Document:

EXHIBIT 10.01

                              EMPLOYMENT AGREEMENT

This Employment  Agreement (the "Agreement")  dated as of the 3rd day of October
2006,  is entered into by and between  Alliance  Distributors  Holdings  Inc., a
Delaware corporation (the "Company) and Stephen Agress (the "Executive").

                                   WITNESSETH

1.    EMPLOYMENT. The Company hereby employs the Executive as its Executive Vice
      President  and Chief  Financial  Officer  for and  during the term of this
      Agreement  (as set forth in  Paragraph  4  below).  The  Executive  hereby
      accepts such  employment  with the Company under the terms and  conditions
      set forth in this Agreement.

2.    DUTIES AND  AUTHORITIES  OF THE EXECUTIVE.  The Executive  shall have such
      duties  and  authorities  as shall be  consistent  with  his  position  as
      Executive Vice President and Chief  Financial  Officer of the Company,  as
      may be  reasonably  assigned to him from time to time by the Company.  The
      Executive shall report to the Company's Chief Executive Officer.

3.    FULL BUSINESS TIME. The Executive  agrees to devote his full business time
      and services to the faithful  performance of his duties hereunder.  During
      the term of his employment with the Company, the Executive shall engage in
      no other  business  activities  whatsoever  during normal  working  hours;
      provided,  however,  that the  Executive  may (i)  serve on the  boards of
      directors of other companies and charitable  organizations  and may devote
      reasonable  time to charitable and civic  organizations,  and (ii) provide
      transition-type  services to his former  employer,  in all cases  provided
      that the performance of his duties and responsibilities on such boards and
      in such service does not interfere with the  performance of his duties and
      responsibilities under this Agreement.

4.    TERM. The term of this Agreement shall commence on October 3, 2006 and end
      on September 30, 2008 (the "Term"),  unless terminated earlier pursuant to
      this Agreement.

5.    COMPENSATION.

      (a)   Base Salary.  The Company shall pay the Executive a base  annualized
            salary  ("Base  Salary") at the annual rate of $210,000,  subject to
            annual reviews by the Company for  discretionary  annual  increases.
            Base  Salary  shall be  subject to  deduction  for  applicable  U.S.
            federal, state and local withholding taxes.

      (b)   Stock Options.  The Company shall by separate instrument (the "Grant
            Letter") grant to the Executive an option (the  "Option")  effective
            on October 3, 2006 ("Grant  Date") to purchase  100,000  shares (the
            "Shares") of the Company's  common stock under the  Company's  stock
            option plan. The

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            Option  price per share shall be equal to the fair market value of a
            share of the  Company's  common stock on the Grant Date.  The Option
            shall  have  a ten  (10)  year  term,  and  will  vest  in 12  equal
            installments  on the  last day of each of the 12  calendar  quarters
            beginning with the calendar  quarter that begins on October 1, 2006,
            but only so long as Executive is employed by the Company on the last
            day of such calendar quarter.  The terms and conditions of the Grant
            Letter shall exclusively govern the award, vesting, exercise and all
            other aspects of the Option.

6.    EMPLOYEE BENEFITS.

      (a)   Throughout the Executive's  employment  during the Term, the Company
            shall  provide the Executive  and all of his  dependents  with group
            medical  insurance  in  amounts  of  coverage  available  to  senior
            executives of the Company with employee  payment  obligations on the
            same terms as such other senior executives.

      (b)   The Executive  shall be entitled to four weeks paid vacation  during
            each 12-month  period of his  employment and personal and sick leave
            in accordance  with the policies of the Company,  which vacation and
            leave  shall  be  taken  by the  Executive  in  accordance  with the
            reasonable  business  requirements  of the Company.  Unused vacation
            will be carried  over from one year to the next,  and the  Executive
            shall be entitled to payment for any accrued,  but unused,  vacation
            upon the termination of the Executive's employment with the Company.

      (c)   The  Executive  shall  receive a  monthly  car  allowance  (the "Car
            Allowance")  in the amount of five hundred and  twenty-five  dollars
            ($525) per month.

      (d)   The Company shall  reimburse  the Executive for properly  documented
            expenses  which  are  incurred  by the  Executive  on  behalf of the
            Company.

      (e)   The Executive shall be entitled to participate in all  tax-qualified
            retirement  plans  maintained by the Company to the extent that such
            participation  is made  available to other senior  executives of the
            Company.

7.    TERMINATION. Notwithstanding any other provision in this Agreement, during
      the Term:

      (a)   Death. If the Executive  dies,  this Agreement  shall  automatically
            terminate as of the date of the Executive's death.

      (b)   Disability.  If the  Executive  is  unable  to  perform  his  duties
            hereunder as a result of any physical or mental disability (i) which
            continues  for 60  consecutive  days or (ii)  for 90 days in any 365
            consecutive-day   period,   then  the  Company  may  terminate  this
            Agreement upon 30 days written notice to

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            the  Executive,  provided  that the  Executive's  Base Salary  shall
            continue  to  accrue  ratably  for 30  days  after  the  date of the
            Executive's termination.

      (c)   Termination by the Company for Cause.  The Company may terminate the
            Executive's  employment with the Company for Cause.  For purposes of
            this Agreement, "Cause" shall mean (i) the Executive's conviction by
            a court of competent  jurisdiction  in the United States of a felony
            or a crime involving the Company; (ii) the Executive's conviction of
            a court of competent  jurisdiction  in the United States of a felony
            involving  moral  turpitude  or  unlawful,  dishonest,  or unethical
            conduct that a  reasonable  person  would  consider  damaging to the
            reputation  of  the  Company;   (iii)  the  Executive's  willful  or
            persistent  refusal or failure to perform assigned duties consistent
            with  duties  of the  Executive's  position  or to  comply  with the
            reasonable  directions  of Company  officer to whom he reports,  the
            Chief  Executive  Officer  or  the  Company's  Board  of  Directors,
            provided that  Executive  has been  provided with written  notice of
            such  refusal or failure to perform at least thirty (30) days before
            termination pursuant to this sub-paragraph; (iv) any material breach
            of any provision of this Agreement,  or any other agreements between
            the Executive and Company, by the Executive;  or (v) the Executive's
            gross  negligence in the performance of his duties;  but in the case
            of paragraph  7(c)(iv) if within  thirty (30) days after the Company
            first has  actual  knowledge  of the  occurrence  of such  action or
            event,  the Company  gives  written  notice to the  Executive of its
            intention to terminate his employment  hereunder,  and the Executive
            does not  reasonably  cure any such action  within  thirty (30) days
            after the date of such notice, where such conduct is curable.

            If the  Executive's  employment  is  terminated  by the  Company for
            Cause,  the Company  shall pay the  Executive  his full accrued Base
            Salary and Car Allowance through the date of termination at the rate
            in effect at the time of such  termination,  and the  Company  shall
            have no further  obligation to the Executive under this Agreement or
            under  any  other  agreements  or  plans.  All  other   compensation
            including,   without  limitation,   bonuses,  severance,   incentive
            compensation  and/or stock  option  grants shall be forfeited if the
            Executive is terminated for Cause.

      (d)   Termination by the Company without Cause.  The Company may terminate
            the Executive's employment under this Agreement without Cause at any
            time,  provided that, in such case, the Company shall, as severance,
            continue to pay to the  Executive an amount equal to his Base Salary
            in normal payroll  installments,  subject to withholding,  until the
            earlier to occur of (i) six months from the date of termination; and
            (ii)  September  30, 2008.  In addition,  the Company  shall pay the
            Executive's  cost of COBRA for the period during which  severance is
            payable as aforesaid.

      (e)   Resignation  by the  Executive  with Good Reason.  The Executive may
            resign  his  employment  if  (i)  the  Company  breaches  any of its
            material obligations under

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            this Agreement, (ii) the Company reduces the Executive's Base Salary
            below  the  amount  provided  for in  this  Agreement,  without  the
            Executive's  written consent, or (iii) the Company assigns duties to
            the Executive  which are not consistent with his office set forth in
            Paragraphs 1 and 2, but in each case only if within thirty (30) days
            after the Executive first has actual  knowledge of the occurrence of
            such action or event,  the  Executive  gives  written  notice to the
            Company of his intention to terminate his employment hereunder,  the
            Company does not revoke or reasonably  cure any such action or event
            within  sixty  (60)  days  after  the date of such  notice,  and the
            Executive   resigns  his   employment   within   fifteen  (15)  days
            thereafter.  Following the Executive's resignation with Good Reason,
            the Company  shall make all  payments to the  Executive  pursuant to
            Paragraph 7(d) above.

      (f)   In addition to any other payments  pursuant to Paragraphs 7(b), 7(d)
            and (e) above, upon the Executive's  resignation without Good Reason
            or upon any of the terminations  identified in Paragraphs 7(a), (b),
            (d) or (e) above,  the  Executive or his estate shall be entitled to
            receive   his  Base   Salary,   any  earned  but  unpaid   incentive
            compensation and all of his then incurred but un-reimbursed business
            expenses, in each case to the date of the Executive's resignation or
            termination.

      (g)   In order to be entitled to the payments under Paragraphs 7(b), 7(d),
            7(e) or 7(f),  Executive  agrees to execute a standard and customary
            separation  agreement  and release in the form to be provided by the
            Company, following his separation from the Company.

8.    CONFIDENTIALITY AGREEMENT AND OWNERSHIP OF INFORMATION.

      (a)   Executive  agrees  that  during  the course of  employment  with the
            Company,  Executive  will come into  contact with and have access to
            various forms of Confidential  Information and Trade Secrets,  which
            are the property of the Company.  This  information  relates both to
            the Company,  its customers  and its  employees.  Such  Confidential
            Information and Trade Secrets  include,  but are not limited to: (i)
            financial and business information, such as information with respect
            to costs, commissions, fees, profits, sales, markets, mailing lists,
            strategies and plans for future business,  new business,  product or
            other development,  potential acquisitions or divestitures,  and new
            marketing  ideas;  (ii) product and technical  information,  such as
            product  formulations,  new and innovative  product ideas,  methods,
            procedures,  devices, machines, equipment, data processing programs,
            software,   software  codes,   computer  models,  and  research  and
            development  projects;  (iii)  marketing  information,  such  as the
            identity of the Company's customers,  distributors and suppliers and
            their  names  and  addresses,  the names of  representatives  of the
            Company's  customers,  distributors  or  suppliers  responsible  for
            entering into contracts  with the Company,  the amounts paid by such
            customers to the Company,  specific customer needs and requirements,
            and leads and referrals to prospective customers; and (iv) personnel
            information, such as the identity and number of

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            the  Company's  employees,  skills,  qualifications,   salaries  and
            abilities.  Executive  acknowledges and agrees that the Confidential
            Information  and Trade Secrets are not generally  known or available
            to the general public, but have been developed, compiled or acquired
            by the  Company  at  its  great  effort  and  expense.  Confidential
            Information and Trade Secrets can be in any form:  oral,  written or
            machine readable, including electronic files.

      (b)   During the  Executive's  employment with the Company and for as long
            as such information shall remain  Confidential  Information or Trade
            Secrets of the Company (except,  during the course of his employment
            with the Company, if in furtherance of the Company's business and in
            accordance with Company policy):

            (i)   The  Executive  will not  disclose  to any  person or  entity,
                  without  the  Company's   prior  consent,   any   Confidential
                  Information  or  Trade  Secrets,  whether  prepared  by him or
                  others.

            (ii)  The  Executive  will not remove  Confidential  Information  or
                  Trade  Secrets  from the  premises of the Company  without the
                  prior written consent of the Company.

      (c)   (i) Upon his  resignation or termination of his employment  with the
            Company for whatever reason,  with or without cause, or at any other
            time the Company so requests, the Executive will promptly deliver to
            the Company all originals and copies (whether in note, memo or other
            document  form or on  video,  audio  or  computer  tapes or discs or
            otherwise) of (A) Confidential  Information and Trade Secrets of the
            Company, or the Company's customers (including,  but not limited to,
            customers obtained for the Company by the Executive), that is in his
            possession,  custody or control,  whether prepared by him or others,
            and (B) all records,  designs,  patents, plans, manuals,  memoranda,
            lists and other  property of the Company  delivered to the Executive
            by or on  behalf  of the  Company,  as the  case  may be,  or by the
            Company's  customers  (including,  but  not  limited  to,  customers
            obtained for the Company by the Executive), and all records compiled
            by the  Executive  which  pertain to the  business  of the  Company,
            whether or not  confidential.  All such material shall be and remain
            the property of the Company and shall be subject at all times to the
            Company's discretion and control.

            (ii)  Information  shall not be deemed  Confidential  Information or
                  Trade Secrets if:

                  (A)   such  information  was  available to the public prior to
                        disclosure thereof by the Executive, or

                  (B)   such information shall, other than by an act or omission
                        on the Executive's  part, be or become  available to the
                        public or

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                        lawfully  made  available by a third party to the public
                        without restrictions as to disclosure.

      (d)   Confidential  Information  may be disclosed where required by law or
            order  of a court  of  competent  jurisdiction,  provided  that  the
            Executive first gives to the Company reasonable prior notice of such
            disclosure  and affords the Company the reasonable  opportunity  for
            the Company to obtain protective or similar orders, where available.

9.    NON-COMPETE AND NON-INTERFERENCE PROVISIONS.

      (a)   Executive  acknowledges  and agrees that the Company is engaged in a
            highly  competitive  business  and  that by  virtue  of  Executive's
            position  and  responsibilities  with the  Company  and  Executive's
            access to the Confidential  Information and Trade Secrets,  engaging
            in any business which is directly  competitive with the Company will
            cause it great and  irreparable  harm.  Accordingly,  the  Executive
            covenants  that  during  the  Limitation   Period  (as   hereinafter
            defined),  the Executive will not directly or indirectly be employed
            by (i) any person or entity  which  competes  with the  business the
            Company  shall  be  conducting  at  the  time  of  the   Executive's
            termination  ("Competitive  Business" as defined  below) or (ii) any
            person or entity the major business of which constitutes Competitive
            Business,  nor will the  Executive  directly or  indirectly  own any
            interest  in  any  such  person  or  entity  or  render  to  it  any
            consulting,  brokerage, contracting, or other services. For purposes
            of this Paragraph,  "Competitive Business" means the distribution of
            video game  consoles  and video game  peripherals,  accessories  and
            software. The foregoing shall not prohibit the Executive from owning
            not in excess of 2% of the outstanding  stock of any company that is
            a reporting company under the Securities Act of 1934.

      (b)   During the Limitation Period (as herein defined), the Executive will
            not,  without the prior written consent of the Company,  directly or
            indirectly,  solicit,  divert or  appropriate or attempt to solicit,
            divert or appropriate any customers or clients of the Company who or
            which (i) were  customers  or clients of the  Company at the time of
            the  termination  of the  Executive's  employment  from the Company;
            and/or  (ii)  with  whom  the  Executive  had  contact   during  his
            employment  with the Company;  and/or (iii) about whom the Executive
            possesses Confidential, or Trade Secret information, for purposes of
            the Executive's offering to such customers or clients of the Company
            products or services which are directly  competitive to the products
            and  services  offered  by  the  Company  as  of  the  date  of  the
            Executive's  termination or  resignation  from  employment  with the
            Company for any reason.

      (c)   The  "Limitation  Period" shall mean:  (i) with respect to Paragraph
            9(a), the period during which the Executive is actually  employed by
            the Company and for a period of twelve (12) months  thereafter;  and
            (ii) with respect to

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            Paragraph  9(b),  the period  during which the Executive is actually
            employed by the Company and for a period of twenty-four  (24) months
            thereafter.

      (d)   Since  monetary  damages may be inadequate  and the Company would be
            irreparably  harmed if the  provisions  of Paragraphs 8, 9 or 10 are
            not  specifically  enforced,  the Company  shall be entitled,  among
            other  remedies,  to seek an  injunction  from a court of  competent
            jurisdiction  (without  the  necessity  of  posting  a bond or other
            security)  restraining any violation of the provisions of Paragraphs
            8, 9 or 10 by the  Executive and by any person or entity to whom the
            Executive   provides  or   proposes  to  provide  any   services  or
            information in violation of such provisions.

10.   INVENTIONS.

      (a)   The  Executive  shall  disclose  promptly to the Company any and all
            inventions,   improvements   and   valuable   discoveries,   whether
            patentable  or not,  which are  conceived  or made by the  Executive
            solely or jointly with another during his employment for the Company
            and which are related to the business or  activities  of the Company
            or which the  Executive  conceives  during and as a direct result of
            his employment by the Company,  and the Executive hereby assigns and
            agrees to assign all his  interests  therein  to the  Company or its
            nominee.  Whenever reasonably requested to do so by the Company, the
            Executive  shall execute any and all  applications,  assignments  or
            other instruments that the Company shall deem necessary to apply for
            and  obtain  Letters  Patent of the  United  States  or any  foreign
            country or to otherwise protect the Company's interest therein.

      (b)   Executive  further  covenants  and agrees that the Company  shall be
            entitled  to  shop  rights  with  respect  to  any   invention   and
            development  conceived or made by Executive during the period of his
            employment  by the Company  that is not related in any manner to the
            business  of the  Company  but  which was  conceived  or made on the
            Company's  time  or  with  the use of the  Company's  facilities  or
            materials.

      (c)   Executive further covenants and agrees that it shall be conclusively
            presumed as against Executive that the following shall belong to the
            Company:  (i) any  invention and  development  described in a patent
            service mark, trademark or copyright application or disclosed in any
            manner  to  a  third   person;   and  (ii)  any  computer   program,
            modification  of any  computer  program,  or systems  technique  for
            processing data conceived or made by Executive  during the period of
            his employment by the Company which is disclosed,  used or described
            by Executive  or any person with whom  Executive  has any  business,
            financial or  confidential  relationship,  within one (1) year after
            leaving the employ of the Company.

      (d)   If any provision contained in this Paragraph 10 or Paragraphs 8 or 9
            above is determined to be void,  illegal or unenforceable,  in whole
            or in part, then the

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            other  provisions  contained  herein  shall remain in full force and
            effect as if the provision which was determined to be void, illegal,
            or unenforceable had not been contained herein. The courts enforcing
            this  Paragraph  10 or  Paragraphs 8 or 9 above shall be entitled to
            modify the duration and scope of any restriction  contained  therein
            to the extent such restriction would otherwise be unenforceable, and
            such restriction as modified shall be enforced.

11.   USE OF  GENERAL  ABILITIES.  Nothing  contained  in this  Agreement  shall
      restrict  the  Executive  after  the  termination  or  resignation  of his
      employment   under  this  Agreement  from  using  his  general   business,
      organizational and financial  abilities,  and the exertion of his efforts,
      in the  prosecution  and  development  of any  business,  so  long  as the
      specific  non-compete  and  other  provisions  of this  Agreement  are not
      thereby violated.

12.   GENERAL PROVISIONS.

      (a)   Notices. All notices,  requests,  consents, and other communications
            under this Agreement shall be in writing and shall be deemed to have
            been delivered (i) on the date personally delivered, or (ii) one day
            after  properly  sent by Federal  Express,  DHL or other  reasonable
            overnight  courier service,  addressed to the respective  parties at
            the following addresses:

            To the Company:

            Alliance Distributors Holdings Inc.
            1160 Commerce Ave
            Bronx, New York 10462-5506
             Attention:  Jay Gelman, Chief Executive Officer

            To the Executive:

            Stephen Agress
            36-14 High Street
            Fair Lawn, New Jersey  07410

            Either party hereto may  designate a different  address by providing
            written  notice of such new  address  to the other  party  hereto as
            provided  above.  All such  copies  shall  be  given  in the  manner
            provided for notices in this Paragraph 12 (a).

      (b)   Severability.  If any provision contained in this Agreement shall be
            determined  to be void,  illegal  or  unenforceable,  in whole or in
            part,  then the other  provisions  contained  herein shall remain in
            full force and effect as if the provision which was determined to be
            void, illegal, or unenforceable had not been contained herein.

<PAGE>

      (c)   Waiver and Modification.  The waiver by any party hereto of a breach
            of any provision of this Agreement shall not operate or be construed
            as a waiver of any  subsequent  breach of any party.  This Agreement
            may not be modified,  altered or amended except by written agreement
            of both of the parties hereto.

      (d)   Integration. This Agreement constitutes the entire agreement between
            the  parties  relating to the  employment  of the  Executive  by the
            Company  or  its  affiliates,  and  supersedes  any  and  all  other
            agreements,   oral  or  written,  and  all  other  negotiations  and
            communications  between the parties  relating to the subject  matter
            described in this Agreement.

      (e)   Binding Effect. This Agreement shall be binding upon and shall inure
            to the  benefit of the  Company  and its  successors  and  permitted
            assigns,  and upon the  Executive,  his heirs and his  executors and
            administrators.  Neither  the  Executive  nor the  Company  shall be
            entitled  to assign the  Executive's  duties  hereunder  without the
            other's prior written consent.

      (f)   Equitable  Relief.  Executive  agrees that the remedy at law for any
            breach of  Paragraphs  8, 9, and 10 of this  Agreement  would not be
            adequate  and that the Company  would be entitled to  injunctive  or
            other equitable relief for any such breach.

      (g)   Jurisdiction,  Etc. Executive hereby consents to the jurisdiction of
            the  courts of the State of New  York,  County of New York,  and the
            United States District  Court,  District of New York with respect to
            any  claims or  disputes  arising  from or in  connection  with this
            Agreement,  except that the Company shall not be precluded hereunder
            from seeking  injunctive or other  equitable  relief in any federal,
            state or local court pursuant to Paragraph  12(f) above.  Service of
            process shall be effective when forwarded in the manner provided for
            notices in Paragraph  12(a).  Trial by jury is hereby waived by both
            of the  parties  to this  Agreement.  The  prevailing  party  in any
            dispute shall be entitled to recover reasonable  attorneys' fees and
            costs from the other.

      (h)   Governing Law. This Agreement  shall be governed by and construed in
            accordance with the laws of the State of New York, without regard to
            its conflicts of law principles.

      (i)   The  Company  shall  indemnify   Executive  to  the  fullest  extent
            permitted by law.

      (j)   Survival.  The  obligations  of  the  parties  hereto  contained  in
            Paragraphs 7, 8, 9, 10, and 12 shall survive the termination of this
            Agreement.

[The next page is the signature page.]

<PAGE>

IN WITNESS  WHEREOF,  the parties have executed this Agreement as of the day and
year first above written.

                                             ALLIANCE DISTRIBUTORS HOLDINGS INC.

                                             By: /s/ Jay Gelman
                                                 -------------------------------
                                                 Jay Gelman
                                                 Its: Chief Executive Officer

                                                 /s/ Stephen Agress
                                                 -------------------------------
                                                 Stephen AgressEXHIBIT 10.03

                               COMPANY LETTERHEAD

                                 October 3, 2006

To: Stephen Agress

Number of shares subject to Option(s): 100,000
Nature of Option(s): Nonstatutory
Option Price: $0.18
Date of Grant: October 3, 2006
Expiration Date: 10th anniversary of the Date of Grant
Quarterly Vesting: 12 equal quarterly installments  commencing with the calendar
quarter that begins on October 1, 2006.  Vesting  shall occur on the last day of
each calendar quarter.

Certain Limitations:

            If the Optionee's  employment with or rendering of other services to
            the  Company  shall  terminate  other than by reason of death,  such
            Option(s)  shall  thereafter be exercisable  only to the extent,  if
            any, that the Option(s) was(were)  exercisable  immediately prior to
            the date of such  termination.  Such  exercise  must occur within 90
            days after  termination of employment,  provided that if termination
            is on account of permanent  disability or retirement after age 65 or
            as  otherwise  defined  by the  Company  in its  primary  retirement
            program,  such exercise shall be valid if made within one year after
            such termination.

            If the  Optionee  should die while in the  employ of the  Company or
            while  retained by the Company,  the Option(s)  shall be exercisable
            only by the estate of the  Optionee or by a person who  acquired the
            right to  exercise  such  Option(s)  by  bequest or  inheritance  or
            otherwise  by  reason of the death of the  Optionee.  The  Option(s)
            shall be  exercisable  only  within  the  twelve-month  period  next
            succeeding the death of the Optionee and only to the extent, if any,
            that the Option(s)  was(were)  exercisable  immediately prior to the
            date of death.

            In no event may Optionee at any  exercise  any  unvested  portion of
            this option.

            Optionee  will not sell any shares so long as Optionee  has material
            information  with respect to the Company which has not been publicly
            disclosed.

<PAGE>

Dear Optionee:

      I am pleased to advise you that the Company has granted you a stock option
pursuant to the Company's  2004 Stock Plan (the  "Plan").  A copy of the plan is
attached as Exhibit A.

      Please  sign one copy of this  letter  and  return  it to the  Company  to
signify your agreement.

      1.    Stock Option. Your option is to purchase the number of shares of our
common stock set forth above (the "Option Shares") at the Option Price set forth
above.  Your option will expire at the close of business on the Expiration  Date
set forth above, subject to earlier termination as set forth in the Plan.

      The reference  above opposite  "Nature of Option"  indicates  whether your
option is an Incentive Stock Option or a Nonstatutory Option.

      2.    Additional  Items.  Your Option and the Option Shares  received upon
the exercise are also subject to the following provisions:

            (a)   Exercisability.  The exercise of your Option is limited by the
Certain Limitations set forth above as well as by additional  restrictions which
may be set forth in the Plan.

            (b)   Procedure for Exercise. You may exercise all or any portion of
your  option,  to the extent it is valid and  outstanding,  at any time and from
time to time prior to its termination,  by delivering to the Company (i) written
notice  containing the  information  and  representations  appearing on the form
attached  as Exhibit B, and (ii)  payment of the Option  Price;  except that not
less than ten shares may be  purchased  at any one time unless the total  number
purchased is the total number that may be purchased under the option.

            (c)   Securities  Laws  Restrictions.  You  represent  that when you
exercise your option you will be  purchasing  Option Shares for your own account
and not on behalf of others.  You  understand and  acknowledge  that federal and
state securities laws govern and restrict your right to offer, sell or otherwise
dispose of any Option  Shares unless  otherwise  covered by a Form S-8 or unless
your offer, sale or other disposition thereof is otherwise  registered under the
Securities Act of 1933, as amended,  (the "1933 Act") and state  securities laws
or,  in the  opinion  of the  Company's  counsel,  such  offer,  sales  or other
disposition is exempt from registration thereunder.  You agree that you will not
offer, sell or otherwise dispose of any Option Shares in any manner which would:
(i) require the Company to file any  registration  statement (or similar  filing
under state laws) with the  Securities  and Exchange  Commission  or to amend or
supplement  any such filing or (ii)  violate or cause the Company to violate the
1933 Act, the rules and regulations promulgated thereunder or any other state or
federal law. You further  understand that the certificates for any Option Shares
you purchase will bear such legends as the Company deems  necessary or desirable
in connection with the 1933 Act or other rules, regulations or

<PAGE>

laws. If you are a director, officer or principal shareholder,  Section 16(b) of
the  Securities  Exchange Act of 1934 further  restricts your ability to sell or
otherwise dispose of Option Shares.

      3.    Non-Transferability of Option. Your option is personal to you and is
non-transferable  by  you  other  than  by  will  or the  laws  of  descent  and
distribution  or as otherwise  permitted by the Plan.  During your lifetime only
you can exercise  your option  except as otherwise  permitted by the Plan.  Upon
your  death,  the person or persons to whom your  rights pass by will or laws of
descent and distribution will have the right to exercise your option.

      4.    Withholding Taxes.

            (a)   The Company  shall have the right to withhold from your salary
or other  compensation any withholding taxes payable as a result of your receipt
of Option Shares.  The Company shall also have the right to require that you pay
to it all  such  withholding  taxes  in cash  as a  condition  precedent  to the
exercise of this Option.

            (b)   If this is an Incentive Stock Option and you dispose of shares
purchased  as a result of  exercise  within  two years of the date  hereof,  the
Company shall have the right to withhold from your salary or other  compensation
any  withholding of taxes payable as a result of such  disposition.  The Company
shall  also have the right to  require  that you pay to it all such  withholding
taxes in cash as a condition precedent to the exercise of this Option.

            (c)   In the case of a  disposition  described in (b), you must give
the Company  written  notice of such  disposition  within 30 days  following the
disposition,  which notice shall  include  such  information  as the Company may
reasonably request to effectuate the provisions hereof.

      5.    Conformity  with Plan.  Your  option is  intended  to conform in all
respects with, and is subject to all applicable  provisions of, the Plan,  which
is incorporated herein by reference. Any inconsistencies between this letter and
the  Plan  shall be  resolved  in  accordance  with the  terms of the  Plan.  By
executing and returning the enclosed copy of this letter,  you acknowledge  your
receipt  of the Plan and  agree to be bound by all the  terms of the  Plan.  All
definitions  stated in the Plan apply to this  letter.  YOU SHOULD READ THE PLAN
CAREFULLY.

      6.    Employment  and  Successors.  Nothing  herein  confers  any right or
obligation on you to continue in the employ of the Company or any  subsidiary or
shall  affect  in any  way  your  right  or the  right  of  the  Company  or any
subsidiary,  as the case may be, to terminate  your  employment at any time. The
agreements  contained  in this  letter  shall be  binding  upon the inure to the
benefit of the successor of the Company.

      7.    Entire   Agreement.    This   agreement   constitutes   the   entire
understanding  between you and the Company, and supersedes all other agreements,
whether  written or oral,  with respect to the stock option  referred to in this
letter.

<PAGE>

      Please sign the extra copy of this letter in the space below and return it
to the Company to confirm your  understanding  and  acceptance of the agreements
contained in this letter.

                                             Very truly yours,

                                             ALLIANCE HOLDING DISTRIBUTORS INC.

                                             By____________________________
                                             Title:________________________

CONFIRMED:

--------------------------

Enclosures:

      1.    Confirmation copy of this letter
      2.    Copy of the Plan - Exhibit A
      3.    Notice of Exercise of Stock Option - Exhibit B

<PAGE>

                                    EXHIBIT B

ALLIANCE HOLDING DISTRIBUTORS INC.

Gentlemen:

      I hereby  exercise  the  following  portion  of stock  options  that  have
heretofore been granted to me as follows:

      Date of grant ____________________________________

      Exercise price per share _________________________

      Number of options granted ________________________

      Number of options held ___________________________

      Number of options being exercised hereby _________

      In connection with this exercise, I enclose my check in the amount of $___
      in payment of the  exercise  price and all taxes which are  required to be
      withheld in connection with my exercise.

      I  hereby  acknowledge  that  I  have  read  and  have  been  afforded  an
opportunity  to ask  questions  of  management  regarding  the  company  and all
financial and other  material  provided to me and have received  answers to such
questions satisfactory to me.

      I hereby agree to execute  whatever other documents are necessary in order
to comply with the Plan and any applicable legal requirements in connection with
the issuance of the stock to me pursuant to the Plan.

      If these are incentive stock options and I dispose of any shares purchased
hereby  within  one year from the date  hereof or within two years from the date
the Company granted me the options  exercised  hereby,  I understand that I must
give the Company written notice of such disposition,  which notice shall include
such  information  as the  Company  may  reasonably  request to  effectuate  the
provisions hereof.

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Optionee (Signature)                Social Security Number

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Please print name
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Date                                Address

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