FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
AND GUARANTY

     FOURTH  AMENDMENT  TO THIRD  AMENDED  AND  RESTATED  CREDIT  AGREEMENT  AND
GUARANTY  dated as of September 30, 1996  ("Fourth  Amendment")  among  Alliance
Entertainment Corp. ("Alliance"), AEC Holdings (UK) Limited ("AEC (UK)"), Castle
Communications Limited ("Castle"),  each of the BANKS as specified in the Credit
Agreement  referred to below,  each of the GUARANTORS as specified in the Credit
Agreement  referred to below,  and THE CHASE MANHATTAN BANK (successor by merger
to The Chase  Manhattan  Bank,  N.A.), as agent for the Banks (in such capacity,
together with its successors,  the "Agent").  Alliance, AEC (UK), and Castle are
referred  to  herein  individually  as a  "Borrower"  and  collectively  as  the
"Borrowers".

     PRELIMINARY  STATEMENT.  The Borrowers,  the Guarantors,  the Banks and the
Agent have  entered  into a Third  Amended and  Restated  Credit  Agreement  and
Guaranty  dated as of July 25,  1995,  as  amended by First  Amendment  to Third
Amended and Restated  Credit  Agreement  and Guaranty  dated as of September 30,
1995,  as further  amended by a Second  Amendment to Third  Amended and Restated
Credit  Agreement  and Guaranty  dated as of December  31, 1995,  and as further
amended by a Third Amendment to Third Amended and Restated Credit  Agreement and
Guaranty Dated as of June 30, 1996 (as further modified, amended or supplemented
from time to time, the "Credit Agreement").  Any term used herein shall have the
meaning assigned to such term in the Credit Agreement.

     Each of the parties  hereto have  agreed to amend the Credit  Agreement  as
hereinafter set forth.

     SECTION  1.  Amendments  to Credit  Agreement.  The  Credit  Agreement  is,
effective  as of  the  date  hereof  and  subject  to  the  satisfaction  of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows;

(1) The following definition is added in its proper alphabetical order:

     "Matrix  Acquisition" means the acquisition by Alliance of Matrix Software,
Inc. under and pursuant to the terms of that certain Merger  Agreement  Dated as
of October 11, 1996.

     (2) The  definition of "Permitted  Acquisition"  is amended by adding after
"purchase" in the last line thereof the following:

"and (4) the Matrix Acquisition".

     (3) The  definition  of  "Permitted  Acquisition  Amount" is amended in its
entirety to read as follows:

     " ' Permitted  Acquisition Amount' means (1) during the period from July 1,
1996 to and  including  October 10,  1996,  Four  Million  Six Hundred  Thousand
Dollars ($4,600,000), and (2)



<PAGE>



during the period from October 11, 1996 to and  including  December 31, 1996, up
to Two Million One Hundred Thousand Dollars  ($2,100,000) in Cash  consideration
in connection with the Matrix Acquisition."

     (4) The definition of "Permitted Employee Loans" is amended by deleting all
text after  "that," in the fourth line  thereof and  inserting  in its place the
following:  ", the aggregate  principal  amount of all such loans or advances to
all employees  outstanding  at any time is equal to or less than One Million Six
Hundred Twenty Thousand Dollars  ($1,620,000)  less an amount equal to the total
of all repayments of such loans or advances made by all employees."

     (5) The definition of "Permitted  Investment  Affiliate Advance" is amended
by deleting all text after  "that" in the second line  thereof and  inserting in
its place the following: " , the aggregate principal amount of all such loans or
advances to  Investment  Affiliates  outstanding  at an time is equal to or less
than Twelve Million Five Hundred Thousand Dollars  ($12,500,000)  less an amount
equal to the  total of all  repayments  of such  loans or  advances  made by all
Investment Affiliates."

     (6) The definition of "Permitted Investments" is amended by deleting clause
"(3)" thereof in its entirety.

     (7) The  definition  of  "Permitted  Investment  Amount"  is amended in its
entirety to read as follows:

     "Permitted  Investment  Amount"  means an  amount  equal  to eight  Hundred
Thousand Dollars  ($800,000) less an amount equal to the total of all repayments
of Permitted Investments.

     (8) Section 8.10, New Restricted Subsidiaries,  is amended by adding at the
end thereof the following:

     "Notwithstanding  the  foregoing,  no  Subsidiary is or can be designated a
Restricted  Subsidiary  if the  assets  of or any of the  capital  stock of such
Subsidiary was acquired by Alliance or any of its  Subsidiaries  in exchange for
or  otherwise  through the  issuance of capital  stock of Alliance or any of its
Subsidiaries."

     (9) The financial  test set forth in Section 10.02,  Consolidated  Leverage
Ratio,  is deleted for September  30, 1996 and each of the  financial  tests set
forth in Section  10.03,  Consolidated  Cash Flow  Coverage  Ratio,  and Section
10.05,  Consolidated  Minimum Interest  Coverage Ratio, are deleted for the four
quarters (taken as a whole) ended September 30, 1996.

     SECTION 2. Conditions of Effectiveness.  This Fourth Amendment shall become
effective  as of the date on which  each of the  following  conditions  has been
fulfilled:

     (1) This Fourth  Amendment.  The Borrowers,  the  Guarantors,  the Required
Banks  and the  Agent  shall  each  have  executed  and  delivered  this  Fourth
Amendment.



<PAGE>




     (2) Amendment  Fee.  Alliance shall have paid to the Agent an amendment fee
in the amount of Two Hundred  Forty  Thousand  Six Hundred  Twenty-Five  Dollars
($240,625) for the account of the Banks, and the Agent will deliver to each Bank
its Pro Rata Share of such fee.

     3. Officer's  Certificate.  The following  statements shall be true and the
Agent shall have received a certificate  signed by a duly authorized  officer of
Alliance dated the date hereof stating that,  after giving effect to this Fourth
Amendment and the transactions contemplated hereby:

     (a) The  representations  and warranties  contained in the Credit Agreement
and in each of the other Loan Documents are correct on and as of the date hereof
as  though  made  on and as of  such  date  in all  material  respects  if  such
representation  and  warranty  is  not  subject  to a  Material  Adverse  Change
exception,  and if  such  representation  and  warranty  is  subject  to such an
exception, is correct, and

(b) No Default or Event of Default has occurred and is continuing.

     (4) Additional  Documentation.  The Agent and each Bank shall have received
such  other  approvals,  opinions  or  documents  as the  Agent or such Bank may
reasonably request.

     SECTION  3.  Reference  to and Effect on the Loan  Documents.  (a) Upon the
effectiveness  of Section 1 hereof,  on and after the date hereof each reference
in the Credit Agreement to "this Agreement",  "hereunder", "hereof", "herein" or
words of like  import,  and each  reference  in the other Loan  Documents to the
Credit  Agreement,  shall mean and be a  reference  to the Credit  Agreement  as
amended hereby.

     (b) The  execution,  delivery and  effectiveness  of this Fourth  Amendment
shall not operate as a waiver of any right,  power or remedy of the Agent or any
Bank under any of the Loan  Documents,  nor constitute a waiver of any provision
of any of the Loan Documents,  and, except as specifically  provided herein, the
Credit  Agreement  and each other Loan  Document  shall remain in full force and
effect and are hereby ratified and confirmed.

     SECTION 4. Costs,  Expenses and Taxes.  Alliance  agrees to  reimburse  the
Agent and each Bank on demand for  out-of-pocket  costs,  expenses  and  charges
(including  without  limitation,  all fees and charges of external legal counsel
for the Agent and each Bank)  incurred by the Agent and each Bank in  connection
with the  preparation,  reproduction,  execution  and  delivery  of this  Fourth
Amendment and any other instruments and documents to be delivered hereunder.  In
addition,  Alliance shall pay any and all stamp and other taxes and fees payable
or  determined  to be payable in  connection  with the  execution  and delivery,
filing or  recording  of this Fourth  Amendment  and the other  instruments  and
documents to be delivered hereunder,  and agrees to save the Agent and each Bank
harmless from and against any and all  liabilities  with respect to or resulting
from any delay in paying or omission to pay such taxes or fees.

     SECTION 5.  Governing Law. This Fourth  Amendment  shall be governed by and
construed in accordance with the laws of the State of New York.


<PAGE>



     SECTION 6. Headings. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Fourth Amendment for any other purpose.

     SECTION 7.  Counterparts.  This  Fourth  Amendment  may be  executed in any
number of counterparts, all of which taken together shall constitute one and the
same  instrument,  and any party  hereto may execute  this Fourth  Amendment  by
signing any such counterpart.

     IN WITNESS HEREOF,  the parties hereto have caused this Fourth Amendment to
be duly executed as of the day and year first above written.

ALLIANCE ENTERTAINMENT CORP.


By /s/ Elliot B. Newman
     --------------------------------------------
Name:    Elliot B. Newman
Title:   Senior Executive Vice President

AEC ONE STOP GROUP, INC.


By
     ------------------------------------------------
Name:     Anil K. Narang
Title:    Vice Chairman, President and
              Chief Financial Officer

PASSPORT DISTRIBUTION, INC.


By /s/ Elliot B. Newman
     ----------------------------------------------
Name:     Elliot B. Newman
Title:    Executive Vice President

CASTLE COMMUNICATIONS LIMITED


By /s/ Elliot B. Newman
     -------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President




<PAGE>



CASTLE COMMUNICATIONS (U.S.), INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President

EXECUSOFT, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President

CONCORD JAZZ, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President

THE JAZZ ALLIANCE, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


PASSPORT MUSIC WORLDWIDE, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President







<PAGE>



AEC ACQUISITION CORP.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


AEC AMERICAS, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


ALLIANCE VENTURES, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


PREMIER ARTISTS SERVICES, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


PREMIER SIGNATURES, INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President







<PAGE>



FL ACQUISITION CORP.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


DISQUEMUSIC COMMERCIAL IMPORTADORA
LTDA.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


BRASISON DISTRIBUIDORA DE DISCOS
LTDA.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


AEC HOLDINGS (UK) LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


CASTLE COMMUNICATIONS (DEUTSCHLAND)


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President





<PAGE>



THE ST. CLAIR ENTERTAINMENT GROUP
INC.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


A.E. LAND CORP.


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


DOJO LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


HENDRING LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


EASTERN LIGHT PRODUCTIONS LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President







<PAGE>



WHITE METAL MUSIC LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


CASTLE COPYRIGHTS LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


KAZ RECORDS LIMITED


By /s/ Elliot B. Newman
     --------------------------------------------------
Name:    Elliot B. Newman
Title:   Executive Vice President


INDEPENDENT NATIONAL DISTRIBUTORS INC.


By /s/ Christopher J. Joyce
     --------------------------------------------------
Name:    Christopher J. Joyce
Title:   Executive Vice President


ONE WAY RECORDS, INC.


By /s/
     --------------------------------------------------
Name:    Anil K. Narang
Title:   Executive Vice President







<PAGE>



DEJA VU MUSIC, INC.


By /s/
     --------------------------------------------------
Name:    Anil K. Narang
Title:   Executive Vice President


THE CHASE MANHATTAN BANK,
   as Bank


By /s/ Maria B. Florez
     --------------------------------------------------
Name:    Maria B. Florez
Title:   Vice President


THE CHASE MANHATTAN BANK,
 (London Branch) as Bank


By /s/ Maria B. Florez
     --------------------------------------------------
Name:    Maria B. Florez
Title:   Vice President


CREDITSTALT CORPORATE
 FINANCE, INC.


By /s/ Clifford L. Wells
     --------------------------------------------------
Name:    Clifford L. Wells
Title:   Vice President


By /s/ Fiona McKone
     --------------------------------------------------
Name:    Fiona McKone
Title:   Senior Associate






<PAGE>



CREDITANSTALT-BANKVEREIN,
 (London Branch)


By /s/ E. Wenusch
     --------------------------------------------------
Name:    E. Wenusch
Title:   Assistant Director

By /s/ M.A. Bowles
     --------------------------------------------------
Name:    M.A. Bowles
Title:   Senior Manager


THE FIRST NATIONAL BANK OF CHICAGO


By /s/ John D. Runger
     --------------------------------------------------
Name:    John D. Runger
Title:   Managing Director


THE FIRST NATIONAL BANK OF CHICAGO
 (London Branch)


By /s/ John D. Runger
     --------------------------------------------------
Name:    John D. Runger
Title:   Managing Director


IBJ SCHRODER BANK & TRUST COMPANY


By
     --------------------------------------------------
Name:
Title:








<PAGE>



NATIONAL BANK OF CANADA


By /s/ Gaetan R. Frosina
     --------------------------------------------------
Name:    Gaetan R. Frosina
Title:   Vice President

By /s/ Joseph M. Triseso
     --------------------------------------------------
Name:    Joseph M. Triseso
Title:   Assistant Vice President


EUROPEAN AMERICAN BANK,


By /s/ Robert Maichin
     --------------------------------------------------
Name:    Robert Maichin
Title:   Vice President

ABN AMRO BANK N.V.


By /s/ K. Page
     --------------------------------------------------
Name:    K. Page
Title:   Authorized Signatories

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION


By /s/ Russell D. Solomon
     --------------------------------------------------
Name:   Russell D. Solomon
Title:  Vice President










<PAGE>



BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
 (London Branch)


By /s/ Russell D. Solomon
     --------------------------------------------------
Name:    Russell D. Solomon
Title:   Vice President


GIROCREDIT BANK
    AKTIENGESELLSCHAFT der
    SPARKASSEN, Grand Cayman
    Island Branch


By /s/ Anca Trifan
     --------------------------------------------------
Name:    Anca Trifan
Title:   Vice President


By /s/
     --------------------------------------------------
Name:
Title:

NATIONAL CITY BANK


By /s/ Lisa Beth Lisi
     --------------------------------------------------
Name:    Lisa Beth Lisi
Title:   Account Officer












<PAGE>


FIRST SOURCE FINANCIAL, LLP.

by FIRST SOURCE FINANCIAL, INC.,
     Its Agent


By /s/ James W. Wilson
     --------------------------------------------------
Name:   James W. Wilson
Title:  Senior Vice President


THE BANK OF NOVA SCOTIA


By /s/ Brian Allen
     --------------------------------------------------
Name:   Brian Allen
Title:  Senior Relationship Manager


SCOTIABANK (U.K.), LTD.


By /s/ Barry G. Hodges
     --------------------------------------------------
Name:    Barry G. Hodges
Title:   Relationship Manager


THE CHASE MANHATTAN BANK,
 as Agent


By /s/ Maria B. Florez
     --------------------------------------------------
Name:    Maria B. Florez
Title:   Vice President