Exhibit 2.5
NOTE EXCHANGE AGREEMENT
THIS NOTE EXCHANGE AGREEMENT is made and entered into as of ________ __,
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 Stanford International Bank Ltd., a corporation organized under
the laws of Antigua and Barbuda (together with its successors, "SIBL").
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 January 6, 2007 (the
"Merger Agreement"), by and among the Company, DGSE Companies, Inc., a Nevada
corporation ("Parent"), DGSE Merger Corp., a Nevada corporation ("Merger Sub"),
and 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, pursuant to that certain Commercial Loan and Security Agreement
originally dated October 1, 2003 (as amended as of March 29, 2005 and as further
amended as of April 6, 2006 and on January 6, 2007, the "Loan Agreement"),
Stanford Financial Group Company, a Florida corporation ("SFG"), has provided
certain credit facilities to the Company;
WHEREAS, on November 30, 2004, SIBL was indirectly assigned all of SFG's
right, title and interest in the Loan Agreement, and the Note issued thereunder;
WHEREAS, the obligation of Parent and Merger Sub to consummate the Merger
is conditioned on SIBL exchanging Eight Million Three Hundred Ninety-Two
Thousand Three Hundred Forty Dollars ($8,392,340) of principal and interest
outstanding under the Loan Agreement (such amount, the "Exchanged Debt") into
4,936,671 shares (the "Exchanged Shares") of the common stock of the Company
(the "Common Shares") in accordance with the terms and conditions set forth
herein, and SIBL is willing to agree to do so subject to the satisfaction of the
conditions herein and all conditions to the obligations of the Company and
Parent set forth in the Merger Agreement;
WHEREAS, in consideration of SIBL entering into this Agreement and certain
amendments to the Loan Agreement, as contemplated in the Merger Agreement,
Parent has agreed to issue to SIBL and its designees, at the Effective Time,
certain A Warrants and B Warrants; and
WHEREAS, SIBL desires to exchange the Exchanged Debt for the Exchanged
Shares to induce Parent and Merger Sub to enter into the Merger Agreement and to
consummate the Merger and other Transactions, including the issuance of the
afore-referenced warrants.
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A G R E E M E N T
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NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:
1. Exchange of Debt. SIBL and the Company hereby agree, subject to (i) the
issuance of the Exchanged Shares as provided in Section 2, (ii) the consummation
of the Merger pursuant to the Merger Agreement immediately after the Exchange
Time, (iii) the issuance of the A Warrants and the B Warrants pursuant to the
Merger Agreement (subject to Section 3 of the Limited Joinder Agreement), and
(iv) the tendering by SIBL of the notes evidencing the Exchanged Debt to the
Company; to exchange the Exchanged Debt for the Exchanged Shares, such exchange
to occur immediately prior to the Effective Time (the "Exchange Time") and
simultaneously with, and conditioned upon, the issuance of the Exchanged Shares.
Upon the issuance of such Exchanged Shares, the Exchanged Debt shall
automatically be cancelled and retired and shall cease to exist, and the holder
of the portion of any note that, immediately prior to the Exchange Time,
represented issued and outstanding Exchanged Debt shall cease to have any rights
with respect thereto, including any claims for any default occurring or other
liability arising prior to the Exchange Time, except the right to receive, upon
the surrender of such portion of the note, the certificates for the Exchanged
Shares contemplated by Section 2.
2. Issuance of Shares. At the Exchange Time and simultaneously with the
exchanges contemplated by Section 1, and subject to the conditions thereof, the
Company shall issue to SIBL the Exchanged Shares in exchange for the
cancellation of the Exchanged Debt. All Common Shares issued and paid upon
exchange of the Exchanged Debt in accordance with the terms hereof shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to the Exchanged Debt.
3. Capitalization Adjustments to Shares. In the event of any Capitalization
Adjustment with respect to the Common Shares occurring after the date of this
Agreement and prior to the Exchange Time, all references in this Agreement to
specified numbers of Common Shares affected thereby, and all calculations
provided for that are based upon numbers of Common Shares, shall be equitably
adjusted to the extent necessary to provide the Parties the same economic effect
as contemplated by this Agreement prior to such Capitalization Adjustment.
4. Representations and Warranties. SIBL represents and warrants to the
Company as follows:
(a) Investment Purpose. SIBL is acquiring the Common Shares issuable
upon the exchange of the Exchanged Debt (collectively, the "Securities") for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act.
(b) Accredited Investor Status. SIBL is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D under the Securities Act,
and it has not been formed solely for the purpose of acquiring the Securities.
(c) Reliance on Exemptions. SIBL understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the Securities Act and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and SIBL's
compliance with, the representations, warranties, agreements, acknowledgments
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and understandings of SIBL set forth herein in order to determine the
availability of such exemptions and the eligibility of SIBL to acquire the
Securities.
(d) Transfer or Resale. SIBL 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) SIBL shall have delivered to
the Company an opinion of counsel, in a form reasonably 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) SIBL provides the
Company with such documents and certificates as the Company may reasonably
request to demonstrate to its satisfaction that such Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the Securities
Act (or a successor rule thereto).
(e) No General Solicitation. SIBL 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. SIBL 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. SIBL, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities and has so evaluated the
merits and risks of such investment.
(h) Ability to Bear Risk. SIBL 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. SIBL either has a preexisting personal or business
relationship with the Company or any of its officers, directors or controlling
persons, or by reason of its business or financial experience or the business or
financial experience of its professional advisers who are unaffiliated with and
who are not compensated by the Company or any affiliate or selling agent of the
Company, directly or indirectly, has the capacity to protect its own interests
in connection with the exchange of the Exchanged Debt and the acquisition of the
Securities.
(j) Legend. SIBL 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
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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.
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.
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
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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.
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:
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Name:
Title:
STANFORD INTERNATIONAL BANK LTD.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Financial Officer
ACKNOWLEDGED AND ACCEPTED:
DGSE COMPANIES, INC.
By:
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▇▇. ▇.▇. ▇▇▇▇▇
Chairman and Chief Executive Officer
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