Exhibit 10.3
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made and entered into as of January 6, 2007
(this "Agreement"), by and between DGSE Merger Corp., a Delaware corporation
("DGSE"), and Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible
Asset Galleries, Inc., a Nevada corporation) ("Superior"). Capitalized terms
used but not defined herein shall have the respective meanings ascribed thereto
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 DGSE Companies Inc., a Nevada corporation ("Parent"),
DGSE, Superior and Stanford International Bank, Ltd., a company organized under
the laws of Antigua and Barbuda (together with its successors, "Stanford").
R E C I T A L S
---------------
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
Superior have approved and declared advisable the Merger Agreement and the
merger of DGSE with and into Superior (the "Merger"), with Superior being the
surviving corporation;
WHEREAS, Superior is engaged in the business, inter alia, of the sale of
rare coins on a retail, wholesale, and auction basis; and
WHEREAS, key personnel of DGSE have substantial expertise that is useful to
Superior, and Superior and DGSE desire that, during the Term hereof, DGSE shall
supply the services of certain of its corporate officers to serve as senior
management of Superior.
A G R E E M E N T
-----------------
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. Appointment. Superior hereby appoints DGSE to render the Services
described in Section 2 for the term of this Agreement.
2. Services.
2.1 DGSE shall provide two or three senior executives (the "Interim
Executives"), on a part-time basis, for the term of this Agreement (the "Term"),
to serve as the senior management of Superior. These individuals are initially
anticipated to be William H. Oyster as interim Chief Executive Officer, Scott
Williamson as interim Chief Operating Officer, and John Benson as interim Chief
Financial Officer and interim Vice President, Finance. The interim Chief
Executive Officer shall report to the Company Board, and the other Interim
Executives shall report to the interim Chief Executive Officer.
2.2 During the term of this Agreement, DGSE shall render to Superior,
by and through the Interim Executives and such of DGSE's Representatives and
Affiliates and Representatives of such Affiliates as DGSE, in its sole
discretion, shall from time to time designate, management, advisory, consulting
and other services in relation to operations, inventory management, litigation,
strategic planning, sales, restructuring, marketing and financial oversight,
including the selection, retention and supervision of independent auditors and
outside legal counsel and the authority to approve hiring, discipline, and
termination of all Superior employees, consultants and contractors (the
"Services"), in consultation with the Company Board.
3. Limitations.
3.1 The Interim Executives shall not effectuate any material business
transaction between DGSE (or any of its Affiliates) and Superior (or any of its
Affiliates), except (i) as expressly contemplated by the Merger Agreement, (ii)
in the Ordinary Course of Business of each of DGSE and Superior, (iii) for
permitted intercompany transactions on the terms described in Schedule 3.1
hereto, or (iv) after consulting with and obtaining the approval of the Special
Interim Committee of the Company Board, comprised of the Superior directors who
are not affiliated with DGSE, initially to consist of Mitchell Stolz and David
Rector (the "Independent Committee").
3.2 The Interim Executives shall not materially change the strategic
direction of Superior's business, except (i) for changes to Superior's strategic
direction described in Schedule 3.2 hereto, or (ii) after consulting with and
obtaining the approval of the Independent Committee. The Parties acknowledge and
agree that Superior has been operating with heavy losses for an extended period
of time and that DGSE shall have broad authority to implement a turnaround,
including changing the focus, strategy and direction of Superior as DGSE in its
business judgment and discretion deems appropriate, and Superior authorizes and
directs the Independent Committee to cooperate with DGSE in implementing DGSE's
turnaround strategy.
4. Payment.
4.1 In consideration for DGSE providing the Services, Superior shall
pay DGSE fees in the amount of (i) $50,000 per month for the services of the
Interim Executives, and (ii) the hourly compensation rate, without mark-up, for
the services of all other DGSE Representatives. Fees shall accrue and be payable
on a daily basis. Fee payments shall be non-refundable.
4.2 Superior shall reimburse DGSE, as accrued, for all of its
reasonable out-of-pocket expenses, including travel, lodging and related costs
for the Interim Executives and other DGSE Representatives for travel to the
offices of Superior or otherwise incurred to perform the Services.
4.3 Superior shall pay to DGSE $60,000 concurrently with the execution
of this Agreement as an advance payment and retainer for all amounts becoming
due under the Agreement, and DGSE may charge its fees and out-of-pocket expenses
directly against the retainer as the same accrue. On the first business day of
each succeeding calendar month during the term hereof, Superior shall restore
the balance of such retainer to $60,000. If at any time the balance of the
retainer shall fall below $5,000, Superior shall advance additional funds
reasonably requested by DGSE as a retainer. DGSE shall have no obligation to
provide any of its Services to Superior, or to incur any out-of-pocket expenses
on behalf of Superior, if it shall not be reasonably assured of obtaining
indefeasible payment for its Services. DGSE shall be obligated to return any
unearned retainer upon the termination of this Agreement.
5. Term of Agreement. The Term shall commence on the date hereof, and shall
continue until the first to occur of the following (or such later time as DGSE
and Superior may agree in writing): (i) the consummation of the Merger; (ii) the
termination of the Merger Agreement; and (iii) the Outside Date. The Parties
acknowledge that nothing contained in this Agreement shall obligate either DGSE
or Superior to consummate the Merger, and that all commitments related to the
consummation of the Merger are set forth in the Merger Agreement.
6. Other Business.
6.1 DGSE and its Affiliates may engage in or possess an interest in any
other business venture of any kind, nature or description, independently or with
others, whether or not such ventures are competitive with Superior,
-2-
notwithstanding that representatives of DGSE or any of its Affiliates are
serving on the Company Board or as senior management of the Company. None of
DGSE nor any of its Affiliates, as a stockholder, officer or director of
Superior, shall have any obligation to offer first to Superior any business
opportunity or venture of any kind, nature or description that DGSE or any such
Affiliate may wish to pursue from time to time, independently or with others.
Nothing in this Agreement shall be deemed to prohibit DGSE or any of its
Affiliates from dealing, or otherwise engaging in business, with Persons
transacting business with Superior. Superior shall not have any rights or
obligations by virtue of this Agreement or the transactions contemplated hereby,
in or to any independent venture of DGSE or its Affiliates, or the income or
profits or losses or distributions derived therefrom, and such ventures shall
not be deemed wrongful or improper even if competitive with the business of
Superior.
6.2 During the Term the Interim Executives are expected to continue
their current services to DGSE on a part-time basis. Nothing herein shall in any
way preclude DGSE or its officers, employees, agents, representatives, members
or affiliates, including the Interim Executives, from engaging in any business
activities or from performing services for its or their own account or for the
account of others, including for companies that may be in competition with the
business conducted by Superior.
7. Confidentiality.
7.1 The Parties acknowledge that DGSE, Superior and Stanford have
previously executed that certain Mutual Confidentiality Agreement, effective
April 1, 2006 (as amended from time to time, the "Confidentiality Agreement"),
which shall continue in full force and effect in accordance with its terms.
7.2 Notwithstanding anything to the contrary in the Confidentiality
Agreement, the Parties acknowledge that each may use Residuals for any purpose.
"Residuals" means any "Confidential Information" (as defined in the
Confidentiality Agreement) and any ideas, concepts, know-how and techniques
contained therein retained in the unaided memories of any employee or agent of a
Party who has had access to Confidential Information. Memory is deemed unaided
if an individual has not intentionally memorized the relevant information for
the purpose of retaining and subsequently using or disclosing it for purposes
unrelated to the purpose of disclosure.
7.3 Notwithstanding anything to the contrary in the Confidentiality
Agreement, the Parties acknowledge that the Interim Executives may use the
Confidential Information in connection with providing the Services, including
(i) delivering Confidential Information to counterparties to Superior Contracts,
(ii) complying with investigations by Governmental Entities, (iii) providing
financial and other information to Superior's independent public auditing firm,
and (iv) publicly disclosing the Confidential Information as the Interim
Executives in good faith deem necessary to comply with Superior's reporting
obligations under the Securities Act, the Exchange Act, SOX or the SEC Rules.
7.4 DGSE and Superior acknowledge and agree that they are competitors
operating in the same line of business and that certain customers, suppliers,
vendors and employees in this business are known to both DGSE and Superior and
that each Party has access to information regarding such customers, suppliers,
vendors and employees that is not Confidential Information. The Party disclosing
Confidential Information ("Discloser") acknowledges that use of such information
will not be restricted by, or, in and of itself, be deemed to violate, any
provision of this Agreement. If a customer or employee of one Party becomes a
customer or employee, respectively, of the other Party, each Party acknowledges
and agrees that such other Party will have no liability with respect thereto
unless such Party can affirmatively prove that the Party receiving Confidential
Information ("Recipient") used Confidential Information to solicit a customer or
-3-
employee of Discloser to become a customer or employee, respectively, of
Recipient. Furthermore, each Party understands that the other Party may
currently or in the future be developing information internally, or receiving
information from other Party that may be similar to Discloser's information.
Accordingly, nothing in this Agreement or the Confidentiality Agreement will be
construed as a representation or inference that Recipient will not enter into a
line of business, that, without violation of this Agreement, would compete with
the business of the other Party, assuming there is no misuse of Confidential
Information.
8. D&O Insurance. Upon the execution of this Agreement, Superior shall use
its commercially reasonably efforts to add the Interim Executives and new
members of the Company Board as named beneficiaries under its insurance policy
for directors and officers.
9. Exculpation; Limitation of Liability. Each Party agrees, on behalf of
itself and its Affiliates, that in performing any duties hereunder, to the
maximum extent permitted by applicable law, DGSE and its Representatives,
including the Interim Executives, shall not be directly or indirectly liable to
any Party, or any Affiliates of any Party, for damages, losses, expenses or
other Liabilities, whether sounding in tort, contract or otherwise, arising from
their acts or omissions, including for their active negligence, violations of
federal or state securities laws, breaches of fiduciary duties, or other
wrongful act of DGSE or any such Representative, except for the acts of gross
negligence or willful misconduct of such Person. DGSE or its Representatives may
consult with legal counsel (whether such counsel will be regularly retained or
specifically employed and whether such counsel is engaged by DGSE or Superior)
in connection with providing the Services and shall be fully protected in any
act taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. IN NO EVENT SHALL DGSE OR ANY INTERIM EXECUTIVE BE LIABLE,
DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE
SERVICES PROVIDED HEREUNDER (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT BY DGSE OR THE INTERIM EXECUTIVE), (ii) SPECIAL
OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR
(iii) DAMAGES WHICH IN THE AGGREGATE WOULD EXCEED THE AMOUNT OF FEES PAID TO
DGSE UNDER THIS AGREEMENT (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT BY DGSE OR THE INTERIM EXECUTIVE). Each Party hereby
agrees to defend, indemnify and hold harmless DGSE and its Representatives for
any Liabilities to any Affiliate of such Party to the extent the provisions of
this Section 9 would limit such Liabilities if such Affiliate were a party and
signatory hereto.
10. Indemnification.
10.1 Superior shall defend, indemnify and hold DGSE, the Interim
Executives and their respective Representatives and Affiliates (collectively,
the "Indemnified Parties") harmless from and against all damages, losses,
expenses or other Liabilities incurred by the Indemnified Parties directly or
indirectly as a result of providing the Services during the Term, including, to
the maximum extent permitted by applicable law, for the active negligence,
violations of federal or state securities laws, breaches of fiduciary duties, or
other wrongful act of an Indemnified Party; provided, however, that Superior
shall not be liable for any loss caused by the gross negligence or willful
misconduct of an Indemnified Party.
10.2 All claims for indemnification under this section shall be
asserted and resolved as follows:
(a) Third party claims.
-4-
(1) If an Indemnified Party becomes aware of a third-party
claim that such Indemnified Party believes may result in a loss to such
Indemnified Party, such Indemnified Party (or DGSE on such Indemnified
Party's behalf) shall promptly notify Superior of such claim; provided
that the failure to so notify Superior shall not relieve Superior of
any liability that it may have to any Indemnified Party, except to the
extent that Superior demonstrates that the defense of such third-party
claim is materially prejudiced by the failure to give such notice.
(2) If an Indemnified Party (or DGSE on its behalf) provides
notice to Superior of the assertion of a third-party claim, Superior
shall be entitled to assume the defense of such third-party claim
unless (i) Superior is also a Person against whom the third-party claim
is made and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) Superior fails to
provide reasonable assurance to the Indemnified Party of both (x) the
financial capacity of Superior to defend such third-party claim, and
(y) the ability of Superior to provide indemnification or to assume the
defense of such third-party claim with counsel satisfactory to the
Indemnified Party. After notice from Superior to the Indemnified Party
of its election to assume the defense of such third-party claim,
Superior shall not, so long as it diligently conducts such defense, be
liable to the Indemnified Party for any fees of other counsel or any
other expenses with respect to the defense of such third-party claim,
in each case subsequently incurred by the Indemnified Party in
connection with the defense of such third-party claim, other than
reasonable costs of investigation. If Superior assumes the defense of a
third-party claim, (A) such assumption shall establish conclusively for
purposes of this Agreement that the claims made in that third-party
claim are within the scope of and subject to indemnification, and (B)
no compromise or settlement of such third-party claims may be effected
by Superior without the Indemnified Party's prior written consent
unless (1) there is no finding or admission of any violation of Law or
any violation of the rights of any Person, (2) the sole relief provided
is monetary damages that are paid in full by Superior, and (3) the
Indemnified Party shall have no liability with respect to any
compromise or settlement of such third-party claims effected without
its written consent. If notice is given to Superior of the assertion of
any third-party claim and Superior does not, within ten days after the
Indemnified Party's notice is provided, provide notice to the
Indemnified Party of the election of Superior to assume the defense of
such third-party claim, then the Indemnified Party may assume the
defense of such third-party claim at the expense of Superior. Superior
shall be bound by any determination made in such third-party claim or
any compromise or settlement effected by the Indemnified Party.
(3) Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable probability that a
third-party claim may adversely affect it or its Related Persons other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Party may, by
notice to Superior, assume the exclusive right to defend, compromise or
settle such third-party claim, but Superior shall not be bound by any
determination of any third-party claim (including the losses incurred
in connection therewith) so defended for the purposes of this Agreement
or any compromise or settlement effected, without its written consent.
(4) Any dispute between any Indemnified Party and Superior
under this section shall be resolved pursuant to the dispute resolution
procedures described in Section 10.2(b) and Section 12.
-5-
(5) If Superior has conducted any defense or consented to any
settlement under this section, Superior shall not have the right, power
or authority to object to the amount of any claim by any Indemnified
Party with respect to and in accordance with such settlement.
(b) Non-third party claims.
(1) If an Indemnified Party has a claim hereunder that does
not involve a claim being asserted against or sought to be collected by
a third party, such Indemnified Party shall with reasonable promptness
deliver a notice with respect to such claim to Superior. Such notice
shall set forth (i) a brief description of the circumstances supporting
such Indemnified Party's claim against Superior; and (ii) a
non-binding, preliminary estimate of the aggregate dollar amount of the
actual and potential losses that have arisen and may arise related to
such claim. If Superior does not notify such Indemnified Party within
30 calendar days from the date of receipt of such notice that Superior
disputes such claim, the amount of such claim shall be conclusively
deemed a liability of Superior hereunder. In case Superior shall object
in writing to any claim made in accordance with this section, the
Indemnified Party shall have 15 calendar days to respond in a written
statement to the objection of Superior. If after such 15 calendar day
period there remains a dispute as to any claim, the Indemnified Party
and Superior shall attempt in good faith for 60 calendar days to agree
upon the rights of the respective parties with respect to each of such
claims. If the Indemnified Party and Superior should so agree, a
memorandum setting forth such agreement shall be prepared and signed by
both parties. If such parties do not so agree, the Indemnified Party
and Superior shall resolve such dispute pursuant to Section 12 and
Section 15.6.
10.3 An Indemnified Party's failure to give reasonably prompt notice to
Superior of any actual, threatened or possible claim or demand which may give
rise to a right of indemnification hereunder shall not relieve Superior of any
liability which Superior may have to such Indemnified Party, unless the failure
to give such notice materially and adversely prejudiced Superior.
10.4 Each Party, on its own behalf, and on behalf of its Affiliates,
agrees that DGSE shall not owe any fiduciary duties to such Party or its
Affiliates, in any capacity (including as a stockholder or creditor of Superior)
in the performance of any of the Services.
11. Right of Setoff. Superior hereby grants to DGSE a right of setoff upon
any and all monies, securities or other property of Superior, and the proceeds
therefrom, now or hereafter held or received by or in transit to DGSE from or
for the account of Superior (including any amounts held as a retainer
hereunder), whether for safekeeping, custody, pledge, transmission, collection
or otherwise, and also upon and against any and all claims or other Actions of
Superior against DGSE, or any sums owing from DGSE to Superior, at any time
arising or existing. The right of setoff granted pursuant to this Section 11
shall be cumulative of and in addition to DGSE's common law right of setoff.
12. Arbitration.
12.1 If a dispute arises concerning the matters contemplated by this
Agreement, the Party defending the claim (the "Defending Party"), may, by
written notice to the Party asserting the claim (the "Prosecuting Party"),
demand arbitration of the matter, which arbitration shall be conducted by a
single arbitrator. The Prosecuting Party and the Defending Party shall use their
respective best efforts to agree on the arbitrator, provided that if they cannot
so agree within ten business days (or such longer period as they may agree),
either the Prosecuting Party or the Defending Party can request that Judicial
-6-
Arbitration and Mediation Services ("JAMS") select the arbitrator. The
arbitrator shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the Defending Party and
Prosecuting Party an opportunity, adequate in the sole judgment of the
arbitrator, to discover relevant information from the other of them about the
subject matter of the dispute. The arbitrator shall rule upon motions to compel
or limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a court of competent Law or
equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator shall be written,
shall be in accordance with applicable Law and with this Agreement, and shall be
supported by written findings of fact and conclusions of Law, which shall set
forth the basis for the decision of the arbitrator. The decision of the
arbitrator as to the validity and amount of any claim shall be binding and
conclusive.
12.2 Judgment upon any award rendered by the arbitrator may be entered
in any court having jurisdiction. Any such arbitration shall be held in Dallas,
Texas under the commercial rules then in effect for JAMS. The non-prevailing
party to an arbitration shall pay its own expenses, the fees of the arbitrator,
any administrative fee of JAMS, and the expenses, including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
13. Notices. All notices, requests, instructions or other documents to be
given or delivered under this Agreement shall be in writing and shall be deemed
given: (i) five Business Days following the deposit of registered or certified
mail in the United States mails, postage prepaid, (ii) when confirmed by
telephone confirmation, if sent by facsimile or email, (iii) when delivered, if
delivered personally to the intended recipient, and (iv) one Business Day
following delivery to a reputable national courier service for overnight
delivery, postage prepaid; and in each case, addressed to a Party at the
following address for such Party:
If to DGSE, addressed to it at:
DGSE Merger Corp.
2817 Forest Lane
Dallas, Texas 75234
Attn: Dr. L.S. Smith
Facsimile: [omitted]
Email: [omitted]
with a copy (which shall not constitute notice and which shall not be
required for delivery to be effective) to:
Sheppard, Mullin, Richter & Hampton LLP
12275 El Camino Real, Suite 200
San Diego, California 92130-2006
Attn: John J. Hentrich, Esq.
Facsimile: [omitted]
Email: [omitted]
If to Superior, addressed to it at:
Superior Galleries, Inc.
9478 W. Olympic Boulevard
Beverly Hills, California 90212
Attn: Chair, Special Independent Committee
Facsimile: [omitted]
Email: [omitted]
-7-
with copies (which shall not constitute notice and which shall not be
required for delivery to be effective) to:
Rutan & Tucker LLP
611 Anton Boulevard Suite 1400
Costa Mesa, California 92626-1931
Attn: Thomas Brockington, Esq.
Facsimile: [omitted]
Email: [omitted]
and:
Stanford International Bank Ltd.
c/o Stanford Financial Group
6075 Poplar Avenue
Memphis, Tennessee 38119
Attn: James M. Davis, Chief Financial Officer
Facsimile: [omitted]
Email: [omitted]
and:
Adorno & Yoss LLP
2525 Ponce de Leon Blvd., Suite 400
Miami, Florida 33134-6012
Attn: Seth P. Joseph, Esq.
Facsimile: [omitted]
Email: [omitted]
Any Party may change its address, email address or fax number for purposes
hereof to such other address, email address or fax number as such Party may have
previously furnished to the other Parties in writing in accordance with this
Section 13.
14. Status. The Parties intend that DGSE shall be an independent contractor
pursuant to this Agreement, and that this Agreement shall not be construed to
create or give rise to any partnership, agency or joint venture.
15. Miscellaneous.
15.1 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
-8-
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
15.3 Entire Agreement. This Agreement, together with the Merger
Agreement and the Confidentiality Agreement, constitute the entire agreement and
understanding of the Parties in respect of the subject matter of this Agreement
and supersede all prior agreements and undertakings by or among the Parties,
both written and oral, among the Parties, or any of them, with respect to the
subject matter of this Agreement.
15.4 Assignment. Neither this Agreement nor any of the rights,
interests, Liabilities or obligations hereunder shall be assigned by any of the
Parties, in whole or in part, by operation of Law or otherwise, without the
prior written consent of the other Parties, and any attempt to make any such
assignment without such consent shall be null and void and of no force or
effect; provided that DGSE may assign its rights and obligations hereunder to
any of its Affiliates.
15.5 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each Party and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as provided in (i)
Section 10 with respect to Indemnified Parties and (ii) Section 8 with respect
to Interim Executives and new members of the Superior board of directors.
15.6 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.
(a) This Agreement and the performance of the obligations of
the Parties hereunder shall be governed by, and construed in accordance
with, the laws of the State of Texas applicable to contracts
negotiated, executed and to be performed entirely within such State.
(b) Each of the Parties hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction and
venue of any Texas district court and any state appellate court
therefrom within the County of Dallas in the State of Texas (or, if the
Texas district court declines to accept jurisdiction over a particular
matter, any state or federal court within said County) in any action or
proceeding arising out of or relating to this Agreement or for
recognition or enforcement of any judgment relating hereto, and each of
the Parties hereby irrevocably and unconditionally (i) agrees not to
commence any such action or proceeding except in such courts, (ii)
agrees that any claim in respect of any such action or proceeding may
be heard and determined in such Texas state court or, to the extent
permitted by law, in such federal court, (iii) waives, to the fullest
extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any such action or
proceeding in any such Texas state or federal court, and (iv) waives,
to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such Texas
state or federal court. Each of the Parties agrees that a final
judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.
(c) Each Party irrevocably consents to service of process in
the manner provided for notices under this Agreement. Nothing in this
Agreement shall affect the right of any Party to this Agreement to
serve process in any other manner permitted by law.
-9-
(d) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE EITHER OF SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
15.7 Counterparts. This Agreement may be executed in two or more
original or facsimile counterparts, and by the different Parties in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute but one and the same agreement.
15.8 Facsimile Execution. A facsimile, telecopy or other reproduction
of this Agreement may be executed by one or more Parties, and an executed copy
of 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.
15.9 Remedies Cumulative. Except as otherwise provided in this Agreement, any
and all remedies in this Agreement that are expressly conferred upon a Party
shall be deemed cumulative with and not exclusive of any other remedy conferred
by this Agreement, or by law or equity upon such Party, and the exercise by a
Party of any one remedy shall not preclude the exercise of any other remedy and
nothing in this Agreement shall be deemed a waiver by any Party of any right to
specific performance or injunctive relief.
15.10 Time. Time is of the essence in the performance of this
Agreement.
15.11 Interpretation. The terms and provisions of Section 1.3 of the
Merger Agreement are hereby incorporated by reference herein and shall apply to
this Agreement mutatis mutandis, as if expressly set forth herein.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-10-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
DGSE MERGER CORP.
By: /s/ William H. Oyster
-----------------------
William H. Oyster
Chief Executive Officer
SUPERIOR GALLERIES, INC.
By: /s/ Silvano DiGenova
-----------------------
Silvano DiGenova
Chief Executive Officer
-11-
SCHEDULE 3.1
------------
PERMITTED INTERCOMPANY TRANSACTIONS
The following transactions may be effected between DGSE Merger Corp. and its
Affiliates (collectively, "DGSE") and Superior Galleries, Inc. and its
Affiliates (collectively, "Superior"):
1. DGSE and Superior may each consign jewelry, watches, coins,
collectibles, and any other inventory to the other for sale to customers at the
standard DGSE dealer rates.
2. DGSE may pay Superior standard dealer rates for scrap gold, silver, and
other metals.
3. DGSE may repair jewelry, watches, and other inventory items for Superior
or Superior's customers at standard dealer rates.
4. Each may sell the other inventory as needed based on standard DGSE
dealer rates.
5. DGSE may consign rare coins to Superior for auction at the preferred
standard auction consignment rates charged by Superior.
6. DGSE may write appraisals for Superior jewelry inventory or Superior
customer jewelry and charge the standard customer rates.
7. Either company may consign to the other items to be sold on eBay or
other Internet sites; such items may be consigned to Superior to establish
DGSE's interest in such items.
SCHEDULE 3.2
------------
APPROVED STRATEGIC CHANGES
DGSE Merger Corp., acting through the Interim Executives and its other
Representatives (collectively, "DGSE"), is authorized to change the strategic
direction of Superior Galleries, Inc. and its Affiliates (collectively,
"Superior") in, inter alia, the following manner:
1. DGSE may reassign Superior personnel between operating activities, or
substantially increase or decrease staffing levels.
2. DGSE may increase or decrease Superior's emphasis on any or all of the
following operating activities:
2.1 auction;
2.2 wholesale;
2.3 retail;
2.4 over the counter buying and selling (second-hand transactions);
2.5 scrap processing;
2.6 trading;
2.7 dealer wholesale; and
2.8 any other activity in which Superior is currently engaged.
3. DGSE may change Superior's accounting hardware and software.
4. DGSE may modify Superior's corporate policies regarding compensation and
fringe benefits.
5. DGSE may change Superior's advertising form and policy.
6. DGSE may introduce new business related to jewelry, watches, diamonds.