Alliance Entertainment Holding Corp 8-K, filed Feb 13, 2023
Alliance Entertainment Holding Corp (AENT)
About this 8-K
Alliance Entertainment Holding Corp filed this 8-K on February 13, 2023, reporting on events of February 10, 2023.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.02: Unregistered sale of equity
- Item 3.03: Change to shareholders' rights
- Item 4.01: Change of auditor
- Item 5.01: Change in control
- Item 5.02: Director or officer change, or executive pay
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 5.05: Code of ethics change or waiver
- Item 5.06: Change in shell company status
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
INTRODUCTORY NOTE
Overview
On February 10, 2023 (the “Closing Date”), Alliance Entertainment Holding Corporation, a Delaware corporation (“Alliance”), Adara Acquisition Corp., a Delaware corporation (“Adara”), and Adara Merger Sub, Inc., a Delaware corporation (“Merger Sub”), consummated the closing of the transactions (the “Closing“) contemplated by the Business Combination Agreement, dated June 22, 2022, by and among Alliance, Adara and Merger Sub (the “Business Combination Agreement”), following their approval at a special meeting of the stockholders of Adara held on January 18, 2023 (the “Special Meeting”),
Pursuant to the terms of the Business Combination Agreement, a business combination of Alliance and Adara was effected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger (the “Surviving Corporation”) as a wholly-owned subsidiary of Adara (the Merger, collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”). Following the consummation of the Merger on the Closing Date, Adara changed its name from Adara Acquisition Corp. to Alliance Entertainment Holding Corporation (the “Company”).
In connection with the Special Meeting and the Business Combination, holders of 11,332,830 shares of Adara Class A common stock, par value $0.0001 per share (“Adara Common Stock”), or 99.1% of the shares with redemption rights, properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.22 per share, for an aggregate redemption amount of $116,581,703. After giving effect to the redemption of public shares, there are currently 167,170 shares of the Company’s Class A common stock issued outstanding and there was $1,719,690.75 remaining balance in the trust count. The remaining amount in the trust account was used to fund the Business Combination.
Conversion and Exchange of Equity in the Business Combination
Pursuant to the Business Combination Agreement, at the effective time of the Business Combination, Adara issued (i) 47,500,000 shares of Class A common stock of Adara (“Company Common Stock”) to holders of common stock of Alliance (“Alliance Common Stock”) and (ii) 60,000,000 shares of Class E Common stock of Adara ( Company Class E Common Stock”) to the Alliance Stockholders were placed in an escrow account to be released to the Alliance stockholders and converted into Company Common Stock upon the occurrence of certain Triggering Events and Merger Sub will merge with and into Alliance, with Alliance surviving the merger and becoming a wholly-owned direct subsidiary of Adara.
The foregoing description of the Business Combination Agreement is not complete and is qualified in its entirety by reference to the full text of the Business Combination Agreement, which is attached as Exhibit 2.1 to this Report.
A description of the Business Combination and the terms of the Business Combination Agreement are included in the final prospectus and definitive proxy statement, dated (the “Proxy Statement/Prospectus”) filed by Adara with the Securities and Exchange Commission (the “SEC”) in the section titled “Proposal No. 1—The Business Combination Proposal” beginning on page 108 of the Proxy Statement/Prospectus. The foregoing description of the Business Combination Agreement is a summary only and is qualified in its entirety by the full text of the Business Combination Agreement, a copy of which is attached hereto as Exhibits 2.1 which is incorporated herein by reference.
Terms used in this Current Report on Form 8-K (this “Report”) but not defined herein, or for which definitions are not otherwise incorporated by reference herein, shall have the meaning given to such terms in the Proxy Statement /Prospectus (as defined below) in the section entitled “Frequently Used Terms” beginning on page 1 thereof, and such definitions are incorporated herein by reference.
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| Item 1.01. | Entry into a Material Definitive Agreement. |
Other Agreements Related to the Business Combination Agreement
Contingent Consideration Shares Escrow
At the Closing, the Company issued an aggregate of 60,000,000 shares of Company Class E Common Stock (the “Contingent Consideration Shares”) to Bruce Ogilvie, Jr. Trust dated January 20, 1994, Ogilvie Legacy Trust dated September 14th, 2021 and Jeff Walker, the Alliance Stockholders. The Contingent Consideration Shares shall be placed into a Contingent Consideration Shares escrow account pursuant to a Contingent Consideration Escrow Agreement (the “Contingent Consideration Escrow Agreement”) and shall not be released from escrow over a ten-year period unless and until they are earned as a result of the occurrence of the applicable Triggering Event as follows: 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of Triggering Event I prior to the five-year anniversary of the Closing; 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of Triggering Event II prior to the seven-year anniversary of the Closing; and 20,000,000 Contingent Consideration Shares will be earned upon the occurrence of Triggering Event III prior to the ten-year anniversary of the Closing.
Upon the occurrence of a Triggering Event, the Contingent Consideration Shares released from the Contingent Consideration Shares escrow account and shall automatically convert into an equal number of shares of Combined Company Common Stock.
In the event that a Triggering Event does not occur during the respective Triggering Event Period, the Contingent Consideration Shares issuable upon the occurrence of the respective Triggering Event shall be forfeited to the Combined Company for cancellation.
Under the Contingent Consideration Escrow Agreement, each Alliance Stockholder owning Contingent Consideration Shares will have all rights with respect to the Contingent Consideration Shares attributable to ownership of such Combined Company Class E Common Stock except (1) the right of possession thereof, (2) the right to sell, assign, pledge, hypothecate or otherwise dispose of or encumber such shares or any interest therein, and (3) the right to be paid dividends with respect to such shares (other than non-taxable stock dividends, which shall remain in and become part of the Contingent Consideration Shares). Additionally, the Alliance Stockholders will have the right to vote such Contingent Consideration Shares, provided that during the escrow period they have contractually agreed to vote their shares of Combined Company Class E Common Stock in the same manner and proportion as the Combined Company Common Stock votes.
The foregoing description of the Contingent Consideration Escrow Agreement is a summary only and is qualified in its entirety by the full text of the Contingent Consideration Escrow Agreement, a copy of which is attached hereto as Exhibit 10.29, which is incorporated herein by reference.
Lock-Up Agreements and Amended and Restated Insider Letter Agreement
In connection with the Business Combination, certain Alliance Stockholders entered into a Lock-Up Agreement (each, a “Lock-Up Agreement”) pursuant to which they have agreed, subject to certain exceptions, not to (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, and the rules and regulations of the SEC promulgated thereunder, the Lock-up Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Lock-up Shares, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). The Lock-Up Period shall terminate 180 days after the Closing.
In connection with Adara’s initial public offering, Adara Sponsor LLC, a Delaware limited liability company (the “Sponsor”) entered into an agreement, dated on March 6, 2021, as amended on June 22, 2022 (the “Insider Letter Agreement”) pursuant to which it has also agreed not to transfer or otherwise dispose of 2,875,000 shares of Adara common stock during the same 180-day lock-up period agreed to by the Alliance stockholders, subject to relief from the lock-up provisions to allow gifts to charitable organizations. Adara’s officers, directors and special advisors entered into similar agreements which, as amended and restated in connection with the Business Combination Agreement (the “Amended and Restated Insider Letter Agreement”), also provide for a six-month post-business combination lock-up restriction. Further, the Sponsor entered into a lock-up agreement pursuant to which it agreed not to transfer its 4,120,000 private warrants exercisable for Combined Company Common Stock at an exercise price of $11.50 per share (the “Private Warrants”) or common stock underlying the Private Warrants, subject to limited exceptions, until 30 days after the Closing Date.
In addition, pursuant to the terms of the Amended and Restated Insider Letter Agreement, the Adara Initial Stockholders agreed to forfeit 1,375,000 shares of Class B Common Stock to the Company for cancellation effective upon the Closing. As a result, the Adara Initial Stockholders own 1,500,000 shares of Class A Common Stock as of immediately following the Closing.
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The foregoing descriptions of the Lock-Up Agreements and the Amended and Restated Insider Letter Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the form of Lock-Up Agreement and Amended and Restated Insider Letter Agreement, copies of which are attached hereto as Exhibit 10.8 and 10.4 and are incorporated herein by reference.
Registration Rights Agreement
In connection with the Closing, the registration rights holders (“Reg Rights Holders”) entered into the Amended and Restated Registration Rights Agreement (the “A&R Registration Rights Agreement”). Pursuant to the A&R Registration Rights Agreement, the Company agreed that, within 30 calendar days after the closing of the Business Combination, the Company will file with the SEC (at the Company’s sole cost and expense) the Resale Registration Statement, and the Company shall use commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 120th calendar day if the SEC notifies the Combined Company that it will “review” the Resale Registration Statement) following the closing of the Business Combination and (ii) the tenth business day after the date the Combined Company is notified (orally or in writing, whichever is earlier) by the SEC that the Resale Registration Statement will not be “reviewed” or will not be subject to further review. In certain circumstances, the Holders can demand up to three underwritten offerings, and all of the Reg Rights Holders will be entitled to piggyback registration rights. Following the Closing, holders of 5,670,000 shares of Company common stock (including 1,500,000 founder shares, 50,000 shares issuable upon exercise of the Underwriters Warrants and up to 4,120,000 shares issuable upon the exercise of Private Warrants to purchase Company common stock) are entitled to certain registration rights.
The foregoing description of the A&R Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the A&R Registration Rights Agreement, a copy of which is attached hereto as Exhibit 10.13 and is incorporated herein by reference.
Indemnity Agreements
In connection with the Closing, the Company entered into indemnity agreements with Messrs. Bruce Ogilvie, Jeffrey Walker, John Kutch, Paul Eibeler, Thomas Finke, W. Tom Donaldson III and Chris Nagelson and Ms. Terilea J. Wielenga, each of whom is a director and/or executive officer of the Company following the Business Combination. These indemnification agreements provide the directors and executive officers with contractual rights to indemnification and advancement for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers.
The foregoing description of the indemnity agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of indemnity agreement, a copy of which is attached hereto as Exhibit 10.9 and is incorporated herein by reference.
Item 2.01 of this Report discusses additional information concerning the consummation of the Transactions and the entry into agreements relating thereto and is incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
The disclosures set forth in the “Introductory Note” and “Item 1.01” above are incorporated by reference into this Item 2.01. The material terms and conditions of the Business Combination Agreement are described in the Proxy Statement/Prospectus in the section titled “The Business Combination Agreement ” beginning on page 126, which is incorporated herein by reference.
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As a result of the Business Combination, and giving effect to the forfeitures under the Amended and Restated Insider Letter Agreement, the 1,500,000 shares of Adara Class B common stock held by the Adara Initial Stockholders, automatically converted to 1,500,000 shares of the Company’s Class A common stock. Such shares were distributed by the Sponsor to its members on the Closing Date.
As of the Closing Date and following the completion of the Business Combination, the Company had the following outstanding securities:
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49,167,170 shares of Class A common stock; | |
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60,000,000 shares of Class E common stock, which are Contingent Consideration Shares; | |
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5,750,000 Public Warrants, each exercisable for one share of common stock at a price of $11.50 per share (the “Public Warrants”); | |
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4,120,000 Private Warrants, each exercisable for one share of common stock at a price of $11.50 per share; and | |
| · | 50,000 Underwriter Warrants, each exercisable for one share of common stock at a price of $11.50 per share. |
The Company’s Class A Common Stock and Public Warrants are presently not traded on any securities exchange and will be listed and quoted on the OTC Markets.
FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the registrant was a shell company, as Adara was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company is providing below the information that would be included in a Form 10 if it were to file a Form 10. Please note that the information provided below relates to the Combined Company after the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise requires.
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K, or some of the information incorporated herein by reference, contains statements that are forward-looking and as such are not historical facts.
This Report includes statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our, our management team’s, Alliance’s and Alliance’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus may include, for example, statements about:
| · | the expected benefits of the Business Combination; |
| · | the Combined Company’s financial and business performance following the Business Combination, including financial projections and business metrics; and |
| · | expectations regarding Alliance’s strategies and future financial performance, including financial projections and business metrics, its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, ability to pay its indebtedness and Alliance’s ability to invest in growth initiatives and pursue acquisition opportunities. |
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These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You should not place undue reliance on these forward-looking statements in deciding how to vote your proxy or instruct how your vote should be cast on the proposals set forth in this proxy statement/prospectus. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
| · | the Company’s ability to recognize the anticipated benefits of the Business Combination, which may be adversely affected by, among other things, the high level of redemptions by Adara’s public stockholders and the significantly reduced amount of capital paid to Alliance at the Closing; | |
| · | costs related to the Business Combination; | |
| · | the Company’s ability to maintain profitability in the future; | |
| · | the impact of Adara’s notice of delisting from the NYSE American after the Closing, and the delisting after any appeal period, and the Alliance shares of Common Stock and Public Warrants trading on the OTC marketplace; |
| · | the Company’s ability to apply for and obtain the listing of our Common Stock and Public Warrants on the Nasdaq Stock Market LLC following the Business Combination; |
| · | the risk that the proposed Business Combination disrupts current plans and operations of Alliance as a result of the announcement and consummation of the transactions described herein; |
| · | risks relating to the uncertainty of the projected financial information with respect to Alliance; |
| · | risks relating to the anticipated growth rates and market opportunities of Alliance; |
| · | our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of Alliance to grow and manage growth profitably following the Business Combination; |
| · | changes in applicable laws or regulations; |
| · | the ability of Alliance to execute its business model, including market acceptance of its systems and related services; |
| · | the Combined Company’s ability to raise capital; |
| · | Alliance’s reliance on a concentration of suppliers for its products and services; |
| · | Changes in Alliance’s customers, product mix and pricing strategy; |
| · | increases in Alliance’s costs, disruption of supply, or shortage of products and materials; |
| · | Alliance’s dependence on a concentration of customers, and failure to add new customers or expand sales to Alliance’s existing customers; |
| · | Increased Alliance inventory and risk of obsolescence; |
| · | Alliance’s significant amount of indebtedness; |
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| · | Risks and failure by Alliance to meet the covenant requirements of its revolving credit facility, one of which, a Fixed Charge Coverage Ratio, has been recently breached with a notice of default letter from the lender dated February 8, 2023, and is subject to a deferred action by the lender; |
| · | Risks that a breach of the revolving credit facility, including Alliance’s recent breach of the covenant requirements, could result in the lender declaring a default and that the full outstanding amount under the revolving credit facility could be immediately due in full, which would have severe adverse consequences for the Company; |
| · | known or future litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Alliance’s resources; |
| · | Alliance’s business being adversely affected by increased inflation, higher interest rates and other adverse economic, business, and/or competitive factors; |
| · | Alliance’s success in retaining or recruiting, or changes required in, our officers, key employees or directors following the completion of the Transactions, and our ability to attract and retain key personnel; |
| · | geopolitical risk and changes in applicable laws or regulations; |
| · | risk that the COVID-19 pandemic, and local, state, and federal responses to addressing the pandemic may have an adverse effect on our business operations, as well as our financial condition and results of operations; |
| · | substantial regulations, which are evolving, and unfavorable changes or failure by Alliance to comply with these regulations; |
| · | product liability claims, which could harm Alliance’s financial condition and liquidity if Alliance is not able to successfully defend or insure against such claims; |
| · | various environmental and safety laws and regulations that could impose substantial costs upon Alliance and negatively impact Alliance’s ability to operate Alliance’s distribution facilities; |
| · | outages and disruptions of Alliance’s services if it fails to maintain adequate security and supporting infrastructure as it scales Alliance’s information technology systems; |
| · | availability of additional capital to support business growth; |
| · | failure to protect Alliance’s intellectual property; |
| · | the inability of Alliance to develop and maintain effective internal controls; |
| · | the diversion of management’s attention and consumption of resources as a result of potential acquisitions of other companies; |
| · | cyber-attacks and security vulnerabilities; |
| · | any changes to U.S. tax laws; and |
| · | other risks and uncertainties described in the Proxy Statement/Prospectus, including those on page 43 thereof under the section titled “Risk Factors.” |
Business
The business of the Company is described in the Proxy Statement/Prospectus in the section entitled “Information About Alliance ” beginning on page 160 thereof and that information is incorporated herein by reference.
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Risk Factors
The risks associated with the Company’s business are described in the Proxy Statement/Prospectus in the section entitled “Risk Factors ” beginning on page 43 thereof and are incorporated herein by reference. A summary of the risks associated with the Company’s business are also described on page 33 of the Proxy Statement/Prospectus under the heading “Summary of Risk Factors” and are incorporated herein by reference.
Additional risk factors as a result of recent developments include:
Adara’s high level of redemptions by its Public Stockholders in connection with the closing of the Business Combination reduced the cash proceeds that the Combined Company will have available for future operations and a substantially reduced number of Public Shares.
In connection with the Special Meeting and the Business Combination, holders of 11,332,830 shares of Adara Class Common Stock, or 99.1% of the shares with redemption rights, exercised their right to redeem their shares for an aggregate cash redemption amount of $116,581,703. After giving effect to the redemption of Adara’s public shares, there are only 167,170 shares of the Company’s Public Common Stock issued outstanding. Further, there was only $1,719,690 remaining balance in the trust count, which was used to fund the Business Combination. As a result of the reduced amount of cash proceeds paid at Closing to fund the Combined Company, and therefore the Company may not be able to pursue its business plans, operations and strategies, which could have an adverse effect on the Company’s growth in revenue and income. Additionally, the reduced number of shares of Public Common Stock will adversely impact the Company’s public float and market liquidity.
Adara’s being delisted from the NYSE American, may negatively affect the price of and liquidity in our securities, including our Common Stock and Public Warrants.
As a result of Adara’s receiving a notice of delisting from the NYSE American after the Closing on February 10, 2023, if the delisting proceeds after any appeal period, there may be no active public market for our Common Stock or Public Warrants. Whether or not our Common Stock or Public Warrants trade on OTC Pink Market will depend on the actions of shareholders and independent third parties, including securities broker-dealers. Any public market that develops will likely be characterized by decreased liquidity and greater volatility, which may materially and adversely affect the value of our Common Stock and Public Warrants. If no active market develops on OTC Pink Market or otherwise, you may be unable to find a buyer for our Common Stock or Public Warrants and may be forced to hold the securities for an indefinite period with no practicable means of recouping any significant part of your investment. In addition, we may be subject to shareholder lawsuits and regulatory proceedings. Our reputation and credibility may be harmed and we may have to incur significant expenses to defend ourselves in any legal or regulatory proceeding brought against us, the outcome of which is uncertain and may have material and adverse impact on our business, financial condition, results of operations and prospects.
Further, the result of Adara’s being delisted from the NYSE American, if our Common Stock trades at less than $5 per share, our stock could come within the definition of a “penny stock” as defined in the Exchange Act and could be covered by Rule 15g-9 of the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
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Since our Common Stock is not listed on a national securities exchange, compliance with applicable state securities laws will be required for certain offers, transfers and sales of the shares of our common stock.
Because our common stock is no longer listed on the NYSE American, we will be required to register or qualify in any state the offer, transfer or sale of the common stock. If our common stock is not eligible to be listed on another national securities exchange, sales of stock pursuant to the exercise of warrants and transfers of the shares of our common stock sold may not be exempt from state securities laws. In such event, it will be the responsibility of us in the case of warrant exercises or the holder of public shares to register or qualify the shares for any offer, transfer or sale in the United States or to determine that any such offer, transfer or sale is exempt under applicable state securities laws.
Covenants and events of default in Alliance’s revolving credit facility could limit our ability to undertake certain types of transactions and adversely affect our liquidity.
Alliance’s revolving credit facility contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest,
Alliance recently failed to meet the covenant requirements of its revolving credit facility, being notified on February 8, 2023 that a Fixed Charge Coverage Ratio has been recently breached, with the letter indicating that is subject to a deferred action by the lender. The Company also has obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly unaudited financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022. These non-compliances resulted in events of default under the revolving credit facility. We cannot provide any assurance that our lender would provide us with a waiver should we not be in compliance in the future. A failure to maintain compliance along with our lender not agreeing to a waiver for the non-compliance would cause the outstanding borrowings to be in default and payable on demand which would have a material adverse effect on us and our ability to continue as a going concern.
A breach of the covenants under our revolving credit facility could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under our revolving credit facility could permit the lenders under our revolving credit facility to terminate all commitments to extend further credit under the facility. Furthermore, if we were unable to repay the amounts due and payable under our revolving credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lender accelerates the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness. You should read our more detailed descriptions of our revolving credit facility in our filings with the Securities and Exchange Commission, including the Proxy Statement/Prospectus at page 54 as well as the documents themselves which are also attached as exhibits to this Current Report on Form 8-K, for further information about these covenants.
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Financial Information
The financial information of the Company is described in the Proxy Statement/Prospectus in the sections entitled “Selected Historical Consolidated Financial Information of Alliance ” and “Alliance’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages 35 and 175 thereof, respectively, and are incorporated herein by reference.
The financial information of Adara is described in the Proxy Statement/Prospectus in the sections entitled “Selected Historical Financial Information of Adara ” and “Adara Management’s Discussion and Analysis of Financial Condition and Results of Operations ” beginning on pages 36 and 206 thereof, respectively, and are incorporated herein by reference.
Unaudited Pro Forma Condensed Combined Financial Information
Reference is made to the disclosure set forth in Item 9.01 of this Report relating to the financial information of the Company and Adara, and to Exhibit 99.2, which is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us regarding the beneficial ownership of our Common Stock immediately following consummation of the Transactions by:
| · | each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock; |
| · | each of our named executive officers and directors; and |
| · | all of our executive officers and directors as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares.
The beneficial ownership of our Class A common stock is based on 49,167,170 shares of Class A common stock issued and outstanding immediately following consummation of the Transactions, including 47,500,000 shares issued to the Alliance Stockholders, 1,500,000 shares owned by the Adara Initial Stockholders and 167,170 public shares remaining after the redemption of public shares as described above.
The table assumes:
| · | For each holder, exercise of Private Warrants held by such holder, which are exercisable 30 days after the Closing; |
| · | no exercise of the 5,750,000 Public Warrants and the 50,000 Underwriter Warrants that will remain outstanding post-Business Combination and that may be exercised at a later date; |
| · | the distribution by the Sponsor of 1,200,000 shares to its members; and |
| · | excludes 60,000,000 Contingent Consideration Shares issued to Alliance’s stockholders subject to future vesting or forfeiture. |
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Beneficial Ownership Table
| Name of Beneficial Owner(1) | Number of Shares of Class A Common Stock Beneficially Owned |
Percentage of Outstanding Class A Common Stock |
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| Bruce Ogilvie (2)(3) | 23,750,000 | 48.3 | % | |||||
| Jeffrey Walker(2) | 22,852,778 | 46.5 | % | |||||
| Thomas Finke(4) | 875,061 | 1.8 | % | |||||
| W. Tom Donaldson III(5) | 2,410,062 | 4.7 | % | |||||
| Paul Eibeler | — | * | ||||||
| Terilea J. Wielenga | — | * | ||||||
| Chris Nagelson | — | * | ||||||
| Directors and executive officers as a group (7 individuals) | 41,333,876 | 80.0 | % | |||||
* Less than 1%.
(1) Unless otherwise indicated, the business address of each of the directors and executive officers of Alliance is c/o Alliance Entertainment Holding Corporation, 8201 Peters Road, Suite 1000, Plantation, Florida 33324.
(2) Excludes Contingent Consideration Shares.
(3) 15,195,975 of such shares are beneficially owned by the Bruce Ogilvie, Jr. Trust dated January 20, 1994, having Mr. Bruce Ogilvie, Jr. as trustee, and 8,554,025 of such shares are beneficially owned by the Ogilvie Legacy Trust dated September 14, 2021, which has Mr. Ogilvie’s two adult children as trustees. Mr. Ogilvie disclaims individual ownership of such shares except to his individual pecuniary interest in such trusts.
(4) Includes 637,333 shares issuable upon exercise of Private Warrants. 323,864 of the listed shares, including 250,000 shares issuable upon exercise of Private Warrants, are held directly by the Thomas M. Finke Family Trust dtd 12/14/2012, of which Mr. Finke’s spouse is the trustee and Mr. Finke’s spouse and children are the beneficiaries. Mr. Finke disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
(5) Such shares are held directly by B&D Series 2020, LLC, of which Mr. Donaldson is the manager. Mr. Donaldson disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Includes 1,837,335 shares issuable upon exercise of Private Warrants.
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Directors and Executive Officers
The Company’s directors and executive officers upon the Closing are described in the Proxy Statement/Prospectus in the section entitled “Management After the Business Combination ” beginning on page 216 thereof and that information is incorporated herein by reference.
Directors
Pursuant to the approval of Adara stockholders from the Special Meeting, the following persons will constitute the Company’s Board effective upon the Closing: Bruce Ogilvie, Jeffrey Walker, Paul Eibeler, Thomas Finke, W. Tom Donaldson III, Terilea J. Wielenga and Chris Nagelson. Thomas Finke and W. Tom Donaldson III were appointed to serve as Class I directors, with terms expiring at the Company’s first annual meeting of stockholders following the Closing; Paul Eibeler, Terilea J. Wielenga and Chris Nagelson were appointed to serve as Class II directors, with terms expiring at the Company’s second annual meeting of stockholders following the Closing; and Bruce Ogilvie and Jeffrey Walker were appointed to serve as Class III directors, with terms expiring at the Company’s third annual meeting of stockholders following the Closing. Biographical information for these individuals is set forth in the Proxy Statement/Prospectus in the section titled “Management After the Business Combination ” beginning on page 216, which is incorporated herein by reference.
Committees of the Board of Directors
Effective as of the Closing, the standing committees of the Company’s Board consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”), and a nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”). Each of the committees reports to the Board.
Audit Committee
Effective as of the Closing, our Board appointed Terilea J. Wielenga, Thomas Finke and W. Tom Donaldson III to serve as members of our audit committee, and Ms. Wielenga chairs the audit committee. Under the applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each member of the audit committee meets the independent director standard under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Ms. Wielenga qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
At the Closing, we adopted the audit committee charter, which details the principal functions of the audit committee, including:
| · | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us; |
| · | pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| · | setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations; |
| · | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| · | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence; |
| · | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
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| · | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation Committee
Effective at the Closing , the Board appointed the members of our compensation committee to include Messrs. Donaldson, Finke and Nagelson. Mr. Donaldson chairs our compensation committee. Under the applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent.
At the Closing, we adopted a compensation committee charter, which detail the principal functions of the compensation committee, including:
| · | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Office’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| · | reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers; |
| · | reviewing on an annual basis our executive compensation policies and plans; |
| · | implementing and administering our incentive compensation equity-based remuneration plans; |
| · | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| · | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| · | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| · | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the SEC.
Nominating Committee
Effective at the Closing, our Board appointed the initial members of our nominating and corporate governance committee to be Thomas Finke, W. Tom Donaldson III, and Chris Nagelson. Mr. Finke will serve as chair of the nominating and corporate governance committee. At least two of the three directors on the nominating and corporate governance committee will be independent.
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At the Closing, we adopted a nominating and corporate governance committee charter, which detail the principal functions of the nominating and corporate governance committee, including:
| · | identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending to the board of directors candidates for nomination for election at the annual general meeting or to fill vacancies on the board of directors; |
| · | developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines; |
| · | coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the company; and |
| · | reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. |
The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors will consider educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, officers and employees. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Our Code of Ethics and our audit committee charter, compensation committee charter, and nominating and corporate governance committee charter are attached as Exhibits 14, 99.3, 99.4, and 99.5, respectively, to this Current Report on Form 8-K. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov.
Executive Officers
Effective as of the Closing, each of Messrs. Thomas Finke and Paul G. Porter resigned as the Chief Executive Officer, Chairman of the Board of Directors, and Chief Financial Officer, respectively. Effective as of the Closing, the Board appointed Bruce Ogilvie to serve as Executive Chairman, Jeffrey Walker to serve as Chief Executive Officer, and John Kutch to serve as Chief Financial Officer.
Executive Compensation
Executive Compensation
The executive compensation of the Company’s named executive officers and directors is described in the Proxy/Prospectus in the section entitled “Management After the Business Combination—Employment Agreements for Named Executive Officers” beginning on page 218 thereof and that information is incorporated herein by reference.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or Compensation Committee.
Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Certain relationships and related transactions are described in the Proxy Statement/Prospectus in the section entitled “Certain Alliance Relationships and Related Transactions ” beginning on page 188 thereof and are incorporated herein by reference.
Director Independence
A majority of our Board will be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company's board of directors, would interfere with the director's exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined that Thomas Finke. W. Tom Donaldson III, Terilea J. Wielenga and Chris Nagelson are “independent directors” as defined in the applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Risk Oversight
Our Board is responsible for overseeing our risk management process. Our Board focuses on our general risk management strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our Audit Committee is also responsible for discussing our policies with respect to risk assessment and risk management. Our Board believes its administration of its risk oversight function has not negatively affected our Board’s leadership structure.
Legal Proceedings
Reference is made to the disclosure regarding legal proceedings in the section of the Proxy Statement/Prospectus titled “Information About Alliance—Legal Proceedings ” beginning on page 170, which is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Prior to the Closing, the Company’s publicly traded Class A Stock, public warrants and units were listed on the NYSE American under the symbols “ADRA,” “ADRA WS” and “ADRA.U,” respectively. The Company’s publicly traded units automatically separated into their component securities upon the Closing and, as a result, no longer trade as a separate security and were delisted from NYSE American. The Company’s Class A Common Stock and Public Warrants are presently not traded on any securities exchange and will be listed and quoted on the OTC Markets.
The Company has not paid any cash dividends on shares of its Class A Stock to date. The payment of any cash dividends in the future will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of the Board. It is the present intention of Alliance’s board of directors to retain all earnings, if any, for use in Alliance’s business operations and, accordingly, Alliance’s Board does not anticipate declaring any dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon Alliance’s revenues and earnings, if any, capital requirements and general financial condition. Further, the ability of Alliance to declare dividends may be limited by the terms of financing or other agreements entered into by it or its subsidiaries from time to time.
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Information respecting Adara’s common stock, warrants and units and related stockholder matters are described in the Proxy Statement/Prospectus in the section titled “Price Range of Securities and Dividends ” on page 243 and such information is incorporated herein by reference.
Holders of Record
As of the Closing and following the completion of the Transactions, including the redemption of public shares as described above, the Company had 49,167,170 shares of Class A common stock outstanding held of record by 22 holders and no shares of preferred stock outstanding. Such amounts do not include DTC participants or beneficial owners holding shares through nominee names.
Securities Authorized for Issuance Under Equity Compensation Plans
Reference is made to the disclosure described in the Proxy Statement/Prospectus in the section entitled “Proposal No. 3—The Equity Incentive Plan Proposal” beginning on pages 151 thereof, which is incorporated herein by reference. As described below, the Alliance 2022 Equity Incentive Plan and the material terms thereunder, including the authorization of the initial share reserves thereunder, were approved by Adara’s stockholders at the Special Meeting.
Recent Sales of Unregistered Securities
Reference is made to the disclosure set forth under Item 3.02 of this Report relating to the issuance of the Company’s Class A common stock in connection with the Transactions, which is incorporated herein by reference.
Description of Registrant’s Securities to be Registered
Common Stock
The Company’s common stock is described in the Proxy Statement/Prospectus in the section entitled “Description of Securities ” beginning on page 220 thereof and that information is incorporated herein by reference. As described below, the Company’s A&R Charter (as defined below) was approved by Adara’s stockholders at the Special Meeting and became effective as of the Closing.
Warrants
A description of the Public and Private Warrants is included in the Proxy Statement/Prospectus in the section titled “Description of Combined Company’s Securities After the Business Combination —Warrants” beginning on page 229 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Indemnification of Directors and Officers
Alliance has entered into indemnity agreements with each of its directors and executive officers. Under the terms of such indemnification agreements, we are required to indemnify each of our directors and executive officers, to the fullest extent permitted by the laws of the state of Delaware, if the basis of the indemnitee’s involvement was by reason of the fact that the indemnitee is or was our director or officer or was serving at our request in an official capacity for another entity. Alliance must indemnify its directors and executive officers against all direct and indirect costs, fees and expenses of any type or nature whatsoever, including all other disbursements, obligations or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be witness in, settlement or appeal of, or otherwise participating in any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding. The indemnification agreements also require Alliance to advance, to the extent not prohibited by law, all direct and indirect costs, fees and expenses that such director or executive officer incurred, provided that such person will return any such advance if it is ultimately determined that such person is not entitled to indemnification by Alliance. The foregoing description of the indemnification agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the indemnification agreements, a form of which is attached hereto as Exhibit 10.11 and is incorporated herein by reference.
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Information about indemnification of the Company’s directors and officers is set forth in the Proxy Statement/Prospectus in the section titled “Management After the Business Combination—Limitation on Liability and Indemnification of Officers and Directors,” at page 225, which information is incorporated herein by reference. The disclosure set forth in Item 1.01 of this Current Report on Form 8-K under the section titled “Indemnification Agreements” is incorporated by herein by reference.
Financial Statements and Supplementary Data
Reference is made to the disclosure set forth under Item 9.01 of this report relating to the financial information of the Company, and to Exhibit 99.2, which is incorporated herein by reference.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Reference is made to the disclosure set forth under Item 4.01 of this report relating to the change in Adara’s certifying accountant, which is incorporated herein by reference.
| Item 3.02. | Unregistered Sales of Equity Securities. |
At the Closing, the 1,500,000 shares of Adara’s Class B common stock held by the the Adara Initial Stockholders, after the forfeiture of 1,375,000 shares, automatically converted to shares of Class A common stock as of the Closing. The disclosure under Item 2.01 of this Report is incorporated into this Item 3.02 by reference.
The Company issued the foregoing securities under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act, as a transaction not requiring registration under Section 5 of the Securities Act. The parties receiving the securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed to the certificates representing the securities (or reflected in restricted book entry with the Company’s transfer agent). The parties also had adequate access, through business or other relationships, to information about the Company.
| Item 3.03. | Material Modification to Rights of Security Holders |
The information set forth in Item 5.03 to this Current Report on Form 8-K is incorporated herein by reference.
| Item 4.01 | Changes in Registrant’s Certifying Accountant |
On February 8, 2023 WithumSmith+Brown PC (“Withum”), Adara’s independent registered public accounting firm prior to the Business Combination, was dismissed as Adara’s independent registered public accounting firm, which dismissal will become effective following the completion of Adara’s audit of the year-ended December 31, 2022, which consists only of the accounts of the pre-Business Combination special purpose acquisition company, Adara.
Withum’s report on Adara’s balance sheets as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through December 31, 2020 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, other than the uncertainty surrounding Adara’s ability to continue as a going concern.
During the period from August 5, 2020 (inception) through December 31, 2021 and the subsequent period through September 30, 2022, there were no: (i) disagreements with Withum on any matter of accounting principles or practices, financial statement disclosures or audited scope or procedures, which disagreements if not resolved to Withum’s satisfaction would have caused Withum to make reference to the subject matter of the disagreement in connection with its report or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K other than as described immediately below.
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On April 12, 2021, the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPAC’s”), the “Statement.” In the Statement, the SEC indicates its view that certain terms of the warrants issued in connection with a SPAC Initial Public Offering (“Public Warrants”) and private placement warrants typically issued by a SPAC (“Private Warrants”) call for such warrants to be accounted for as liabilities and not as equity. The Company had recorded such warrants as equity. In light of the SEC's Statement Adara re-evaluated the guidance surrounding the Public and Private Warrants and determined that both Warrants should be recorded as a liability. This determination (liability vs. equity) caused the Company to restate previously issued financial statements that showed the warrants as equity. Further in December 2021 Adara determined that the Class A common stock contains a redemption feature that management has no control over and therefore all Class A shares should be recorded as temporary equity. This change caused the restatement of previously issued financial statements to effect this change. As a result of these restatements, management concluded that the Company did not maintain effective internal control over financial reporting as of February 11, 2021, March 31, 2021, June 30, 2021 September 30, 2021, December 31, 2021, March 31, 2022 and June 30, 2022, due to a material weakness in the Company’s internal control over financial reporting related to a lack of an effectively designed control over financial reporting related to the Company’s accounting for complex financial instruments. The need to restate financial statements in these instances constitutes a material weakness in internal control.
In response to the previously identified material weakness, Adara designed and implemented remediation measures to address the material weakness identified and enhanced its internal control over financial reporting. Adara has enhanced its financial reporting processes to better identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to its financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among Adara’s personnel and third-party professionals with whom management consults regarding complex accounting applications.
The Company has provided Withum with a copy of the disclosures made by the Company in response to this Item 4.01 and has requested that Withum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the registrant in response to Item 304(a) and, if not, stating the respects in which it does not agree. A letter from Withum is attached as Exhibit 16.1 to this Report.
| Item 5.01. | Changes in Control of the Registrant. |
The information set forth in the section titled “Introductory Note” , Item 1.01 and in the section titled “Security Ownership of Certain Beneficial Owners and Management” in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
As a result of the completion of the Business Combination pursuant to the Business Combination Agreement, a change of control of Adara has occurred, and the stockholders of Adara as of immediately prior to the Closing held 4,545,170 shares, representing 9.2% of the 49,167,170 outstanding shares of Common Stock immediately following the Closing.
The information set forth above under Item 1.01 and Item 2.01 of this Report is incorporated herein by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The information set forth above in the sections titled “Directors and Officers,” “Executive Compensation,” “Certain Relationships and Related Transactions” and “Indemnification of Directors and Officers” in Item 2.01 to this Report is incorporated herein by reference.
2022 Equity Incentive Plan
As previously disclosed, at the Special Meeting, on January 18, 2023, the stockholders of the Company considered and approved the 2022 Equity Incentive Plan. The 2022 Equity Incentive Plan was previously approved, subject to stockholder approval, by the Board. The 2022 Equity Incentive Plan became effective immediately upon the Closing.
A description of the 2022 Equity Incentive Plan is included in the Proxy Statement/Prospectus in the section titled “Proposal No. 5—Approval of the Equity Incentive Plan Proposal ,” at page 151, which is incorporated herein by reference. The foregoing description of the 2022 Equity Incentive Plan does not purport to be complete and is qualified in its entirety by the full text of the 2022 Equity Incentive Plan attached as Exhibit 10.10, and incorporated herein by reference.
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| Item 5.03. | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
At the Special Meeting, the Adara stockholders considered and approved, among other things, Proposal No. 2-The Charter Proposals (the “Charter Proposals”).
The Second Amended and Restated Certificate of Incorporation of the Company (the “A&R Certificate of Incorporation”), which became effective upon filing with the Secretary of State of the State of Delaware on February 10, 2023, includes the amendments proposed by the Charter Proposals.
On February 10, 2023, the Company’s board of directors approved and adopted the Amended and Restated Bylaws of the Company (the “A&R Bylaws”), which became effective as of the effective time of the Business Combination.
Copies of the A&R Certificate of Incorporation and the A&R Bylaws are attached as Exhibit 3.4 and Exhibit 3.5 to this Report, respectively, and are incorporated herein by reference.
The material terms of each of the A&R Certificate of Incorporation and the A&R Bylaws and the general effect upon the rights of holders of the Company’s capital stock are included in the Proxy Statement/Prospectus under the sections titled “Proposal No. 2—The Charter Proposals ” at page 148 of the Proxy Statement/Prospectus, respectively, which are incorporated herein by reference.
On February 10, 2023, the board of directors approved a change in the fiscal year end for the Company from December 31 to June 30. The Company expects to file the financial statements of Alliance as of and for year ended June 30, 2023.
| Item 5.05 | Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics. |
In connection with the Business Combination, on February 10, 2023, the Company’s board of directors approved and adopted a new Code of Ethics applicable to all employees, officers and directors of the Company. A copy of the Code of Ethics can be found in the Investor Relations section of the Company’s website at www.aent.com.
| Item 5.06 | Change in Shell Company Status |
As a result of the Business Combination, which fulfilled the definition of a “Business Combination” as required by the amended and restated certificate of incorporation of the Company, as in effect immediately prior to the Closing, the Company ceased to be a shell company upon the Closing. Reference is made to the disclosure in the Proxy Statement/Prospectus in the sections entitled “Proposal No. 1—The Business Combination Proposal ” beginning on page 108 thereof, which is incorporated herein by reference.
| Item 7.01. |
On February 10, 2023, the parties issued a joint press release announcing the completion of the Business Combination, a copy of which is furnished as Exhibit 99.1 hereto.
The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information contained in this Item 7.01, including Exhibit 99.1.
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| Item 9.01. | Financial Statement and Exhibits. |
(a) Financial statements of businesses acquired.
The audited consolidated financial statements of Alliance for the years ended June 30, 2022, 2021 and 2020 and the related notes are included in the Proxy Statement/Prospectus beginning on page F-15 and are incorporated herein by reference.
The unaudited condensed consolidated financial statements of Alliance for the three months ended September 30, 2022 and 2021 and the related notes are included in the Proxy Statement/Prospectus beginning on page F-2 and are incorporated herein by reference.
The audited consolidated financial statements of Adara as of and for the year ended December 31, 2021 and for the period from April 30, 2019 (Adara’s inception) to December 31, 2020 and the related notes are included in the Proxy Statement/Prospectus beginning on page F-38 of the Proxy Statement/Prospectus and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of Adara and Alliance as of and for the year ended December 31, 2021 and the nine months ended September 30, 2022 is filed as Exhibit 99.2 and is incorporated herein by reference.
(d) Exhibits.
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* Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
| † | Indicates a management contract or compensatory plan, contract or arrangement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Alliance Entertainment Holding Corporation | |||
| Date: | February 13, 2023 | By: | /s/ Jeffrey Walker |
| Name: | Jeffrey Walker | ||
| Title: | Chief Executive Officer | ||
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Exhibit 3.5
ALLIANCE ENTERTAINMENT HOLDING CORPORATION
BYLAWS
(as adopted on February 10, 2023)
ARTICLE I - CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of Alliance Entertainment Holding Corporation (the “Corporation”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended from time to time (the “certificate of incorporation”).
1.2 OTHER OFFICES
The Corporation may at any time establish other offices.
ARTICLE II - MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at a place, if any, within or outside the State of Delaware, determined by the board of directors of the Corporation (the “Board of Directors”). The Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.
2.2 ANNUAL MEETING
The Board of Directors shall designate the date and time of the annual meeting of stockholders. At the annual meeting, directors shall be elected and any other proper business, brought in accordance with Section 2.4 of these bylaws, may be transacted. The Board of Directors may cancel, postpone or reschedule any previously scheduled annual meeting at any time, before or after the notice for such meeting has been sent to the stockholders.
2.3 SPECIAL MEETING
(a) A special meeting of the stockholders may be called at any time only by (i) the Board of Directors, (ii) the chairperson of the Board of Directors, (iii) the chief executive officer or (iv) the president, but a special meeting may not be called by any other person or persons and any power of stockholders to call a special meeting of stockholders is specifically denied. The Board of Directors may cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders.
(b) The notice of a special meeting shall include the purpose for which the meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the Board of Directors, the chairperson of the Board of Directors, the chief executive officer or the president. Nothing contained in this Section 2.3(b) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.
2.4 ADVANCE NOTICE PROCEDURES
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board of Directors or the proposal of other business to be transacted by the stockholders at an annual meeting of stockholders may be made only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto); (B) by or at the direction of the Board of Directors; (C) as may be provided in the certificate of designation for any class or series of preferred stock; or (D) by any stockholder of the Corporation who (1) is a stockholder of record at the time of giving of the notice contemplated by Section 2.4(a)(ii); (2) is a stockholder of record on the record date for the determination of stockholders entitled to notice of the annual meeting; (3) is a stockholder of record on the record date for the determination of stockholders entitled to vote at the annual meeting; (4) is a stockholder of record at the time of the annual meeting; and (5) complies with the procedures set forth in this Section 2.4(a).
(ii) For nominations or other business to be properly brought before an annual meeting of stockholders by a stockholder pursuant to clause (D) of Section 2.4(a)(i), the stockholder must have given timely notice in writing to the secretary and any such proposed business (other than a nomination) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice must be received by the secretary at the principal executive offices of the Corporation no earlier than 8:00 a.m., local time, on the 150th day and no later than 5:00 p.m., local time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in this Section 2.4(a)(ii)) for the preceding year’s annual meeting of stockholders (which anniversary date shall, for purposes of the Corporation’s first annual meeting after its shares of stock are first publicly traded, be deemed to be April 15, 2024). However, if no annual meeting of stockholders was held in the preceding year, or if the date of the applicable annual meeting is more than 30 days before or more than 60 days after the first anniversary of the preceding year’s annual meeting, then to be timely such notice must be received by the secretary at the principal executive offices of the Corporation no earlier than 8:00 a.m., local time, on the 120th day prior to the day of the annual meeting and no later than the later of (A) 5:00 p.m., local time, on the 90th day before the meeting or (B) 5:00 p.m., local time, on the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Corporation. In no event will the adjournment, rescheduling or postponement of any annual meeting, or any announcement thereof, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. The number of nominees a stockholder may nominate for election at the annual meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such annual meeting. Notwithstanding anything in the second sentence of this Section 2.4(a)(ii) to the contrary, if the number of directors to be elected to the Board of Directors at the annual meeting is increased after the time period for which nominations would otherwise be due under this Section 2.4(a)(ii) and there is no public announcement naming the nominees for the additional directorships at least 10 days before the last day that a stockholder may deliver a notice of nomination pursuant to the foregoing provisions, then a stockholder’s notice required by this Section 2.4(a)(ii) will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the secretary at the principal executive offices of the Corporation no later than 5:00 p.m., local time, on the 10th day following the day on which such public announcement is first made. “Public announcement” means disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934 (as amended and inclusive of rules and regulations thereunder, the “1934 Act”). “The date of the proxy statement” means “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the 1934 Act, as interpreted by the Securities and Exchange Commission from time to time.
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(iii) A stockholder’s notice to the secretary must set forth:
(A) as to each person whom the stockholder proposes to nominate for election as a director:
(1) such person’s name, age, business address, residence address and principal occupation or employment; the class, series and number of shares of stock of the Corporation that are held of record or are beneficially owned by such person and a description of any Derivative Instruments (defined below) held or beneficially owned thereby or of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of such person; and all information relating to such person that is required to be disclosed in solicitations of proxies for the contested election of directors, or is otherwise required, in each case pursuant to Section 14 of the 1934 Act;
(2) such person’s written consent to being named in the proxy statement and related materials of the Corporation and the proxy statement and related materials of such stockholder as a nominee of the stockholder and to serving as a director of the Corporation if elected;
(3) a reasonably detailed description of any direct or indirect compensatory, payment, indemnification or other financial agreement, arrangement or understanding that such person has, or has had within the past three years, with any person or entity other than the Corporation (including the amount of any payment or payments received or receivable thereunder), in each case in connection with candidacy or service as a director of the Corporation (a “Third-Party Compensation Arrangement”); and
(4) a description of any other material relationships between such person and such person’s respective affiliates and associates, or others acting in concert with them, on the one hand, and such stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, and their respective affiliates and associates, or others acting in concert with them, on the other hand;
(B) as to any other business that the stockholder proposes to bring before the annual meeting:
(1) a brief description of the business desired to be brought before the annual meeting;
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(2) the text of the proposal or business (including the text of any resolutions proposed for consideration and, if applicable, the text of any proposed amendment to these bylaws or the Corporation’s certificate of incorporation);
(3) the reasons for conducting such business at the annual meeting;
(4) any material interest in such business of such stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, and their respective affiliates and associates, or others acting in concert with them; and
(5) a description of all agreements, arrangements and understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and their respective affiliates or associates or others acting in concert with them, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder; and
(C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(1) the name and address of such stockholder (as they appear on the Corporation’s books), of such beneficial owner and of their respective affiliates or associates or others acting in concert with them;
(2) for each class or series, the number of shares of stock of the Corporation that are, directly or indirectly, held of record or are beneficially owned by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them;
(3) a description of any agreement, arrangement or understanding between such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, and any other person or persons (including, in each case, their names) in connection with the proposal of such nomination or other business;
(4) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into by or on behalf of such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, with respect to the Corporation’s securities (any of the foregoing, a “Derivative Instrument”), or any other agreement, arrangement or understanding that has been made the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for or increase or decrease the voting power of such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, with respect to the Corporation’s securities;
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(5) any rights to dividends on the Corporation’s securities owned beneficially by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, that are separated or separable from the underlying security;
(6) any proportionate interest in the Corporation’s securities or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership;
(7) any performance-related fees (other than an asset-based fee) that such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with, them is entitled to based on any increase or decrease in the value of the Corporation’s securities or Derivative Instruments, including, without limitation, any such interests held by members of the immediate family of such persons sharing the same household;
(8) any significant equity interests or any Derivative Instruments in any principal competitor of the Corporation that are held by such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them;
(9) any direct or indirect interest of such stockholder, such beneficial owner or their respective affiliates or associates or others acting in concert with them, in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (in each case, including any employment agreement, collective bargaining agreement or consulting agreement);
(10) a representation and undertaking that the stockholder is a holder of record of stock of the Corporation as of the date of submission of the stockholder’s notice and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting;
(11) a representation and undertaking that such stockholder or any such beneficial owner intends, or is part of a group that intends, to (x) deliver a proxy statement or form of proxy to holders of at least the percentage of the voting power of the Corporation’s then-outstanding stock required to approve or adopt the proposal or to elect each such nominee; or (y) otherwise solicit proxies or votes from stockholders in support of such proposal or nomination;
(12) any other information relating to such stockholder, such beneficial owner, or their respective affiliates or associates or others acting in concert with them, or director nominee or proposed business that, in each case, would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of such nominee (in a contested election of directors) or proposal pursuant to Section 14 of the 1934 Act; and
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(13) such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action.
(iv) In addition to the requirements of this Section 2.4, to be timely, a stockholder’s notice (and any additional information submitted to the Corporation in connection therewith) must further be updated and supplemented (A) if necessary, so that the information provided or required to be provided in such notice is true and correct as of the record date(s) for determining the stockholders entitled to notice of, and to vote at, the meeting and as of the date that is 10 business days prior to the meeting or any adjournment, or postponement thereof and (B) to provide any additional information that the Corporation may reasonably request. Such update and supplement or additional information, if applicable, must be received by the secretary at the principal executive offices of the Corporation, in the case of a request for additional information, promptly following a request therefor, which response must be delivered not later than such reasonable time as is specified in any such request from the Corporation or, in the case of any other update or supplement of any information, not later than five business days after the record date(s) for the meeting (in the case of any update and supplement required to be made as of the record date(s)), and not later than eight business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof). The failure to timely provide such update, supplement or additional information shall result in the nomination or proposal no longer being eligible for consideration at the meeting.
(b) Special Meetings of Stockholders. Special meetings of stockholders may be called only in accordance with the certificate of incorporation and Section 2.3(a) of these bylaws. Only such business will be conducted at a special meeting of stockholders as has been brought before the special meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or any committee thereof or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting by any stockholder who (i) is a stockholder of record at the time of giving of the notice contemplated by this Section 2.4(b); (ii) is a stockholder of record on the record date for the determination of stockholders entitled to notice of the special meeting; (iii) is a stockholder of record on the record date for the determination of stockholders entitled to vote at the special meeting; (iv) is a stockholder of record at the time of the special meeting; and (v) complies with the procedures set forth in this Section 2.4(b). The number of nominees a stockholder may nominate for election at the special meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. For nominations to be properly brought by a stockholder before a special meeting pursuant to this Section 2.4(b), the stockholder’s notice must be received by the secretary at the principal executive offices of the Corporation no earlier than 8:00 a.m., local time, on the 120th day prior to the day of the special meeting and no later than 5:00 p.m., local time, on the later of the 90th day prior to the day of the special meeting or the 10th day following the day on which public announcement of the date of the special meeting at which directors are to be elected was first made by the Corporation. In no event will any adjournment, rescheduling or postponement of a special meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice. A stockholder’s notice to the secretary must comply with the applicable notice requirements of Section 2.4(a)(iii).
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(c) Other Requirements.
(i) To be eligible to be a nominee by any stockholder for election as a director of the Corporation, the proposed nominee must provide to the secretary, in accordance with the applicable time periods prescribed for delivery of notice under Section 2.4(a)(ii) or Section 2.4(b), as applicable:
(A) a signed and completed written questionnaire (in the form provided by the secretary at the written request of the nominating stockholder, which form will be provided by the secretary within 10 days of receiving such request);
(B) a written representation and undertaking that, such nominee is not, and will not become, a party to any voting agreement, arrangement, commitment, assurance or understanding with any person or entity as to how such nominee, if elected as a director, will vote on any issue (a “Voting Commitment”) that has not been disclosed to the Corporation or any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law;
(C) a written representation and undertaking that, unless previously disclosed to the Corporation, such nominee is not, and will not become, a party to any Third-Party Compensation Arrangement;
(D) a written representation and undertaking that, if elected as a director, such nominee would be in compliance, and will continue to comply, with the Corporation’s corporate governance guidelines as disclosed on the Corporation’s website, as amended from time to time; and
(E) a written representation and undertaking that such nominee, if elected, intends to serve a full term on the Board of Directors.
(ii) At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director must furnish to the secretary the information that is required to be set forth in a stockholder’s notice of nomination that pertains to such nominee.
(iii) No person will be eligible to be nominated by a stockholder for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.4. No business proposed by a stockholder will be conducted at a stockholder meeting except in accordance with this Section 2.4.
(iv) The chairperson of the applicable meeting of stockholders will, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws or that business was not properly brought before the meeting. If the chairperson of the meeting should so determine, then the chairperson of the meeting will so declare to the meeting and the defective nomination will be disregarded or such business will not be transacted, as the case may be.
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(v) Notwithstanding anything to the contrary in this Section 2.4, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear in person at the meeting to present a nomination or other proposed business, such nomination will be disregarded or such proposed business will not be transacted, as the case may be, notwithstanding that proxies in respect of such nomination or business may have been received by the Corporation and counted for purposes of determining a quorum. For purposes of this Section 2.4, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, director, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting, and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting.
(vi) Without limiting this Section 2.4, a stockholder must also comply with all applicable requirements of the 1934 Act with respect to the matters set forth in this Section 2.4, it being understood that (A) any references in these bylaws to the 1934 Act are not intended to, and will not, limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.4; and (B) compliance with clause (D) of Section 2.4(a)(i) and with Section 2.4(b) are the exclusive means for a stockholder to make nominations or submit other business (other than as provided in Section 2.4(c)(vii)).
(vii) Notwithstanding anything to the contrary in this Section 2.4, the notice requirements set forth in these bylaws with respect to the proposal of any business pursuant to this Section 2.4 will be deemed to be satisfied by a stockholder if (A) such stockholder has submitted a proposal to the Corporation in compliance with Rule 14a-8 under the 1934 Act; and (B) such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for the meeting of stockholders. Subject to Rule 14a-8 and other applicable rules and regulations under the 1934 Act, nothing in these bylaws will be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of a director or any other business proposal.
2.5 NOTICE OF STOCKHOLDERS’ MEETINGS
Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
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2.6 QUORUM
The holders of a majority of the voting power of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. Where a separate vote by a class or series or classes or series is required, the holders of a majority of the voting power of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.
If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting, or (b) the stockholders so present (by the affirmative vote of the holders of a majority in voting power of the capital stock of the Corporation which are present in person or represented by proxy and entitled to vote thereon) shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting in accordance with Section 2.7, until a quorum is present or represented.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
2.8 ORGANIZATION; CONDUCT OF BUSINESS
The chairperson of any meeting of stockholders shall be designated by the Board of Directors; in the absence of such designation, the chairperson of the Board of Directors, if any, or the chief executive officer (in the absence of the chairperson of the Board of Directors) or the president (in the absence of the chairperson of the Board of Directors and the chief executive officer), or in their absence any other executive officer of the Corporation, shall serve as chairperson of the stockholder meeting. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairperson of the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairperson of the meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairperson of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chairperson at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chairperson should so determine, such chairperson shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
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2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder as of the applicable record date.
Unless a different or minimum vote is required by applicable law, the certificate of incorporation, these bylaws, the rules or regulations of the stock exchange on which the Corporation’s securities are listed, or any law or regulation applicable to the Corporation or its securities, in which case such different or minimum vote shall be the applicable vote on the matter, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the votes cast. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of such class or series or classes or series present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of such class or series or classes or series, unless a different or minimum vote is required by applicable law, the certificate of incorporation, these bylaws, the rules or regulations of the stock exchange on which the Corporation’s securities are listed, or any law or regulation applicable to the Corporation or its securities, in which case such different or minimum vote shall be the applicable vote on the matter.
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2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Subject to the rights of holders of preferred stock of the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent by such stockholders.
2.11 RECORD DATES
In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.
If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
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2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders, or to take corporate action by consent without a meeting, may authorize another person or persons to act for such stockholder by proxy in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The authorization of a person to act as a proxy may be documented, signed and delivered in accordance with Section 116 of the DGCL; provided that such authorization shall set forth, or be delivered with information enabling the Corporation to determine, the identity of the stockholder granting such authorization. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Corporation’s principal place of business. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
2.14 INSPECTORS OF ELECTION
Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act.
Such inspectors shall:
(a) ascertain the number of shares outstanding and the voting power of each;
(b) determine the shares represented at the meeting and the validity of proxies and ballots;
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(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.
Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. If there are multiple inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE III - DIRECTORS
3.1 POWERS
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided in the DGCL or the certificate of incorporation.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of one or more members, each of whom shall be a natural person. The size of the Board of Directors will be fixed in the manner set forth in the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy or a newly created directorship, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.
The terms of directors shall be as set forth in the certificate of incorporation.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon notice given in writing or by electronic transmission to the chairperson of the Board of Directors, chief executive officer, president or secretary of the Corporation. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
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Any vacancies or newly created directorship on the Board of Directors shall be filled in accordance with the certificate of incorporation.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairperson of the Board of Directors, the chief executive officer, the president, the secretary or a majority of the directors then in office; provided that the person(s) authorized to call special meetings of the Board of Directors may authorize another person or persons to send notice of such meeting.
Notice of the time and place of special meetings shall be:
(a) delivered personally by hand, by courier or by telephone;
(b) sent by United States first-class mail, postage prepaid;
(c) sent by facsimile;
(d) sent by electronic mail; or
(e) otherwise given by electronic transmission (as defined in Section 232 of the DGCL),
directed to each director at that director’s address, telephone number, facsimile number, electronic mail address or other contact for notice by electronic transmission, as the case may be, as shown on the Corporation’s records.
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If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile, (iii) sent by electronic mail or (iv) otherwise given by electronic transmission, it shall be delivered, sent or otherwise directed to each director, as applicable, at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting, unless required by statute.
3.8 QUORUM; VOTING
Unless otherwise provided in the certificate of incorporation, at all meetings of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
The affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.
3.9 BOARD ACTION BY CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these bylaws, (a) any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission; and (b) a consent may be documented, signed and delivered in any manner permitted by Section 116 of the DGCL. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this Section 3.9 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board of Directors, or the committee or subcommittee thereof, in the same paper or electronic form as the minutes are maintained.
3.10 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors.
3.11 REMOVAL OF DIRECTORS
Any director or the entire Board of Directors may be removed from office by stockholders of the Corporation in the manner specified in the certificate of incorporation and applicable law. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
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3.12 BOARD MINUTES
The Board of Directors shall keep (or direct the secretary or assistant secretary of the Corporation or another person to keep) regular minutes of its meetings.
ARTICLE IV - COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (a) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (b) adopt, amend or repeal any bylaw of the Corporation.
4.2 SUBCOMMITTEES
Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
4.3 COMMITTEE MINUTES
Each committee and subcommittee shall keep (or direct the secretary or assistant secretary of the Corporation or another person to keep) regular minutes of its meetings.
4.4 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees and subcommittees shall be governed by, and held and taken in accordance with, the provisions of:
(a) Section 3.5 (Place of meetings; Meetings by telephone);
(b) Section 3.6 (Regular meetings);
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(c) Section 3.7 (Special meetings; Notice);
(d) Section 3.8 (Quorum; Voting);
(e) Section 3.9 (Board action by consent without a meeting); and
(f) Section 7.4 (Waiver of notice),
with such changes in the context of those bylaws as are necessary to substitute the committee or subcommittee and its members for the Board of Directors and its members; provided, however, (i) the time and place of regular meetings of committees or subcommittees may be determined either by resolution of the Board of Directors or by resolution of the committee or subcommittee; (ii) special meetings of committees or subcommittees may also be called by resolution of the Board of Directors or the committee or the subcommittee; and (iii) notice of special meetings of committees and subcommittees shall also be given to all alternate members who shall have the right to attend all meetings of the committee or subcommittee. The Board of Directors, or in the absence of any such action by the Board of Directors, the applicable committee or subcommittee, may adopt rules for the government of any committee or subcommittee not inconsistent with the provisions of these bylaws.
ARTICLE V - OFFICERS
5.1 OFFICERS
The officers of the Corporation shall include a president, a treasurer and a secretary. The Corporation may also have, at the discretion of the Board of Directors, a chairperson of the Board of Directors, a vice chairperson of the Board of Directors, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The Board of Directors shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers as the business of the Corporation may require. Each of such officers shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board of Directors may from time to time determine.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors or, for the avoidance of doubt, any duly authorized committee or subcommittee thereof or by any officer who has been conferred such power of removal.
Any officer may resign at any time by giving notice, in writing or by electronic transmission, to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors or as provided in Section 5.3.
5.6 REPRESENTATION OF SECURITIES OF OTHER ENTITIES
The chairperson of the Board of Directors, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of the Corporation or any other person authorized by the Board of Directors or the chief executive officer, the president or a vice president, is authorized to vote, represent and exercise on behalf of the Corporation all rights incident to any and all shares or other securities of any other entity or entities, and all rights incident to any management authority conferred on the Corporation in accordance with the governing documents of any entity or entities, standing in the name of the Corporation, including the right to act by written consent. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.7 AUTHORITY AND DUTIES OF OFFICERS
All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors.
ARTICLE VI - STOCK
6.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Unless otherwise provided by resolution of the Board of Directors, every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of, the Corporation by any two officers of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Corporation shall not have power to issue a certificate in bearer form.
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The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, or upon the books and records of the Corporation in the case of uncertificated partly-paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the Corporation shall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
6.2 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the registered owner thereof shall be given a notice, in writing or by electronic transmission, containing the information required to be set forth or stated on certificates pursuant to this Section 6.2 or Sections 156, 202(a), 218(a) or 364 of the DGCL or with respect to this Section 6.2 a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
6.3 LOST CERTIFICATES
Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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6.4 DIVIDENDS
The Board of Directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Corporation’s capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock, subject to the provisions of the certificate of incorporation. The Board of Directors may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
6.5 TRANSFER OF STOCK
Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.
6.6 STOCK TRANSFER AGREEMENTS
The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
6.7 CERTAIN RESTRICTIONS ON TRANSFER
Without the prior written consent of the Corporation as approved by a majority of the independent directors of the Corporation, and without limiting the rights of any party to the Amended and Restated Registration Rights Agreement, dated as of the date hereof, by and among the Corporation and the stockholders party thereto (the “A&R Registration Rights Agreement”), neither any Restricted Transfer nor any public announcement of any intention to effect any Restricted Transfer of any Lock-Up Shares Beneficially Owned or otherwise held by any Non-Electing Seller (or any Permitted Transferee thereof) may be made during the Lock-Up Period applicable to such Lock-Up Shares.
No Transfer of any shares of the Corporation’s stock may be made, except in compliance with applicable federal and state securities laws.
To the extent shares of the Corporation’s stock are uncertificated, the Corporation shall give notice of the restrictions set forth in this Section 6.7 in accordance with the DGCL.
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During the Lock-Up Period applicable to any Non-Electing Seller (or any Permitted Transferee thereof), any purported Transfer of Lock-Up Shares by such Non-Electing Seller (or such Permitted Transferee) other than in accordance with these Bylaws shall be null and void, and the Corporation shall refuse to recognize any such Transfer for any purpose.
Notwithstanding the provisions set forth in this Section 6.7, if (A) at least 120 days have elapsed since the Closing Date (as defined in the Business Combination Agreement) and (B) the Lock-Up Period is scheduled to end during a Blackout Period or within five Trading Days prior to a Blackout Period, the Lock-Up Period shall end 10 Trading Days prior to the commencement of the Blackout Period (the “Blackout-Related Release”); provided that the Corporation shall announce the date of the expected Blackout-Related Release through a major news service, or on a Form 8-K, at least two Trading Days in advance of the Blackout-Related Release; and provided further that the Blackout-Related Release shall not occur unless the Corporation shall have publicly released its earnings results for the quarterly period during which the Closing (as defined in the Business Combination Agreement) occurred. For the avoidance of doubt, in no event shall the Lock-Up Period end earlier than 120 days after the Closing Date pursuant to the Blackout-Related Release.
The foregoing notwithstanding, to the extent any Non-Electing Seller (or any Permitted Transferee thereof that Beneficially Owns any Lock-Up Shares as a result of a Permitted Transfer) is granted a release or waiver from the restrictions contained in this Section 6.7 prior to the expiration of the Lock-Up Period or any party under the Sponsor Holders Agreement, dated as of the date hereof, by and among the Corporation and the parties thereto (the “Sponsor Holders Agreement”) or the A&R Registration Rights Agreement is granted a release or waiver from its restrictions on transfer of the Corporation’s securities under such agreement, then all Non-Electing Sellers (and any Permitted Transferee thereof that Beneficially Owns any Lock-Up Shares as a result of a Permitted Transfer) shall be automatically granted a release or waiver from the restrictions contained in this Section 6.7 to the same extent, on substantially the same terms as and on a pro rata basis with, such Non-Electing Seller (or any Permitted Transferee thereof that Beneficially Owns any Lock-Up Shares as a result of a Permitted Transfer) or Person under the Sponsor Holders Agreement or A&R Registration Rights, as applicable, to which such release or waiver is granted.
As used in this Section 6.7, the below terms shall have the following meanings ascribed to them:
(a) “Affiliate” means (i) with respect to any specified Person that is not a natural person, (A) any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person, and (B) any corporation, trust, limited liability company, general or limited partnership or other entity advised or managed by, or under common control or management with, such Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person, or any Person that is, directly or indirectly, controlled by such specified natural person; provided that the Corporation and each of its subsidiaries shall be deemed not to be Affiliates of any Person.
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(b) “Beneficially Own” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
(c) “Blackout Period” means a broadly applicable and regularly scheduled period during which trading in the Corporation’s securities would not be permitted under the Corporation’s insider trading policy.
(d) “Lock-Up Period” means the period ending one hundred and eighty (180) days following the Closing Date.
(e) “Lock-Up Shares” means shares of the Corporation’s stock held by a Non-Electing Seller or a Permitted Transferee thereof, issued (i) as consideration pursuant to that certain Business Combination Agreement (as it may be amended from time to time, the “Business Combination Agreement”), dated as of June 22, 2022, by and among the Corporation, Adara Acquisition Corp., Adara Merger Sub, and Alliance Entertainment Holding Corporation , (the “Prior Companies”) or (ii) to directors, officers and employees of the Corporation or its subsidiaries upon the settlement or exercise of stock options or other equity awards outstanding as of immediately following the Closing (as defined in the Business Combination Agreement) in respect of awards of the Prior Companies outstanding immediately prior to the Closing. For the avoidance of doubt, shares of the Corporation’s stock, which prior to the Domestication (as defined in the Business Combination Agreement) were Class A ordinary shares, shares of the Corporation’s stock sold to the PIPE Investors (as defined in the Business Combination Agreement), shares of the Corporation’s stock issuable upon conversion of the Convertible Notes (as defined in the Business Combination Agreement), shares acquired pursuant to open market purchases after the Closing, as well as any and all other shares of the Corporation’s stock held by any Person other than a Non-Electing Seller or a Permitted Transferee thereof, are not Lock-Up Shares and such shares are not subject to any Lock-Up Period under these Bylaws.
(f) “Member of the Immediate Family” means, with respect to any Person who is an individual, (i) each parent, spouse (but not including a former spouse or a spouse from whom such Person is legally separated) or child (including those adopted) of such individual and (ii) each trustee, solely in his or her capacity as trustee, for a trust naming only one or more of the Persons listed in sub-clause (i) as beneficiaries.
(g) “Non-Electing Seller” means any Person that (i) is a holder of Lock-Up Shares and (ii) did not execute a counterpart to the A&R Registration Rights Agreement agreeing to be party thereto.
(h) “Permitted Transfer” means any Transfer (i) made to an Affiliate; (ii) pursuant to a bona fide gift or charitable contribution; (iii) by will or intestate succession upon the death of the stockholder; (iv) pursuant to a court order, qualified domestic relations order, divorce settlement, divorce decree, separation agreement or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union; (v) in the case of a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (vi) pro rata (or in accordance with the applicable organizational documents of the Person making a Transfer) to the direct or indirect partners, members or stockholders of a Person or any related investment funds or vehicles controlled or managed by such Persons or their respective Affiliates; (vii) to a nominee or custodian of a Person to whom a Transfer would be permitted under clauses (i) through (vi) above; (viii) in connection with any legal, regulatory or other order; (ix) to satisfy tax withholding obligations in connection with the exercise of options to purchase shares of the Corporation’s stock or the vesting of Corporation stock-based awards; (x) to the Corporation in connection with the repurchase of any Person’s shares of the Corporation’s stock in connection with the termination of the stockholder’s employment with the Corporation pursuant to contractual agreements with the Corporation; (xi) made in connection with the establishment of a trading plan pursuant to Rule 10b5-1 promulgated under the Exchange Act; provided, however, that such plan does not provide for the Transfer of Lock-Up Shares during the Lock-Up Period; (xii) in payment on a “net exercise” or “cashless” basis of the exercise or purchase price with respect to the exercise of options to purchase shares of the Corporation’s stock; (xiii) in the event of the Corporation’s completion of a liquidation, merger, share exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of stock for cash, securities or other property.
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(i) “Permitted Transferee” means, prior to the expiration of the Lock-Up Period, any Person to whom a Non-Electing Seller is permitted to Transfer shares of stock prior to the expiration of the Lock-Up Period pursuant to the definition of Permitted Transfer.
(j) “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
(k) “Restricted Transfer” means any Transfer other than a Permitted Transfer.
(l) “Trading Day” means a day on which the New York Stock Exchange and the Nasdaq Stock Market are open for the buying and selling of securities.
(m) “Transfer” means, when used as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition by the transferor (whether by operation of law or otherwise) and, when used as a verb, the transferor voluntarily or involuntarily, transfers, sells, pledges or hypothecates or otherwise disposes of (whether by operation of law or otherwise), including, in each case, (i) the establishment or increase of a put equivalent position or liquidation with respect to, or decrease of a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934 (as may be amended, the “Exchange Act”) with respect to, any security or (ii) entry into any swap or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise. A Transfer shall be deemed to include any indirect voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition that is effectuated for the purpose of circumventing the restrictions on Transfer set forth in Section 6.7 of these Bylaws. The terms “Transferee,” “Transferor,” “Transferred,” and other forms of the word “Transfer” shall have the correlative meanings.
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6.8 REGISTERED STOCKHOLDERS
The Corporation:
(a) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and notices and to vote as such owner; and
(b) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER
7.1 NOTICE OF STOCKHOLDERS’ MEETINGS
Notice of any meeting of stockholders shall be given in the manner set forth in the DGCL and these bylaws.
7.2 NOTICE TO STOCKHOLDERS SHARING AN ADDRESS
Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any stockholder who fails to object in writing to the Corporation, within 60 days of having been given written notice by the Corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice. This Section 7.2 shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.
7.3 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL
Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
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7.4 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.
ARTICLE VIII - INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS
Subject to the other provisions of this Article VIII, the Corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
8.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
Subject to the other provisions of this Article VIII, the Corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
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8.3 SUCCESSFUL DEFENSE
To the extent that a present or former director or officer (for purposes of this Section 8.3 only, as such term is defined in Section 145(c)(1) of the DGCL) of the Corporation has been successful on the merits or otherwise in defense of any Proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. The Corporation may indemnify any other person who is not a present or former director or officer (as such term is defined in Section 145(c)(1) of the DGCL) of the Corporation against expenses (including attorneys’ fees) actually and reasonably incurred by such person to the extent he or she has been successful on the merits or otherwise in defense of any Proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein.
8.4 INDEMNIFICATION OF OTHERS
Subject to the other provisions of this Article VIII, the Corporation shall have power to indemnify its employees and agents, or any other persons, to the extent not prohibited by the DGCL or other applicable law. The Board of Directors shall have the power to delegate to any person or persons identified in subsections (1) through (4) of Section 145(d) of the DGCL the determination of whether employees or agents shall be indemnified.
8.5 ADVANCED PAYMENT OF EXPENSES
Expenses (including attorneys’ fees) actually and reasonably incurred by an officer or director of the Corporation in defending any Proceeding shall, to the fullest extent permitted by law, be paid by the Corporation in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) actually and reasonably incurred by current or former directors and officers or other current or former employees and agents of the Corporation or by persons currently or formerly serving at the request of the Corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. The right to advancement of expenses shall not apply to any Proceeding (or any part of any Proceeding) for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding (or any part of any Proceeding) referenced in Section 8.6(b) or 8.6(c) prior to a determination that the person is not entitled to be indemnified by the Corporation.
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8.6 LIMITATION ON INDEMNIFICATION
Subject to the requirements in Section 8.3 and the DGCL, the Corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):
(a) for which payment has actually been received by or on behalf of such person under any statute, insurance policy, contract, agreement or other indemnity or advancement provision, vote or otherwise, except with respect to any excess beyond the amount actually received under any statute, insurance policy, contract, agreement, other indemnity or advancement provision, vote or otherwise;
(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);
(c) for any reimbursement of the Corporation by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Corporation, as required in each case under the 1934 Act (including any such reimbursements that arise from an accounting restatement of the Corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Corporation of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);
(d) initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Corporation or its directors, officers, employees, agents or other indemnitees, unless (i) the Board of Directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law, (iii) otherwise required to be made under Section 8.7 or (iv) otherwise required by applicable law; or
(e) if prohibited by applicable law.
8.7 DETERMINATION; CLAIM
If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 30 days after receipt by the Corporation of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The Corporation shall indemnify such person against any and all expenses that are actually and reasonably incurred by such person in connection with any action brought in accordance with this Section 8.7 for indemnification or advancement of expenses from the Corporation under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the Corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.
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8.8 NON-EXCLUSIVITY OF RIGHTS
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.
8.9 INSURANCE
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of the DGCL.
8.10 SURVIVAL
The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
8.11 EFFECT OF REPEAL OR MODIFICATION
A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or these bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
8.12 CERTAIN DEFINITIONS
For purposes of this Article VIII, references to the “Company” shall include, in addition to the resulting company, any constituent company (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent company, or is or was serving at the request of such constituent company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving company as such person would have with respect to such constituent company if its separate existence had continued. For purposes of this Article VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.
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ARTICLE IX - GENERAL MATTERS
9.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
Except as otherwise provided by law, the certificate of incorporation or these bylaws, the Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.
9.2 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.
9.3 SEAL
The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board of Directors. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
9.4 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes a corporation, partnership, limited liability company, joint venture, trust or other enterprise, and a natural person. Any reference in these bylaws to a section of the DGCL shall be deemed to refer to such section as amended from time to time and any successor provisions thereto.
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ARTICLE X - AMENDMENTS
These bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the affirmative vote of the holders of at least two-thirds of the total voting power of outstanding voting securities, voting together as a single class, shall be required for the stockholders of the Corporation to alter, amend or repeal, or adopt any bylaw inconsistent with, the following provisions of these bylaws: Article II, Section 3.1, Section 3.2, Section 3.4, Section 3.11, Article VIII or this Article X (including, without limitation, any such Article or Section as renumbered as a result of any amendment, alteration, change, repeal, or adoption of any other bylaw). The Board of Directors shall also have the power to adopt, amend or repeal bylaws.
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Exhibit 10.29
CONTINGENT CONSIDERATION ESCROW AGREEMENT
THIS CONTINGENT CONSIDERATION ESCROW AGREEMENT (this “Agreement”) is made and entered into as of February 10, 2023, by and among Adara Acquisition Corp., a Delaware corporation (and, after the Closing, to be renamed Alliance Entertainment Holding Corporation) (“Parent”), Bruce Ogilvie, solely in his capacity as representative of the Company Stockholders (the “Securityholder Representative”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent”).
BACKGROUND
A Parent, Adara Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Alliance Entertainment Holding Corporation, a Delaware corporation (the “Company”), have entered into a Business Combination Agreement, dated as of June 22, 2022 (as may be amended from time to time, the “Business Combination Agreement”), pursuant to which, among other things, Merger Sub will merge with and into the Company, after which the Company will be the surviving corporation and a wholly-owned subsidiary of Parent and Parent shall change its name to “Alliance Entertainment Holding Corporation” and the Company shall change its name to “AENT Corporation”; Capitalized terms used but not defined herein shall have their respective meanings assigned to them in the Business Combination Agreement.
B. In accordance with Section 3.03 of the Business Combination Agreement, at the Closing, Parent shall issue the Contingent Consideration Shares to the Contingent Consideration Eligible Company Equityholders and shall deposit, or shall cause to be deposited, such Contingent Consideration Shares with the Escrow Agent to serve as a source of payment for certain Contingent Consideration Eligible Company Equityholders in the event that the Surviving Corporation achieves certain Triggering Events after the Closing pursuant to the terms of the Business Combination Agreement.
C. The Escrow Agent has agreed to accept, hold and disburse the Contingent Consideration Shares in accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Appointment.
(a) Each of Parent and the Securityholder Representative hereby appoint the Escrow Agent to serve as escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment under the terms and conditions set forth herein.
(b) The Escrow Agent shall act only in accordance with the terms and conditions contained in this Agreement and shall have no duties or obligations with respect to the Business Combination Agreement.
2. Contingent Consideration Shares.
(a) Simultaneously with the execution and delivery of this Agreement, Parent shall deposit in escrow 60,000,000 shares of Adara Class E Common Stock (the “Contingent Consideration Shares”) with the Escrow Agent. The Escrow Agent hereby acknowledges receipt of the Contingent Consideration Shares and shall hold the Contingent Consideration Shares as a book-entry position registered in the names of the Contingent Consideration Eligible Company Equityholders in accordance with their respective Contingent Consideration Pro Rata Share and as set forth on Exhibit A attached hereto.
(b) During the term of this Agreement and for so long as the Contingent Consideration Shares are not forfeited and/or cancelled: (i) the Contingent Consideration Shares shall be shown as issued and outstanding on Parent’s financial statements, and shall be outstanding as of the Effective Time; (ii) each Contingent Consideration Eligible Company Equityholder will have all rights with respect to the Contingent Consideration Shares attributable to ownership of such Contingent Consideration Shares except (A) the right of possession thereof, (B) the right to sell, assign, pledge, hypothecate or otherwise dispose of or encumber such shares or any interest therein, and (C) the right to be paid dividends with respect such shares (other than non-taxable stock dividends, which shall remain in and become part of the Contingent Consideration Shares).
(c) During the term of this Agreement, the Contingent Consideration Eligible Equityholders will have the right to exercise voting rights with respect to the Contingent Consideration Shares that are not forfeited and/or cancelled in accordance with each Contingent Consideration Eligible Equityholder’s Contingent Consideration Pro Rata Share; provided that with respect to any matter for which the Contingent Consideration Shares are permitted to vote, the Contingent Consideration Eligible Equityholders shall vote, or cause to be voted, the Contingent Consideration Shares in the same proportion that the number of Adara Class A Common Stock owned by all other stockholders of Parent are voted, as notified to the Contingent Consideration Eligible Equityholders by Parent. In the absence of notice from Parent, as to the proportion that the number of Adara Class A Common Stock owned by all other stockholders of Parent are voted, the Contingent Consideration Eligible Equityholders shall not vote any of the shares comprising the Contingent Consideration Shares.
(d) Any dividends paid or issued with respect to any Contingent Consideration Escrow Shares while such shares are held in escrow shall be held by Parent and upon the release of any Contingent Consideration Escrow Shares to the Contingent Consideration Eligible Equityholders in accordance with this Agreement and the Merger Agreement, Parent shall cause the associated dividends to be distributed to the Contingent Consideration Eligible Equityholders.
(e) In the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of the Parent Common Stock, other than a regular cash dividend, the Contingent Consideration Shares shall be appropriately adjusted on a pro rata basis and consistent with the terms of this Agreement.
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3. Disposition and Termination.
(a) The Contingent Consideration Shares shall serve as a source of payment for certain Contingent Consideration Eligible Equityholders in the event that the Surviving Corporation reaches certain Triggering Events after the Closing in accordance with the terms of the Business Combination Agreement. Claims for the release of Contingent Consideration Shares by the Securityholder Representative on behalf of the Contingent Consideration Eligible Equityholders shall be referred to as “Contingent Consideration Escrow Claims”. Parent shall notify the Securityholder Representative and the Escrow Agent in writing of the occurrence of any Triggering Event under the Business Combination Agreement and any Contingent Consideration Escrow Claim resulting therefrom (“Contingent Consideration Escrow Notice”). Promptly after the receipt of such Contingent Consideration Escrow Notice (but in any event no later than two (2) Business Days thereafter), Parent and the Securityholder Representative shall execute and deliver to the Escrow Agent a Joint Written Instruction (as defined below) with respect to the release of the number of Contingent Consideration Shares specified in such applicable Contingent Consideration Escrow Notice pursuant to the following sentence. In its Contingent Consideration Escrow Notice, Parent shall provide a calculation of the number of Contingent Consideration Shares due to the Contingent Consideration Eligible Equityholders in accordance with the Business Combination Agreement and the Closing Consideration Spreadsheet. The Escrow Agent shall have no duty to determine whether any Contingent Consideration Escrow Notice accurately describes an Contingent Consideration Escrow Claim or conforms to or is permitted under by or by virtue of the Business Combination Agreement but shall be entitled to assume conclusively and without inquiry that any such Contingent Consideration Escrow Notice satisfies the requirements of the Business Combination Agreement and this Agreement. The Escrow Agent shall not distribute all or any portion of the Contingent Consideration Shares except in accordance with Section 3(b).
(b) Within five (5) Business Days after receipt of either (i) a joint written instruction in the form attached hereto as Exhibit A signed by each of Parent and the Securityholder Representative (a “Joint Written Instruction”) or (ii) a Final Order (as defined below), a copy of which shall be simultaneously provided to the other parties hereto, in each case specifying the amount of Contingent Consideration Shares asserted by Parent for such Contingent Consideration Escrow Claim, the Escrow Agent shall disburse the portion of the Contingent Consideration Shares to such parties as provided in the Joint Written Instruction or Final Order, as the case may be. Any Joint Written Instruction shall contain all requisite information needed by the Escrow Agent in order to distribute the Contingent Consideration Shares in accordance with this Agreement, including names, addresses, number of shares, and any other information requested by the Escrow Agent. For the avoidance of doubt, the Escrow Agent shall make distributions of the Contingent Consideration Shares only in accordance with a Joint Written Instruction or a Final Order.
(c) If a Contingent Consideration Escrow Claim with respect to Triggering Event I has not been made before the date that is the fifth anniversary of the Closing Date (the “First Release Date”), then within ten (10) Business Days after the First Release Date, Parent and the Securityholder Representative shall deliver a Joint Written Instruction to the Escrow Agent, instructing the Escrow Agent to return/disburse to Parent 20,000,000 Contingent Consideration Shares less any Contingent Consideration Shares that are subject to an Contingent Consideration Escrow Claim with respect to which the Escrow Agent shall have received a Contingent Consideration Escrow Notice prior to the applicable Release Date, but which remains unresolved or unsatisfied as of such date (a “Remaining Amount”). If a Contingent Consideration Escrow Claim with respect to Triggering Event II has not been made before the date that is the seventh anniversary of the Closing Date (the “Second Release Date”), then within ten (10) Business Days after the Second Release Date, Parent and the Securityholder Representative shall deliver a Joint Written Instruction to the Escrow Agent, instructing the Escrow Agent to return/disburse to Parent 20,000,000 Contingent Consideration Shares less any Remaining Amount. If a Contingent Consideration Escrow Claim with respect to Triggering Event III has not been made before the date that is the tenth anniversary of the Closing Date (the “Final Release Date” and, together with the First Release Date and the Second Release Date, each a “Release Date”), then within ten (10) Business Days after the Final Release Date, Parent and the Securityholder Representative shall deliver a Joint Written Instruction to the Escrow Agent, instructing the Escrow Agent to return/disburse to Parent 20,000,000 Contingent Consideration Shares less any Remaining Amount.
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(d) With respect to any Remaining Amounts, the Escrow Agent shall continue to hold such amounts in escrow in accordance with the terms of this Agreement until the resolution of such underlying Contingent Consideration Escrow Claims. Such Remaining Amounts, once resolved, shall be disbursed by the Escrow Agent pursuant to Section 3(b) of this Agreement or returned/disbursed to the Parent pursuant to this Section 3(c), as the case may be.
(e) Upon the delivery of all of the Contingent Consideration Shares by the Escrow Agent in accordance with the terms of this Agreement and instructions, this Agreement shall terminate, subject to the provisions of Section 6.
(f) For the purposes of this Agreement, “Final Order” means a final and nonappealable judgment, award or order of a court of competent jurisdiction (an “Order”), which Order is delivered to the Escrow Agent accompanied by a written instruction from Parent or the Securityholder Representative (as applicable) given to effectuate such Order and confirming that such Order is final, nonappealable and issued by a court of competent jurisdiction, and the Escrow Agent shall be entitled to conclusively rely upon any such confirmation and instruction and shall have no responsibility to review the Order to which such confirmation and instruction refers.
4. Escrow Agent.
(a) The Escrow Agent shall have only those duties as are specifically and expressly provided herein, which shall be deemed purely ministerial in nature, and no other duties shall be implied. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of, nor have any requirements to comply with, the terms and conditions of any other agreement, instrument or document between the parties and any other person or entity, in connection herewith, including the Business Combination Agreement, nor shall the Escrow Agent be required to determine if any person or entity has complied with any such agreements, nor shall any additional obligation of the Escrow Agent be inferred from the terms of such agreements, even though reference thereto may be made in this Agreement.
(b) With respect to the rights, duties and obligations of the Escrow Agent only, in the event of any conflict between the terms and provisions of this Agreement with those of the Business Combination Agreement, any schedule or exhibit attached to this Agreement, or any other agreement among the parties, the terms and conditions of this Agreement shall control.
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(c) The Escrow Agent may rely upon, and shall not be liable for acting or refraining from acting upon, any written notice, document, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by any of the parties without inquiry and without requiring substantiating evidence of any kind. The Escrow Agent shall not be liable to any beneficiary, or other person or entity, for refraining from acting upon any instruction setting forth, claiming, containing, objecting to, or related to the transfer or distribution of the Contingent Consideration Shares, or any portion thereof, unless such instruction shall have been delivered to the Escrow Agent in accordance with Section 9 below and the Escrow Agent has been able to satisfy any applicable security procedures as may be required hereunder and as set forth in Section 10. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document, notice, instruction or request. The Escrow Agent shall have no duty to solicit any payments which may be due, nor shall the Escrow Agent have any duty or obligation to confirm or verify the accuracy or correctness of any amounts deposited with it hereunder.
(d) The Escrow Agent shall not be liable for any action taken, suffered or omitted to be taken by it in good faith except to the extent that a final adjudication of a court of competent jurisdiction determines that the Escrow Agent’s fraud, gross negligence or willful misconduct was the primary cause of any loss to any party hereto or any beneficiary of the Contingent Consideration Shares. The Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through affiliates or agents.
(e) The Escrow Agent may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for any action taken, suffered or omitted to be taken by it in accordance with, or in reliance upon, the advice or opinion of any such counsel, accountants or other skilled persons except to the extent that a final adjudication of a court of competent jurisdiction determines that the Escrow Agent’s fraud, gross negligence or willful misconduct was the primary cause of any loss to any of the parties hereto or any beneficiary or the Contingent Consideration Shares. In the event that the Escrow Agent shall be uncertain or believe there is some ambiguity as to its duties or rights hereunder or shall receive instructions, claims or demands from hereto which, in its opinion, conflict with any of the provisions of this Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all the property held in escrow until it shall be given a direction in writing which eliminates such ambiguity or uncertainty to the satisfaction of the Escrow Agent, until an Order or judgement of a court of competent jurisdiction agrees to pursue any redress or recourse in connection with any dispute without making the Escrow Agent a party to the same.
5. Succession.
(a) The Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving thirty (30) days’ advance notice in writing of such resignation to the parties specifying a date when such resignation shall take effect; provided that such resignation shall not take effect until a successor Escrow Agent has been appointed in accordance with this Section 5. If the parties have failed to appoint a successor Escrow Agent prior to the expiration of thirty (30) days following receipt of the notice of resignation, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent or for other appropriate relief, and any such resulting appointment shall be binding upon all of the parties hereto. The Escrow Agent’s sole responsibility after such thirty (30) day notice period expires shall be to hold the Contingent Consideration Shares (without any obligation to reinvest the same) and to deliver the same to a designated substitute Escrow Agent, if any, or in accordance with the directions of a Final Order or judgement of a court of competent jurisdiction, at which time of delivery, the Escrow Agent’s obligations hereunder shall cease and terminate, subject to the provisions of Section 7. In accordance with Section 7, the Escrow Agent shall have the right to withhold, as security, an amount of shares equal to any dollar amount due and owing to the Escrow Agent, plus any costs and expenses the Escrow Agent shall reasonably believe may be incurred by the Escrow Agent in connection with the termination of this Agreement.
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(b) Any entity into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any entity to which all or substantially all the escrow business may be transferred, shall be the Escrow Agent under this Agreement without further act.
6. Compensation and Reimbursement. The Escrow Agent shall be entitled to compensation for its services under this Agreement as Escrow Agent and for reimbursement for its reasonable out-of-pocket costs and expenses, in the amounts and payable as set forth on Exhibit B. The Escrow Agent shall also be entitled to payments of any amounts to which the Escrow Agent is entitled under the indemnification provisions contained herein as set forth in Section 7. The obligations of Parent set forth in this Section 6 shall survive the resignation, replacement or removal of the Escrow Agent or the termination of this Agreement.
7. Indemnity.
(a) The Escrow Agent shall be indemnified and held harmless by Parent from and against any expenses, including counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, other than expenses or losses arising from the fraud, gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the receipt of such notice, the Escrow Agent, in its sole discretion, may commence an action in any state or federal court located in New York County in the State of New York..
(b) The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its own best judgement, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement unless evidenced by a writing delivered to the Escrow Agent are affected, unless it shall have given its prior written consent thereto.
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(c) This Section 7 shall survive termination of this Agreement or the resignation, replacement or removal of the Escrow Agent for any reason.
8. Patriot Act Disclosure; Taxpayer Identification Numbers; Tax Reporting.
(a) Section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) requires the Escrow Agent to implement reasonable procedures to verify the identity of any person or entity that opens a new account with it. Accordingly, each of the parties acknowledges that Section 326 of the USA PATRIOT Act and the Escrow Agent’s identity verification procedures require the Escrow Agent to obtain information which may be used to confirm the identity of such party, including such person or entity’s name, address and organizational documents (“identifying information”). The parties agree to provide the Escrow Agent with and consent to the Escrow Agent obtaining from third parties any such identifying information required as a condition of opening an account with or using any service provided by the Escrow Agent.
(b) The parties hereto agree that Parent shall be treated as the owner of the Contingent Consideration Shares for U.S. federal and applicable state and local income tax purposes.
9. Notices.
(a) All communications hereunder shall be in writing and, except for Joint Written Instructions (which shall be governed by Section 10), all notices and communications hereunder shall be deemed to have been duly given and made if in writing and if (i) served by personal delivery upon the party for whom it is intended, (ii) delivered by registered or certified mail, return receipt requested, or by Federal Express or similar overnight courier, or (iii) sent by facsimile or e-mail, electronically or otherwise, to the party at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such party:
If to the Escrow Agent:
Continental Stock Transfer and Trust Company
One State Street — 30th Floor
New York, New York 10004
Facsimile No: +1 (212) 616-7615
Attention: Administration Department
If to Parent:
Adara Acquisition Corp.
211 East Boulevard
Charlotte, NC 28203
Attention: Thomas Finke, Chief Executive Officer
Email: tmfinke@gmail.com
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with a copy to (which shall not constitute notice):
Blank Rome LLP
1271 Avenue of the Americas
New York, NY 10019
Attention: Brad L. Shiffman and Kathleen A. Cunningham
Email: brad.shiffman@blankrome.com; kathleen.cunningham@blankrome.com
If to the Securityholder Representative:
Bruce Ogilvie.
8201 Peters Road, Suite 1000
Plantation, FL 33324
Email: bruceo@sdcd.com
with a copy to (which shall not constitute notice):
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attn: Mitchell Nussbaum
E-mail: mnussbaum@loeb.com
Notwithstanding the above, in the case of communications delivered to the Escrow Agent, such communications shall be deemed to have been given on the date received by an officer of the Escrow Agent or any employee of the Escrow Agent who reports directly to any such offer at the above-referenced office. In the event that the Escrow Agent, in its sole discretion, shall determine that an emergency exists, the Escrow Agent may use such other means of communication as the Escrow Agent deems appropriate. For purposes of this Agreement, “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which the Escrow Agent located at the notice address set forth above is authorized or required by law or executive order to remain closed.
10. Security Procedures.
(a) Notwithstanding anything to the contrary as set forth in Section 9, any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of the Contingent Consideration Shares, including any Joint Written Instruction permitted pursuant to Section 3 of this Agreement, may be given to the Escrow Agent only by confirmed facsimile or other electronic transmission (including e-mail) and no instruction for or related to the transfer or distribution of the Contingent Consideration Shares, or any portion thereof, shall be deemed delivered and effective unless the Escrow Agent actually shall have received such instruction by facsimile or other electronic transmission (including e-mail) at the number or e-mail address provided to the parties by the Escrow Agent in accordance with Section 9 and as further evidenced by a confirmed transmittal to that number.
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(b) In the event transfer instructions are so received by the Escrow Agent by facsimile or other electronic transmission (including e-mail), the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Exhibit C hereto, and the Escrow Agent may rely upon the confirmation of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. If the Escrow Agent is unable to contact any of the authorized representatives identified on Exhibit C, the Escrow Agent is hereby authorized both to receive written instructions from and seek confirmation of such instructions by officers of Parent (collectively, the “Senior Officers”), as the case may be, which shall include the titles of Chief Executive Officer, General Counsel, Chief Financial Officer, President of Executive Vice President, as the Escrow Agent may select. Such Senior Officer shall deliver to the Escrow Agent a fully executed incumbency certificate, and the Escrow Agent may rely upon the confirmation of anyone purporting to be any such officer.
(c) The parties hereto acknowledge that the Escrow Agent is authorized to deliver the Contingent Consideration Shares to the custodian account of a recipient of the Contingent Consideration Shares, as designated in a Joint Written Instruction.
11. Compliance with Court Orders. In the event that any escrow property shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgement or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders, judgements or decrees so entered or issued, whether with or without jurisdiction, and in the event that the Escrow Agent reasonably obeys or complies with any such writ, order, judgement or decree, it shall not be liable to any of the parties hereto or to any other person, entity, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree being subsequently reversed, modified, annulled, set aside or vacated.
12. Miscellaneous.
(a) Except for changes to transfer instructions as provided in Section 10, the provisions of this Agreement may be waived, altered, amended or supplemented, in whole or in part, only by a writing signed by the parties hereto.
(b) Neither this Agreement nor any right or interest hereunder may be assigned in whole or in part by any party hereto, except as provided in Section 5, without the prior consent of all of the other parties hereto.
(c) This Agreement shall be governed by and construed under the laws of the State of New York. Each party hereto irrevocably waives any objection on the grounds of venue, forum non-conveniens, or any similar grounds and irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the jurisdiction of the any state or federal court in New York County in the State of New York.
(d) To the extent that in any jurisdiction any party may now or hereafter be entitled to claim for itself or its assets, immunity from suit, execution attachment (before or after judgement), or other legal process, such party shall not claim, and it hereby irrevocably waives, such immunity.
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(e) The parties further hereby waive any right to a trial by jury with respect to any lawsuit or judicial proceedings arising or relating to this Agreement.
(f) No party to this Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Agreement because of, acts of God, fire, war, terrorism, floods, strikes, electrical outages, equipment or transmission failure, or other causes reasonably beyond its control.
(g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All signatures of the parties to this Agreement may be transmitted by facsimile or other electronic transmission (including e-mail), and such facsimile or other electronic transmission (including e-mail) will, for all purposes, be deemed to be the original signature of such party whose signature it reproduces, and will be binding upon such party.
(h) If any provision of this Agreement is determined to be prohibited or unenforceable by reason of any applicable law of a jurisdiction, then such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in such jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction.
(i) A person who is not a party to this Agreement shall have no right to enforce any term of this Agreement.
(j) The parties represent, warrant and covenant that each document, notice, instruction or request provided by such party to the other party shall comply with applicable laws and regulations. Where, however, the conflicting provisions of any such applicable law may be waived, they are hereby irrevocably waived by the parties hereto to the fullest extent permitted by law, to the end that this Agreement shall be enforced as written.
(k) Except as expressly provided in Section 7 above, nothing in this Agreement, whether express or implied, shall be construed to give to any person or entity other than the Escrow Agent and the parties any legal or equitable right, remedy, interest or claim under or in respect of this Agreement or the Contingent Consideration Shares escrowed hereunder.
[Remainder Of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.
| PARENT | ||
| ADARA ACQUISITION CORP. | ||
| By: | /s/ Thomas Finke | |
| Name: Thomas Finke | ||
| Title: Chief Executive Officer | ||
| SECURITYHOLDER REPRESENTATIVE | ||
| BRUCE OGILVIE | ||
| By: | /s/ Bruce Ogilvie | |
| Name: Bruce Ogilvie | ||
| Title: Executive Chairman | ||
| ESCROW AGENT | ||
| CONTINENTAL STOCK TRANSFER AND TRUST COMPANY | ||
| By: | /s/ Erika Young | |
| Name: Erika Young | ||
| Title: Vice President | ||
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EXHIBIT A
Form of Joint Written Instructions
[●]
Continental Stock Transfer & Trust Company
One State Street — 30th Floor
New York, New York 10004
Facsimile No: (212) 616-7615
Attention: [●]
| RE: | Contingent Consideration Escrow Agreement, dated as of February 10, 2023 (the “Contingent Consideration Escrow Agreement”), by and among Adara Acquisition Corp., a Delaware corporation (“Parent”), Bruce Ogilvie, solely in his capacity as representative, agent and attorney-in-fact of the Company Securityholders (the “Securityholder Representative”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent”). |
Dear [●]:
Unless otherwise defined in this letter, capitalized terms used in this letter shall have the definitions ascribed to them in the Contingent Consideration Escrow Agreement.
This letter shall serve as the Joint Written Instruction of Parent and the Securityholder Representative pursuant to Section 3 of the Contingent Consideration Escrow Agreement.
The parties hereto hereby instruct the Escrow Agent to disburse the Contingent Consideration Shares to the following persons and entities in the amounts set forth on Exhibit A hereto.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Joint Written Instructions on [ ].
| PARENT | ||
| ALLIANCE ENTERTAINMENT HOLDING CORPORATION | ||
| By: | ||
| Name: | ||
| Title: | ||
| SECURITYHOLDER REPRESENTATIVE | ||
| BRUCE OGILVIE | ||
| By: | ||
| Name: | ||
| Title: | ||
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EXHIBIT A
| Name | Number of Contingent Consideration Shares |
| Jeff Walker | 28,866,667 |
| Bruce Ogilvie, Jr. Trust dated January 20, 1994 | 19,194,915 |
| Ogilvie Legacy Trust dated September 14th, 2021 | 10,805,085 |
| Sungaze LLC | 1,133,333 |
Exhibit 14
CODE OF CONDUCT AND ETHICS
OF
ALLIANCE ENTERTAINMENT HOLDING CORPORATION
The Board of Directors of Alliance Entertainment Holding Corporation (the “Company”) has adopted this Code of Conduct and Ethics (this “Code”) to provide value for our shareholders; and
| ● | To encourage honest and ethical conduct, including fair dealing and the ethical handling of conflicts of interest; |
| ● | To prompt full, fair, accurate, timely and understandable disclosure; |
| ● | To comply with applicable laws and governmental rules and regulations; |
| ● | To prompt internal reporting of violations of this Code; |
| ● | To protect the Company’s legitimate business interests, including corporate opportunities, assets and confidential information; and |
| ● | To deter wrongdoing. |
All directors, officers, employees and independent contractors of the Company are expected to be familiar with this Code and to adhere to the principles and procedures set forth in this Code. For purposes of this Code, all directors, officers, employees and independent contractors are referred to collectively as “employees” or “you” throughout this Code.
I. Honest and Ethical Conduct
All directors, officers, employees and independent contractors owe duties to the Company to act with integrity. Integrity requires, among other things, being honest and ethical. This includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Deceit and subordination of principle are inconsistent with integrity.
All directors, officers, employees and independent contractors have the following duties:
| ● | To conduct business with professional courtesy and integrity, and act honestly, fairly and in good faith without prejudice in all commercial dealings for a proper purpose which are in the best interests of the Company; |
| ● | To work in a safe, healthy and efficient manner, using skills, time and experience to the maximum of abilities; |
| ● | To comply with applicable awards, Company policies and job requirements, and adhere to a high standard of business ethics; |
| ● | To observe both the form and spirit of laws, governmental rules, regulations and accounting standards; |
| ● | Not to knowingly make any misleading statements to any person or to be a party to any improper practice in relation to dealings with or by the Company; |
| ● | To ensure that Company resources and properties are used properly; |
| ● | To maintain the confidentiality of information where required or consistent with Company policies; and |
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| ● | Not to disclose information or documents relating to the Company or its business, other than as required by law, not to make any unauthorized public comment on Company affairs and not to misuse any information about the Company or its associates, and not to accept improper or undisclosed material personal benefits from third parties as a result of any transaction or transactions of the Company. |
II. Conflicts of Interest
A “conflict of interest” arises when an individual’s personal interest interferes or appears to interfere with the interests of the Company. A conflict of interest can arise when a director, officer or employee takes actions or has personal interests that may make it difficult to perform his or her Company work objectively and effectively.
There are a variety of situations in which a conflict of interest may arise. While it would be impractical to attempt to list all possible situations, some common types of conflicts may be:
| ● | To serve as a director, employee or contractor for a company that has a business relationship with, or is a competitor of the Company; |
| ● | To have a financial interest in a competitor, supplier or customer of the Company; |
| ● | To receive improper personal benefits from a competitor, supplier or customer, as a result of any transaction or transactions of the Company; |
| ● | To accept financial interest beyond entertainment or nominal gifts in the ordinary course of business, such as a meal or a coffee mug; |
| ● | To present at a conference where the conference sponsor has a real or potential business relationship with the Company (e.g. vendor, customer, or investor), and, the conference sponsor offers travel or accommodation arrangements or other benefits materially in excess of the Company’s standard; or |
| ● | To use for personal gain, rather than for the benefit of the Company, an opportunity that you discovered through your role with the Company. |
Fidelity or service to the Company should never be subordinated to or dependent on personal gain or advantage. Conflicts of interest should be avoided.
In most cases, anything that would constitute a conflict for a director, officer or employee also would present a conflict if it is related to a member of his or her family.
Interests in other companies, including potential competitors and suppliers, that are purely for management of the other entity, or where an otherwise questionable relationship is disclosed to the Board and any necessary action is taken to ensure there will be no effect on the Company, are not considered conflicts unless otherwise determined by the Board.
Evaluating whether a conflict of interest exists can be difficult and may involve a number of considerations. Please refer to other policies, such as the employee handbook, for further information. We also encourage you to seek guidance from your manager, Chief Executive Officer or Chief Financial Officer, or their equivalents, when you have any questions or doubts.
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III. Disclosure
Each director, officer or employee, to the extent involved in the Company’s disclosure process, including the Chief Executive Officer or Chief Financial Officer, or their equivalents, the (the “Senior Financial Officers”), is required to be familiar with the Company’s disclosure controls and procedures applicable to him or her so that the Company’s public reports and documents comply in all material respects with the applicable securities laws and rules. In addition, each such person having direct or supervisory authority regarding these securities filings or the Company’s other public communications concerning its general business, results, financial condition and prospects should, to the extent appropriate within his or her area of responsibility, consult with other Company officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.
Each director, officer or employee, to the extent involved in the Company’s disclosure process, including the Senior Financial Officers, must:
| ● | Familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company. |
| ● | Not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent auditors, governmental regulators and self-regulatory organizations. |
IV. Compliance
It is the Company’s policy to comply with all applicable laws, rules and regulations. It is the personal responsibility of each employee, officer and director to adhere to the standards and restrictions imposed by those laws, rules and regulations in the performance of their duties for the Company, including those relating to accounting and auditing matters and insider trading.
The Board endeavors to ensure that the directors, officers and employees of the Company act with integrity and observe the highest standards of behavior and business ethics in relation to their corporate activities.
Specifically, directors, officers and employees must:
| ● | Comply with the law; |
| ● | Act in the best interests of the Company; |
| ● | Be responsible and accountable for their actions; and |
| ● |
Observe the ethical principles of fairness, honesty and truthfulness, including disclosure of potential conflicts. |
Generally, it is against Company policies for any individual to profit from undisclosed information relating to the Company or any other company in violation of insider trading or other laws. Anyone who is aware of material nonpublic information relating to the Company, our customers, or other companies may not use the information to purchase or sell securities in violation of securities laws.
If you are uncertain about the legal rules involving your purchase or sale of any Company securities or any securities in companies that you are familiar with by virtue of your work for the Company, you should consult with the Chief Executive Officer or Chief Financial Officer, or their equivalents, before making any such purchase or sale. Other policies issued by the Company also provide guidance as to certain of the laws, rules and regulations that apply to the Company’s activities.
V. Reporting and Accountability
The Board of Directors has the authority to interpret this Code in any particular situation. Any director, officer or employee who becomes aware of any violation of this Code is required to notify the Chief Executive Officer or Chief Financial Officer, or their equivalents, promptly.
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Any questions relating to how these policies should be interpreted or applied should be addressed to your manager, Chief Executive Officer or Chief Financial Officer, or their equivalents. Any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest, as discussed in Section II of this Code, should be discussed with your manager, Chief Executive Officer or Chief Financial Officer, or their equivalents. A director, officer or employee who is unsure of whether a situation violates this Code should discuss the situation with the Chief Executive Officer or Chief Financial Officer, or their equivalents, to prevent possible misunderstandings and embarrassment at a later date.
Each director, officer or employee must:
| ● | Notify the Chief Executive Officer or Chief Financial Officer, or their equivalents, promptly of any existing or potential violation of this Code. |
| ● | Not retaliate against any other director, officer or employee for reports of potential violations. |
The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:
| ● | The Chief Executive Officer or Chief Financial Officer, or their equivalents, as the case may be, will take all appropriate action to investigate any violations reported. In addition, the Chief Executive Officer or Chief Financial Officer, or their equivalents, as appropriate, shall report each violation and alleged violation involving a director or an executive officer to the Chairman of the Board of Directors. To the extent he or she deems appropriate, the Chairman of the Board of Directors shall participate in any investigation of a director or executive officer. After the conclusion of an investigation of a director or executive officer, the conclusions shall be reported to the Board of Directors. |
| ● | The Board of Directors will conduct such additional investigation as it deems necessary. The Board will determine that a director or executive officer has violated this Code. Upon being notified that a violation has occurred, the Chief Executive Officer or Chief Financial Officer, or their equivalents, as the case may be, will take such disciplinary or preventive action as deemed appropriate, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of appropriate law enforcement authorities. |
VI. Corporate Opportunities
Employees, officers and directors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers and directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.
Sometimes, the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers and directors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with your manager, the Chief Executive Officer or Chief Financial Officer, or their equivalents.
VII. Confidentiality
In carrying out the Company’s business, employees, officers and directors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers and directors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.
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VIII. Fair Dealing
Our core value of operating is based on responsiveness, openness, honesty and trust with our members, business partners, employees and shareholders. We do not seek competitive advantages through illegal or unethical business practices. Each employee, officer and director should endeavor to deal fairly with the Company’s customers, service providers, suppliers, competitors and employees. No employee, officer or director should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.
IX. Protection and Proper Use of Company Assets
All employees, officers and directors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes. Theft, carelessness and waste have a direct impact on our profit.
X. Waivers and Amendments
From time to time, the Company may waive provisions of this Code. Any employee or director who believes that a waiver may be called for should discuss the matter with your manager, the Chief Executive Officer or Chief Financial Officer, or their equivalents.
Any waiver of the Code for executive officers (including Senior Financial Officers) or directors of the Company may be made only by the Board of Directors and must be promptly disclosed to shareholders along with the reasons for such waiver in a manner as required by applicable law or the rules of the applicable stock exchange. Any amendment or waiver of any provision of this Code must be approved in writing by the Board or, if appropriate, its delegate(s) and promptly disclosed pursuant to applicable laws and regulations.
Any waiver or modification of the Code for a Senior Financial Officer will be promptly disclosed to shareholders if and as required by applicable law or the rules of the applicable stock exchange.
The Company is committed to continuously reviewing and updating its policies, and therefore reserves the right to amend this Policy at any time, for any reason, subject to applicable law.
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Exhibit 16.1
February 10, 2023
Office of the Chief Accountant
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
United States of America
Commissioners:
We have read Alliance Entertainment Holding Corp. (formerly known as Adara Acquisition Corp.) statements included under Item 4.01 of its Form 8-K dated February 10, 2023. We agree with the statements concerning our Firm under Item 4.01, in which we were informed of our dismissal on February 8, 2023. We are not in a position to agree or disagree with other statements contained therein.
Very truly yours,
/s/ WithumSmith+Brown, PC
New York, New York
Exhibit 99.1
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Alliance Entertainment Completes Business Combination with Adara Acquisition Corp.
Leading Direct-to-Consumer and E-Commerce Provider to the Entertainment Industry to Commence M&A Roll-Up Initiative and Investments in Automation and Proprietary Software to Drive Increased Market Share & Dominant Position in Physical Media
Chairman Bruce Ogilvie and CEO Jeff Walker Will Continue to Lead the Combined Company Along with its Current Proven Management Team
Charlotte, NC & Sunrise, FL - February 10, 2023 – Alliance Entertainment Holding Corporation ("Alliance Entertainment"), a distributor and wholesaler of the world’s largest in stock selection of music, movies, video games, electronics, arcades, and collectibles, and Adara Acquisition Corp. (“Adara”) (NYSE American: ADRA, ADRA.U, ADRA.WS), a special purpose acquisition corporation, have completed the previously announced business combination which was approved at an Extraordinary General Meeting of Adara’s shareholders on January 18, 2023.
Beginning on February 13, 2023, Alliance Entertainment’s shares and warrants will be quoted on the OTC under the ticker symbols “ADRA” and “ADRA WS”, respectively. The new CUSIP number for the shares will be 01861F102 and the CUSIP number for the warrants will be 01861F110. Concurrent with Alliance Entertainment’s OTC quotation, Adara Acquisition Corp. has been delisted from the NYSE American. Alliance Entertainment also intends to seek to list on the Nasdaq Capital Market as soon as practicable after the close of the Business Combination and subject to satisfying the conditions for initial listing.
Chairman Bruce Ogilvie and CEO Jeff Walker will continue to lead the combined company, along with its current proven management team.
This transaction values Alliance Entertainment at approximately $480 million. As a public company, Alliance expects to be able to make further investment in growth including automating facilities, upgrading proprietary software that positions Alliance Entertainment to increase market share. Management believes the transaction also positions the Company to drive inorganic growth through a roll-up strategy of acquiring and integrating competitors and complementary businesses.
“We believe that today’s milestone combined with our strong revenue growth, expanding customer base and product offering, and several successful acquisitions, will help accelerate our future expansion initiatives,” said Jeff Walker, CEO of Alliance Entertainment. “Alliance Entertainment today is well positioned to continue to capitalize on shifts towards eCommerce and Omni-Channel strategies, especially with retailers and manufacturers vastly increased reliance on their DTC (Direct to Consumer) fulfillment and distribution partners. We are at an inflection point that now positions us to execute a multi-prong growth strategy that we expect will deliver a double-digit revenue growth rate with strong cash generation to the bottom line.”
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Bruce Ogilvie, Chairman of Alliance Entertainment, added, “Moreover, this business combination will further enable our significant focus on a strategic roll-up strategy of acquiring and integrating competitors and complementary businesses which we believe will drive an accelerated competitive position and value creation. Combined with further investment including automating facilities and upgrading proprietary software, we are confident we can grow revenue and expand margins. In this next phase of our development, we expect to see growth from enhancing our DTC relationships to grow existing revenue lines and improving capabilities which will generate a more attractive overall service offering. We will also continue to expand into new consumer product segments, growing our product offering and providing more to our existing customer base while attracting new customers in the process. The board of Alliance Entertainment would like to thank the team at Adara and its group of investors for the successful completion of the business combination.”
Tom Finke, CEO & Chairman of Adara Acquisition Corp., commented, “We congratulate Alliance Entertainment on today’s accomplishment and look forward to their continued evolution as a leading DTC and eCommerce provider for the entertainment industry. We are confident Alliance Entertainment will provide shareholders with a diversified investment alternative as one of the largest physical media and entertainment product distributors in the world. We believe their expanding use of automation technology to further impact efficiency, cost, and capacity for future growth will deliver long-term value. We look forward to collaborating with Alliance Entertainment as they strategically position the company to achieve its growth objectives.”
Advisors
ThinkEquity acted as the advisor to Adara Acquisition Corp. in connection with the business combination. Blank Rome LLP served as legal advisor to Adara Acquisition Corp. in connection with the business combination. Alliance Entertainment was represented in the transaction by John Frankenheimer, Mitchell Nussbaum, Jessica Isokawa and David Flemming from Loeb & Loeb LLP, and were advised by Jeff Franklin of ATI.
Alliance Entertainment Highlights
With more than thirty-five years of distribution experience, Alliance Entertainment serves customers of every size, providing a robust suite of services to resellers and leading retailers worldwide. The Company’s efficient processing and essential seller tools noticeably reduce the costs associated with administrating multiple vendor relationships, while helping omni-channel retailers expand their product selection and fulfillment goals.
Alliance stocks over 485,000 unique entertainment products from Microsoft, Nintendo, Activision, Electronic Arts, Sega, Funko, Disney, Warner Home Video, Universal Video, Sony Pictures, Fox, Lionsgate, Paramount, Warner Music, Sony Music, Universal Music, Mattel, Lego, Hasbro, Arcade1Up, and over 500 additional Entertainment product manufacturers.
Through the exclusive distribution divisions of AMPED, Distribution Solutions, and Cokem, Alliance is the exclusive distributor of over 57,300 unique Vinyl, CD, DVD, and Video Game products to retailers worldwide.
eCommerce fulfillment is a cornerstone of Alliance’s success and a significant growing division with over 38% of the companies $1.4 billion in sales being delivered directly to consumers homes. In 2021 over 13,845,000 products were delivered as a drop shipper for Amazon, Walmart, Best Buy, Wayfair, GameStop, Kohls, Target, and hundreds of additional eCommerce customers. The DTU division of Alliance also has its own websites and retail brands such as Deepdiscount.com, Popmarket.com, Importcds.com, Critic’s Choice Video, Collectors Choice Music, and Movies Unlimited. In addition, the Company has worldwide accounts on eBay, Amazon Marketplace, Discogs, and many more.
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Through strategic acquisitions led by Bruce and Jeff, Alliance Entertainment has expanded its relationships with leading media brands and global retailers, as well as diversified its product offerings. As a public company, Alliance Entertainment will enhance its ability to pursue future acquisitions, while also investing in further automation of its distribution facilities and upgrading its proprietary suite of software.
About Alliance Entertainment
Alliance Entertainment is a premier distributor of music, movies, and consumer electronics. We offer 485,000 unique in stock SKUs, including over 57,300 exclusive compact discs, vinyl LP records, DVDs, Blu-rays, and video games. Complementing our vast media catalog, we also stock a full array of related accessories, toys and collectibles. With more than thirty-five years of distribution experience, Alliance Entertainment serves customers of every size, providing a robust suite of services to resellers and retailers worldwide. Our efficient processing and essential seller tools noticeably reduce the costs associated with administrating multiple vendor relationships, while helping omni-channel retailers expand their product selection and fulfillment goals. For more information visit www.aent.com.
About Adara Acquisition Corp.
Adara securities have been listed on the NYSE American under the ticker symbols "NYSE: ADRA, ADRA.U, ADRA.WS". Adara is a blank check company organized for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or other similar business combination with one or more businesses or entities. Adara is led by its CEO, Thomas Finke (former Chairman and CEO of Barings LLC) and its director, W. Tom Donaldson (founder of Blystone & Donaldson). In addition to Messrs. Finke and Donaldson, Adara’s Board of Directors also include Frank Quintero, Dylan Glenn and Beatriz Acevedo-Greiff. To learn more, please visit: https://www.adaraspac.com
Forward Looking Statements
Certain statements included in this press release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of financial and performance metrics, projections of market opportunity, expectations and timing related to Alliance Entertainment’s business, customer growth and other business milestones, potential benefits of the proposed business combination (the "Proposed Transactions"), and expectations related to the timing of the Proposed Transactions.
These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of Adara’s and Alliance Entertainment’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by an investor as, a guarantee, an assurance, a prediction, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Alliance Entertainment and Adara.
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These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political, and legal conditions; failure to realize the anticipated benefits of the merger; risks relating to the uncertainty of the projected financial information with respect to Alliance Entertainment; risks related to the music, video, gaming, and entertainment industry, including changes in entertainment delivery formats; global economic conditions; the effects of competition on Alliance Entertainment’s future business; risks related to fulfilment network; risks related to expansion and the strain on Alliance Entertainment’s management, operational, financial, and other resources; risks related to operating results and growth rate; risks related to Alliance’s high levels of debt, including risks of covenant breaches; the business could be harmed by the amount of redemption requests paid to Adara’s public stockholders; and those factors discussed in Adara’s definitive Proxy Statement on Form S-4 filed with the SEC on December 12, 2022 under the heading "Risk Factors," and the Current Report on Form 8-K filed on June 23, 2022 and other documents of Adara and Alliance filed, or to be filed, with the SEC.
No Offer or Solicitation
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such other jurisdiction.
For investor inquiries, please contact:
MZ Group
Chris Tyson/Larry Holub
(949) 491-8235
AENT@mzgroup.us
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements present the combination of the financial information of Adara and Alliance adjusted to give effect to the Business Combination. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Business”, which is herein referred to as Article 11.
The unaudited pro forma condensed combined balance sheet as of September 30, 2022, combines the historical balance sheet of Adara and the historical consolidated balance sheet of Alliance on a pro forma basis as if the Business Combination had been consummated on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021, combine the historical statements of operations of Adara and Alliance on a pro forma basis as if the Business Combination had been consummated on January 1, 2021, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial information has been developed from and should be read in conjunction with:
| · | the accompanying notes to the unaudited pro forma condensed combined financial statements; |
| · | the historical audited financial statements of Adara as of and for the year ended December 31, 2021, and the related notes, which are incorporated by reference in this Current Report; |
| · | the historical unaudited condensed financial statements of Adara as of and for the nine months ended September 30, 2022, and the related notes, which are incorporated by reference in this Current Report; |
| · | the historical unaudited condensed consolidated financial statements of Alliance as of September 30, 2022, and for the 3 months ended September 30, 2022, and the related notes, which are incorporated by reference in this Current Report; |
| · | the historical unaudited condensed consolidated financial statements of Alliance as of December 31, 2021, and for the six months ended December 31, 2021, and the related notes, which are not included or incorporated by reference in this Current Report; and |
| · | other information relating to Adara and Alliance contained in or incorporated by reference in this Current Report, including the Business Combination Agreement and the description of certain items thereof set forth in the section entitled “The Business Combination Agreement” and the risk factors set forth under the section entitled “Risk Factors” of this registration statement. |
Shares outstanding as presented in the unaudited pro forma condensed combined financial statements include the following, which reflects actual redemptions by Adara’s Public Shareholders:
| Shares | % | |||||||
| Adara Class A common stockholders (Public Shareholders) | 167,170 | 0.3 | ||||||
| Adara Class A common stockholders (Sponsor) | 1,500,000 | 3.1 | ||||||
| Former Alliance stockholders(1) | 47,500,000 | 96.6 | ||||||
| Shares outstanding | 49,167,170 | 100 | % | |||||
| (1) | This presentation does not account for 60,000,000 shares that are subject to certain performance vesting terms. |
Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only, and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the post-merger company following the completion of the Business Combination. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
1
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2022
(Amounts in thousands, except shares and per share amounts)
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments |
Notes | Pro Forma Condensed Combined |
||||||||||||||
| Assets | ||||||||||||||||||
| Current Assets | ||||||||||||||||||
| Cash | $ | 30 | $ | 809 | $ | 1,720 | 1c | $ | 99 | |||||||||
| (2,460 | ) | 1f | ||||||||||||||||
| Accounts Receivables – Net | 93,347 | 93,347 | ||||||||||||||||
| Inventory | 286,943 | 286,943 | ||||||||||||||||
| Other Current Assets | 53 | 10,438 | (2,400 | ) | 1f | 8,091 | ||||||||||||
| Related Party Receivable | 0 | 0 | ||||||||||||||||
| Total Current Assets | 83 | 391,537 | (3,140) | 388,480 | ||||||||||||||
| Property & Equipment – Net | 6,283 | 6,283 | ||||||||||||||||
| Operating Lease Right-Of-Use Assets | 7,263 | 7,263 | ||||||||||||||||
| Intangible Assets | 26,782 | 26,782 | ||||||||||||||||
| Goodwill | 81,903 | 81,903 | ||||||||||||||||
| Marketable securities held in Trust Account | 116,831 | — | (115,111 | ) | 1b | — | ||||||||||||
| (1,720 | ) | 1c | ||||||||||||||||
| Other Assets | 371 | 371 | ||||||||||||||||
| Deferred Tax Asset | 2,804 | 2,804 | ||||||||||||||||
| Total Assets | $ | 116,914 | $ | 516,943 | $ | (119,971 | ) | $ | 513,886 | |||||||||
2
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Current Liabilities | ||||||||||||||||||
| Outstanding Checks | ||||||||||||||||||
| Accounts Payable | $ | 200,934 | $ | 200,934 | ||||||||||||||
| Accrued Expenses | 1,051 | 14,274 | (800 | ) | 1f | 14,525 | ||||||||||||
| Revolving Credit Facility | 0 | 0 | ||||||||||||||||
| Promissory Note | 436 | 436 | ||||||||||||||||
| Current Portion of Seller Note | — | — | ||||||||||||||||
| Current Portion of Obligations Under Capital Lease | — | — | ||||||||||||||||
| Current Portion of Operating Lease Obligations | 4,268 | 4,268 | ||||||||||||||||
| Income Tax Payable | 69 | 0 | 69 | |||||||||||||||
| Total Current Liabilities | 1,556 | 219,476 | (800 | ) | 220,232 | |||||||||||||
| Long-Term Liabilities | ||||||||||||||||||
| Revolving Credit Facility | 183,524 | 183,524 | ||||||||||||||||
| Deferred Tax Liability | 5,271 | 5,271 | ||||||||||||||||
| Debt – Non-Current | 3,377 | 3,377 | ||||||||||||||||
| Long-Term Portion of Operating Lease Obligations | 3,876 | 3,876 | ||||||||||||||||
| Warrant Liabilities | 1,885 | — | (1,093 | ) | 1h | 792 | ||||||||||||
| Total Long-Term Liabilities | 1,885 | 196,048 | (1,093 | ) | 196,840 | |||||||||||||
| Total Liabilities | $ | 3,441 | $ | 415,524 | $ | (1,893 | ) | $ | 417,072 | |||||||||
3
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Commitments and Contingencies | ||||||||||||||||||
| Class A common stock subject to possible redemption, $0.0001 par value; 11,500,000 shares at $10.16 per share redemption value | 116,411 | (115,111 | ) | 1b | — | |||||||||||||
| (1,300 | ) | 1b | ||||||||||||||||
| Stockholders’ Equity | ||||||||||||||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,875,000 shares issued and outstanding | — | — | 1d | — | ||||||||||||||
| Class A New | — | 1d | 6 | |||||||||||||||
| 1 | 1b | |||||||||||||||||
| 5 | 1e | |||||||||||||||||
| Paid-In Capital | 40,000 | (2,938 | ) | 1a | 96,874 | |||||||||||||
| 1,299 | 1b | |||||||||||||||||
| (5 | ) | 1e | ||||||||||||||||
| (3,000 | ) | 1f | ||||||||||||||||
| (2,674 | ) | 1e | ||||||||||||||||
| (1,060 | ) | 1f | — | |||||||||||||||
| 64,159 | 1g | |||||||||||||||||
| 1,093 | 1h | |||||||||||||||||
| Treasury stock, 57 shares carried at cost | (2,674 | ) | 2,674 | 1e | — | |||||||||||||
| Retained Earnings | (2,938 | ) | 64,159 | 2,938 | 1a | — | ||||||||||||
| (64,159 | ) | 1g | ||||||||||||||||
| Comprehensive Income | (66 | ) | (66 | ) | ||||||||||||||
| Total Stockholders’ Equity | (2,938 | ) | 101,419 | (1,667 | ) | 96,814 | ||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 116,914 | $ | 516,943 | $ | (119,971 | ) | $ | 513,886 | |||||||||
4
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2022
(Amounts in thousands, except shares and per share amounts)
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Net Sales | $ | 824,432 | $ | 824,432 | ||||||||||||||
| Cost of Sales | 730,338 | 730,338 | ||||||||||||||||
| Gross Margin | 94,094 | — | 94,094 | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||
| Fulfillment Services | 45,918 | 45,918 | ||||||||||||||||
| Technology | 9,614 | 9,614 | ||||||||||||||||
| Sales & Marketing | 22,540 | 22,540 | ||||||||||||||||
| General & Administrative | $ | 1,887 | $ | 11,077 | $ | (90 | ) | 2a | $ | 12,874 | ||||||||
| Depreciation & Amortization | — | 5,522 | 5,522 | |||||||||||||||
| Transaction Costs | 671 | 671 | ||||||||||||||||
| IC DISC | 5,033 | 5,033 | ||||||||||||||||
| Total Operating Expenses | 1,887 | 100,375 | (90 | ) | 102,172 | |||||||||||||
| Operating Income (Loss) | (1,887 | ) | (6,281 | ) | 90 | (8,078 | ) | |||||||||||
5
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2022
(Amounts in thousands, except per share amounts)
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Non Operating Income (Expenses): | ||||||||||||||||||
| Interest | (4,674 | ) | (4,674 | ) | ||||||||||||||
| Interest earned on marketable securities held in Trust Account | 671 | (671 | ) | 2b | — | |||||||||||||
| Change in fair value of warrants liabilities | 2,976 | (1,726 | ) | 2e | 1,250 | |||||||||||||
| Total Non-Operating Income (Expenses) | 3,647 | (4,674 | ) | (2,397 | ) | (3,424 | ) | |||||||||||
| Income before Income Taxes | 1,760 | (10,955 | ) | (2,307 | ) | (11,502 | ) | |||||||||||
| Provision for Income Taxes | (70 | ) | 2,539 | 140 | 2d | 2,609 | ||||||||||||
| Net Income (Loss) | $ | 1,690 | $ | (8,416 | ) | $ | (2,167 | ) | $ | (8,893 | ) | |||||||
| Supplemental Data | ||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic shares outstanding | 14,375 | 1 | 49,167 | |||||||||||||||
| Diluted shares outstanding | 14,375 | 1 | 49,167 | |||||||||||||||
| Basic and Diluted earnings (Loss) per share: | ||||||||||||||||||
| Basic earnings (Loss) per share | $ | 0.12 | $ | (9,351 | ) | $ | (0.18 | ) | ||||||||||
| Diluted earnings (Loss) per share | $ | 0.12 | $ | (9,351 | ) | $ | (0.18 | ) | ||||||||||
6
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 2021
(Amounts in thousands)
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Net Sales | $ | 1,441,762 | $ | 1,441,762 | ||||||||||||||
| Cost of Sales | 1,241,650 | 1,241,650 | ||||||||||||||||
| Gross Margin | 200,112 | 200,112 | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||
| Fulfillment Services | 60,682 | 60,682 | ||||||||||||||||
| Technology | 12,772 | 12,772 | ||||||||||||||||
| Sales & Marketing | 29,845 | 29,845 | ||||||||||||||||
| General & Administrative | 977 | 16,655 | (105 | ) | 2a | 17,527 | ||||||||||||
| Depreciation & Amortization | 9,910 | — | 9,910 | |||||||||||||||
| Transaction costs | 86 | (282 | ) | 1,060 | 2c | 864 | ||||||||||||
| IC DISC | 8,589 | 8,589 | ||||||||||||||||
| Total Operating Expenses | 1,063 | 138,171 | 955 | 140,189 | ||||||||||||||
| Income from Operations | (1,063 | ) | 61,941 | (955 | ) | 59,923 | ||||||||||||
7
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 2021
(Amounts in thousands, except per share amounts)
| Historical | ||||||||||||||||||
| US GAAP | ||||||||||||||||||
| Adara | Alliance | Transaction Adjustments | Notes | Pro Forma Condensed Combined | ||||||||||||||
| Non Operating Income (Expenses): | ||||||||||||||||||
| Gain\loss on Disposal of PPE | (47 | ) | (47 | ) | ||||||||||||||
| Interest | (3,237 | ) | (3,237 | ) | ||||||||||||||
| Interest earned on marketable securities held in Trust Account | 10 | — | (10 | ) | 2b | — | ||||||||||||
| Change in fair value of warrants liabilities | 4,297 | — | (2,490 | ) | 2e | 1,807 | ||||||||||||
| Total Non Operating Income (Expenses) | 4,307 | (3,284 | ) | (2,500 | ) | (1,477 | ) | |||||||||||
| Income before Income Taxes | 3,244 | 58,657 | (3,455 | ) | 58,446 | |||||||||||||
| Provision for Income Taxes | (14,076 | ) | 232 | 2d | (13,844) | |||||||||||||
| Net Income | $ | 3,244 | $ | 44,581 | $ | (3,223 | ) | $ | 44,602 | |||||||||
| Supplemental Data | ||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic shares outstanding | 13,040 | 1 | 49,167 | |||||||||||||||
| Diluted shares outstanding | 13,040 | 1 | 49,167 | |||||||||||||||
| Basic and Diluted earnings per share: | ||||||||||||||||||
| Basic earnings per share | $ | 0.25 | $ | 49,534.44 | $ | 0.91 | ||||||||||||
| Diluted earnings per share | $ | 0.25 | $ | 49,534.44 | $ | 0.91 | ||||||||||||
8
Notes to Unaudited Pro Forma Condensed Combined Financial Information
| 1. | Basis of Presentation |
The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Adara is treated as the “acquired” company for accounting and financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of Alliance issuing stock for the net assets of Adara, accompanied by a recapitalization. The net assets of Adara are stated at historical cost, with no goodwill or other intangible assets recorded.
The unaudited pro forma condensed combined balance sheet as of September 30, 2022, gives pro forma effect to the Business Combination as if it had been consummated on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022 and the year ended December 31, 2021, give pro forma effect to the Business Combination, as if it had occurred on January 1, 2021.
The unaudited pro forma condensed combined balance sheet as of September 30, 2022, has been prepared using, and should read in conjunction with, the following:
| · | Adara’s unaudited condensed consolidated balance sheet as of September 30, 2022, and the related notes, incorporated by reference in this Current Report; and |
| · | Alliance’s unaudited condensed consolidated balance sheet as of September 30, 2022, and the related notes, incorporated by reference in this Current Report. |
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 has been prepared using, and should be read in conjunction with, the following:
| · | Adara’s unaudited condensed statement of operations for the nine months ended September 30, 2022, and the related notes, incorporated by reference in this Current Report; |
| · | Alliance’s audited consolidated statement of operations for the year ended June 30, 2022, and related notes, incorporated by reference in this Current Report, adjusted for Alliance’s unaudited condensed consolidated statement of operations for the six months ended December 31, 2021 (not included or incorporated by reference in this Current Report) and three months ended as of September 30, 2022, incorporated by reference in this Current Report, and the related notes. |
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, has been prepared using, and should be read in conjunction with, the following:
| · | Adara’s audited statement of operations for the year ended December 31, 2021, and the related notes, incorporated by reference in this Current Report; |
| · | Alliance’s audited consolidated statement of operations for the year ended June 30, 2021, and the related notes, incorporated by reference in this Current Report, adjusted for the unaudited condensed consolidated statements of operations for the six months ended December 31, 2021, and 2020, (not included or incorporated by reference in this Current Report). |
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
Management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the combined company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
9
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost sayings that may be associated with the Business Combination. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain estimates, assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Adara and Alliance.
| 2. | Adjustments to Unaudited Pro Forma Condensed Combined Financial Information |
The unaudited proforma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11, which requires the presentation of adjustments for the accounting for the transaction and provides management with the option to present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur. Adara has elected to only present transaction accounting adjustments and other pro forma adjustments, in the following unaudited pro forma condensed combined financial information. There were no intercompany transactions between Adara and Alliance that would require adjustment to these pro forma financial statements for any of the periods presented.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
| 1. | The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2022, are as follows: |
| a. | Reflects the elimination of Adara’s historical accumulated deficit upon consummation of the Business Combination. |
| b. | Reflects actual redemptions where public stockholders holding 11,332,830 shares of the Adara Class A common stock exercised their right to redeem such shares in February 2023. The redemption price in these pro forma financial statements is approximately $10.16 in order to show the actual proceeds that remain in the Trust Account after redemption. However, the actual redemption price will be approximately $10.28 which reflects additional earnings in the Trust Account between September 30, 2022 and February 8, 2023. |
| c. | Reflects the reclassification of investments held in the Trust Account to cash and cash equivalents that resulted from the consummation of the Business Combination. |
| d. | Reflects the conversion of all outstanding shares of Adara Class B common stock to Adara Class A common stock and the forfeiture of 1,375,000 Class B shares pursuant to the Business Combination. |
| e. | Reflects the cancelation and conversion of each then-outstanding share of Alliance common stock and Treasury stock into the number of shares of Adara Class A common stock to be received. |
10
| f. | Reflects the payment of estimated transaction costs of approximately $5,160,000 ($3,000,000 for Alliance and $2,160,000 for Adara). Costs include legal, financial advisory and other professional fees related to the Business Combination. In connection with the reverse recapitalization treatment, Alliance’s transaction costs are recorded as reductions to additional paid-in capital. Adara’s expected net transaction costs, including $60,000 for amounts paid to the underwriter related to retaining Public Shareholder funds in the merged entity, are recorded through the statement of operations and treated as an increase to accumulated deficit that is reclassified to additional paid-in capital upon consummation of the merger. |
| g. | Reflects recording the fair value of the 60,000,000 shares of Class E stock that is subject to performance vesting (treated as an equity award). The value was estimated using a Monte Carlo valuation model and was recorded as an increase in APIC and decrease in retained earnings as it is treated like a dividend. Retained earnings was only reduced to -0-, and not for the entire estimated value of approximately $297 million. Management acknowledges that US GAAP does not specifically address the accounting for dividends that exceed retained earnings, and that there is diversity in practice. Therefore, management has elected an accounting policy to not reduce retained earnings below $0, and to reduce APIC by the excess amount. Assumptions used to estimate fair value are as follows: |
| Tranche 1 | Tranche 2 | Tranche 3 | ||||||||||
| Common stock value | $ | 9.95 | $ | 9.95 | $ | 9.95 | ||||||
| Exercise price | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||
| Contractual stock price threshold | $ | 20.00 | $ | 30.00 | $ | 50.00 | ||||||
| One-touch barrier | $ | 22.12 | $ | 33.23 | $ | 55.34 | ||||||
| Expiration date | 6/30/2027 | 6/30/2029 | 6/29/2032 | |||||||||
| Expected item | 5.00 | 7.00 | 10.00 | |||||||||
| Risk-free rate | 4.02 | % | 3.93 | % | 3.79 | % | ||||||
| Dividend | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
| Volatility | 37.8 | % | 37.8 | % | 37.8 | % | ||||||
| Value of an up-and-in barrier option | $ | 5.74 | $ | 4.85 | $ | 4.29 | ||||||
| Fair value per share | $ | 5.74 | $ | 4.85 | $ | 4.29 | ||||||
| h. | To reflect the reclassification of the Public warrants to permanent equity. |
Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
| 2. | The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for nine months ended September 30, 2022, and the year ended December 31, 2021, are as follows: |
| a. | Reflects the elimination of Adara’s administrative services fee paid to certain related parties of Adara that ended upon consummation of the Business Combination and therefore would not have been incurred if the Business Combination was consummated on January 1, 2021. |
| b. | Reflects the elimination of interest and dividends on investments held in the Trust Account, which includes interest income and dividends earned related to the investments held in the Trust Account of Adara that would not have been earned if the Business Combination was consummated on January 1, 2021. |
| c. | Reflects approximately $2,160,000 of non-recurring Adara transaction costs related to the Business Combination to be incurred through the close of the transaction. Approximately $1,060,000 of these transaction costs are not reflected in Adara’s historical financial statements and are adjusted for in the proforma statement of operations and will be expensed as incurred. Approximately $60,000 of the costs relate to fees that are paid to Adara’s underwriter, calculated as 3.5% of the funds in the Trust Account which were not redeemed by Adara Class A Common Stockholders. |
11
| d. | Reflects the income tax effect related to the pro forma adjustments, at an estimated effective tax rate of 24%. |
| e. | Reflects the reversal of the change in fair value of the Public warrants which were reclassified to permanent equity. |
Income per Share
Represents the net income per share calculated using the historical basic and diluted weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2021. As the Business Combination is being reflected as if it had occurred as of January 1, 2021, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes the shares to be issued and outstanding upon the consummation of the Business Combination have been outstanding for the entire periods presented.
Basic and diluted net loss per share attributable to the holders of Adara common stock are as follows:
| For
the nine months ended September 30, 2022 | ||||
| Pro forma net Loss attributable to common stockholders | $ | (8,893,000 | ) | |
| Pro forma weighted average shares calculation, basic and diluted: | ||||
| Adara Class A common stockholders (Public Shareholders) | 167,170 | |||
| Adara Class B common stockholders (Sponsor) | 1,500,000 | |||
| Former Alliance stockholders | 47,500,000 | |||
| Pro forma weighted average shares outstanding – basic and diluted(1) | 49,167,170 | |||
| Net loss per share – basic and diluted(1) | $ | (0.18 | ) | |
| For the year ended December 31, 2021 | ||||
| Pro forma net income attributable to common stockholders | $ | 44,602,000 | ||
| Pro forma weighted average shares calculation, basic and diluted: | ||||
| Adara Class A common stockholders (Public Shareholders) | 167,170 | |||
| Adara Class B common stockholders (Sponsor) | 1,500,000 | |||
| Former Alliance stockholders | 47,500,000 | |||
| Pro forma weighted average shares outstanding – basic and diluted(1) | 49,167,170 | |||
| Net income per share – basic and diluted(1) | $ | 0.91 | ||
| (1) | Weighted average shares outstanding are the same for basic and diluted earnings per share because all 9,920,000 warrants are considered antidilutive. Also excludes the 60,000,000 contingent shares that are subject to performance conditions after the merger because they are not considered outstanding for the earnings per share calculations. |
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Exhibit 99.3
Alliance Entertainment Holding Corporation
Audit committee of the Board of Directors
The responsibilities and powers of the Audit Committee of the Board of Directors (the “Board”) of Alliance Entertainment Holding Corporation (the “Company”), as delegated by the Board, are set forth in this charter (this “Charter”). Whenever the Audit Committee takes an action, it shall exercise its independent judgment on an informed basis that the action is in the best interests of the Company and its shareholders.
| I. | PURPOSE |
The purpose of the Audit Committee shall be to represent and assist the Board in the oversight and monitoring of:
| ● | The Company’s accounting and financial reporting processes and the audits of the Company’s financial statements; |
| ● | The integrity of the Company’s financial statements; |
| ● | The Company’s internal accounting and financial controls; and |
| ● | The Company’s compliance with legal and regulatory requirements, and the independent auditors’ qualifications, independence and performance. |
| II. | COMMITTEE MEMBERSHIP |
The Audit Committee will initially consist of three members of the Board. The members of the Audit Committee shall be appointed by and serve at the discretion of the Board. Members of the Audit Committee must meet the following criteria:
| ● | Each member must meet the independence and experience requirements and standards established from time to time by the Securities and Exchange Commission (the “SEC”) and any securities exchange on which the Company’s securities are listed or quoted for trading, in each case as amended from time to time. |
| ● | Each member must be financially literate and able to read and understand fundamental financial statements, including the Company’s balance sheet, statement of operations and statement of cash flows, as determined by the Board. |
| ● | At least one member must have accounting or related financial management expertise, as the Board interprets such qualification in its business judgment, by virtue of such member’s current or past employment experience in finance or accounting, requisite professional certification in finance or accounting, or any other comparable experience or background which results in such individual’s financial sophistication. |
| ● | Each member shall also meet any other requirements and standards established from time to time to time by the SEC and any securities exchange on which the Company’s securities are listed or quoted for trading, in each case as amended from time to time, for audit committee members. |
The Board shall designate one member of the Audit Committee as its chairperson.
An Audit Committee member may resign by delivering his or her written resignation to the chairman of the Board, or may be removed by majority vote of the Board by delivery to such member of written notice of removal, to take effect at a date specified therein, or upon delivery of such written notice to such member if no date is specified. The Board shall have the power at any time to fill vacancies in the Audit Committee, subject to such new member(s) satisfying the above requirements.
| III. | MEETINGS AND PROCEDURES |
The Audit Committee will set its own schedule of meetings and will meet at least quarterly, with the option of holding additional meetings at such times as it deems necessary or appropriate. Meetings of the Audit Committee shall be called by a majority of the members of the Audit Committee upon such notice as is provided for in the Company’s charter documents with respect to meetings of the Board. A majority of the Audit Committee members shall constitute a quorum. Actions of the Audit Committee may be taken in person at a meeting or in writing without a meeting. Actions taken at a meeting, to be valid, shall require the approval of a majority of the members of the Audit Committee present and voting. Actions taken in writing, to be valid, shall be signed by all members of the Audit Committee. The Audit Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board. Periodically, the Audit Committee shall meet separately with the Company’s management, with the internal auditors and/or internal control director, and with the independent auditors.
The Audit Committee may form subcommittees for any purpose that the Audit Committee deems appropriate and may delegate to such subcommittees such power and authority as the Audit Committee deems appropriate. The Audit Committee shall not delegate to a subcommittee any power or authority required by law, regulation or listing standard to be exercised by the Audit Committee as a whole.
The Audit Committee shall make regular reports to the Board, which reports shall include to the extent that the Audit Committee deems appropriate, any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors or the performance of the internal audit function.
| IV. | COMMITTEE AUTHORITY AND RESPONSIBILITIES |
The Audit Committee shall appoint and oversee the work of the independent auditors, approve the compensation of the independent auditors and review and, if appropriate, discharge the independent auditors. In this regard, the independent auditors shall report directly to the Audit Committee, and the Audit Committee shall have the sole authority to approve the hiring and discharging of the independent auditors, all audit engagement fees and terms and all permissible non-audit engagements with the independent auditors.
The Audit Committee shall pre-approve (or, where permitted under the rules of the SEC, subsequently approve) engagements of the independent auditors to render audit services and/or establish pre-approval policies and procedures for such engagements, provided that (i) such policies and procedures are detailed as to the particular services rendered, (ii) the Audit Committee is informed of each such service and (iii) such policies and procedures do not include delegation to management of the Audit Committee’s responsibilities under the Securities Exchange Act of 1934 or SEC rules. The Audit Committee shall also pre-approve any non-audit services proposed to be provided to the Company by the independent auditors.
The Audit Committee shall review and reassess the adequacy and scope of this Charter annually and recommend any proposed changes to the Board for approval.
The Audit Committee shall evaluate its performance annually.
To the extent deemed necessary or appropriate, the Audit Committee shall be responsible for:
Oversight of the Company’s Relationship with the Independent Auditor
| ○ | Review the independence of the independent auditors, including (i) obtaining on a periodic basis a formal written statement from the independent auditors delineating all relationships between the independent auditors and the Company, (ii) maintaining an active dialogue with the independent auditors, covering any disclosed relationship or services that may impair their objectivity and independence, (iii) presenting this statement to the Board and (iv) to the extent there are any such relationships, monitoring and investigating them and, if necessary, taking, or recommending to the Board that the Board take, appropriate action to maintain the independence of the independent auditors. |
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| ○ | Evaluate, at least annually, the independent auditors’ qualifications, performance and independence, which evaluation shall include a review and evaluation of the lead partner of the independent auditors, and take appropriate action to oversee the independence of the independent auditors. |
| ○ | Review, in consultation with the independent auditors, the annual audit plan and scope of audit activities and monitor such plan’s progress. |
| ○ | Establish policies regarding the hiring of employees or former employees of the independent auditors. |
Financial Statements and Disclosure Matters
| ○ | Discuss and, as appropriate, review with management and the independent auditors the Company’s financial statements and annual and quarterly reports, including the Company’s disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations, discuss with the independent auditors any other matters required to be discussed by accounting and auditing standards, and recommend to the Board whether the audited financial statements should be included in the Company’s annual report. |
| ○ | Discuss with management, the internal auditor and the independent auditors significant financial reporting issues raised and judgments made in connection with the preparation of the Company’s financial statements, including the review of (i) major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company’s selection or application of accounting principles; (ii) analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues raised and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP or IFRS methods on the financial statements; (iii) the effect of regulatory and accounting initiatives, as well as off-balance sheet arrangements, on the Company’s financial statements; and (iv) the type and presentation of information be included in earnings press releases, as well as any financial information and earnings guidance to be provided to analysts and rating agencies. |
| ○ | At least annually, obtain and review a report by the independent auditor describing: (i) the audit firm’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or (iii) by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the audit firm, and any steps taken to deal with any such issues described in the report. |
| ○ | Receive, review and discuss quarterly reports from the independent auditors on (i) the Company’s major critical accounting policies and practices; (ii) significant alternative treatments of financial information within GAAP or IFRS that have been discussed with management; (iii) ramifications of the use of such alternative disclosures and treatments; (iv) any treatments preferred by the independent auditors; and (v) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences. |
| ○ | Review on a regular basis with the Company’s independent auditors any problems or difficulties encountered by the independent auditors in the course of any audit work, including management’s response with respect thereto, any restrictions on the scope of the independent auditors’ activities or on access to requested information, and any significant disagreements with management; and ensure the resolution of any disagreements between management and the independent auditors regarding financial reporting. |
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| ○ | Review disclosures regarding the Company’s internal controls that are required to be included in SEC reports. |
| ○ | Discuss with management and the independent auditors any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies. |
| ○ | Discuss with management earnings press releases and financial information and earnings guidance to be provided to analysts and rating agencies, including any proposed use of “pro forma” or “adjusted” non- GAAP and non-IFRS information. |
Oversight of the Company’s Internal Control Function
| ○ | Review the adequacy and effectiveness of the Company’s internal control policies and procedures on a regular basis, including the responsibilities, budget and staffing of the Company’s internal audit and control function, as well as the need for any special audit procedures in response to material control deficiencies, through inquiry and discussions with the Company’s independent auditors and management. |
| ○ | Review the reports prepared by management, assessing the adequacy and effectiveness of the Company’s internal controls and procedures, prior to the inclusion of such reports in the Company’s periodic filings as required under SEC rules. |
Compliance Oversight Responsibilities
| ○ | Discuss and review guidelines and policies with respect to risk assessment and risk management, including the Company’s insurance coverage from time to time. |
| ○ | Discuss with the Company’s chief legal officer legal matters that may have a material impact on the financial statements or the Company’s compliance procedures. |
| ○ | Establish procedures for receiving, retaining and treating complaints received by the Company regarding accounting, internal accounting controls or auditing matters and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. |
| ○ | Review, approve and monitor the Company’s code of ethics applicable to its senior financial officers. |
| ○ | Review any conflicts of interest and related party transactions to assess an impact on the Company’s internal controls or financial reporting and disclosure. |
The Audit Committee shall have the authority to engage independent counsel and other advisers, as it determines necessary, to carry out its duties. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of (i) compensation to the independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit review or attest services for the Company, (ii) compensation to any advisers employed by the Audit Committee and (iii) ordinary administrative expenses of the Audit Committee that are necessary or appropriate for carrying out its duties.
Adopted _______, 2022
4
Exhibit 99.4
ALLIANCE ENTERTAINMENT HOLDING CORPORATION
COMPENSATION COMMITTEE CHARTER
OF THE BOARD OF DIRECTORS
Purpose of the Committee
The purposes of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Alliance Entertainment Holding Corporation (the “Company”) shall be to oversee and review the Company’s compensation policies, plans and programs, including its executive, director and other incentive and equity-based compensation plans, and to review and prepare any disclosures required to be made by the Company in its periodic filings with the Securities and Exchange Commission (“SEC”) pursuant to the rules and regulations of the SEC. For purposes of this charter, the term “compensation” shall include salary, long-term incentives, bonuses, performance based cash incentive plans, perquisites, equity incentives, severance arrangements, change of control related arrangements, retirement benefits, tax gross up provisions and other related benefits and benefit plans.
This charter is intended as a tool within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s charter and bylaws (“Governing Documents”), it is not intended to establish by its own force any legally binding obligations.
Composition of the Committee
The members of the Committee shall be appointed by the Board on the recommendation of the Nominating Committee. The Board may designate one member of the Committee as its Chairperson and in the absence of any such designation by the Board, the Committee shall designate by majority vote of the full Committee one member of the Committee as its Chairperson. Vacancies on the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy or by written consent of the Board. No member of the Committee shall be removed except by majority vote of the Board. The Board may remove any member (including the Chairperson) from the Committee at any time with or without cause.
The Committee shall be comprised of directors, each of whom meets the independence requirements established by the Board and applicable laws, regulations and listing requirements of The Nasdaq Stock Market (“Nasdaq”), except that the Committee may have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule 5605(d)(2)(B) of Nasdaq. At least two of the Committee members shall be “non-employee directors” as defined by Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Notwithstanding the foregoing, none of the members of the Committee will be one of the Company’s officers or employees. The members of the Committee and the Chairperson shall be selected not less frequently than annually by the Board and serve at the pleasure of the Board. Each member shall also be free of any relationship that, in the judgment of the Board, would interfere with the exercise of his or her independent judgment.
Meetings and Procedures of the Committee
The Committee may fix its own rules of procedure, which shall be consistent with the Governing Documents. The Committee shall meet at least annually, or more frequently as circumstances require. The Chairperson of the Committee or a majority of the members of the Committee may also call a special meeting of the Committee. A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum. Any action required or permitted to be taken at any meeting of the Committee may be taken without a meeting, if all members of the Committee consent thereto in writing, and the writing or writings are filled with the minutes of proceedings of the Committee.
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The Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests. The Company’s Chief Executive Officer (“CEO”) shall not attend the portion of any meeting where the CEO’s performance or compensation are discussed.
The Compensation Committee shall report to the Board on Committee findings, recommendations and other matters the Committee deems appropriate or the Board requests. The Committee shall keep written minutes of its meetings, which minutes shall be maintained with the books and records of the Company.
Delegation of Authority
The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.
The Committee may also delegate to one or more executive officers of the Company the authority to make grants of equity-based compensation to eligible individuals who are not executive officers. Any executive officer to whom the Committee grants such authority shall regularly report to the Committee grants so made and the Committee may revoke any delegation of authority at any time.
Committee Responsibilities
The primary responsibilities of the Committee shall be to:
| · | Oversee and review the Company’s executive compensation plans and policies. |
| · | Ensure that the Company’s executive compensation programs are designed to enable it to recruit, retain and motivate a large group of talented and diverse executives. |
| · | Ensure that the Company’s executive compensation programs are appropriately competitive, support organization objectives and stockholder interests, and ensure executive compensation is adequately designed to align the interests of executive officers with the long-term performance of the Company. |
| · | Review and report to the Board for its consideration any cash incentive compensation plans, option plans or other equity based plans that provide for payment in the Company’s stock or are based on the value of the Company’s stock, subject to any approvals required by the stockholders of the Company. |
| · | Oversee all employee benefit plans and programs of the Company, its subsidiaries and divisions, including the authority to adopt, amend and terminate such plans and programs (unless approval by the Board or stockholders is required by law). |
| · | Implement and administer the Company’s compensation equity-based remuneration plans. |
| · | Review and approve annual corporate goals and objectives relevant to the President and CEO’s compensation; evaluate the President and CEO’s performance in light of those goals and objectives; and determine and approve the President and CEO’s compensation level (if any) based on this evaluation. |
| · | Evaluate and approve, on an annual basis, the individual elements of total compensation for the executive officers (within the meaning of Section 16 of the Exchange Act), other than the President and CEO, and other key executives. |
| · | Review and approve all special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s officers and employees. |
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| · | Evaluate and recommend for Board approval any mandatory stock ownership guidelines. |
| · | Review and evaluate the compensation paid to directors and make recommendations to the Board for any adjustments. |
| · | Make all approvals necessary under Section 16, Section 162(m) and other regulatory provisions. |
| · | If applicable, review and discuss with management the Compensation Discussion and Analysis (the “CD&A”) required to be included in the Company’s proxy statement and annual report on Form 10-K by the rules and regulations of the SEC, and, based on such review and discussion, determine whether or not to recommend to the Board that the CD&A be so included. |
| · | The Committee shall produce the annual Compensation Committee Report for inclusion in the Company’s proxy statement in compliance with the rules and regulations promulgated by the SEC. |
| · | Annually assess and report to the Board on the performance and effectiveness of the Committee. |
| · | Review this charter on an annual basis, update it as appropriate, and submit it for the approval of the Board when updated. |
| · | Undertake such other responsibilities or tasks as the Board may delegate or assign to the Committee from time to time. |
Investigations and Studies; Outside Advisers
The Committee may conduct or authorize investigations into or studies of matters within the Committee’s scope of responsibilities, and may retain, at the Company’s expense, such legal counsel or other consultants or advisers as it deems necessary and appropriate, including compensation consultants to advise the Committee with respect to amounts or forms of executive or director compensation, and may rely on the integrity and advice of any such counsel or other advisers. It is the Committee’s intention that any compensation consultant engaged to advise the Committee with respect to executive and director compensation will not engage in work for the Company that is unrelated to executive and director compensation advisory services without prior approval of the Committee Chairperson.
The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any such compensation consultant, legal counsel and other adviser retained by the Committee. The Company shall provide for appropriate funding, as determined by the compensation committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee. The Committee shall have sole authority to approve related fees and retention terms.
The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration all factors relevant to the adviser’s independence from management, including in the factors required by the Nasdaq listing rules and the SEC, and the following factors:
| · | the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser; |
| · | the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; |
| · | the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; |
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| · | any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee; |
| · | any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and |
| · | any business or personal relationship of the compensation consultant, legal counsel other adviser or the person employing the adviser with a member of senior management. |
Notwithstanding the foregoing, the Committee is not required to conduct an independence assessment for a compensation adviser that acts in a role limited to the following activities for which no disclosure is required under Item 407(e)(3)(iii) of Regulation S-K promulgated by the SEC: (a) consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the Company, and that is available generally to all salaried employees; and/or (b) providing information that either is not customized for the Company or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice.
Adopted: ______, 2022
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Exhibit 99.5
ALLIANCE ENTERTAINMENT HOLDING CORPORATION
NOMINATING COMMITTEE CHARTER APPLICABLE TO
OF THE BOARD OF DIRECTORS
Purpose
The Nominating Committee Charter is established to help ensure that the Board of Directors {\(the “Board”) of Alliance Entertainment Holding Corporation (the “Company”) properly meets its fiduciary obligations to stockholders and the Company and that the Company has and follows appropriate practices and standards with respect to the nomination of candidates for its Board.
Procedures
| · | Only directors who meet the independence requirements established by the Board and applicable laws, regulations and listing requirements of The Nasdaq Stock Market, as in effect from time to time shall participate in the nomination process with respect to candidates for the Board.. |
| · | The Company’s independent directors will set their own schedule of meetings and will meet at least once per year, with the option of holding additional meetings at such times as they deems necessary or appropriate. The Company’s independent directors will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board, and shall report on its meetings to the Board and any action taken or approved by the independent directors. |
Authority and Responsibilities
To the extent it deems necessary or appropriate, the independent director of the Company shall perform the following:
Board Composition, Evaluation and Nominating Activities
| · | Evaluate the current composition, organization and governance of the Board and its committees, determine future requirements and make recommendations to the Board for approval. |
| · | Review periodically the policy and procedures for considering stockholder nominees for election to the Board. |
| · | Recommend for approval by the Board on an annual basis desired qualifications and characteristics for Board membership and with corresponding attributes. |
| · | Search for, identify, evaluate and recommend for the selection by the Board, candidates to fill new positions or vacancies on the Board, and review any candidates recommended by stockholders, directors, the Company’s management, investment bankers and others. |
| · | Evaluate the performance of individual members of the Board eligible for re-election, and recommend for the selection by the Board, the director nominees for election to the Board at the annual meeting of stockholders. |
| · | Evaluate the independence of directors and director nominees against the independence requirements of the stock exchange rules and regulations and Security and Exchange Commission (“SEC”) rules and other applicable requirements. |
| · | Evaluate director compensation, consulting with outside consultants and/or management, when appropriate, and make recommendations to the Board regarding director compensation. |
Board Committees
| · | Review periodically the composition of each committee of the Board, the need for additional committees, or changes in mandate or dissolution of existing committees, and make recommendations to the Board accordingly. |
| · | Recommend to the Board persons to be members and chairpersons of the various committees. |
Guidelines for Selecting Director Nominees
In selecting director nominees for election to the Board, the independent directors shall consider whether the nominee:
| · | has demonstrated notable or significant achievements in business, education or public service; |
| · | possess the requisite intelligence, education and experience to make a significant contribution to the Board and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
| · | has the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders. |
The independent directors will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the Board. The independent directors may require certain skills or attributes, such as financial or accounting experience, to meet specific Board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of Board members. The independent directors does not distinguish among nominees recommended by stockholders and other persons.
Adopted: _____, 2022