STOCK PURCHASE AGREEMENT
EXHIBIT A
THIS STOCK PURCHASE AGREEMENT (“Agreement”) dated the 20th day of November, 2007
(“Effective Date”), by and between Xxxxx Xxxxxx (the “Seller”) and STG Strategy Partners, L.P. (the
“Purchaser”).
WHEREAS, on the terms and conditions contained herein, the Seller is hereby agreeing to sell
to the Purchaser, and Purchaser is hereby agreeing to purchase from Seller, 8,226,671 shares (the
“Shares”) of the common stock, $.01 par value, of Alliance Distributors Holding Inc., a Delaware
corporation (the “Company”); and
WHEREAS, the Shares constitute all of the Company’s capital stock currently owned or otherwise
held by Seller;
NOW THEREFORE, for and in consideration of the mutual covenants, representations, warranties,
promises, and agreements hereinafter contained, the parties hereto do hereby contract and agree on
the following terms:
1. Purchase of Shares. The Seller hereby agrees to sell to the Purchaser, and the
Purchaser hereby agrees to purchase from the Seller, the Shares.
2. Consideration to Seller. Purchaser hereby agrees to purchase, and Seller hereby
agrees to sell, the Shares for the following consideration:
(a) At the Closing, Purchaser shall pay to Seller $750,000.00 (“Cash Consideration”) in
readily available funds via wire transfer to an account specified in writing to Purchaser
(“Wire Transfer Account”). The parties acknowledge that, on a per share base, as rounded,
this equals nine cents ($.09) (“Per Share Cash Consideration”).
(b) In consideration for the performance by Seller of the non-compete/non-solicitation
undertakings set forth in Section 8 hereunder, Purchaser shall also pay to Seller
additional consideration (“Additional Consideration”), in readily available funds via check
payable to Seller or wire transfer to the Wire Transfer Account (or to such other account
specified in writing to Purchaser at least two days prior to when payment is due) the
following amount(s):
(i) If at any time(s) after Closing (and each time), Purchaser sells or
transfers (including, without limitation, pursuant to a liquidation, reverse stock
split, merger or consolidation) any or all of the Shares, an amount per share sold
at such time by Purchaser equal to a percentage of the amount by which the per share
amount received by Purchaser in such sale or transfer (inclusive of all value
received by Purchaser directly or indirectly with respect to or in connection with
such sale or transfer of such Shares) exceeds the sum of the Per Share Cash
Consideration plus two cents ($.02), which equals eleven cents ($.11) (the “Per
Share Base Value”). The percentage (which will be applied to the entire excess) of
the excess to be paid will be determined as follows:
| Excess over Per Share Base Value | % of Excess | |
From at least $0.00 up to and including $0.09 |
10% | |
From at least $0.10 up to and including $0.19 |
12.5% | |
From at least $0.20 up to and including $0.29 |
15% | |
From at least $0.30 up to and including $0.39 |
17.5% | |
$0.40 or more |
20% |
By way of example only, if the excess over the Per Share Base
Value were $0.25 (assume Purchaser received $.36 per share;
subtract $.11 from the $.36, which yields an excess of $.25),
the
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Additional Consideration per share would be equal to 15%
x $.25. Purchaser shall, immediately following such sale,
(i) notify Seller of the sale, and (ii) provide Seller with a
copy of the Stock Purchase Agreement and/or other
documentation evidencing the terms and conditions of such
sale. Solely in order to confirm the amount payable to
Seller, Seller shall have the right to inspect Purchaser’s
books and records in connection with the foregoing.
Purchaser will make the payment of this Additional
Consideration no later than the third business day after the
date of the sale of Shares. Notwithstanding the foregoing,
if at the time of the sale Seller has been paid Additional
Consideration pursuant to Section 2(b)(ii), no further
Additional Consideration will be due to Seller.
(ii) To the extent Purchaser continues to hold any of the Shares after the
second anniversary of the Closing Date, then Seller may once exercise (by delivering
a written notice to Purchaser) his right to receive Additional Consideration with
respect to the number of Shares still held by Purchaser at the time of the written
notice in an amount equal to a percentage of the amount by which the per share value
(as explained below) exceeds the Per Share Base Value. The per share value will be
equal to the average daily closing price on the OTC Bulletin Board (or, if no longer
traded on the OTC Bulletin Board, wherever then traded) over the twenty (20) trading
days ending on the day immediately prior to the written notice. The percentage
(which will be applied to the entire excess) of the excess to be paid will be
determined as follows:
| Excess over Per Share Base Value | % of Excess | |
From at least $0.00 up to and including $0.09 |
10% | |
From at least $0.10 up to and including $0.19 |
12.5% | |
From at least $0.20 up to and including $0.29 |
15% | |
From at least $0.30 up to and including $0.39 |
17.5% | |
$0.40 or more |
20% |
By way of example only, if the excess over the Per Share Base
Value were $0.25 (assume the average daily closing price over
the preceding twenty (20) days is $.36 per share; subtract
$.11 from the $.36, which yields an excess of $.25), the
Additional Consideration per share would be equal to 15% x
$.25. Purchaser will make the payment of this Additional
Consideration no later than the third business day after the
date of the written notice.
(c) In the event that the outstanding common stock of the Company is hereafter changed
by reason of reorganization, recapitalization, reclassification, stock split-up, combination
of shares, reverse split, stock dividend or the like, an appropriate adjustment shall be
made to the cent figures set forth in this Section 2. If the Company shall be reorganized,
consolidated, or merged with another corporation and securities of such other corporation
(the “Successor Securities”) are received by Purchaser in exchange for the Shares, the
provisions of this Section 2 shall apply with respect to the Successor Securities, with an
appropriate adjustment made to the cent figures set forth in this Section 2.
(d) Notwithstanding the foregoing, in the event that, in connection with any
transaction, the consideration received by Purchaser consists partly of cash and partly of
other consideration, then, to the extent that any cash is received in connection with the
transaction, Additional Consideration shall be payable with respect thereto as provided for
in paragraph (a) hereof. In such event, it will be deemed that the number of Shares sold
was equal to the Shares multiplied by a fraction, the numerator of which is the cash
received by Purchaser and the denominator of which is the total consideration received by
Purchaser.
(e) In the event of any transfer of any of the Shares to one or more parties of
Purchaser, all references herein to Purchaser shall also apply to each partner-transferee
thereof.
3. Closing. The closing of the transaction described herein, to be effective as of
the Effective Date, will take place contemporaneously with the execution of this Agreement, which
date of execution will also be referred to herein as the “Closing” or “Closing Date.” This Closing
may be consummated remotely by PDF or
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facsimile exchange of documents in counterparts, except that the original stock certificate
evidencing the Shares must be delivered at Closing to the offices of Xxxxxx & Xxxx LLP, 0000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000.
4. Representations and Warranties of Seller. The Seller represents and warrants to
the Purchaser as of the Effective Date and the Closing Date that:
(a) the Seller is the lawful record and beneficial owner of the Shares and has the
absolute and unrestricted right, power, authority and capacity to sell, assign, transfer and
deliver the Shares to the Purchaser as provided herein and to execute, deliver and perform
this Agreement;
(b) the Seller has good, legal and marketable title to the Shares free and clear of any
claims, liens or encumbrances of any kind whatsoever;
(c) this Agreement has been duly executed and delivered by the Seller and is the legal,
valid and binding obligation of Seller enforceable against the Seller in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws generally affecting the enforcement of creditors’ rights and by
general principles of equity whether applied in a proceeding at law or in equity;
(d) the negotiation, execution, delivery and performance of this Agreement by the
Seller and the consummation of the transactions contemplated hereby will not, with or
without the giving of notice, the passage of time, or both, violate, conflict with, result
in a default, breach or loss of rights under, or result in the creation of any encumbrance
or other claim pursuant to any encumbrance, instrument, agreement, understanding, law,
regulation, rule, order, judgment or decree to which the Seller is bound;
(e) upon payment of the Cash Consideration hereunder, Purchaser will acquire good,
legal and marketable title to, and the entire legal and beneficial ownership of, the Shares,
free and clear of all claims, liens, charges or encumbrances other than the obligation to
pay Additional Consideration, if any, to Seller;
(f) no person holds any proxy or power of attorney from or affecting the Seller with
respect to the Shares, or the Shares with respect to any matter;
(g) in connection with his resignation as an officer and director of the Company on
July 26, 2007, Seller provided a release to the Company; and
(h) this Agreement does not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements therein, under the circumstances in which
they were made, not misleading.
The representations and warranties of the Seller will survive the date of Closing.
5. Representations and Warranties of Purchaser. The Purchaser represents and warrants
to the Seller as of the Effective Date and the Closing Date that:
(a) the Purchaser is a limited partnership, consisting of STG Strategy Investments, LLC
as the general partner (the “General Partner”) and Xxxxx Xxxxxxx (“Basil”) and Xxxxxxx
Xxxxxxx (“Xxxxxxx”) as the sole limited partners;
(b) Basil and Xxxxxxx are the sole members of the General Partner;
(c) this Agreement has been duly executed and delivered by the Purchaser and is the
legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization or other
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laws generally affecting the enforcement of creditors’ rights and by general principles
of equity whether applied in a proceeding at law or in equity;
(d) the negotiation, execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby will not, with or
without the giving of notice, the passage of time, or both, violate, conflict with, result
in a default, breach or loss of rights under, or result in the creation of any encumbrance
or other claim pursuant to any encumbrance, instrument, agreement, understanding, law,
regulation, rule, order, judgment or decree to which the Purchaser, Basil or Xxxxxxx is
bound;
(e) Purchaser is acquiring the Shares for its own account for investment, not as a
nominee or agent, and not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the same. Purchaser has
no present or contemplated contract, agreement, undertaking, arrangement, obligation,
indebtedness, or commitment providing for the disposition thereof;
(f) Purchaser acknowledges that the Shares have not been registered under the
Securities Act of 1933 as amended or any state securities law;
(g) Purchaser represents and warrants further that (i) it is an “accredited investor,”
as such term is defined in Rule 501(a) promulgated under the Securities Act of 1933, as
amended, and has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the acquisition of the Shares; (ii) it is able
to bear the economic risks of an investment in the Shares, including, without limitation,
the risk of the loss of part or all of its investment and the inability to sell or transfer
the Shares for an indefinite period of time; (iii) it has adequate financial means of
providing for current needs and contingencies and has no need for liquidity in its
investment in the Shares; and (iv) it does not have an overall commitment to investments
which are not readily marketable that is excessive in proportion to net worth and an
investment in the Shares will not cause such overall commitment to become excessive;
(h) Purchaser has been given an opportunity to ask and has asked, to the extent the
Purchaser deemed necessary, questions of and has received answers from the Seller or the
Company concerning the Shares, the terms and conditions of the transfer, and the Company and
its affairs, current and anticipated. The Purchaser has been given or afforded access to all
documents, records, books and additional information that it has requested regarding such
matters and has reviewed all filings made by the Company with the Securities and Exchange
Commission as it deemed necessary; and
(i) Purchaser acknowledges that the following restrictive legend will be placed on any
instrument, certificate or other document evidencing the Shares.
“The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended. These shares have been acquired for
investment and not for distribution or resale. They may not be sold, assigned,
encumbered, pledged, hypothecated or otherwise transferred or disposed of
without an effective registration statement for such shares under the Securities
Act of 1933, as amended, or an opinion of counsel for the Company that
registration is not required under such Act. The shares represented by this
certificate are held subject to the terms and conditions of a certain Stock
Purchase Agreement, dated November 20, 2007, between Xxxxx Xxxxxx and STG
Strategy Partners, L.P.”
The representations and warranties of the Purchaser will survive the date of Closing.
6. Seller’s Deliveries. At the Closing of the transactions described herein, the
Seller will deliver to the Purchaser:
(a) the original stock certificate(s) evidencing the Shares;
(b) fully executed blank stock power(s) transferring the Shares to the Purchaser;
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(c) a fully executed original of this Agreement; and
(d) such other agreements, documents, certificates or instruments as the Purchaser may
reasonably request in order to carry out the transactions contemplated by this Agreement.
7. Purchaser’s Deliveries. At the Closing of the transactions described herein, the
Purchaser will execute and deliver, or cause to be executed and delivered, to the Seller:
(a) a fully executed original of this Agreement;
(b) the Cash Consideration via check payable to Seller or wire transfer to the Wire
Transfer Account;
(c) a Guaranty executed by Basil, pursuant to which Basil guarantees all of the
obligations of Purchaser under this Agreement; and
(d) such other agreements, documents, certificates or instruments as the Seller may
reasonably request in order to carry out the transactions contemplated by this Agreement.
8. Non-Compete/Non-Solicitation. Seller acknowledges that Purchaser is induced to
purchase the Shares in part by Seller’s covenant, as set forth below, not to compete with the
Company or solicit Company employees following the Closing.
(a) Accordingly, Seller hereby agrees and covenants that for a period of twenty-four
(24) months after the Closing, Seller will not directly or indirectly act as an owner,
partner, stockholder, employee, broker, agent, principal, trustee, corporate officer,
director, consultant or in any other capacity whatsoever for a video game distribution
business geared toward retail consumer use anywhere in the world where the Company is
involved or proposes to be involved, provided, however, that this will not
prevent Seller from holding for investment up to 1% of any class of stock or other
securities quoted or dealt in on a recognized stock exchange. In addition, Seller shall not
at any time during the twenty-four (24) month period following the Closing directly or
indirectly solicit any individuals to leave the Company employ for any reason or interfere
in any other manner with employment relations.
(b) It is understood and agreed that the scope of the foregoing covenants are
reasonable as to time, area and persons and is necessary to induce Purchaser to purchase the
Shares. It is further agreed that such covenants will be regarded as divisible and will be
operative as to time, area and persons to the extent that they may be so operative, and if
any part of either such covenant is declared invalid, unenforceable, or void as to time,
area or persons, the validity and enforceability of the remainder will not be affected;
(c) If Seller violates the restrictive covenants of this Section 8 and
Purchaser brings legal action for injunctive or other relief, Purchaser shall not be
deprived of the benefit of the full period of the restrictive covenant, as a result of the
time involved in obtaining the relief. Accordingly, Seller agrees that the regularly
scheduled expiration date of such covenant shall be extended by the same amount of time that
Stockholder is determined to have violated such covenant;
(d) If Seller violates either of the restrictive covenants of this Section 8,
Purchaser will no longer be obligated to pay from that point forward any further Additional
Consideration. If at any time Purchaser asserts that Seller has violated either of the
restrictive covenants of this Section 8, Purchaser’s obligation to pay Additional
Consideration will be suspended until the matter is resolved regarding non-competition or
non-solicitation.
9. Survival. This Agreement and all terms, conditions, representations, warranties
and stipulations contained herein will survive the Closing.
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10. Modification. This Agreement embodies the entire Agreement between the parties and
may not be modified or terminated orally, and no modification, termination or attempted waiver will
be valid unless in writing, signed by the party against whom the same is sought to be enforced.
This Agreement also supersedes and replaces in all respects any other agreements, whether written
or oral, related to the Purchaser’s purchase of the Shares.
11. Successors. All of the terms and conditions of this Agreement are hereby made
binding on the executors, heirs, administrators, successors and assigns of both parties hereto.
12. Venue and Governing Law. This Agreement will be governed by the substantive laws
of the State of Texas, without regard to its conflict of laws provisions, and all undertakings
hereunder will be performable in Dallas County, Texas, wherein venue will lie.
13. No Other Representations or Warranties. Other than the representations and
warranties of the parties expressly set forth in this Agreement, no party has made any
representation or warranty of any kind relating to the transactions contemplated by this Agreement.
Purchaser is not relying on any representations of the Seller with respect to the Company, it
being understood that Purchaser has conducted its own investigation of the Company in connection
with its purchase of Shares.
14. Notices. Any notice required or permitted to be given under this Agreement must be
either (i) in writing and given either by personal delivery or by mailing the same by registered or
certified mail, return receipt requested, to the party to whom the notice is directed at the
address of such party as hereinafter set forth or such other address as the parties may hereinafter
designate in writing in accordance herewith, or (ii) by facsimile as set forth below:
| Seller: | Xxxxx Xxxxxx | |||||
| 00 Xxxxxxx Xxxxxx Xxxx | ||||||
| Xxx Xxxxx, Xxx Xxxx 00000 | ||||||
| Facsimile: (000) 000-0000 | ||||||
| With a copy to: | Certilman Balin Xxxxx & Xxxxx, LLP | |||||
| 00 Xxxxxxx Xxxxxx | ||||||
| Xxxx Xxxxxx, Xxx Xxxx 00000 | ||||||
| Attn: Xxxx Xxxxxxx, Esq. | ||||||
| Facsimile: (000) 000-0000 | ||||||
| Purchaser: | STG Strategy Partners, L.P. | |||||
| 0000 Xxxxx Xxxx | ||||||
| Xxxxxx, Xxxxx 00000 | ||||||
| Facsimile: (000) 000-0000 | ||||||
| With a copy to: | Xxxxxx & Xxxx LLP | |||||
| 0000 Xxxx Xxxxxx | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxx, Xxxxx 00000 | ||||||
| Attn: Xxxxx X. Xxxxxx, Xx., Esq. | ||||||
| Facsimile: (000) 000-0000 | ||||||
15. Further Assurances. Each party agrees to execute and deliver, or cause to be
executed and delivered, on or after the date of Closing, all such instruments and will take all
such actions as the other party may reasonably request from time to time in order to effectuate the
provisions and purposes of this Agreement.
16. Payments to Broker. At the Closing, Purchaser shall pay to Prospera Financial
(“Prospera”) as broker a fee equal to $.01 per share of the Shares. Each of Purchaser, Seller and
Prospera represents and warrants to the others that there are not, and will not be, any other
broker’s or finder’s fee or agent’s commission in connection with this Agreement or the
transactions contemplated hereby.
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17. Counterparts. This Agreement may be executed in two (2) or more counterparts, each
of which will be deemed an original, but all of which together will constitute one (1) and the same
instrument.
[Remainder of page intentionally left blank; Signature page follows.]
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IN WITNESS WHEREOF the parties hereto have duly executed this Agreement on the 20th
day of November, 2007.
| SELLER: | ||
| /s/ Xxxxx Xxxxxx | ||
| Xxxxx Xxxxxx | ||
| PURCHASER: | ||
| STG STRATEGY PARTNERS, L.P. | ||
| By: STG Strategy Investments, LLC | ||
| General Partner |
| /s/ Xxxxx Xxxxxxx | ||||||
| By: | Xxxxx Xxxxxxx, | |||||
| [Managing Member] | ||||||
ACKNOWLEDGED FOR PURPOSES
OF SECTIONS 10 AND 16 ONLY
OF SECTIONS 10 AND 16 ONLY
PROSPERA FINANCIAL
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