W. Townsend Ziebold.  Jr.
Managing Director



                                            Wasserstein Perella & Co., Inc.
                                            31 West 52nd Street
WASSERSTEIN                                 New York, New, York 10019
PERELLA & CO                                Telephone 212-969-2690
                                            Fax 2l2-969-7879



August 15, 1996


Alliance Entertainment Corp.
110 East 59th Street
New York, NY 10022

Attention:    Joseph J. Bianco
              Anil K. Narang

Gentlemen:

     This letter confirms our understanding that Wasserstein Perella & Co., Inc.
("WP&Co.")  has been engaged as a financial  and  strategic  advisor to Alliance
Entertainment  Corp. (the "Company") to provide certain  financial  advisory and
investment  banking services to the Company.  References herein to the "Company"
include  affiliates of the Company and any entity that the Company or any of its
affiliates may form to pursue any of the transactions  contemplated  hereby.  If
appropriate in connection with  performing its services  hereunder,  WP&Co.  may
utilize the  services of one or more of its  affiliates,  including  Wasserstein
Perella  Securities,  Inc.,  in which  case  references  herein to WP&Co.  shall
include such affiliates.

     1 . WP&Co.,  in its  capacity as  financial  advisor to the  Company,  will
perform such of the following  financial and strategic  advisory and  investment
banking services as the Company may reasonably request:

(a) WP&Co. will meet with the Company's management and familiarize itself to the
extent  it  reasonably  deems  necessary,  appropriate  and  feasible  with  the
business,  operations,  properties,  financial  condition  and  prospects of the
Company in order to better  determine  ways in which WP&Co.  can  facilitate the
Company's  financial and strategic  objectives.  The Company agrees to cause the
chief executive  officer and each  co-chairman to meet with WP&Co. at least once
every  quarter on an agreed  date to discuss  among other  things the  financial
condition


<PAGE>



and business plan of the Company and any significant recent developments;

     (b) WP&Co.  will advise and assist the Company at the Company's  request in
identifying  and/or  evaluating  various  financial  alternatives  that  may  be
available  to the  Company to enhance  shareholder  values,  including,  without
limitation, a public or private sale of equity or debt securities of the Company
or such other form of financial  transaction  that WP&Co.,  after completing the
familiarization  process provided for in subparagraph l(a) hereof,  believes may
be of possible  interest to the Company  (each a  "Financial  Transaction"),  it
being  understood and agreed that nothing  contained  herein shall  constitute a
commitment by WP&Co. to underwrite, place or purchase any securities;

     (c) WP&Co.  will advise and assist the Company at the Company's  request in
identifying and/or evaluating various non-financial  strategic alternatives that
may be available to the Company to enhance shareholder value, including, without
limitation,  an  acquisition  of all or a  significant  portion of the assets or
equity  securities of another  corporation or other business entity, a merger or
consolidation  or other  business  combination  involving the Company and one or
more third parties, a sale (whether or not the proposal therefor is solicited or
unsolicited) of the Company or a significant  portion of its equity  securities,
assets  or  businesses  to one or more  third  parties,  a  recapitalization  or
restructuring  of  the  Company  (including   through   spin-offs,   split-offs,
repurchases by the Company of its equity or other  securities,  an extraordinary
dividend or any similar  transaction),  a liquidation of the Company, a material
joint  venture,  a  strategic  alliance or such other form of  transaction  that
WP&Co.,   after   completing  the   familiarization   process  provided  for  in
subparagraph  l(a) hereof,  believes may be of possible  interest to the Company
(each a "Strategic Transaction");

     (d) If the Company  determines  in the ordinary  course of business that it
will utilize a financial  advisor to consider or undertake one or more Financial
and/or Strategic  Transactions,  WP&Co.  will, subject to the provisions of this
agreement, advise and assist the Company with respect thereto;

     (e) The Company agrees that, in the event it retains a financial advisor in
connection with any such matter,  WP&Co. shall serve as the Company's  exclusive
financial advisor with respect to matters relating to takeover defense; and

     (f) WP&Co. will render such other financial advisory and investment banking
services as may from time to time be agreed upon by WP&Co. and the Company.

     If  the  Company  requests  services  hereunder,  the  Company  shall  make
available  to WP&Co.  all  information  concerning  the  business,  assets,  the
operations,  financial  condition  and  prospects  of the  Company  that  WP&Co.
reasonably  requests in  connection  with the services to be  performed  for the
Company  hereunder,  and shall  provide  WP&Co.  with  reasonable  access to the
Company's  officers,  directors,  employees,  independent  accountants and other
advisors and agents as WP&Co. shall deem appropriate.



<PAGE>



2.   WP&Co.'s compensation for services rendered under this engagement
will include the following cash fees:

     (a) An annual  retainer fee of $150,000,  the first two annual  payments of
which  are due and  shall  be paid by the  Company  upon the  execution  of this
agreement, and subsequent payments of which shall be due and paid by the Company
in  advance  on each  subsequent  annual  anniversary  (beginning  on the second
anniversary)  of the date of this agreement  during the term of this  agreement.
The  initial  retainer  fee of  $300,000  payable  to  WP&Co.  pursuant  to this
subparagraph  2(a)  shall be  non-refundable.  Half of the annual  retainer  fee
either paid as of the date of this agreement or payable in any future year shall
be  credited  against  any  fees  paid by the  Company  to  WP&Co.  pursuant  to
paragraphs  2(b),  2(c), and 2(d) below during the year in respect of which such
retainer fee is paid.

     (b) In connection with any Financial Transaction, financing fees, customary
under the  circumstances,  the precise  amounts of which shall be agreed upon by
the Company and WP&Co.  It is  understood  and agreed that in the event that the
Company  determines  to engage in any  Financial  Transaction  for which it will
engage a financial  advisor,  WP&Co shall be offered the right, but shall not be
obligated,  to act as: (i) co-manager  with respect to a public  offering of the
Company's equity  securities,  unless the chief executive officer of the Company
shall  reasonably  determine in good faith that the  appointment of WP&Co.  as a
co-manager would have a material adverse effect on the ability of the Company to
obtain  or  retain  analyst  coverage  from  one or more  nationally  recognized
investment  banks,  (ii) sole, or at WP&Co.'s option,  lead agent of any private
placement of the Company's equity securities, and (iii) co-manager of any public
offering or private placement of the Company's debt securities.

     (c) In connection with any Strategic  Transaction  involving  substantially
all of the capital stock or assets of the Company,  a  transaction  fee based on
Aggregate  Consideration (as hereafter defined) calculated as follows:  (i) 1.5%
of the first $250  million  of  Aggregate  Consideration,  plus (ii) 1.0% of the
Aggregate  Consideration,  if any,  between $250 million and $500 million,  plus
(iii) 0.75% of the Aggregate Consideration,  if any, between $500 million and $1
billion, plus (iv) 0.5% of the Aggregate Consideration,  if any, in excess of $1
billion provided,  however, that the minimum transaction fee payable pursuant to
this subparagraph  2(c) shall be $3.0 million.  It is understood and agreed that
in the event that the Company determines to engage in any Strategic  Transaction
for which it will engage a financial advisor, WP&Co. shall be offered the right,
but shall not be obligated,  to act as the Company's exclusive financial advisor
in  connection  with  such  Strategic  Transaction.  In the  event  the board of
directors of the Company  determines that a fairness  opinion is required from a
non-affiliated,  third party nationally  recognized investment bank, WP&Co. will
pay for the fee for such  opinion,  provided that the Company pays for the first
$50,000 of such  opinion  and  provided  that WP&Co.  and the  Company  mutually
participate in the retention of such third party investment bank.

     For purposes of this  subparagraph  2(c), the term Aggregate  Consideration
shall mean the total  amount of cash and the fair  market  value (on the date of
payment) of all other


<PAGE>



     property paid or payable,  directly or indirectly,  by the acquiring  party
(the  "Acquiror") to the acquired  party or the seller of the acquired  business
(in either case, the "Acquired"),  or for securities of the Acquired,  or by the
Acquired  to the  Acquired's  equity  security  holders,  in  connection  with a
Strategic  Transaction  or a transaction  related  thereto  (including,  without
limitation,  amounts  paid by the  Acquiror  (A)  pursuant to  covenants  not to
compete,   employment  contracts,   employee  benefit  plans  or  other  similar
arrangements of the Acquired and (B) to holders of any warrants,  stock purchase
rights,  convertible securities or similar rights of the Acquired and to holders
of any options or stock appreciation  rights issued by the Acquired,  whether or
not  vested).  Aggregate  Consideration  shall  also  include  the  value of any
long-term liabilities (including the short-term portion thereof) of the Acquired
(including  the  principal  amount  of  any  indebtedness  for  borrowed  money)
indirectly or directly assumed or acquired by the Acquiror,  or otherwise repaid
or retired, in connection with or in anticipation of a Strategic Transaction. In
the event of a Strategic  Transaction that takes the form of a  recapitalization
or  restructuring  of  the  Company  (including,   without  limitation,  through
negotiated   repurchases  of  its   securities,   an  issuer  tender  offer,  an
extraordinary dividend, a spin-off, split-off or similar transaction), Aggregate
Consideration  shall  also  include  the fair  market  value  of (i) the  equity
securities of the Company retained by the Company's  security holders  following
such  transaction  and  (ii)  any  cash,  securities  (including  securities  of
subsidiaries) or other consideration  received by the Company's security holders
in exchange for or in respect of securities  of the Company in  connection  with
such transaction (all such cash,  securities or other consideration  received by
such security holders being deemed to have been paid to such security holders in
such  transaction).  If a Strategic  Transaction takes the form of a purchase of
assets,  Aggregate Consideration shall also include (i) the value of any current
assets  not  purchased,  minus  (ii) the value of any  current  liabilities  not
assumed  by the  Acquiror.  In the event that any part of the  consideration  in
connection  with any  Strategic  Transaction  will be  payable  (whether  in one
payment  or a  series  of two  or  more  payments)  at any  time  following  the
consummation thereof, the term Aggregate Consideration shall include the present
value of such future payment or payments,  agreed upon in good faith between the
Company and WP&Co.

     (d) In  connection  with any  Strategic  Transaction  that does not involve
substantially all of the assets or capital stock of the Company and in which the
Company would retain a financial  advisor,  the Company and WP&Co. shall in good
faith negotiate a fee that would be customary for such a transaction.

     (e)  Financing  and/or  transaction  fees  payable  to WP&Co.  pursuant  to
subparagraphs   2(b),  2(c),  and  2(d)  above  shall  be  contingent  upon  the
consummation  of the  relevant  transaction  and  payable  on the  closing  date
thereof.

     3. In addition to any fees payable by the Company to WP&Co. hereunder,  the
Company shall, whether or not any Financial Transaction or Strategic Transaction
shall be proposed or  consummated,  reimburse  WP&Co. on a monthly basis for its
travel and other  reasonable  out-of-pocket  expenses  (including all reasonable
fees, disbursements and other


<PAGE>



     charges of counsel to be retained by WP&Co.,  and of other  consultants and
advisors retained by WP&Co.  with the Company's  consent) incurred in connection
with,  or arising  out of  WP&Co.'s  activities  under or  contemplated  by this
engagement;  provided  that the  Company  shall not be  required to pay any such
expenses  in excess of an amount set forth in a budget  agreed to by WP&Co.  and
the  Company in  connection  with any  specific  assignment  for which  WP&Co is
engaged.  The Company shall also reimburse WP&Co., at such times as WP&Co. shall
request, for any sales, use or similar taxes (including additions to such taxes,
if any) arising in connection with any matter  referred to or  contemplated  by,
this engagement.  Such reimbursements  shall be made promptly upon submission by
WP&Co. of statements for such expenses.

     4. The Company recognizes and confirms that, in advising the Company and in
completing  its  engagement  hereunder,  WP&Co.  will be using  and  relying  on
publicly  available  information and on data,  material,  and other  information
furnished to WP&Co.  by the Company and other parties.  It is understood that in
performing  under this engagement  WP&Co.  may assume and rely upon the accuracy
and  completeness  of, and is not assuming any  responsibility  for  independent
verification of, such publicly  available  information and the other information
so furnished.

     5. The Company and WP&Co.  have entered into a separate  letter  agreement,
dated the date hereof and attached hereto,  providing for the indemnification by
the  Company  of  WP&Co.  and  certain  related  persons.  Such  indemnification
agreement  is an  integral  part of this  agreement  and the terms  thereof  are
incorporated  by  reference  herein.  As stated  therein,  such  indemnification
agreement  shall survive any  termination  or completion of WP&Co.'s  engagement
hereunder.

     6. This  agreement and WP&Co.'s  engagement  hereunder may be terminated by
either the Company or WP&Co.  at any time  effective  after August 15, 1999 upon
thirty days' prior written notice thereof to the other party; provided, however,
that (a)  termination  of  WP&Co.'s  engagement  hereunder  shall not affect the
Company's continuing  obligation to indemnify WP&Co. and certain related persons
as  provided  in the  separate  letter  agreement  referred  to  above  and  its
continuing  obligation under paragraph 7 hereof,  (b)  notwithstanding  any such
termination,  WP&Co.  shall be entitled to (i) the full annual  retainer fees in
the amounts and at the times provided for in paragraph 2(a) hereof, and (ii) the
full financing  and/or  transaction fees agreed upon pursuant to or provided for
in  paragraphs  2(b) and 2(c)  hereof in the event that at any time prior to the
expiration six months  following  such  termination,  any Financial  Transaction
and/or any Strategic Trans be, is  consummated;  and (c) termination of WP&Co.'s
engagement he the Company's  obligation to reimburse the expenses accruing prior
to extent provided for herein.

     7.  WP&Co.  has  been  retained  under  this  agreement  as an  independent
contractor with duties owed solely to the Company.  The advice (oral or written)
rendered by WP&Co. pursuant to this agreement is intended solely for the benefit
and use of the Board of Directors of the Company in  considering  the matters to
which this agreement relates, and the Company agrees that such advice may not be
relied upon by any other person, used


<PAGE>



for any other purpose or reproduced,  disseminated, quoted or referred to at any
time,  in any  manner or for any  purpose,  nor shall any public  references  to
WP&Co. be made by the Company without the prior written consent of WP&Co.

     8.  The  Company  agrees  that  WP&Co.   shall  have  the  right  to  place
advertisements in financial and other newspapers and journals at its own expense
describing  its services to the Company  hereunder,  provided  that WP&Co.  will
submit a copy of any such  advertisement to the Company for its approval,  which
approval shall not be unreasonably withheld or delayed.

     9. This agreement  shall be deemed made in New York. This agreement and all
controversies arising from or relating to performance under this agreement shall
be governed by and  construed  in  accordance  with the laws of the State of New
York, without giving effect to such state's rules concerning  conflicts of laws.
The Company hereby irrevocably consents to personal jurisdiction in any court of
the State of New York or any Federal court  sitting in the Southern  District of
New York for the purposes of any suit, action or other proceeding arising out of
this agreement or any of the  agreements or  transactions  contemplated  hereby,
which is brought by or against the Company, hereby waives any objection to venue
with respect  thereto,  and hereby agrees that all claims in respect of any such
suit,  action or proceeding may be heard and  determined in any such court.  The
Company  hereby  irrevocably  consents  to the  service of process of any of the
aforementioned  courts in any such suit,  action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid,  to the Company
at its address set forth above,  such service to become  effective ten (10) days
after  such  mailing.  ANY RIGHT TO TRIAL BY JURY WITH  RESPECT  TO ANY CLAIM OR
ACTION  ARISING  OUT OF THIS  AGREEMENT  OR  CONDUCT  IN  CONNECTION  WITH  THIS
ENGAGEMENT IS HEREBY WAIVED.

     10. This agreement may be executed in counterparts,  each of which together
shall be  considered a single  document.  This  agreement  shall be binding upon
WP&Co.  and the  Company  and their  respective  successors  and  assigns.  This
agreement  is not intended to confer any rights upon any  shareholder,  owner or
partner of the  Company,  or any other  person not a party hereto other than the
indemnified  persons  referenced in the  indemnification  agreement  referred to
above.

     11. It is understood  and agreed that WP&Co.  and its  affiliates  may from
time to time make a market in, have a long or short position in, buy and sell or
otherwise effect  transactions for customer  accounts and for their own accounts
in the securities of, or perform  investment  banking or other services for, the
Company and other  entities  which are or may be the  subject of the  engagement
contemplated by this agreement.  It is further understood that neither WP&Co. or
any of its affiliates will use any  information  obtained in connection with its
services  provided  pursuant  to this  agreement  (unless  such  information  is
publicly  available  or generally  known) in  conducting  any of the  activities
described in this paragraph.



<PAGE>



     12.  Any  payments  to be made to WP&Co.  hereunder  and under the  related
indemnification  agreement  referred to above shall be in U.S. dollars and shall
be free of all withholding,  stamp and other taxes and of all other governmental
charges of any nature whatsoever.

     We are  pleased to accept  this  engagement  and look  forward to acting as
financial  and  strategic  advisor  to the  Company.  Please  confirm  that  the
foregoing is in accordance with your  understanding  by signing and returning to
us the enclosed  duplicate of this letter,  which shall  thereupon  constitute a
binding agreement between WP&Co. and the Company.

                                Very truly yours,

                                              WASSERSTEIN PERELLA & CO., INC.

                                              By: /s/W. Townsend Ziebold, Jr.
                                             ---------------------------------
                                              Name: W. Townsend Ziebold, Jr.
                                              Title: Managing Director

ACCEPTED AND AGREED TO:
ALLIANCE ENTERTAINMENT CORP.


By: /s/Timothy J. Dahltorp
     ---------------------------------------------
     Name: Timothy J. Dahltorp
     Title: Executive Vice President

















<PAGE>



August 15, 1996


Wasserstein Perella & Co., Inc.
31 West 52nd Street
New York, NY 10019

Gentlemen:

     In connection with your engagement as our financial  advisor  pursuant to a
separate  agreement  between you and, us, we hereby agree to indemnify  and hold
harmless  Wasserstein Perella & Co., Inc.  ("WP&Co.") and its affiliates,  their
respective directors,  officers,  agents, employees and controlling persons, and
each of their respective successors and assigns (collectively,  the "indemnified
persons"),  to the full extent  lawful,  from and  against  all losses,  claims,
damages,  liabilities and expenses  incurred by them which (A) are related to or
arise  out of (i)  actions  or  alleged  actions  taken or  omitted  to be taken
(including any untrue  statements made or any statements  omitted to be made) by
us or (ii)  actions  or  alleged  actions  taken  or  omitted  to be taken by an
indemnified  person  with our  consent  or in  conformity  with our  actions  or
omissions or (B) are  otherwise  related to or arise out of WP&Co.'s  activities
under WP&Co.'s engagement. We will not be responsible,  however, for any losses,
claims, damages, liabilities or expenses pursuant to clause (B) of the preceding
sentence which are finally judicially determined to have resulted primarily from
the gross negligence or willful misconduct of the person seeking indemnification
hereunder.  We also agree that no indemnified person shall have any liability to
us for or in connection with such  engagement or any  transactions or conduct in
connection therewith except for losses, claims, damages, liabilities or expenses
incurred  by us  which  are  finally  judicially  determined  to  have  resulted
primarily from the gross  negligence or willful  misconduct of such  indemnified
person;  provided,  however,  that in no event  shall the  indemnified  persons'
aggregate  liability  to us exceed the fees  WP&Co.  actually  receives  from us
pursuant to its engagement  referred to above,  unless there is a final judicial
determination of willful misconduct specified in this sentence.

     After  receipt by an  indemnified  person of notice of any complaint or the
commencement of any action or proceeding  with respect to which  indemnification
is being  sought  hereunder,  such  person  will  notify us in  writing  of such
complaint or of the commencement of such action or proceeding, but failure so to
notify us will relieve us from any liability  which we may have  hereunder  only
if, and to the extent  that such  failure  results  in the  forfeiture  by us of
substantial  rights and defenses,  and will not in any event relieve us from any
other  obligation  or  liability  that  we may  have to any  indemnified  person
otherwise than under this letter  agreement.  If we so elect or are requested by
such  indemnified  person,  we  will  assume  the  defense  of  such  action  or
proceeding,  including the  employment  of counsel  reasonably  satisfactory  to
WP&Co.  and the payment of the fees and  disbursements  of such counsel.  In the
event,  however,  such indemnified person reasonably  determines in its judgment
that  having  common  counsel  would  present  such  counsel  with a conflict of
interest or if the defendants in, or targets of,


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any such action or  proceeding  include both an  indemnified  person and us, and
such indemnified  person  reasonably  concludes that there may be legal defenses
available  to it or other  indemnified  persons  that are  different  from or in
addition  to those  available  to us, or if we fail to assume the defense of the
action  or  proceeding  or to employ  counsel  reasonably  satisfactory  to such
indemnified  person,  in either case in a timely manner,  then such  indemnified
person may employ separate  counsel to represent or defend it in any such action
or  proceeding  and we will  pay the  fees and  disbursements  of such  counsel;
provided,   however,  that  we  will  not  be  required  to  pay  the  fees  and
disbursements  of more than one separate  counsel (in addition to local counsel)
for  all  indemnified  persons  in any  jurisdiction  in any  single  action  or
proceeding.  In any action or  proceeding  the  defense of which we assume,  the
indemnified  person will have the right to participate in such litigation and to
retain its own counsel at such  indemnified  person's  own  expense.  We further
agree that we will not,  without the prior written consent of WP&Co.,  settle or
compromise or consent to the entry of any judgement in any pending or threatened
claim,  action,  suit or  proceeding  in  respect  of which  indemnification  or
contribution  may be  sought  hereunder  (whether  or not  WP&Co.  or any  other
indemnified person is an actual or potential party to such claim,  action,  suit
or  proceeding)  unless  such  settlement,  compromise  or consent  includes  an
unconditional release of WP&Co. and each other indemnified person hereunder from
all liability arising out of such claim, action, suit or proceeding.

     We  agree  that if any  indemnification  sought  by an  indemnified  person
pursuant to this letter  agreement is held by a court to be unavailable  for any
reason other than as specified in the second  sentence of the first paragraph of
this letter agreement,  then (whether or not WP&Co. is the indemnified  person),
we and WP&Co. will contribute to the losses,  claims,  damages,  liabilities and
expenses  for  which  such  indemnification  is  held  unavailable  (i) in  such
proportion as is appropriate to reflect the relative  benefits to us, on the one
hand,  and WP&Co.,  on the other hand,  in connection  with WP&Co.'s  engagement
referred to above, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the  relative  benefits  referred to in clause (i),  but also the  relative
fault of us, on the one hand,  and  WP&Co.,  on the other  hand,  as well as any
other relevant equitable considerations; provided however, that in any event the
aggregate  contribution of all indemnified  persons,  including  WP&Co.,  to all
losses,  claims,  damages,  liabilities  and  expenses  with  respect  to  which
contribution is available  hereunder will not exceed the amount of fees actually
received by WP&Co. from us pursuant to WP&Co.'s engagement referred to above. It
is hereby agreed that for purposes of this paragraph,  the relative  benefits to
us, on the one hand,  and WP&Co.,  on the other hand,  with  respect to WP&Co.'s
engagement  shall be deemed to be in the same  proportion as (i) the total value
paid or proposed to be paid or received by us or our  stockholders,  as the case
may be,  pursuant  to the  transaction,  whether or not  consummated,  for which
WP&Co. is engaged to render financial advisory  services,  bears to (ii) the fee
paid or proposed to be paid to WP&Co. in connection with such engagement.  It is
agreed that it would not be just and equitable if contribution  pursuant to this
paragraph  were  determined by pro rata  allocation or by any other method which
does not take into account the considerations referred to in this paragraph.


<PAGE>



     We  further  agree that we will  promptly  reimburse  WP&Co.  and any other
indemnified person hereunder for all expenses  (including fees and disbursements
of counsel) as they are incurred by WP&Co. or such other  indemnified  person in
connection with investigating, preparing for or defending, or providing evidence
in, any pending or threatened  action,  claim,  suit or proceeding in respect of
which  indemnification  or contribution may be sought hereunder  (whether or not
WP&Co.  or any  other  indemnified  person  is a party)  and in  enforcing  this
agreement.

     Our indemnity, contribution, reimbursement and other obligations under this
letter  agreement  shall be in addition to any  liability  that we may otherwise
have, at common law or  otherwise,  and shall be binding on our  successors  and
assigns.

     Solely for purposes of enforcing this letter  agreement,  we hereby consent
to personal  jurisdiction,  service and venue in any court in which any claim or
proceeding  which  is  subject  to,  or  which  may  give  rise to a  claim  for
indemnification or contribution  under, this letter agreement is brought against
WP&Co. or any other indemnified person.

     This  letter  agreement  shall be  deemed  made in New  York.  This  letter
agreement and all  controversies  arising from or relating to performance  under
this letter  agreement shall be governed by and construed in accordance with the
laws of the State of New York,  without  giving  effect  to such  state's  rules
concerning  conflicts  of laws.  ANY RIGHT TO TRIAL BY JURY WITH  RESPECT TO ANY
CLAIM OR ACTION ARISING OUT OF THIS LETTER AGREEMENT OR ANY ENGAGEMENT OF WP&CO.
IS HEREBY WAIVED.

     The provisions of this letter agreement shall apply to the  above-mentioned
engagement,  activities  relating to the engagement  occurring prior to the date
hereof, and any subsequent modification of or amendment to such engagement,  and
shall remain in full force and effect following the completion or termination of
WP&Co.'s engagement.

                                              Very   truly    yours,


                            ALLIANCE ENTERTAINMENT CORP.

                            By:/s/Timothy J. Dahltorp
                            ---------------------------------
                            Name: Timothy J. Dahltorp
                            Title: Executive Vice President




Accepted:


WASSERSTEIN PERELLA & CO., INC.



By:/s/W. Townsend Ziebold
      ----------------------------------------
      Name: W. Townsend Ziebold
      Title: Managing Director