Exhibit 99.2
SECURITIES EXCHANGE AGREEMENT
THIS SECURITIES EXCHANGE AGREEMENT is made and entered into as of January
6, 2007 (this "Agreement"), by and between DGSE Companies, Inc., a Nevada
corporation (the "Company"), and Silvano DiGenova, an individual resident of the
State of California ("DiGenova"). Capitalized terms used but not defined herein
shall have the respective meanings ascribed to such terms in that certain
Amended and Restated Agreement and Plan of Merger and Reorganization, made and
entered into as of the date hereof (the "Merger Agreement"), by and among
Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset
Galleries, Inc., a Nevada corporation) (together with its successors,
"Superior"), the Company, DGSE Merger Corp., a Nevada corporation ("Merger
Sub"), and Stanford International Bank Ltd., a corporation organized under the
laws of Antigua and Barbuda (together with its successors, "SIBL"), as
stockholder agent.
R E C I T A L S
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WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the Merger Agreement and the merger
of Merger Sub with and into the Company (the "Merger"), with the Company being
the surviving corporation, upon the terms and subject to the conditions of the
Merger Agreement;
WHEREAS, in the Merger, one hundred percent (100%) of the issued and
outstanding shares of capital stock of the Company will be converted into the
right to receive shares of Common Stock of Parent (as set forth in Article III
of the Merger Agreement), on the terms and subject to the conditions set forth
in the Merger Agreement and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL") and Chapters 78 and 92A of Title 7 of the
Nevada Revised Statutes (the "NPCA");
WHEREAS, DiGenova is the holder of record of 1,905,064 shares of common
stock of Superior (the "Superior Common Shares"), and the Beneficial Owner of
(1) an additional 2,200 Superior Common Shares held in his IRA, (2) 1,000
Superior Common Shares held of record by his children, and (3) 30,000 Superior
Common Shares subject to outstanding Company Options; and
WHEREAS, DiGenova desires to induce Parent and Merger Sub to consummate the
Merger by exchanging 355,000 of his Superior Common Shares (the "Exchanged
Shares") for a warrant, substantially in the form of Exhibit A hereto (the
"Warrant"), to purchase shares of common stock, par value $0.01 per share, of
the Company ("DGSE Common Shares"), all in accordance with the terms and subject
to the conditions set forth herein.
A G R E E M E N T
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NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:
1. Exchange of Securities. On the terms and subject to the conditions set
forth in this Agreement, DiGenova shall sell, convey, transfer and assign to the
Company, and the Company shall purchase and accept from DiGenova, all right,
title and interest in and to the Exchanged Shares, in exchange (the "Exchange")
for the Warrant on the date hereof (the "Exchange Time"). Not later than three
business days after the Exchange Time, (i) DiGenova shall deliver to the Company
a certificate for the Exchanged Shares duly endorsed or accompanied by stock
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powers duly endorsed in blank, with any required transfer tax stamps affixed
thereto, and (ii) upon receipt thereof, the Company shall deliver to DiGenova
the Warrant duly issued in the name of DiGenova. Upon the effectiveness of the
Exchange at the Exchange Time, all right, title and interest to the Exchanged
Shares shall vest in the Company.
2. Representations and Warranties. Each Party represents and warrants to
the other Party as follows:
(a) Investment Purpose. Such Party is acquiring the Exchanged Shares or
Warrant issuable upon the exchange of the Exchanged Shares, as the case may be,
(collectively, the "Securities") for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
Securities Act.
(b) No Conflicts or Consents. The execution and delivery of this
Agreement by such Party do not, and the performance of this Agreement by such
Party will not, (i) conflict with or violate any Law or Order applicable to such
Party or to which it or any of its Properties is or may be subject or affected,
or (ii) result in or constitute a Breach of, or result (with or without notice
or lapse of time) in the creation of any Encumbrance on any of the Securities
pursuant to, any Contract to which such Party is a party or by which such Party
or any of its affiliates or Property is or may be bound or affected. The
execution and delivery of this Agreement by such Party do not, and the
performance of this Agreement by such Party will not, require any Consent of any
Person.
(c) Accredited Investor Status. Such Party is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D under the Securities Act.
(d) Reliance on Exemptions. Such Party understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the Securities Act and state securities laws and
that the other Party is relying in part upon the truth and accuracy of, and such
Party's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Party set forth herein in order to
determine the availability of such exemptions and the eligibility of such Party
to acquire the Securities.
(e) Transfer or Resale. Such Party understands that the Securities have
not been registered under the Securities Act or any state securities laws, and
may not be offered for sale, sold, assigned, pledged, hypothecated or
transferred unless (A) subsequently registered thereunder, (B) such Party shall
have delivered to the issuers of the Securities an opinion of counsel, in a form
reasonably satisfactory to such issuer, to the effect that such Securities may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Party provides the issuer of the Securities with such
documents and certificates as such issuer may reasonably request to demonstrate
to its satisfaction that such Securities can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the Securities Act (or a successor rule
thereto).
(f) No General Solicitation. Such Party is not acquiring the Securities
as a result of any advertisement, article, notice or other communication
regarding any Securities published in any newspaper, magazine or similar media
or broadcast over television or radio, or presented at any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising.
(g) Disclosure of Information. Such Party believes it has received all
the information it considers necessary or appropriate for deciding whether to
acquire the Securities being acquired by it hereunder. Such Party has had an
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opportunity to ask questions and receive answers from the issuer of such
Securities regarding the business, properties, prospects and financial condition
of such issuer.
(h) Adequate Information. Such Party is aware of business affairs and
financial condition of the issuer of the Securities, and has acquired
information about such issuer sufficient to reach an informed and knowledgeable
decision to acquire the Securities.
(i) Sophistication and Experience. Such Party, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities and has so evaluated the
merits and risks of such investment.
(j) Ability to Bear Risk. Such Party is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(k) Relationship. Such Party either has a preexisting personal or
business relationship with the issuer of the Securities or any of its officers,
directors or controlling persons, or by reason of its business or financial
experience or the business or financial experience of its professional advisers
who are unaffiliated with and who are not compensated by such issuer or any
affiliate or selling agent of such issuer, directly or indirectly, has the
capacity to protect its own interests in connection with the acquisition of the
Securities.
(l) Legend. Such Party understands that the Securities shall bear a
restrictive legend in substantially the following form:
NEITHER THE SECURITIES EVIDENCED BY THIS CERTIFICATE NOR THE
SECURITIES FOR WHICH THESE SECURITIES MAY BE EXERCISED
(COLLECTIVELY, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE (THE
"SECURITIES LAWS"). THE SECURITIES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF (1) REGISTRATION AND QUALIFICATION UNDER THE
ACT AND APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF
COUNSEL AND/OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
3. Company Representations. The Company agrees, represents and warrants to
DiGenova as follows:
(a) Valid Issuance. The Warrant, and the shares of share of common
stock, par value $0.01 per share, of the Company (the "Common Stock") issuable
upon exercise of the Warrant, (the "Shares") have been duly authorized and, when
issued and paid for in accordance with this Agreement and the Warrant, as
applicable, will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
the Warrant in order to issue the full number of shares of Common Stock as may
become issuable in accordance with the Warrant.
4. DiGenova Representations. DiGenova agrees, represents and warrants to
the Company as follows:
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(a) Warrant Representations. DiGenova has read and fully understood the
Warrant, including the representations and warranties being made by the "Holder"
(as defined in the Warrant) in Section 10.3 of the Warrant, and hereby makes
such representations and warranties to the Company. Without limiting the
generality of the foregoing, DiGenova represents and warrants that he (i) has
read and fully understood the Warrant and the Merger Agreement, and the
implications and consequences thereof; (ii) understands that in the event the
Merger is not consummated by the Expiration Date (as defined in the Warrant),
the Warrant shall expire without having ever become exercisable, and (iii) has
been represented in the preparation, negotiation, and execution of the Warrant
by legal counsel and tax advisers of his own choice, or has made a voluntary and
informed decision to decline to seek such counsel or advice.
(b) Certain Warrant Provisions. DiGenova acknowledges the terms and
provisions of Section 6 of the Warrant, pursuant to which the DGSE Common Shares
to be issued upon the exercise of the Warrant are made subject to the escrow
provisions of the Merger Agreement, and Section 9 of the Warrant, pursuant to
which the Warrant may not be Transferred except pursuant to the laws of descent
and distribution.
(c) Title to Shares. DiGenova is the beneficial owner and record holder
of the Exchanged Shares, free and clear of any Encumbrance, and has the full
right, power and authority to transfer the Exchanged Shares to the Company
pursuant to this Agreement.
(d) Securities Held. After giving effect to the repayment of "DiGenova
Note" (as defined in that certain Termination and Release Agreement, made and
entered into as of the date hereof, by and among the Company, Merger Sub,
Superior, DiGenova, Sanford, SFG and Stanford Venture Capital Holdings) and the
conversion of DiGenova's 400,000 shares of the Company's Series B $1.00
Convertible Preferred Stock pursuant to that certain Conversion Agreement, made
and entered into as of the date hereof, by and between Superior and DiGenova,
DiGenova (1) will be the Beneficial Owner or record holder of (A) 1,905,064
Superior Common Shares held of record in his name, (B) 2,200 Superior Common
Shares held in his IRA, (C) 1,000 Superior Common Shares held of record by his
children, and (D) Company Options to acquire, in the aggregate, 30,000 Superior
Common Shares, and (2) will not Beneficially Own or own of record any Securities
of the Company other than the Superior Common Shares and the Company Options
specifically set forth in Section 4(d)(1).
(e) California Qualification. DIGENOVA UNDERSTANDS THAT THE SALE OF THE
SECURITIES HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT
OF ANY PART OF THE CONSIDERATION FOR THE SECURITIES PRIOR TO SUCH QUALIFICATION
IS UNLAWFUL, UNLESS THE SALE OF THE SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF
ALL PARTIES TO THIS AGREEMENT EXPRESSLY ARE CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
(f) Residence of Transferee. The Person identified in Schedule 6 is not
a resident of, and does not have a residence in, the State of California.
5. Escrow Provisions. DiGenova acknowledges that the Shares to be issued
upon the exercise of the Warrant shall be subject to the escrow provisions of
the Merger Agreement and the Escrow Agreement. DiGenova acknowledges and agrees
that, upon any exercise of the Warrant, DGSE will deliver 15% of the Shares for
which the Warrant is exercised (collectively, the "Escrow Shares") to the Escrow
Agent for deposit into the Escrow Account established with the Escrow Agent
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under the Escrow Agreement for the purpose of securing the indemnification
obligations (including DiGenova's indemnification obligations) set forth in
Article VIII of the Merger Agreement, all as contemplated by, and subject to the
terms and conditions of, Section 3.14 and Article VIII of the Merger Agreement
and the Escrow Agreement. DiGenova further acknowledges and agrees that the
Escrow Shares shall be subject to all of the applicable terms and provisions of
the Merger Agreement and Escrow Agreement, including the terms and conditions
relating to the release thereof and the use thereof as security to satisfy the
claims of the Indemnified Parties. DiGenova (i) irrevocably appoints and
constitutes the Stockholder Agent from time to time as his exclusive agent,
attorney-in-fact and representative in relation to or in connection with the
afore-referenced provisions of the Merger Agreement and the Escrow Agreement and
the transactions contemplated thereby, (ii) consents to and authorizes the
Stockholder Agent to take or omit to take any and all actions and to make or
omit to make any and all decisions required or permitted to be taken by it under
the Merger Agreement or the Escrow Agreement, and (iii) consents to and approves
the terms and provisions of the Escrow Agreement.
6. Transfer of Exchanged Shares.
(a) The Company hereby covenants and agrees not to, directly or
indirectly, sell, offer, contract to sell, pledge, transfer the economic risk of
ownership, enter into any Commitment for, or make any short sale, pledge or
otherwise transfer, any Exchanged Shares prior to the earlier to occur of the
termination or exercise of the Warrant, except (i) a transfer to an Affiliate of
the Company which agrees to be bound by the provisions of this Section 6 as if
it were the Company hereunder, or (ii) in connection with the acquisition by one
or more Persons, directly or indirectly, pursuant to a tender offer, exchange
offer, merger, reorganization, consolidation or other business combination, sale
of assets, bulk transfer or other transaction, of all or substantially all of
the assets or Common Stock of the Company.
(b) If the Warrant expires or otherwise terminates without having been
exercised, in whole or in part, the Company shall promptly assign and deliver
(without recourse, representation or warranty) the Exchanged Shares to the
Person identified in Schedule 6. Upon such delivery, the Warrant shall
immediately be cancelled and be of no further force or effect.
7. Governing Law; Jurisdiction. This Agreement shall be governed in all
respects by the laws of the State of Texas applicable to contracts negotiated,
executed and to be performed entirely within such State. All suits, actions or
proceedings arising out of, or in connection with, this Agreement or the
transactions contemplated by this Agreement shall be brought in any federal or
state court of competent subject matter jurisdiction sitting in Dallas County,
Texas.
8. Construction. The rules of construction specified in Section 1.3
(Construction) of the Merger Agreement are hereby incorporated by reference
herein and shall apply to this Agreement mutatis mutandis, as if expressly set
forth herein.
9. Titles and Headings. The section and paragraph titles and headings
contained herein are inserted purely as a matter of convenience and for ease of
reference and shall be disregarded for all other purposes, including the
construction, interpretation or enforcement of this Agreement or any of its
terms or provisions.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the Parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
11. Facsimile Execution. A facsimile, telecopy or other reproduction of
this Agreement may be executed by one or more Parties, and an executed copy of
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this Agreement may be delivered by one or more Parties by facsimile, email or
similar electronic or digital transmission pursuant to which the signature of or
on behalf of such Party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
12. Notices. All notices, requests, instructions or other documents to be
given or delivered under this Agreement shall be given in the manner, with the
effect and to the address, email address or fax number to be used for such Party
as provided in Section 10.1 of the Merger Agreement; provided that the initial
address, email address and fax number for DiGenova shall be as follows:
Silvano DiGenova
32001 S. Coast Highway
Laguna Beach, California 92651
Facsimile:
Email: [omitted]
13. Entire Agreement. This Agreement and the Merger Agreement constitute
the entire agreement among the Parties with respect to the subject matter
hereof.
14. Amendment; Waiver. This Agreement and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Party against which enforcement of the same is sought and by
Parent. This Agreement may be amended only by a writing executed by all Parties
and by Parent.
15. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Parties and their respective successors
and permitted assigns.
16. Specific Performance; Injunctive Relief. Each of the Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions hereof would cause substantial and irreparable
damage to the other parties hereto, and that money damages would be an
inadequate remedy therefor. Accordingly, each of the Parties agrees that each of
them shall be entitled to seek equitable relief, including specific performance
and injunctive relief, in the event of any such breach, non-performance or
default in any Action instituted in any court of the United States or any state
having competent jurisdiction, or before any arbitrator, in addition to any
other remedy to which such Party may be entitled, at law or in equity.
17. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof; provided
that if any provision of this Agreement, as applied to any Party or to any
circumstance, is adjudged by a court, tribunal or other governmental body,
arbitrator or mediator not to be enforceable in accordance with its terms, the
Parties agree that such governmental body, arbitrator or mediator making such
determination shall have the power to modify the provision in a manner
consistent with its objectives such that it is enforceable, and to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
18. Further Assurances. At any time, and from time to time, after the
effective date, each Party will execute such additional instruments and take
such action as may be reasonably requested by any other Party to confirm or
perfect title to any property interests transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
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19. Third-Party Beneficiaries. This Agreement is made solely for the
benefit of the Parties and Parent, and their respective permitted successors and
assigns, and no other Person shall have or acquire any right or remedy by virtue
hereof except as otherwise expressly provided herein.
20. Voluntary Execution of Agreement. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties. Each of the Parties hereby acknowledges, represents and warrants
that (i) it has read and fully understood this Agreement, the Merger Agreement
and the Escrow Agreement, and the implications and consequences thereof; (ii) it
has been represented in the preparation, negotiation, and execution of this
Agreement by legal counsel of its own choice, or it has made a voluntary and
informed decision to decline to seek such counsel; and (iii) it is fully aware
of the legal and binding effect of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
DGSE COMPANIES, INC.
By: /s/ Dr. L.S. Smith
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Dr. L.S. Smith
Chairman and Chief Executive Officer
SILVANO DIGENOVA
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EXHIBIT A
FORM OF WARRANT
(Attached)
SCHEDULE 6
TRANSFEREE OF EXCHANGED SHARES
[ OMITTED ]