SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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SUPERIOR GALLERIES, INC.
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(Name of Registrant as Specified In Its Charter)
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SUPERIOR GALLERIES, INC.
9478 WEST OLYMPIC BOULEVARD
BEVERLY HILLS, CA 90212
November 8, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 annual meeting of
stockholders of Superior Galleries, Inc. that will be held at 8:00 a.m. local
time on November 30, 2004 at our Beverly Hills, California offices located at
9478 West Olympic Boulevard, Beverly Hills, California 90212. All holders of our
outstanding common stock, Series B Preferred Stock and Series D Preferred Stock
as of the close of business on November 7, 2004 are entitled to vote at the 2004
annual meeting.
Enclosed is a copy of the notice of annual meeting of stockholders, a
proxy statement and a proxy card. A current report on our business operations
will be presented at the meeting, and stockholders will have an opportunity to
ask questions.
We hope you will be able to attend the 2004 annual meeting. Whether or
not you expect to attend, it is important that you complete, sign, date and
return the proxy card in the enclosed envelope in order to make certain that
your shares will be represented at the 2004 annual meeting.
Sincerely,
/S/ Silvano DiGenova
Silvano DiGenova
Chairman of the Board and Chief Executive Officer
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SUPERIOR GALLERIES, INC.
9478 WEST OLYMPIC BOULEVARD
BEVERLY HILLS, CA 90212
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 30, 2004
__________________________
NOTICE IS HEREBY GIVEN that the 2004 annual meeting of stockholders of
Superior Galleries, Inc., a Delaware corporation, will be held at 8:00 a.m.
local time on November 30, 2004 at our Beverly Hills, California offices located
at 9478 West Olympic Boulevard, Beverly Hills, California 90212, for the
following purposes:
1. To elect five directors to the board of directors;
2. To ratify the selection of Singer Lewak Greenbaum & Goldstein
LLP as our independent certified public accountants to audit
our financial statements for the year ending June 30, 2005;
3. To approve a form of indemnification agreement set forth in
the attached Proxy Statement for our officers and directors;
and
4. To transact such other business as may properly come before
the 2004 annual meeting or any adjournment or adjournments
thereof.
The board of directors has fixed the close of business on November 7,
2004 as the record date for the determination of stockholders entitled to notice
of and to vote at the 2004 annual meeting and all adjourned meetings thereof.
By Order of the Board of Directors
/S/ Silvano DiGenova
Silvano DiGenova
Chairman of the Board and Chief Executive Officer
Dated: November 8, 2004
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
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SUPERIOR GALLERIES, INC.
9478 WEST OLYMPIC BOULEVARD
BEVERLY HILLS, CA 90212
PROXY STATEMENT
_____________________
2004 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 30, 2004
_____________________
THESE PROXY MATERIALS ARE FIRST BEING MAILED TO
STOCKHOLDERS ON OR ABOUT NOVEMBER 8, 2004
_____________________
VOTING AND PROXY
This proxy statement is being furnished in connection with the
solicitation of proxies by our board of directors for use at the 2004 annual
meeting of stockholders to be held at 8:00 a.m. local time on November 30, 2004
at our Beverly Hills, California offices located at 9478 West Olympic Boulevard,
Beverly Hills, CA 90212, and at any adjournments of the 2004 annual meeting.
When a proxy is properly executed and returned, the shares it represents will be
voted according to directions noted on the proxy. If no specification is
indicated, the shares will be voted "for" each of the proposals listed on the
proxy. Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by providing written notice to our corporate Secretary, by
issuance of a subsequent proxy, or by voting in person at the 2004 annual
meeting.
At the close of business on November 7, 2004, the record date for
determining stockholders entitled to notice of and to vote at the 2004 annual
meeting, we had issued and outstanding 4,509,942 shares of common stock,
3,400,000 shares of Series B Preferred Stock, and 2,000,000 shares of Series D
Preferred Stock. We also had 125,000 shares of Series A Preferred Stock
outstanding at such date, but such shares are nonvoting. Only stockholders of
record at the close of business on the record date are entitled to notice of and
to vote at the 2004 annual meeting or at any adjournments of the meeting.
Each share of common stock entitles the holder of record to one vote on
any matter coming before the 2004 annual meeting. Each holder of Series B
Preferred stock is entitled to 0.5 votes for each share held by him or her, and
each holder of Series D Preferred Stock is entitled to 0.833 votes for each
share held by him or her. In voting for directors, the candidates receiving the
highest number of votes of the shares entitled to vote for them, up to the
number of directors to be elected, shall be elected. Votes against a candidate
and votes withheld will have no legal effect in the election of directors.
The person or persons holding the proxies solicited by our board of
directors will exercise their voting rights, at their discretion, to vote the
shares they hold in such a way as to ensure the election of as many of the
nominees of the board of directors as they deem possible. This discretion and
authority of the proxy holders may be withheld by checking the box on the proxy
card marked "withhold from all nominees." Such an instruction will deny the
proxy holders the authority to vote for any or all of the nominees of the board
of directors at the 2004 annual meeting.
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A stockholder may choose to withhold from the proxy holders the
authority to vote for any of the individual candidates nominated by our board of
directors by marking the appropriate box on the proxy card and striking out the
names of the disfavored candidates as they appear on the proxy card. In that
event, the proxy holders will not cast any of the stockholder's votes for
candidates whose names have been crossed out. However, the proxy holders will
retain the authority to vote for the candidates nominated by the board of
directors whose names have not been struck out and for any candidates who may be
properly nominated at the 2004 annual meeting. If a stockholder wishes to
specify the manner in which his or her votes are allocated, he or she must
appear and vote in person at the 2004 annual meeting. Ballots will be available
at the 2004 annual meeting for stockholders who desire to vote in person.
A majority of the shares entitled to vote, represented in person or by
proxy, will constitute a quorum at a meeting of stockholders. Votes cast at the
meeting will be tabulated by the person or persons appointed by us to act as
inspectors of election for the meeting. Directors will be elected by a plurality
of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors, which means that the
five candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them will be elected. So long as a quorum is present, a
failure to vote in the election of directors or a vote "against" a nominee will
have no effect.
Under Delaware law, in order to ratify the form of indemnification
agreement for directors and officers and the selection of Singer Lewak Greenbaum
& Goldstein LLP as our independent auditors, a majority of those voting must
cast their votes in favor of ratification. You may cast your votes in favor of,
or against, this proposal or abstain from voting on the proposal. Only votes
cast "for" a matter constitute affirmative votes. Thus, a failure to vote on
these proposals or an abstention will not be treated as a vote cast "for" the
proposals and will have the same effect as a vote "against" the proposals.
"Broker non-votes" are not counted either "for" or "against" any
proposals, but will be treated the same as abstentions. Thus, if the number of
"broker non-votes" results in the votes "for" a proposal not equaling at least a
majority of the outstanding voting shares (other than in the election of
directors), the proposal will not be approved. This will be the case even though
the number of votes "for" these proposals exceeds the number of votes "against"
the proposal.
We will pay the expenses of soliciting proxies for the 2004 annual
meeting, including the cost of preparing, assembling and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail or by
telephone, or by our directors, officers and regular employees who will not be
additionally compensated. We have no present plans to hire special employees or
paid solicitors to assist in obtaining proxies, but we reserve the option to do
so if it appears that a quorum otherwise might not be obtained. The matters to
be considered and acted upon at the 2004 annual meeting are referred to in the
preceding notice and are discussed below more fully. Executed proxies may be
delivered by facsimile transmission (fax) to our transfer agent, Stalt, Inc., at
(775) 831-3337.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
Our bylaws provide that there are five seats on our Board of Directors.
Directors are elected annually and hold office until the next annual meeting of
stockholders, until their respective successors are elected and qualified or
until their earlier death, resignation or removal. It is intended that the
proxies solicited by our board of directors will be voted "for" election of the
following five nominees unless a contrary instruction is made on the proxy:
Silvano DiGenova, Paul Biberkraut, Lee Ittner, David Rector and James M.
Gollihugh.
If for any reason one or more of the nominees is unavailable as a
candidate for director, an event that is not anticipated, the person named in
the proxy will vote for another candidate or candidates nominated by our board
of directors. However, under no circumstances may a proxy be voted in favor of a
greater number of persons than the number of nominees named above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS NOMINATED
IN THIS PROPOSAL NO. 1.
The current directors and executive officers of Superior Galleries,
Inc. and their ages, positions, business experience and education are as
follows:
Name Age Position
---- --- --------
Silvano DiGenova............. 42 Chairman of the Board, Chief Executive
Officer, President and Director
J. Michael Wolfe............. 46 Chief Operating Officer and Executive
Vice President
Paul Biberkraut.............. 43 Chief Financial Officer, Executive Vice
President, Secretary and Director
Lee Ittner(1,2).............. 42 Director
David Rector(1,2)............ 57 Director
James M. Gollihugh(1,2)...... 57 Director
(1) Member of audit committee.
(2) Member of compensation committee.
All directors hold office until the next annual meeting of stockholders
and until their respective successors are elected or until their earlier death,
resignation or removal. Each of our officers serves at the discretion of the
board of directors. There are no family relationships between or among any of
our directors, director nominees or executive officers.
DIRECTORS AND DIRECTOR NOMINEES
SILVANO DIGENOVA is our chairman of the board, chief executive officer
and a director. Mr. DiGenova has also served as our acting chief financial
officer from September 2002 through December 2002. Mr. DiGenova founded Tangible
Investments of America, which would later become our company, in 1977. Mr.
DiGenova is a recognized leader in the numismatic and fine arts field. In 1986,
Mr. DiGenova helped form the Professional Coin Grading Service, the first widely
accepted uniform grading system for rare coins. Mr. DiGenova attended the
Wharton School of Business at the University of Pennsylvania for four years.
However, Mr. DiGenova left Wharton in his fourth year to develop Tangible
Investments of America, and did not obtain a degree from Wharton.
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J. MICHAEL WOLFE is our chief operating officer and executive vice
president. Mr. Wolfe has served in this role since July 2004. Mr. Wolfe has over
twenty years of experience in management roles in sales and marketing,
operations and executive management. Prior to joining our company, Mr. Wolfe was
a principal in a privately-held direct marketing start-up company from April
2002 to June 2004. Mr. Wolfe was the president and chief operating officer from
1992 to 2000 and chief executive officer from 2000 to 2002 of Concepts Direct,
Inc., a publicly traded company specializing in catalog and internet retailing.
PAUL BIBERKRAUT is our executive vice president, chief financial
officer, secretary and a director. Mr. Biberkraut has served in this role since
December 2002 and previously was our Company's Vice President of Finance and
chief financial officer from October 1999 to December 2000. Mr. Biberkraut has
over fifteen years of experience in management roles with varying levels of
responsibilities for finance, accounting, information technology, operations and
human resources. Prior to returning to our company Mr. Biberkraut was a senior
finance manager for information technology at PacifiCare Health Systems, Inc.
from December 2000 to November 2002 and was the corporate controller of Quality
Systems, Inc. from November 1997 to June 1999. Mr. Biberkraut also served as the
chairman of the audit committee for an Orange County, California based credit
union from 1997 to 1999 and had served as a board member, treasurer and
president of an Orange County, California based not-for-profit social service
agency from 1989 to 1998.
LEE ITTNER is one of our directors. He has served in this role since
May 2003. Mr. Ittner is currently the Vice President for Latin America for
Kyocera Wireless Corp., a position he has held since 2002. Prior to that time,
Mr. Ittner was Senior Vice President of the Americas Region for Cellstar
Corporation. Mr. Ittner has over fifteen years of experience in both domestic
and international operational management, sales and marketing, customer
relations and strategic planning in the communications industry.
DAVID RECTOR is one of our directors and the chairman of our
compensation committee. Mr. Rector has served in this role since May 2003. Mr.
Rector is currently the chief executive officer, president and director of
Nanoscience Technologies, Inc., a publicly traded company, a position he has
held since May 2004. From 1992 to 2004, Mr. Rector had been a principal
management consultant with The David Stephen Group, where he provided executive
management services for several companies, overseeing operations and strategic
planning. Mr. Rector has over twenty years of experience as a senior executive
focusing on general management with Fortune 100 and developmental companies.
JAMES M. GOLLIHUGH is one of our directors and the chairman of our
audit committee. Mr. Gollihugh has served in these roles since October 2004. Mr.
Gollihugh is currently the chief executive officer of Management Resource
Center, Inc., a privately held merchant bank and mergers and acquisition
advisory firm, a position that he has held since 1976. Mr. Gollihugh is a
director and/or a shareholder of several real estate holding companies, a
commercial bank and other financial companies. Mr. Gollihugh is Certified Public
Accountant and is a past chairman of the Institute of Merger and Acquisition
Professionals. Mr. Gollihugh has 30 years of financial and business experience
ranging from the structuring and negotiating private equity transactions to
controller responsibilities at two Fortune 500 Corporations.
BOARD NOMINATIONS, COMMITTEES AND MEETINGS
Our board of directors has an audit committee and a compensation
committee but does not have a nominating committee. In the absence of a
nominating committee, the entire board of directors satisfies the duties of that
committee. Selection of nominees for our board of directors is made by the
entire board of directors, and each member of the board participates in the
consideration of nominees. The board believes a separate committee is not
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necessary for this purpose because: (i) due to the relatively small size of the
board, it can function efficiently without forming a committee composed of fewer
members; (ii) a majority of the members of the board are independent, as defined
in Rule 4200(a)(15) of the National Association of Securities Dealers ("NASD")
listing standards, and (iii) those members of the board that are not independent
have a unique familiarity with and understanding of the industry within which
the company operates, enabling them to provide important perspective on the
necessary qualifications of a board member.
The board utilizes a variety of methods for identifying and evaluating
nominees for director, including candidates that may be referred by
stockholders. Stockholders that desire to recommend candidates for the board for
evaluation may do so by contacting the company in writing, identifying the
potential candidate and providing background information. See "Stockholder
Communications with Directors" in this Proxy Statement. Candidates may also come
to the attention of the board through current board members, professional search
firms and other persons. In evaluating potential candidates, the board will take
into account a number of factors, including, among others, the following:
o Independence from management;
o Whether the candidate has relevant business experience;
o Judgment, skill, integrity and reputation;
o Existing commitments to other businesses;
o Corporate governance background;
o Financial and accounting background, to enable the board to
determine whether the candidate would be suitable for Audit
Committee membership; and
o The size and composition of the board.
The audit committee is composed of three non-employee directors. From
June 2003 through August 2004, the audit committee was composed of Messrs.
Ittner and Rector and the late Mr. Cohen, with Mr. Cohen serving as the
committee chairman and the audit committee financial expert as defined by Item
401(e) of Regulation S-B. From August 2004 through October 2004, Mr. Rector
acted as chairman of the audit committee. In October 2004 Mr. Gollihugh was
appointed to the audit committee to fill the vacancy left by Mr. Cohen's passing
and to assume the positions of committee chairman and audit committee financial
expert as defined by Item 401(e) of Regulation S-B. The audit committee held
meetings on July 17, 2003, September 12, 2003, October 23, 2003, November 17,
2003, January 26, 2004, March 1, 2004 and April 22, 2004 during our last fiscal
year.
Messrs. Ittner, Rector and Gollihugh are, and the late Mr. Cohen was,
"independent" as defined in Rule 4200(a)(15) of the National Association of
Securities Dealers ("NASD") listing standards.
The audit committee operates pursuant to a charter approved by our
board of directors. The committee's principal functions are to monitor our
financial reporting process and internal control system, review and appraise the
audit efforts of our independent auditors, and provide an avenue of
communication among our independent accountants, financial and senior management
and our board of directors.
The compensation committee is composed of three disinterested,
non-employee directors. From June 2003 through August 2004, the compensation
committee was composed of Messrs. Ittner and Rector and the late Mr. Cohen, with
Mr. Rector serving as the committee chairman. In October 2004 Mr. Gollihugh was
appointed to the compensation committee to fill the vacancy left by Mr. Cohen's
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passing. The compensation committee's primary functions are to administer our
employee stock option plans, approve grants of stock options and approve
compensation for executive officers. The compensation committee held a meeting
on August 28, 2003 during our last fiscal year.
During our 2004 fiscal year, our board of directors held seven (7)
meetings and took action by written consent on eight (8) occasions. During the
2004 fiscal year, Lee Ittner attended fewer than 75% of the aggregate of the
total number of meetings of the board of directors held during the period for
which he has been a director and the total number of meetings held by all
committees of the board on which he served during the periods that he served.
BOARD AUDIT COMMITTEE REPORT
The audit committee of our board of directors reviewed and discussed
with the independent auditors all matters required by generally accepted
auditing standards, including those described in Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees," and reviewed and
discussed with both management and the independent auditors our audited
financial statements. Discussions with the independent auditors were both with
and without management present. In addition, the audit committee obtained from
the independent auditors a formal written statement describing all relationships
between the auditors and us that might bear on the auditors' independence
consistent with Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees," and discussed with the auditors any
relationships that may impact their objectivity and independence and satisfied
itself as to the auditors' independence. Based upon the audit committee's review
and discussions with management, the audit committee recommended to our board of
directors that our audited financial statements be included in our annual report
on Form 10-K for fiscal year 2004, for filing with the Commission. The audit
committee also recommended that we continue to use Singer Lewak Greenbaum &
Goldstein LLP as our independent auditors and our board of directors concurred
in that recommendation.
AUDIT COMMITTEE:
David Rector, Acting Chairman
Lee Ittner
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers and directors, and persons who beneficially own
more than 10% of a registered class of our common stock to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission. These officers, directors and stockholders are required by
Securities and Exchange Commission regulations to furnish us with copies of all
such reports that they file.
We have reviewed copies of such reports furnished to us during the
fiscal year ended June 30, 2004 and thereafter, and written representations
received by us from our directors and officers and the beneficial owners of more
than 10% of our common stock (with the exception of the late Mr. Cohen)
concerning their compliance with Section 16(a) of the Exchange Act. Based on
this review, we believe that during the 2004 fiscal year, the only failure by
any such person to timely file a report under Section 16(a) of the Exchange Act
was a late filing of a Form 4 Statement of Changes in Beneficial Ownership of
Securities by Paul Biberkraut, our Chief Financial Officer, Executive Vice
President and Director. This filing has now been made.
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APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL 2)
Our board of directors has selected the independent certified public
accounting firm of Singer Lewak Greenbaum & Goldstein LLP to audit and comment
on our financial statements for the year ending June 30, 2005, and to conduct
whatever audit functions are deemed necessary. Singer Lewak Greenbaum &
Goldstein LLP audited our financial statements for the fiscal year ended June
30, 2004. The independent certified public accounting firm of Haskell & White
LLP audited and commented on our financial statements for the previous fiscal
year, which ended June 30, 2003.
The appointment of Singer Lewak Greenbaum & Goldstein LLP is being
submitted to shareholders for ratification. A representative of Singer Lewak
Greenbaum & Goldstein LLP is expected to attend the annual meeting, respond to
appropriate questions and if the representative desires, which is not now
anticipated, make a statement.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THIS PROPOSAL.
FORMER ACCOUNTANTS
On November 18, 2003, we notified Haskell & White LLP, the independent
certified public accounting firm that was engaged at that time to audit our
financial statements, that we intended to engage new certifying accountants, in
effect terminating our relationship with Haskell & White LLP.
The audit report of Haskell & White LLP on our consolidated financial
statements as of and for the year ended June 30, 2003 did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles, except that Haskell & White
LLP's report dated September 5, 2003 on our consolidated financial statements as
of and for the year ended June 30, 2003 contained a separate paragraph stating
as follows:
"The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
15 to the consolidated financial statements, the Company has suffered recurring
losses from operations, negative cash flows from operations, is in default on a
significant debt obligation, and has limited working capital that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 15. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty."
Our decision to change accountants was approved by our audit committee
and board of directors, and was ratified by our stockholders at the April 27,
2004 annual meeting. In connection with the audit of the year ended June 30,
2003, and during the subsequent interim period through November 18, 2003 there
were no disagreements with Haskell & White LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures which disagreements, if not resolved to Haskell & White LLP's
satisfaction, would have caused them to make reference to the subject matter of
the disagreement in connection with its opinion. In addition, there were no
reportable events as described in Item 304(a)(1)(iv)(B) of Regulation S-B under
the Act.
Prior to our engagement of Singer Lewak Greenbaum & Goldstein LLP, we
did not consult with them regarding the application of accounting principles to
a specified transaction or the type of audit opinion that might be rendered on
Superior's financial statements or as to any disagreement or reportable event as
described in Item 304(a)(1)(iv) of Regulation S-B.
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On November 18, 2003, we provided Haskell & White LLP with a copy of
the disclosures we proposed to make in a Current Report on Form 8-K, as required
under the federal securities laws. We requested that Haskell & White LLP furnish
us with a letter addressed to the Securities and Exchange Commission stating
whether that firm agreed with the statements made by us, and, if not, stating
the respects in which it did not agree. We filed a copy of Haskell & White LLP's
letter as an exhibit to our Current Report on Form 8-K reporting the change in
our auditors.
FEES PAID TO AUDITORS
The following table shows the fees paid or accrued by Superior
Galleries for the audit and other services provided by Singer Lewak Greenbaum &
Goldstein LLP ("SLGG") and Haskell & White LLP ("H&W") for the fiscal years
shown.
2004 2003
---- ----
SLGG H&W SLGG H&W
---- --- ---- ---
Audit Fees $59,953 $37,211 -- $81,295
Audit-Related Fees $9,762 -- -- --
Tax Fees -- $1,000 -- $23,100
All Other Fees -- -- -- --
-------- -------- ------- ---------
Total $69,715 $38,211 -- $104,395
The Audit-Related Fees shown above all related to the performance of
agreed upon procedures required to be performed in connection with our line of
credit from Stanford Financial Group Company, and the Tax Fees shown above all
related to the preparation of our corporate tax returns.
Our Audit Committee approved the Audit Fees for fiscal 2004, but none
of the other fees for 2004. The Audit Committee did not approve any of the above
fees for 2003, as the committee was not created until after the end of that
year. Our Audit Committee policies require it to approve the fees and scope of
work for all annual audits and quarterly financial statement review.
RATIFICATION OF INDEMNIFICATION AGREEMENT
(PROPOSAL 3)
GENERAL
The board of directors has directed the submission to a vote of the
stockholders of a proposal to approve and ratify the form of indemnification
agreement which may be made between the company and its directors, officers and
key employees, as may be determined from time to time by the board, in
substantially the form attached hereto as Appendix 1. The company intends to
enter into indemnification agreements with each of its directors and officers
(the "Indemnified Parties"). The indemnification agreements indemnify the
Indemnified Parties against certain liabilities arising out of their service in
such capacities.
The proposal would also authorize the company, subject to the approval
of its board of directors, to enter into indemnification agreements providing
rights similar to those set forth in the indemnification agreements to any
future director or officer.
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We currently have indemnification agreements with our directors and
officers. We adopted those agreements as a response to the increasing hazard,
and related expense, of unfounded litigation directed against directors and
officers, the difficulty of obtaining broad directors' and officers' liability
insurance and significant limitations in amounts and breadth of coverage,
dramatic increases in premiums for that coverage, and our potential inability to
continue to attract and retain qualified directors and executive officers in
light of these circumstances.
We are proposing the approval of the indemnification agreement to
replace the existing agreements as a result of our reincorporation in Delaware
in 2003, in order to conform the agreements to the provisions of Delaware law.
Although stockholder approval of the indemnification agreement is not required
by law, we consider it appropriate to submit the indemnification agreement to
our stockholders for approval because the members of the board are parties to,
and the beneficiaries of, the rights contained in the indemnification agreement.
The board believes the indemnification agreement serves the best
interests of the company and its stockholders by strengthening our ability to
attract and retain the services of knowledgeable and experienced persons as
directors and officers who, through their efforts and expertise, can make a
significant contribution to our success. The indemnification agreement is
intended to complement the indemnity protection available under applicable law,
our certificate of incorporation and bylaws and any policies of insurance which
may hereafter be maintained by us.
DELAWARE LAW
Under the Delaware General Corporation Law ("DGCL"), a Delaware
corporation is obligated to indemnify officers and directors in connection with
liabilities arising from legal proceedings resulting from that person's service
to the corporation in certain circumstances. A Delaware corporation may also
voluntarily undertake to indemnify certain persons acting on its behalf in
certain circumstances.
o The DGCL states that Delaware corporations shall indemnify any
present or former director or officer against reasonable expenses
(including attorney's fees) incurred in connection with any
proceeding to which such person was a party if that person is
successful on the merits or otherwise in the defense of such
action.
o The DGCL authorizes corporations to indemnify any director or
officer against liability incurred in a proceeding to which he or
she was a party if his or her conduct was in good faith and he or
she reasonably believed that his or her conduct was in or not
opposed to the corporation's best interests, and in the case of
any criminal proceeding, the director had no reasonable cause to
believe his or her conduct was unlawful. This voluntary
indemnification must be approved by a majority of uninterested
directors, by a committee of such directors designated by majority
vote of uninterested directors, by independent legal counsel in a
written opinion if the uninterested directors so direct, or by the
stockholders.
o The DGCL authorizes the Court of Chancery to summarily determine a
corporation's obligation to advance expenses (including attorney's
fees).
o The DGCL also authorizes corporations to advance reasonable
expenses to a director or officer in advance of final disposition
of a proceeding if the corporation receives an undertaking by or
on behalf of such director or officer to repay such amount if it
is ultimately determined that such person is not entitled to be
indemnified by the corporation.
SUMMARY OF INDEMNIFICATION AGREEMENT
Under the indemnification agreement, the company agrees to indemnify
the Indemnified Parties to the fullest extent permitted by law against all
expenses incurred by reason of such Indemnified Party becoming, or being
threatened to be made, a party to, a witness, or other participant in any
action, suit or proceeding, whether civil, criminal administrative,
investigative or other. Such expenses will be advanced by the company upon
written request by an Indemnified Party. The company has no obligation to
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provide such indemnification if the party selected by the board of directors (or
independent legal counsel, if applicable) to review the Indemnified Party's
request for indemnification (the "Reviewing Party") determines that the
Indemnified Party would not be permitted to be indemnified under applicable law.
Additionally, if the company has advanced expenses to the Indemnified Party and
the Reviewing Party subsequently determines the Indemnified Party is not
permitted to be indemnified under applicable law, the advanced expenses must be
reimbursed by the Indemnified Party to the company, which reimbursement
obligation shall be unsecured and without interest.
If there is a change in control of the company (other than a change in
control approved by a majority of the board of directors who were directors
immediately prior to the change in control), then the Indemnified Party may
choose independent legal counsel, subject to the company's approval, to act as
the Reviewing Party with respect to all matters concerning the rights of the
Indemnified Party to indemnification under the indemnification agreement. The
company agrees to pay the reasonable fees of such independent counsel in
connection with his or her engagement pursuant to the indemnification agreement.
If an Indemnified Party is successful on the merits of an action the
company is required to indemnify such Indemnified Party against all expenses
incurred in connection with such action. An Indemnified Party must notify the
company in writing, as soon as practicable, of any claim made against him or her
for which indemnification will or could be sought.
The termination of any claim by judgment, order, settlement,
conviction, or plea of NOLO CONTENDERE, or its equivalent, shall not create a
presumption that an Indemnified Party did not meet a particular standard or
conduct or that a court has determined that indemnification is not permitted by
applicable law. Additionally, if the company is obligated to pay the expenses of
any claim, the company may assume the defense of such claim with counsel
approved by such Indemnified Party upon the delivery to such Indemnified Party
of written notice of the company's election to do so.
The company is not obligated to make any payment in connection with any
claim against an Indemnified Party to the extent such Indemnified Party has
otherwise actually received payment (under any insurance policy or otherwise) of
the amounts indemnifiable under the indemnification agreement.
The company shall not be obligated under the indemnification agreement:
(i) to indemnify an Indemnified Party for acts, omissions or transactions from
which such Indemnified Party may not be relieved of liability under applicable
law; (ii) to indemnify or advance expenses to an Indemnified Party with respect
to claims initiated or brought voluntarily by such Indemnified Party and not by
way of defense, except under certain circumstances; (iii) to indemnify an
Indemnified Party for any expenses incurred by such Indemnified Party with
respect to any proceeding instituted by the Indemnified Party to enforce or
interpret the indemnification agreement, if a court of competent jurisdiction
determines that each of the material assertions made by such Indemnified Party
in such proceeding was not made in good faith or was frivolous; and (iv) to
indemnify an Indemnified Party for expenses and the payment of profits arising
from the purchase and sale by such Indemnified Party of securities in violation
of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
similar successor statute. The indemnification agreement is governed by Delaware
law.
INDEMNIFICATION FOR LIABILITIES UNDER THE SECURITIES ACT OF 1933
The Securities and Exchange Commission has expressed its opinion that
indemnification of directors, officers and controlling persons of the Company
against liabilities arising under the Securities Act of 1993, as amended (the
"Act"), is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the company of expenses incurred or paid
by a director or officer of the company in the successful defense of the action,
suit or proceeding) is asserted by the director or officer in connection with
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securities which may have been registered, the company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court or appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issues.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors believes that the indemnification agreement
serves the best interests of the company and our stockholders by strengthening
our ability to attract and retain the services of knowledgeable and experienced
persons as directors and officers who, through their efforts and expertise, can
make a significant contribution to our success.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THIS PROPOSAL.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 18, 2004 certain
information with respect to the beneficial ownership of our stock by (i) each of
our executive officers named in the summary compensation table below, (ii) each
of our directors, (iii) each person known to us to be the beneficial owner of
more than 5% of each class of our outstanding voting securities, and (iv) all of
our directors and executive officers as a group.
Amount and Nature of Percentage of
Name and Address Beneficial Ownership of Class
of Beneficial Owner(1) Title of Class Common Stock(2) Outstanding(2)
--------------------------------------- ------------------------ ----------------------- --------------
Silvano DiGenova Common(3) 2,038,434 42.10%
Series B Preferred Stock 400,000 11.76%
Stanford Venture Capital Holdings, Inc. Common (4) 4,566,667 59.49%
6075 Poplar Avenue Series B Preferred Stock 3,000,000 88.24%
Memphis, TN 38119 Series D Preferred Stock 2,000,000 100.00%
All Executive Officers and Common(3,5) 2,074,684 42.53%
Directors as a Group (5 persons) Series B Preferred Stock 400,000 11.76%
___________________
(1) Except as set forth above, the address of each individual is 9478 West
Olympic Boulevard, Beverly Hills, California 90212.
(2) Based upon information furnished to us by the directors and executive
officers or obtained from our stock transfer books showing 4,509,942 shares
of common stock outstanding as of October 18, 2004. We are informed that
these persons hold the sole voting and dispositive power with respect to
the common stock except as noted herein. For purposes of computing
"beneficial ownership" and the percentage of outstanding common stock held
by each person or group of persons named above as of October 18, 2004, any
security which such person or group of persons has the right to acquire
within 60 days after such date is deemed to be outstanding for the purpose
of computing beneficial ownership and the percentage ownership of such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes 132,500 shares of common stock issuable upon the exercise of
options and warrants, 200,000 shares of common stock issuable upon the
conversion of Series B Preferred Stock, all of which were exercisable,
convertible or exercisable or convertible within 60 days of the date of
this table, and 1,000 shares held by Mr. DiGenova's children, over which
Mr. DiGenova exercises voting control.
(4) Includes 1,500,000 shares of common stock issuable upon the conversion of
Series B Preferred Stock and 1,666,667 shares of common stock issuable upon
the conversion of Series D Preferred Stock, both of which are currently
convertible within the next 60 days. Includes an aggregate of 650,000
shares of common stock owned by four of Stanford's employees, Daniel Bogar,
William Fusselmann, Osvaldo Pi and Ronald Stein, in equal amounts.
(5) Includes 16,250 shares of common stock issuable upon the exercise of
options held by Paul Biberkraut and 10,000 shares each of common stock
issuable upon the exercise of options held by Lee Ittner and David Rector,
all of which were exercisable within 60 days of the date of this table.
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EXECUTIVE COMPENSATION
The summary compensation table below shows certain compensation
information for services rendered in all capacities to us by our chief executive
officer and by each other executive officer whose total annual salary and bonus
exceeded $100,000 during the fiscal year ended June 30, 2004. Compensation
information for such individuals is provided for the fiscal year ended June 30,
2004, the fiscal year ended June 30, 2003 and the fiscal year ended June 30,
2002, to the extent applicable. Other than as set forth below, no executive
officer's total annual salary and bonus exceeded $100,000 during our last fiscal
year.
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Payouts
----------------------------------- ----------- ----------------------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Awards SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ---- --------- -------- ------------ ---------- ----------- ------- ------------
Silvano DiGenova, 2004 $375,000 $37,500 -0- -0- 10,000 -0- -0-
Chairman of the 2003 350,000 -0- -0- -0- -0- -0- -0-
Board, and Chief 2002 308,333 -0- -0- -0- 2,500 -0- -0-
Executive Officer
Paul Biberkraut, 2004 $127,500 $30,000 -0- -0- 60,000 -0- -0-
Chief Financial 2003 61,585 -0- -0- -0- -0- -0- -0-
Officer, Executive
Vice President and
Secretary
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS DURING FISCAL 2004
The following table summarizes options to purchase shares of our common
stock that we granted during the fiscal year ended June 30, 2004 to each of the
executive officers identified in the summary compensation table above. We have
never granted any stock appreciation rights.
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price(s) Expiration
Name Granted (#) Fiscal Year (%) ($/Share) Date(s)
- ---- ----------- --------------- --------- -------
Silvano DiGenova 10,000 4.55% $0.33 May 2009
Paul Biberkraut 10,000 4.55% $0.30 May 2009
Paul Biberkraut 25,000 11.36% $0.30 December 2012
Paul Biberkraut 25,000 11.36% $1.01 April 2013
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table summarizes exercises of stock options during the
fiscal year ended June 30, 2004 by each of the executive officers named in the
summary compensation table above and the year-end value of unexercised options
for these executive officers.
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Number of
Unexercised Securities Value of Unexercised
Shares Value Underlying Options In-the-Money Options
Acquired Realized at Fiscal Year End at Fiscal Year End
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- --- ------------------------- -------------------------
Silvano DiGenova 0 N/A 37,500/0 $17,950/0
Paul Biberkraut 0 N/A 16,250/43,750 $26,000/$52,250
LONG-TERM INCENTIVE PLAN AWARDS
In fiscal 2004, no awards were given to the executive officers named in
the summary compensation table under long-term incentive plans.
DIRECTORS' COMPENSATION
Each of our non-employee directors currently receive cash compensation
in the amount of $5,000 per year for service on our board of directors and all
directors are reimbursed for certain expenses in connection with attendance at
board meetings. At the discretion of our board of directors, directors may be
granted stock options. During the fiscal year ended June 30, 2004, our five
directors were each granted options to purchase 10,000 shares of our common
stock at an exercise price of $0.30 per share. These options fully vested on May
31, 2004 and are exercisable for a period of five years after vesting or for
three months, if vested, following the termination or resignation of the
director from the board.
REPRICING OF OPTIONS
No adjustments to, or repricing of, stock options previously awarded to
the executive officers named in the summary compensation table above occurred in
fiscal 2004.
EMPLOYMENT AGREEMENTS
On June 15, 2001, we entered into an employment agreement with Silvano
DiGenova under which we agreed to pay an annual salary of $375,000 and bonus
arrangements based on a sliding scale of 5% to 50% of base salary based on a
corresponding fiscal year consolidated pre-tax income (as defined) of our
company from $250,000 to $4,000,000, a bonus of 25% of base salary payable in
our common stock if market capitalization of our common stock exceeds
$50,000,000 for a specified period and a bonus of 5% of the base salary payable
in our common stock if average market capitalization increases by 20% over the
average market capitalization of the prior fiscal year subject to certain
limitations. This agreement terminates December 31, 2004.
On December 27, 2002 we entered into an employment agreement with our
Chief Financial Officer, Paul Biberkraut, under which we agreed to pay an annual
salary of $120,000 and bonus arrangements of up to 50% of base salary based on
personal and Company performance. Effective April 1, 2004, Mr. Biberkraut's
agreement was modified to increase his annual base salary to $150,000 and reduce
the maximum bonus as a percentage of base salary to 30%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 24, 2003, we issued 1,845,100 common shares pursuant to the
exercise of outstanding warrants to purchase our common stock with an exercise
price of $0.001 per common share, to the following related parties and
affiliates:
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Silvano DiGenova - Chief executive officer and principal stockholder 345,100 shares
Stanford Venture Capital Holdings, Inc. - Principal stockholder 750,000 shares
Daniel Bogar - Employee of Stanford affiliate 187,500 shares
William Fusselmann - Employee of Stanford affiliate 187,500 shares
Osvaldo Pi - Employee of Stanford affiliate 187,500 shares
Ronald Stein - Employee of Stanford affiliate 187,500 shares
The total proceeds to us from the issuance of the above referenced
common stock was $1,845.
On October 13, 2003, we executed a Commercial Loan and Security
Agreement ("Commercial LOC") with Stanford Financial Group Company, an affiliate
of a principal stockholder, Stanford Venture Capital Holdings, Inc.
("Stanford"), to provide us with a $7.5 million line of credit for purposes of
financing our inventory, auction advances and inventory loans to other rare coin
dealers and collectors. The Commercial LOC bears interest at the prime-lending
rate (4.00% at June 30, 2004) and is secured by substantially all of our assets.
On October 23, 2003, our board of directors approved the sale of our
remaining fine art inventory to Silvano DiGenova, our chief executive officer
and a principal stockholder ("CEO"), who is also an independent dealer of fine
art, for $350,000. We solicited bids from third parties and the bid from the CEO
was the highest. We realized a gross profit of $15,860 on sale of the art
inventory to the CEO. The sale was paid in full by reductions in the balances
owing on notes payable to the CEO.
On May 28, 2004, our board of directors approved a short-term sub-lease
of a portion of our vacant Newport Beach facility to our CEO. The lease term is
from June 1, 2004 through September 30, 2004 and provides for a monthly rental
payment of $4,000. The sub-lease terminates concurrently with our master lease
of the Newport facility.
On June 1, 2001, we entered into an employment agreement with Silvano
DiGenova, our chief executive officer under which we agreed to pay him an annual
salary of $375,000 and bonus arrangements based on a sliding scale of 5% to 50%
of base salary based on a corresponding fiscal year pre-tax income (as defined)
of our company from $250,000 to $4,000,000, a bonus of 25% of base salary
payable in our common stock if market capitalization of our common stock exceeds
$50,000,000 for a specified period and a bonus of 5% of the base salary payable
in our common stock if average market capitalization increases by 20% over the
average market capitalization of the prior fiscal year subject to certain
limitations.
On January 31, 2003, we entered into a consulting agreement with
Stanford to provide financial and advisory services to us for a three year
period commencing on April 1, 2003. The annual fee for such services is $60,000
and is payable on a quarterly basis.
On February 14, 2003, our company issued 2,000,000 shares of newly
created Series D $1.00 convertible preferred stock ("Series D stock") for a
purchase price of $2,000,000 pursuant to a stock purchase and warrant agreement
("purchase agreement") with Stanford. On that date $1,500,000 of the purchase
price was paid with $500,000 in cash and the conversion of $1,000,000 in bridge
loans that Stanford made to the company in anticipation of the closing of the
purchase agreement. The balance of the purchase price was paid on March 14,
2003. The Series D stock is convertible in common shares of the company at any
time at the option of Stanford at the conversion rate of $1.20 per common share,
after giving effect to the one-for-twenty reverse stock split that was effective
June 30, 2003, and subject to certain anti-dilution adjustments. The Series D
stockholders are entitled to vote on all matters requiring a vote of the
stockholders and are entitled to the number of votes equal to the number of
common shares into which the Series D Stock is convertible. The purchase
agreement also provided for the reduction to $0.001 per common share of the
purchase price of 1,500,000 warrants that were issued to Stanford and their
designated warrant holders as part of our Series B stock sale in April 2002. The
warrants were exercised on July 24, 2003.
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Concurrently with the closing of the purchase agreement, the company,
Stanford and our CEO entered into a share exchange and note modification
agreement ("modification agreement"). Under the modification agreement our CEO
exchanged 7,000 shares of Series C Preferred Stock of the Company for 583,333
shares of our common stock . The modification agreement provided for a reduction
to $0.001 per common share of the exercise price of 345,100 warrants that were
previously issued to the CEO, with such reduced price to remain the same after
the reverse stock split described herein. These warrants were exercised on July
24, 2003.
With respect to the warrant repricings described above, our company
recorded a dividend of $340,000 and interest expense of $29,020.
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Superior Galleries stockholders who want to communicate with the Board
or any individual director can write to: Mr. Paul Biberkraut, Corporate
Secretary, Superior Galleries, Inc., 9478 West Olympic Boulevard, Beverly Hills,
California 90212.
Your letter should indicate that you are a Superior Galleries
stockholder. Depending on the subject matter, management will:
o Forward the communication to the director or directors to whom it
is addressed;
o Attempt to handle the inquiry directly, for example where it is a
request for information or it is a stock-related matter; or
o Not forward the communication if it is primarily commercial in
nature or if it relates to an improper or irrelevant topic.
At each board meeting, a member of management presents a summary of all
communications received since the last meeting that were not forwarded and makes
those communications available to the directors upon request.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports and other information with the
Commission relating to its business, financial statements and other matters.
Reports and information statements filed pursuant to the informational
requirements of the Exchange Act and other information filed with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Midwest Regional Offices at 500 West Madison
Street, Chicago, Illinois 60606 and Northeast Regional Office at 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be obtained electronically by visiting the
Commission's web site on the Internet at http://www.sec.gov. Quotations for our
Common Stock are available on the OTC Bulletin Board under the symbol "SPGR.OB."
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SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals by stockholders that are intended for inclusion in our proxy
statement and proxy and to be presented at our next annual meeting must be
received by us by July 9, 2005 in order to be considered for inclusion in our
proxy materials. These proposals must be addressed to our Secretary and may be
included in next year's proxy materials if they comply with certain rules and
regulations of the Securities and Exchange Commission governing stockholder
proposals. If a stockholder fails to so notify us of any such proposal prior to
such date, management of Superior Galleries, Inc. will be allowed to use their
discretionary voting authority with respect to proxies held by management when
the proposal is raised at the annual meeting, without any discussion of the
matter in our proxy statement.
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APPENDIX 1
SUPERIOR GALLERIES, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of
_______________, 20__, by and between Superior Galleries, Inc., a Delaware
corporation (the "COMPANY"), and ____________________ (the "INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. CERTAIN DEFINITIONS.
(a) "CHANGE IN CONTROL" shall mean, and shall be deemed to
have occurred if, on or after the date of this Agreement, (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "ACT")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company acting in such capacity
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
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surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "CLAIM" shall mean any threatened, pending or completed
action, suit, proceeding or alternative dispute resolution mechanism, or any
hearing, inquiry or investigation that Indemnitee in good faith believes might
lead to the institution of any such action, suit, proceeding or alternative
dispute resolution mechanism, whether civil, criminal, administrative,
investigative or other.
(c) References to the "COMPANY" shall include, in addition to
Superior Galleries, Inc., any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger to which Superior
Galleries, Inc. (or any of its wholly owned subsidiaries) is a party which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(d) "EXPENSES" shall mean any and all expenses (including
attorney's fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of any Claim
regarding any Indemnifiable Event and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(e) "EXPENSE ADVANCE" shall mean an advance payment of
Expenses to Indemnitee pursuant to SECTION 3(a).
(f) "INDEMNIFIABLE EVENT" shall mean any event or occurrence
related to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of the Company, or any subsidiary of the Company, or is or
was serving at the request of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.
(g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm
of attorneys, selected in accordance with the provisions of SECTION 2(c) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "OTHER ENTERPRISES" shall include employee
benefit plans; references to "FINES" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "SERVING
AT THE REQUEST OF THE COMPANY" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
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be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "REVIEWING PARTY" shall mean any appropriate person or
body consisting of a member or members of the Company's Board of Directors or
any other person or body appointed by the Board of Directors who is not a party
to the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(j) "VOTING SECURITIES" shall mean any securities of the
Company that vote generally in the election of directors.
2. INDEMNIFICATION.
(a) INDEMNIFICATION OF EXPENSES. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any Claim by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of Expenses shall be made by the Company
as soon as practicable but in any event no later than five (5) business days
after written demand by Indemnitee therefor is presented to the Company.
(b) REVIEWING PARTY. Notwithstanding the foregoing, (i) the
obligations of the Company under SECTION 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in SECTION 2(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance shall be subject to the condition that, if, when and to the extent that
the Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expense Advance shall
be unsecured and no interest shall be charged thereon. If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by the Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
-23-
(c) CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, if desired by Indemnitee, shall be selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be indemnified under applicable law and the Company agrees to abide
by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorney's fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
(d) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than SECTION 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than five business days after written demand by Indemnitee therefor to the
Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of NOLO
CONTENDERE, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
-24-
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to SECTION 3(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee (not to be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election so to do. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense
and (ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee's separate counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or Rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or Rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or Rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in SECTION 9(a) hereof.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any other
agreement, any vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity even though
Indemnitee may have ceased to serve in such capacity.
5. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
-25-
6. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
7. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
8. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. EXCEPTIONS. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
-26-
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. ATTORNEY'S FEES. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having jurisdiction over such action
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware as applied to contracts between Delaware residents entered into and to
be performed entirely within the State of Delaware.
-27-
17. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
18. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
19. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
20. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
[SIGNATURE PAGE FOLLOWS]
-28-
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
SUPERIOR GALLERIES, INC.
By:
--------------------------
Title:
-----------------------
Address:
--------
9478 West Olympic Boulevard
Beverly Hills, CA 90212
INDEMNITEE:
------------------------------
(signature)
------------------------------
(print)
Address:
--------
------------------------------
------------------------------
-29-
SUPERIOR GALLERIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 30, 2004
The undersigned stockholder of Superior Galleries, Inc. ("Company")
hereby constitutes and appoints Silvano DiGenova and Paul Biberkraut, and either
of them individually, with the power to appoint his substitution, as attorney,
agent and proxy, to appear, attend and vote all of the shares of voting stock of
any class of the Company standing in the name of the undersigned on the record
date at the 2004 annual meeting of stockholders of the Company to be held at
8:00 a.m. local time, at 9478 West Olympic Boulevard, Beverly Hills, California
90212 on November 30, 2004, and at any adjournments and postponements thereof.
|X| Please mark your votes
as in this example.
FOR all nominees WITHHOLD AUTHORITY
listed at right to vote
(except as marked to for all nominees
the contrary below) listed at right NOMINEES:
[ ] [ ] Silvano DiGenova
Paul Biberkraut
1. ELECTION OF DIRECTORS: Lee Ittner
David Rector
James M. Gollihugh
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name on the lines immediately below)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS: Ratification of
the appointment of Singer Lewak Greenbaum & Goldstein LLP as our
independent certified public accountants to audit the financial
statements for the year ending June 30, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF FORM OF INDEMNIFICATION AGREEMENT: To approve the form of
Indemnification Agreement as described in the Proxy Statement filed
with the Securities Exchange Commission.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR Proposals 1 through 4.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE OR FAX BOTH PAGES TO STALT, INC. AT (775) 831-3337.
Dated: _____________________________, 2004
Name: ____________________________________
Common Shares:____________________________
Series B Preferred Shares: _______________
Series D Preferred Shares: _______________
__________________________________________
Signature
__________________________________________
Signature (if jointly held)
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.