference to Current Report on Form 8-K, as filed with the  SEC on March 4, 2005 (File No. 001-13437).                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.59** |   | Form of Split-Dollar Insurance Agreement,  incorporated by reference to Current Report on Form 8-K, as filed with the  SEC on March 4, 2005 (File No. 001-13437).                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.60   |   | Consulting Agreement dated February 28, 2005 between  the Registrant and The Yucaipa Companies, LLC, incorporated by reference to  Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File No.  001-13437).                                                                                |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.61+  |   | Product Fulfillment Services Agreement dated as of  March 17, 2004 between Barnes & Noble, Inc. and AEC One Stop Group, Inc.,  incorporated by reference to Annual Report on Form 10-K, as filed with the  SEC on April 18, 2005 (File No. 001-13437)                                                   |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.62+  |   | Distribution and Supply Agreement dated May 10, 2005  between the Registrant and Levy Home Entertainment LLC, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on May 16,  2005 (File No. 001-13437)                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.63   |   | Lease Agreement dated May 10, 2005 between Chas.  Levy Company LLC and Chas. Levy Circulating Co. LLC concerning real estate  located at 1140 North Branch Street, Chicago, Illinois, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on May 16,  2005 (File No. 001-13437) |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.65   |   | Lease Agreement dated May 10, 2005 between Chas.  Levy Company LLC and Chas. Levy Circulating Co. LLC concerning real estate  located at 1006 Wright Street, Brainerd, Minnesota                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.66   |   | Lease Agreement dated March 15, 2000 between High  Properties and the Chas. Levy Circulating Company, LLC relating to 1850  Colonial Village Lane, Lancaster, Pennsylvania                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                        |
| 10.66.1 |   | Amendment #1 to the Lease dated December 3, 2003                                                                                                                                                                                                                                                            |

 

21

----

 
| 10.67   |   | Industrial Real Estate Lease dated March 22, 1999  between MICO Archibald Partners, L.L.C. and Anderson News, LLC relating to  2590 East Lindsay Privado, Ontario, California.                                                                            |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                      |
| 10.68** |   | Separation Agreement dated November 10, 2006 between  Source Interlink Companies, Inc. and S. Leslie Flegel, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on November  13, 2006 (File No. 001-13437).                  |
|    |   |                                                                                                                                                                                                                                                      |
| 14.1    |   | Code of Business Conduct and Ethics of Source  Interlink Companies, Inc., a Delaware corporation, incorporated by reference  to Current Report on Form 8-K, as filed with the SEC on March 4, 2005 (File  No. 001-13437).                                 |
|    |   |                                                                                                                                                                                                                                                      |
| 14.2    |   | Code of Ethics for Chief Executive Officer and  Financial Executives of Source Interlink Companies, Inc., a Delaware  corporation, incorporated by reference to Current Report on Form 8-K, as  filed with the SEC on March 4, 2005 (File No. 001-13437). |
|    |   |                                                                                                                                                                                                                                                      |
| 14.3    |   | Code of Conduct for Directors and Executive Officers  of Source Interlink Companies, Inc., a Delaware corporation, incorporated by  reference to Current Report on Form 8-K, as filed with the SEC on March 4,  2005 (File No. 001-13437).                |
|    |   |                                                                                                                                                                                                                                                      |
| 21.1    |   | Subsidiaries of the Registrant.                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                      |
| 23.1    |   | Consent of BDO Seidman, LLP.                                                                                                                                                                                                                              |
|    |   |                                                                                                                                                                                                                                                      |
| 31.1*   |   | Rule 13a-14(a)/15d-14(a) Certification of Principal  Executive Officer.                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                      |
| 31.2*   |   | Rule 13a-14(a)/15d-14(a) Certification of Principal  Financial Officer.                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                      |
| 32.1*   |   | Section 1350 Certification of Principal Executive  Officer and Principal Financial Officer.                                                                                                                                                               |

 

----

*            Filed herewith

**     Indicates management contractor compensatory plan, contract or arrangement

+            Certain material hasbeen omitted pursuant a request for confidential treatment and such materialhas been filed separately with the SEC.

22

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SIGNATURES

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, asamended, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.
|         |   |   | SOURCE INTERLINK COMPANIES, INC. |
|--------------|--------|--------|----------------------------------|
|         |   |   |                             |   |
| May 31, 2007 |   |   | By:                              | /s/ Marc Fierman |   |
|         |   |   |                             | Marc Fierman |
|         |   |   |                             | Chief Financial Officer |
|         |   |   |                             | (principal financial officer) |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, as amended, this reporthas been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated.
| May 31, 2007                        |   | /s/ Michael R. Duckworth                        |   |
|-------------------------------------|--------|-------------------------------------------------|--------|
|                                |   | Michael R. Duckworth                            |
|                                |   | Chairman of the Board of Directors              |
|                                |   | (principal executive officer)                   |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ James R. Gillis                             |   |
|                                |   | James R. Gillis                                 |
|                                |   | Interim Co-Chief Executive Officer and Director |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ Gray Davis                                  |   |
|                                |   | Gray Davis                                      |   |
|                                |   | Director                                        |
|                                |   |                                            |
| May   ,  2007             |   |                                            |   |
|                                |   | Ariel Z. Emanuel                                |
|                                |   | Director                                        |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ David R. Jessick                            |   |
|                                |   | David R. Jessick                                |
|                                |   | Director                                        |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ Allan R. Lyons                              |   |
|                                |   | Allan R. Lyons                                  |
|                                |   | Director                                        |
|                                |   |                                            |
| May     ,  2007 |   |                                            |   |
|                                |   | Gregory Mays                                    |
|                                |   | Director                                        |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ George A. Schnug                            |   |
|                                |   | George A. Schnug                                |
|                                |   | Director                                        |
|                                |   |                                            |
| May 31, 2007                        |   | /s/ Terrence J. Wallock                         |   |
|                                |   | Terrence J. Wallock                             |
|                                |   | Director                                        |
|                                     |        |                                                 |        |  |

 

23

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