Exhibit 10.2
CONVERSION AGREEMENT
THIS CONVERSION AGREEMENT is made and entered into as of January 6, 2007
(this "Agreement"), by and between Superior Galleries, Inc., a Delaware
corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (the
"Company"), and Xxxxxxx XxXxxxxx, an individual resident of the State of
California ("XxXxxxxx"). Capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in that certain Amended and
Restated Agreement and Plan of Merger and Reorganization, made and entered into
as of the date hereof (the "Merger Agreement"), by and among the Company, DGSE
Companies, Inc., a Nevada corporation ("Parent"), DGSE Merger Corp., a Nevada
corporation ("Merger Sub"), and Stanford International Bank Ltd., a corporation
organized under the laws of Antigua and Barbuda (together with its successors,
"SIBL"), as stockholder agent.
R E C I T A L S
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WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the Merger Agreement and the merger
of Merger Sub with and into the Company (the "Merger"), with the Company being
the surviving corporation, upon the terms and subject to the conditions of the
Merger Agreement;
WHEREAS, in the Merger, one hundred percent (100%) of the issued and
outstanding shares of capital stock of the Company will be converted into the
right to receive shares of Common Stock of Parent (as set forth in Article III
of the Merger Agreement), on the terms and subject to the conditions set forth
in the Merger Agreement and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL") and Chapters 78 and 92A of Title 7 of the
Nevada Revised Statutes (the "NPCA");
WHEREAS, XxXxxxxx is the holder of 400,000 shares of the Company's Series B
$1.00 Convertible Preferred Stock (the "Preferred Shares"); and
WHEREAS, XxXxxxxx desires to induce Parent and Merger Sub to consummate the
Merger by converting all of the XxXxxxxx Preferred Shares into 202,330 shares
(the "Converted Shares") common stock of the Company (the "Common Shares")
effective on the date hereof, all in accordance with the terms and subject to
the conditions set forth herein.
A G R E E M E N T
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NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:
1. Conversion of Preferred Stock. XxXxxxxx and the Company hereby agree,
subject to the issuance of the Converted Shares as provided in Section 2 and the
tendering by XxXxxxxx of all stock certificates evidencing the Preferred Shares
to the Company, to convert the Preferred Shares into the Converted Shares on the
date hereof (the "Conversion Time"), simultaneously with, and conditioned upon,
the issuance of the Converted Shares. Upon the issuance of the Converted Shares
to XxXxxxxx, the Preferred Shares shall automatically be cancelled and retired
and shall cease to exist, and the holder of any stock certificate that,
immediately prior to the Conversion Time, represented issued and outstanding
Preferred Shares shall cease to have any rights with respect thereto, including
any claims for any default occurring or other liability arising prior to the
Conversion Time, except the right to receive, upon the surrender of such
certificates, the certificates for the Converted Shares contemplated by Section
2.
2. Issuance of Shares. At the Conversion Time and simultaneously with the
conversions contemplated by Section 1, and subject to the surrender of the stock
certificates evidencing the Preferred Shares, the Company shall issue to
XxXxxxxx the Converted Shares in exchange for the cancellation of the Preferred
Shares. All Common Shares issued and paid upon conversion of the Preferred
Shares in accordance with the terms hereof shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Preferred Shares.
3. Waiver and Termination of Certain Rights.
(a) Effective at the Conversion Time, XxXxxxxx hereby irrevocably
waives all rights that he may have pursuant to any shares of preferred stock of
the Company, and any agreement with the Company relating thereto, including any
securities purchase agreement, registration rights agreement, shareholders
agreement or otherwise, whether or not such agreement is referenced herein, to
acquire any Equity Interest in the Company, other than as is to be issued to
XxXxxxxx hereunder. Without limitation of the generality of the foregoing,
effective at the Conversion Time, XxXxxxxx hereby irrevocably waives all of his
preemptive rights, participation rights, rights of co-sale or first refusal,
registration rights, or any other similar rights that XxXxxxxx may have pursuant
to any Preferred Shares, or any such agreements, which rights (if any) shall, at
such time, hereby be forever terminated.
(b) XxXxxxxx hereby irrevocably waives all anti-dilution, conversion
rate adjustment, conversion price adjustment, share coverage adjustment or
similar rights he may have pursuant to the Preferred Shares or any other
Commitments of the Company which he may have in connection with (i) the
exchanges of shares, conversions of debt, or issuances of warrants contemplated
hereby or by the Merger Agreement, or (ii) the issuance of shares or assumptions
of options or warrants contemplated by Article III of the Merger Agreement.
4. Representations and Warranties. XxXxxxxx represents and warrants to the
Company as follows:
(a) Investment Purpose. XxXxxxxx is acquiring the Common Shares
issuable upon the conversion of the Preferred Shares (collectively, the
"Securities") for his own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the Securities
Act.
(b) Accredited Investor Status. XxXxxxxx is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D under the Securities Act.
(c) Reliance on Exemptions. XxXxxxxx understands that the Securities
are being offered and sold to him in reliance on specific exemptions from the
registration requirements of the Securities Act and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and
XxXxxxxx'x compliance with, the representations, warranties, agreements,
acknowledgments and understandings of XxXxxxxx set forth herein in order to
determine the availability of such exemptions and the eligibility of XxXxxxxx to
acquire the Securities.
(d) Transfer or Resale. XxXxxxxx understands that the Securities have
not been registered under the Securities Act or any state securities laws, and
may not be offered for sale, sold, assigned, pledged, hypothecated or
transferred unless (A) subsequently registered thereunder, (B) XxXxxxxx shall
have delivered to the Company an opinion of counsel, in a form reasonably
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satisfactory to the Company, to the effect that such Securities may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
XxXxxxxx provides the Company with such documents and certificates as the
Company may reasonably request to demonstrate to his satisfaction that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule thereto).
(e) No General Solicitation. XxXxxxxx is not acquiring the Securities
as a result of any advertisement, article, notice or other communication
regarding any Securities published in any newspaper, magazine or similar media
or broadcast over television or radio, or presented at any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising.
(f) Adequate Information. XxXxxxxx is aware of the Company's business
affairs and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire the
Securities.
(g) Sophistication and Experience. XxXxxxxx, either alone or together
with his representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities and has so evaluated the
merits and risks of such investment.
(h) Ability to Bear Risk. XxXxxxxx is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(i) Relationship. XxXxxxxx either has a preexisting personal or
business relationship with the Company or any of its officers, directors or
controlling persons, or by reason of his business or financial experience or the
business or financial experience of his professional advisers who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, has the capacity to
protect his own interests in connection with the conversion of the Preferred
Shares and the acquisition of the Securities.
(j) Legend. XxXxxxxx understands that the stock certificates
representing the Common Shares shall bear a restrictive legend in substantially
the following form (or another legend substantially in such form as the transfer
agent for the Company may from time to time use generally on certificates
evidencing restricted securities of the Company):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN OPINION OF COUNSEL, IN A FORM
REASONABLY SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
5. Governing Law; Jurisdiction. This Agreement shall be governed in all
respects by the laws of the State of Texas applicable to contracts negotiated,
executed and to be performed entirely within such State. All suits, actions or
proceedings arising out of, or in connection with, this Agreement or the
transactions contemplated by this Agreement shall be brought in any federal or
state court of competent subject matter jurisdiction sitting in Dallas County,
Texas.
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6. Construction. The rules of construction specified in Section 1.3
(Construction) of the Merger Agreement are hereby incorporated by reference
herein and shall apply to this Agreement mutatis mutandis, as if expressly set
forth herein.
7. Titles and Headings. The section and paragraph titles and headings
contained herein are inserted purely as a matter of convenience and for ease of
reference and shall be disregarded for all other purposes, including the
construction, interpretation or enforcement of this Agreement or any of its
terms or provisions.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the Parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9. 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.
10. Entire Agreement. This Agreement and the Merger Agreement constitute
the entire agreement among the Parties with respect to the subject matter
hereof.
11. Notices. All notices, requests, instructions or other documents to be
given or delivered under this Agreement shall be given in the manner, with the
effect and to the address, email address or fax number to be used for such Party
as provided in Section 10.1 of the Merger Agreement; provided that the initial
address, email address and fax number for XxXxxxxx shall be as follows:
Xxxxxxx XxXxxxxx
00000 X. Xxxxx Xxxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile:
Email: [omitted]
12. Amendment; Waiver. This Agreement and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Party against which enforcement of the same is sought and by
Parent. This Agreement may be amended only by a writing executed by all Parties
and by Parent.
13. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Parties and their respective successors
and permitted assigns.
14. Specific Performance; Injunctive Relief. Each of the Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions hereof would cause substantial and irreparable
damage to the other parties hereto, and that money damages would be an
inadequate remedy therefor. Accordingly, each of the Parties agrees that each of
them shall be entitled to seek equitable relief, including specific performance
and injunctive relief, in the event of any such breach, non-performance or
default in any Action instituted in any court of the United States or any state
having competent jurisdiction, or before any arbitrator, in addition to any
other remedy to which such Party may be entitled, at law or in equity.
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15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof; provided
that if any provision of this Agreement, as applied to any Party or to any
circumstance, is adjudged by a court, tribunal or other governmental body,
arbitrator or mediator not to be enforceable in accordance with its terms, the
Parties agree that such governmental body, arbitrator or mediator making such
determination shall have the power to modify the provision in a manner
consistent with its objectives such that it is enforceable, and to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
16. Further Assurances. At any time, and from time to time, after the
effective date, each Party will execute such additional instruments and take
such action as may be reasonably requested by any other Party to confirm or
perfect title to any property interests transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
17. Third-Party Beneficiaries. This Agreement is made solely for the
benefit of the Parties and Parent, and their respective permitted successors and
assigns, and no other Person shall have or acquire any right or remedy by virtue
hereof except as otherwise expressly provided herein.
18. Voluntary Execution of Agreement. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties. Each of the Parties hereby acknowledges, represents and warrants
that (i) it has read and fully understood this Agreement and the implications
and consequences thereof; (ii) it has been represented in the preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,
or it has made a voluntary and informed decision to decline to seek such
counsel; and (iii) it is fully aware of the legal and binding effect of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
SUPERIOR GALLERIES, INC.
By: /s/ Xxxxxxx XxXxxxxx
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Xxxxxxx XxXxxxxx
Chief Executive Officer
XXXXXXX XXXXXXXX
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ACKNOWLEDGED AND ACCEPTED:
DGSE COMPANIES, INC.
By: /s/ Xx. X.X. Xxxxx
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Xx. X.X. Xxxxx
Chairman and Chief Executive Officer
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