PLAN OF MERGER AND REORGANIZATION

<PAGE>

Exhibit 2.1

IMPORTANT NOTICE



THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (THE
"MERGER AGREEMENT") CONTAINS CERTAIN REPRESENTATIONS AND WARRANTIES (THE
"REPRESENTATIONS") BY DGSE COMPANIES, INC. ("DGSE") AND DGSE MERGER CORP., A
WHOLLY-OWNED SUBSIDIARY OF DGSE, IN FAVOR OF SUPERIOR GALLERIES, INC.
("SUPERIOR"), AND BY SUPERIOR IN FAVOR OF DGSE. NO PERSON, OTHER THAN THE
PARTIES TO THE MERGER AGREEMENT, ARE ENTITLED TO RELY ON THE REPRESENTATIONS
CONTAINED IN THE MERGER AGREEMENT. THE MERGER AGREEMENT IS FILED IN ACCORDANCE
WITH THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AS A MATERIAL PLAN OF
ACQUISITION, AND IS INTENDED BY DGSE AND SUPERIOR SOLELY AS A RECORD OF THE
AGREEMENT REACHED BY THE PARTIES THERETO. THE FILING OF THE MERGER AGREEMENT IS
NOT INTENDED AS A MECHANISM TO UPDATE, SUPERSEDE OR OTHERWISE MODIFY PRIOR
DISCLOSURES OF INFORMATION AND RISKS CONCERNING DGSE AND SUPERIOR WHICH DGSE AND
SUPERIOR HAVE MADE TO THEIR RESPECTIVE STOCKHOLDERS.

INVESTORS AND POTENTIAL INVESTORS SHOULD ALSO BE AWARE THAT THE REPRESENTATIONS
ARE QUALIFIED BY INFORMATION IN CONFIDENTIAL DISCLOSURE SCHEDULES THAT DGSE HAS
DELIVERED TO SUPERIOR, AND CONFIDENTIAL DISCLOSURE SCHEDULES THAT SUPERIOR HAS
DELIVERED TO DGSE (THE "DISCLOSURE SCHEDULES"). THE DISCLOSURE SCHEDULES CONTAIN
INFORMATION THAT MODIFIES, QUALIFIES AND CREATES EXCEPTIONS TO THE
REPRESENTATIONS.

INVESTORS AND POTENTIAL INVESTORS SHOULD ALSO BE AWARE THAT CERTAIN
REPRESENTATIONS MADE IN THE MERGER AGREEMENT ARE NOT INTENDED TO BE AFFIRMATIVE
REPRESENTATIONS OF FACTS, SITUATIONS OR CIRCUMSTANCES, BUT ARE INSTEAD DESIGNED
AND INTENDED TO ALLOCATE CERTAIN RISKS BETWEEN DGSE AND ITS WHOLLY-OWNED
SUBSIDIARY, ON THE ONE HAND, AND SUPERIOR AND ITS STOCKHOLDERS, ON THE OTHER
HAND. THE USE OF REPRESENTATIONS AND WARRANTIES TO ALLOCATE RISK IS A STANDARD
DEVICE IN MERGER AGREEMENTS.

ACCORDINGLY, STOCKHOLDERS, INVESTORS AND POTENTIAL INVESTORS SHOULD NOT RELY ON
THE REPRESENTATIONS AS AFFIRMATIONS OR CHARACTERIZATIONS OF INFORMATION
CONCERNING DGSE OR SPACEDEV AS OF THE DATE OF THE MERGER AGREEMENT, OR AS OF ANY
OTHER DATE.










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<PAGE>


================================================================================









AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

by and among

DGSE COMPANIES, INC.

DGSE MERGER CORP.

SUPERIOR GALLERIES, INC.

and

STANFORD INTERNATIONAL BANK, LTD.,
as Stockholder Agent


----------------------------------

January 6, 2007

----------------------------------












================================================================================




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<PAGE>

TABLE OF CONTENTS
-----------------

Page
----


Article I. Defined Terms; Construction.........................................2
Section 1.1 Certain Definitions.................................2
Section 1.2 Other Definitions..................................15
Section 1.3 Construction.......................................15

Article II. The Merger........................................................17
Section 2.1 The Merger.........................................17
Section 2.2 The Closing........................................17
Section 2.3 Effective Time.....................................17
Section 2.4 Effect of the Merger...............................17
Section 2.5 Certificate of Incorporation; Bylaws...............17
Section 2.6 Directors and Officers.............................18

Article III. Conversion of Securities; Exchange of Certificates...............18
Section 3.1 Conversion of Securities...........................18
Section 3.2 Capitalization Adjustments to Shares...............18
Section 3.3 Allocation and Distribution of
Merger Consideration...............................19
Section 3.4 Surrender of Certificates; Payment.................19
Section 3.5 Withholding Rights.................................21
Section 3.6 Share Transfer Books...............................21
Section 3.7 Company Options....................................21
Section 3.8 Unvested Company Shares............................22
Section 3.9 Company Warrants...................................23
Section 3.10 Appraisal Rights...................................24
Section 3.11 Taking of Necessary Action; Further Action.........24
Section 3.12 Tax Consequences...................................24
Section 3.13 Accounting Treatment...............................24
Section 3.14 Escrow Agreement; Escrow Account...................24
Section 3.15 Transfer Of Contingent Rights......................25

Article IV. Company Representations and Warranties............................26
Section 4.1 Organization and Qualification; Subsidiaries.......26
Section 4.2 Certificate of Incorporation and Bylaws;
Corporate Books and Records........................26
Section 4.3 Capitalization.....................................27
Section 4.4 Authority..........................................29
Section 4.5 No Conflict; Required Filings and Consents.........30
Section 4.6 Permits; Compliance With Law.......................31
Section 4.7 SEC Filings; Financial Statements..................31
Section 4.8 Disclosure Documents...............................33
Section 4.9 Absence of Certain Changes or Events...............34
Section 4.10 Employee Benefit Plans.............................35
Section 4.11 Customers..........................................39
Section 4.12 Contracts..........................................39
Section 4.13 Litigation.........................................42
Section 4.14 Environmental Matters..............................42
Section 4.15 Intellectual Property..............................43

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Section 4.16 Taxes..............................................46
Section 4.17 Insurance..........................................48
Section 4.18 Opinion of Financial Advisor.......................48
Section 4.19 Brokers............................................48
Section 4.20 Properties.........................................48
Section 4.21 Interested Party Transactions......................48
Section 4.22 Export and Import Laws.............................48
Section 4.23 Pseudo-Foreign Corporation.........................49
Section 4.24 Representations Complete...........................49

Article V. Representations and Warranties of Parent and Merger Sub............49
Section 5.1 Organization and Qualification; Subsidiaries.......49
Section 5.2 Certificate of Incorporation and Bylaws;
Corporate Books and Records........................50
Section 5.3 Capitalization.....................................50
Section 5.4 Authority..........................................51
Section 5.5 No Conflict; Required Filings and Consents.........52
Section 5.6 Permits; Compliance With Law.......................53
Section 5.7 SEC Filings; Financial Statements..................53
Section 5.8 Disclosure Documents...............................55
Section 5.9 Absence of Certain Changes or Events...............56
Section 5.10 Employee Benefit Plans.............................57
Section 5.11 Customers..........................................61
Section 5.12 Contracts..........................................61
Section 5.13 Litigation.........................................64
Section 5.14 Environmental Matters..............................64
Section 5.15 Intellectual Property..............................64
Section 5.16 Taxes..............................................67
Section 5.17 Insurance..........................................69
Section 5.18 Opinion of Financial Advisor.......................69
Section 5.19 Brokers............................................69
Section 5.20 Properties.........................................69
Section 5.21 Interested Party Transactions......................70
Section 5.22 Export and Import Laws.............................70
Section 5.23 Capitalization, Ownership and
Prior Activities of Merger Sub.....................70
Section 5.24 Interested Stockholders............................70
Section 5.25 Representations Complete...........................70

Article VI. Covenants.........................................................71
Section 6.1 SEC Reports; Preparation of Form S-4
and Proxy Statement................................71
Section 6.2 Parent Stockholders Meeting........................73
Section 6.3 Company Stockholders Meeting.......................73
Section 6.4 Access to Information; Confidentiality.............74
Section 6.5 Notice of Acquisition Proposals....................75
Section 6.6 Affiliate Letters..................................75
Section 6.7 Certain Notices....................................76
Section 6.8 Public Announcements...............................76
Section 6.9 Certain Litigation.................................76
Section 6.10 Employees..........................................77
Section 6.11 Termination of Benefit Plans.......................77
Section 6.12 Parent Board.......................................77
Section 6.13 Company Board......................................78

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Section 6.14 Tax Matters........................................78
Section 6.15 Third Party Consents...............................78
Section 6.16 Best Efforts.......................................78
Section 6.17 Refinancings.......................................79
Section 6.18 Indemnification....................................79

Article VII. Closing Conditions...............................................80
Section 7.1 Conditions to Obligations of Each
Party Under This Agreement.........................80
Section 7.2 Additional Conditions to Obligations
of Parent and Merger Sub...........................81
Section 7.3 Additional Conditions to Obligations
of the Company.....................................82

Article VIII. Survival of Representations, Warranties and Covenants;
Indemnification....................................83
Section 8.1 Survival of Representations, Warranties
and Covenants......................................83
Section 8.2 Indemnification; Closing Balance Sheet;
Escrow Account.....................................84
Section 8.3 Limitation on Indemnification......................85
Section 8.4 Indemnification Procedures.........................85
Section 8.5 Stockholder Agent..................................87
Section 8.6 Resolution of Conflicts............................90
Section 8.7 No Contribution....................................91
Section 8.8 Fraud; Willful Misrepresentation...................91
Section 8.9 Exclusive Remedies.................................91
Section 8.10 Purchase Price Adjustment..........................91

Article IX. Termination, Amendment and Waiver.................................92
Section 9.1 Termination........................................92
Section 9.2 Effect of Termination..............................93
Section 9.3 Amendment..........................................93
Section 9.4 Waiver.............................................93
Section 9.5 Fees and Expenses..................................93

Article X. General Provisions.................................................94
Section 10.1 Notices............................................94
Section 10.2 Headings...........................................95
Section 10.3 Severability.......................................95
Section 10.4 Entire Agreement...................................95
Section 10.5 Assignment.........................................96
Section 10.6 Parties in Interest................................96
Section 10.7 Governing Law; Consent to Jurisdiction;
Waiver of Trial by Jury............................96
Section 10.8 Disclosure.........................................97
Section 10.9 Counterparts.......................................97
Section 10.10 Facsimile Execution................................97
Section 10.11 Remedies Cumulative................................97
Section 10.12 Specific Performance...............................97
Section 10.13 Time...............................................97
Section 10.14 Certain Taxes......................................97



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<PAGE>

TABLE OF EXHIBITS AND SCHEDULES
-------------------------------


Exhibit A.............Form of Certificate of Merger
Exhibit B.............Form of Letter of Transmittal
Exhibit C.............Form of Escrow Agreement
Exhibit D.............Form of Amended and Restated Commercial Loan and
Security Agreement
Exhibit E.............Form of Warrant
Exhibit F ............Form of Note Exchange Agreement
Exhibit G.............Form of Stanford Termination and Release Agreement
Exhibit H.............Form of Registration Rights Agreement
Exhibit I.............Form of Corporate Governance Agreement
Exhibit J.............Form of Stanford Officer's Certificate
Exhibit K.............Form of Company Legal Opinion
Exhibit L.............Form of Stanford Legal Opinion
Exhibit M.............Form of Parent Officers' Certificate
Exhibit N.............Form of Parent Legal Opinion






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<PAGE>
<TABLE>
<CAPTION>

INDEX OF DEFINED TERMS
----------------------

<S> <C>
401(k) Plan................................77 Company Information...........................5
A Warrants.................................79 Company Insider..............................22
Acquisition Proposal........................2 Company IP...................................43
Actions.....................................3 Company Material Contract....................39
Actual Knowledge............................3 Company Option................................5
Affiliate...................................3 Company Permits..............................31
Affiliate Letter...........................76 Company Preferred Shares.....................27
Agreement...................................1 Company Products.............................43
Amend.......................................3 Company SEC Reports...........................5
Amended and Restated Stanford LOC..........79 Company Stock Option Plan.....................5
Applicable Time.............................3 Company Stockholder Approval.................30
B Warrants.................................79 Company Stockholders Meeting.................30
Balance Sheet Correction...................85 Company Subsidiaries.........................26
Basket Amount..............................85 Company Subsidiary...........................26
Beneficial Owner............................3 Company Warrant...............................5
Beneficial Ownership........................3 Company-Owned IP.............................43
Beneficially Own............................3 Confidentiality Agreement....................75
Beneficially Owning.........................3 Consent.......................................5
Best Efforts................................3 Continuing Employees.........................77
Blue Sky Laws...............................3 Contract......................................5
Board Recommendation........................3 Control.......................................5
Breach......................................3 controlled by.................................5
Business Day................................4 Conversion Agreements.........................5
Capitalization Adjustment...................4 D&O Insurance................................79
Certificate of Merger......................17 Defending Party..............................90
Certificates................................4 DGCL..........................................1
Claim Notice...............................84 DiGenova.....................................25
Closing....................................17 DiGenova Warrant..............................5
Closing Company Common Shares...............4 Dissenting Shares............................24
Closing Date...............................17 Dissenting Stockholders.......................5
COBRA......................................36 Effective Time...............................17
Code........................................4 Employment Agreements.........................5
Commitment..................................4 Encumber......................................6
Company.....................................1 Encumbrance...................................5
Company Affiliate..........................75 Entity........................................6
Company Balance Sheet.......................4 Environment...................................6
Company Balance Sheet Date..................4 Environmental Claims..........................6
Company Benefit Plans......................35 Environmental Laws............................6
Company Board...............................2 Environmental Release.........................6
Company Board Recommendation................4 Environmentally Released......................6
Company Bylaws.............................26 Equity Interest...............................6
Company Certificate of Incorporation.......26 ERISA.........................................7
Company Common Share........................4 ERISA Affiliate...............................7
Company Common Stock........................4 Escrow Account...............................24
Company Disclosure Schedules...............26 Escrow Agent..................................7
Company Financial Advisor..................48 Escrow Agreement.............................25
Company Financial Statements...............32 Escrow Assets................................88
Company Group..............................46 Escrow Period................................25
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Escrow Stock...............................24 Open Source Materials........................11
Escrow Termination Date.....................7 Order........................................11
Event.......................................7 Ordinary Course of Business..................11
Exchange Act................................7 Organizational Documents.....................11
Exchange Agent.............................20 Original Agreement............................1
Exchange Ratio.............................18 OTCBB........................................11
Exemption Conditions.......................29 Other Filings................................11
Expenses....................................7 Other Merger Filings.........................71
Facilities..................................7 Outside Date.................................92
Forbearance Agreement......................92 Outstanding Company Common Shares............29
Foreign Plan...............................37 Parent........................................1
Form S-4....................................7 Parent Authorized Stock Increase.............71
GAAP........................................7 Parent Balance Sheet.........................11
Governmental Entity.........................7 Parent Balance Sheet Date....................11
Governmental Permit.........................8 Parent Benefit Plans.........................57
Group.......................................8 Parent Board..................................2
Hazardous Materials.........................8 Parent Board Recommendation..................11
Indebtedness................................8 Parent Bylaws................................50
Indemnified Parties........................84 Parent Certificate of Incorporation..........50
Indemnifying Parties.......................84 Parent Common Share..........................12
Independent Committee.......................8 Parent Disclosure Schedules..................49
Insured Parties............................79 Parent Financial Advisor.....................69
Intellectual Property.......................8 Parent Financial Statements..................54
Interim Company Board......................78 Parent Group.................................67
IRS.........................................9 Parent Information...........................12
JAMS.......................................91 Parent IP....................................64
Key Employee................................9 Parent Material Contract.....................61
Knowledge...................................9 Parent Option................................12
Law.........................................9 Parent Permits...............................53
Lease.......................................9 Parent Products..............................64
Letters of Transmittal.....................19 Parent SEC Reports...........................12
Liability...................................9 Parent Stock Option Plan.....................12
Liable......................................9 Parent Stockholder Approval..................52
Lien........................................9 Parent Stockholders Meeting..................52
Limited Joinder Agreement...................1 Parent Subsidiaries..........................49
Lock-Up Agreement..........................10 Parent Subsidiary............................49
Losses......................................9 Parent Warrant...............................12
Made Available.............................10 Parent-Owned IP..............................64
Management Agreement.......................10 PCAOB........................................12
Material...................................10 Person.......................................12
Material Adverse Effect....................10 Post-Merger Parent Board.....................77
Materially.................................10 Principal Market.............................12
Materials of Environmental Concern.........10 Property.....................................12
Maximum Amount.............................79 Prosecuting Party............................91
Merger......................................1 Proxy Statement..............................12
Merger Sub..................................1 Registered Intellectual Property.............12
Minimum Company Stockholders Equity........11 Registration Rights Agreement................82
Minute Books...............................11 Related Agreement............................13
New Option.................................21 Representative...............................13
Note Exchange Agreement....................81 Repurchase Rights............................13
NPCA........................................1 SEC..........................................13
</TABLE>

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<TABLE>
<CAPTION>
<S> <C>
SEC Reports................................13 Support Agreements...........................14
SEC Rules..................................13 Surviving Corporation........................17
Securities.................................13 SVCH.........................................81
Securities Act.............................13 Tangible Personal Property...................14
Security Interest..........................13 Tax Authority................................14
SFG........................................81 Tax Return...................................15
Shared Expenses Agreement..................93 Taxes........................................14
Significant Company Customer...............39 Termination and Release Agreement............81
Significant Parent Customer................61 Third Party Intellectual Property Rights.....15
SOX........................................14 Transaction..................................15
Specified Consents.........................30 Transaction Document.........................15
Stanford....................................1 Transfer.....................................15
Stanford LOC...............................79 Transferred..................................15
Stockholder Agent...........................1 Transferring.................................15
Stockholder Agent Expense Cap..............90 U.S. Export and Import Laws..................15
Stockholders...............................14 under common control with.....................5
Subsidiary.................................14 Unvested Company Shares......................22
Superior....................................1 WARN Act.....................................39
Superior Offer.............................14
</TABLE>








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<PAGE>

AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
is made and entered into as of January 6, 2007 (together with all schedules and
exhibits hereto, this "Agreement"), by and among (i) DGSE Companies, Inc., a
Nevada corporation (together with its successors and permitted assigns,
"Parent"), (ii) DGSE Merger Corp., a Delaware corporation and a direct
wholly-owned subsidiary of Parent (together with its successors and permitted
assigns, "Merger Sub"), (iii) Superior Galleries, Inc., a Delaware corporation
(f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (together with its
successors, the "Company" or "Superior"), and (iv) Stanford International Bank
Ltd., a company organized under the laws of Antigua and Barbuda (together with
its successors, "Stanford"), as agent, attorney-in-fact and representative for
the stockholders of the Company (together with its successors in such capacity,
the "Stockholder Agent"). Stanford is not a signatory to this Agreement but is
joining, and becoming a party to, this Agreement in its individual capacity and
as Stockholder Agent to the limited extent provided in that certain Limited
Joinder Agreement, made and entered into as of even date herewith (the "Limited
Joinder Agreement"), by and among the parties hereto (including Stanford).

R E C I T A L S
---------------

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable this Agreement and the merger of
Merger Sub with and into the Company (the "Merger"), with the Company being the
surviving corporation;

WHEREAS, on July 12, 2006, Parent, Merger Sub and the Company entered into
that certain Agreement and Plan of Merger and Reorganization (the "Original
Agreement"), and Stanford joined the Original Agreement pursuant to that certain
Limited Joinder Agreement, made and entered into as of July 12, 2006, relating
to the Merger;

WHEREAS, the "Outside Date" (as defined in the Original Agreement) has
transpired without the consummation of the Merger;

WHEREAS, since the date of the Original Agreement, the financial statements
of the Company have changed in material respects;

WHEREAS, the parties hereto desire to amend and restate the Original
Agreement and that certain Limited Joinder Agreement, made and entered into as
of July 12, 2006, by and among the parties hereto, in its entirety;

WHEREAS, the parties hereto wish to state herein their mutual agreements
and obligations and to set forth certain requirements with respect to the
disposition of Company Common Shares, the issuance of Parent Common Shares,
access to information about the Company and the management of the Company;

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),
on the terms and subject to the conditions set forth in this 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"); and



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<PAGE>

WHEREAS, the Board of Directors of the Company (the "Company Board") and
the Board of Directors of Parent (the "Parent Board") has each resolved to
recommend to its stockholders the adoption and approval of this Agreement and
the Merger.

A G R E E M E N T
-----------------

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:

ARTICLE I.
DEFINED TERMS; CONSTRUCTION

Section 1.1. Certain Definitions. Unless otherwise expressly provided
herein, the following terms, whenever used in this Agreement, shall have the
meanings ascribed to them below or in the referenced Sections of this Agreement:

"Acquisition Proposal" means, (A) with respect to the Company, any
agreement, offer, proposal or indication of interest (other than this Agreement,
the Merger or any other offer, proposal or indication of interest by Parent), or
any public announcement of intention to enter into any such agreement or of any
intention to make any offer, proposal or indication of interest, relating to or
involving (i) the purchase from the Company or any Company Subsidiary or any
acquisition by any Person of more than a 10% interest (or, with respect to any
Person holding more than a 10% interest on the date hereof, of an additional
interest) in the total outstanding voting securities of the Company or any
Company Subsidiary (other than acquisitions of voting securities of a Company
Subsidiary by the Company) or any tender offer or exchange offer that if
consummated would result in any Person Beneficially Owning 10% or more of the
total outstanding voting securities of the Company or any Company Subsidiary,
(ii) any merger, consolidation, business combination or similar transaction
involving the Company or any Company Subsidiary, or (iii) any sale (other than
in the Ordinary Course of Business) or disposition of the assets of the Company
and the Company Subsidiaries in any single transaction or series of related
transactions that constitute or represent 10% or more of the total revenue or
operating assets of the Company and the Company Subsidiaries taken as a whole,
in each case other than (x) the Merger, (y) the exercise of Company Options, or
(z) the conversion or exchange of Company Preferred Shares or Company
Indebtedness by Stanford, as contemplated by Article VII; and (B) with respect
to Parent, any agreement, offer, proposal or indication of interest (other than
this Agreement, the Merger or any other offer, proposal or indication of
interest by the Company), or any public announcement of intention to enter into
any such agreement or of any intention to make any offer, proposal or indication
of interest, relating to or involving (i) the purchase from the Parent or any
Parent Subsidiary or any acquisition by any Person of more than a 10% interest
(or, with respect to any Person holding more than a 10% interest on the date
hereof, of an additional interest) in the total outstanding voting securities of
Parent or any Parent Subsidiary (other than acquisitions of voting securities of
a Parent Subsidiary by Parent) or any tender offer or exchange offer that if
consummated would result in any Person Beneficially Owning 10% or more of the
total outstanding voting securities of Parent or any Parent Subsidiary, (ii) any
merger, consolidation, business combination or similar transaction involving the
Parent or any Parent Subsidiary, or (iii) any sale (other than in the Ordinary
Course of Business) or disposition of the assets of Parent and the Parent
Subsidiaries in any single transaction or series of related transactions that
constitute or represent 10% or more of the total revenue or operating assets of
Parent and the Parent Subsidiaries taken as a whole, in each case other than the
Merger and the exercise of Parent Options.


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<PAGE>

"Actions" means any action, appeal, petition, plea, charge, complaint,
claim, suit (whether civil, criminal, administrative, judicial or investigative,
whether formal or informal, whether public, private or otherwise, whether at law
or in equity), demand, litigation, arbitration, mediation, hearing, inquiry,
investigation, audit or similar event, occurrence, or proceeding, in each case
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Entity, arbitrator or mediator.

"Actual Knowledge" means, with respect to a particular fact or other
matter, (i) with respect to an individual, that such individual is actually
aware of such fact or other matter, and (ii) with respect to an Entity, that any
Person who is serving, or who has at any time served, as a director, officer,
management-level employee, partner, executor or trustee of such Entity (or, in
all cases above, in any similar or equivalent capacity), or any employee of such
Entity charged with responsibility for a particular functional or regional area
of such Entity's business or operations, has, or at any time had, Actual
Knowledge of such fact or other matter.

"Affiliate" shall have the meaning ascribed to such term in Rule 144
promulgated under the Securities Act.

"Amend" means, with respect to any Contract, Law, filing or
Organizational Document, to amend, supplement, extend, waive a provision of or
otherwise modify such Contract, Law, filing or Organizational Document. The
related terms "Amended" and "Amendment" shall have the correlative meanings.

"Applicable Time" means (i) with respect to the Form S-4, the time the Form
S-4, or any amendment or supplement thereto, is filed with the SEC, the time the
Form S-4 becomes effective under the Securities Act and at the Effective Time,
(ii) with respect to the Proxy Statement, the date the Proxy Statement, or any
amendment or supplement thereto, is first mailed to the stockholders of Parent
or the Company, at the times of the Parent Stockholder Meeting and the Company
Stockholder Meeting, and at the Effective Time, or (iii) with respect to any
Other Filing, the date such Other Filing, or any amendment or supplement
thereto, is filed with the applicable Governmental Entity.

"Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act. The related terms "Beneficially Own",
"Beneficially Owning" and "Beneficial Ownership" shall have the correlative
meanings.

"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously and effectively as possible.

"Board Recommendation" means the Company Board Recommendation or the Parent
Board Recommendation.

"Blue Sky Laws" means state securities or "blue sky" laws.

"Breach" means (a) any breach of, or inaccuracy in, any representation or
warranty, (b) any breach or violation of, default under (including any
designated "event of default"), failure to perform, failure to comply with or
failure to notify, or noncompliance with, any covenant, agreement or obligation,
or (c) any one or more other Events the existence of which, individually or
together, whether unconditionally or with the passing of time or the giving of
notice, or both, would (i) constitute a breach, violation, default, failure or
noncompliance referred to in clauses (a) and (b) next above, (ii) result in the
acceleration of, or permit any Person to accelerate, any monetary obligation,
(iii) result in the abridgement, modification, acceleration, termination,
revocation, rescission, redemption, cancellation or vesting of, or permit any
Person to abridge, modify, accelerate, delay, condition, terminate, revoke,


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<PAGE>

rescind, redeem or cancel, any right, license, liability, benefit, debt, power,
authority, privilege or obligation, or (iv) require, or permit any Person to
require, the payment of a monetary penalty or liquidated damages.

"Business Day" means any day other than (i) a Saturday or Sunday, and (ii)
any day on which the SEC shall be closed for business.

"Capitalization Adjustment" means, with respect to any class of shares, an
adjustment based on any stock split, reverse stock split, combination,
consolidation, reorganization or reclassification of, or any stock dividend
(including any dividend or distribution of Securities convertible into capital
stock) on, such class of shares, the recapitalization of the issuer thereof, or
any like change.

"Certificates" means, collectively, the stock certificates representing
Company Common Shares immediately before the Effective Time.

"Closing Company Common Shares" means the Company Common Shares outstanding
immediately at the Effective Time, including any Company Common Shares issued or
issuable upon the exercise or conversion, before or at the Effective Time, of
any Company Options, Company Warrants or other Commitments therefor, including
the conversions and exchanges contemplated by the Conversion Agreements and Note
Exchange Agreement, but, for avoidance of doubt, excluding Company Common Shares
(i) to be cancelled pursuant to Section 3.1(b), or (ii) issuable upon the
exercise of any Company Options or Company Warrants being assumed by Parent
pursuant to Section 3.7 and Section 3.9, respectively.

"Code" means the United States Internal Revenue Code of 1986, as Amended.

"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, purchase or acquisition rights,
conversion rights, exchange rights, or other Contracts that require an Entity to
issue any of its Equity Interests, (b) any other securities convertible into,
exchangeable or exercisable for, or representing the right to subscribe for, in
each case with or without consideration, any Equity Interest of an Entity, (c)
statutory pre-emptive rights or pre-emptive rights granted under an Entity's
Organizational Documents, (d) rights of first refusal, tag-along rights, co-sale
rights, drag-along rights, registration rights, piggyback rights, buy-sell
arrangements, or voting agreements, or (e) stock appreciation rights, phantom
stock, profit participation, or other similar rights with respect to an Entity.

"Company Balance Sheet" means the balance sheet of the Company as of the
Company Balance Sheet Date, as previously Made Available to Parent.

"Company Balance Sheet Date" means September 30, 2006.

"Company Board Recommendation" means the unanimous recommendation by the
Company Board that the Company's stockholders vote in favor of (i) the adoption
and approval of this Agreement and the Merger, and (ii) the Stockholder Agent
Appointment.

"Company Common Share" means a share of Company Common Stock.

"Company Common Stock" means the common stock, par value $0.001 per share,
of the Company.


-4-
<PAGE>

"Company Information" means the statements regarding the Company, its
operations, business, directors, officers, Subsidiaries and stockholders
contained in the Form S-4, Proxy Statement or Other Filings.

"Company Option" means any option granted, to the extent not exercised,
expired or terminated, to a current or former employee, director, officer or
consultant of the Company or any Company Subsidiary, or any predecessor of any
of the foregoing, to purchase or otherwise acquire Company Common Shares
pursuant to any Company Stock Option Plan.

"Company SEC Reports" means all SEC Reports filed by the Company with the
SEC, including those that the Company may file subsequent to the date hereof.

"Company Stock Option Plan" means any equity incentive, stock option, stock
bonus, stock award or stock purchase plan, program or arrangement, as amended to
date, of the Company or any Company Subsidiary, or any predecessor of any of the
foregoing, including the Company's 2003 Omnibus Stock Option Plan and 2000
Omnibus Stock Option Plan.

"Company Warrant" means a warrant or similar right to purchase any Company
Common Shares.

"Consent" means any consent, approval, authorization, permit, ratification,
favorable vote, authorization, waiver, or other similar action.

"Contract" means any agreement, contract, subcontract, lease, sublease,
power of attorney, note, loan, evidence of indebtedness, letter of credit,
binding undertaking, covenant not to compete, license, instrument, obligation,
binding commitment, binding understanding, indenture, option or warranty; in
each case whether oral or written, express or implied.

"Control" means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise. The related terms
"controlled by" and "under common control with" shall have the correlative
meanings.

"Conversion Agreements" means those certain Conversion Agreements, made and
entered into as of the date hereof, by and between the Company, on the one hand,
and Stanford or DiGenova, on the other hand.

"DiGenova Warrant" means that certain Warrant, issued by Parent to DiGenova
on the date hereof pursuant to that certain Securities Exchange Agreement, dated
as of the date hereof, by and between Parent and DiGenova.

"Dissenting Stockholders" means stockholders of the Company who have
perfected their appraisal rights pursuant to Section 262 of the DGCL, or are
otherwise duly exercising dissenters' or appraisal rights under applicable Law,
in respect of the Merger.

"Employment Agreements" means the executive employment agreements between
Parent, on the one hand, and Dr. L.S. Smith or William H. Oyster, on the other
hand, previously approved by the Parent Board and Made Available to the Company.

"Encumbrance" means, with respect to any Property, any Order, Lien,
easement, right of way, encroachment, servitude, right of first option, right of


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<PAGE>

first refusal or similar restriction, drag-along or similar rights, community or
other marital property interest, condition, equitable interest, license,
encumbrance or other binding restriction of any kind (including restrictions on
use, Transfer, receipt of income or exercise of any other attribute or indicia
of ownership) on such Property or any interest therein or right thereto, whether
directly or indirectly (through one or more intermediary Persons or otherwise),
whether voluntarily, involuntarily or by operation of law, and, where
applicable, any restriction on voting thereof or receipt of income thereon and
any Commitments in respect thereof; provided that Transfer restrictions under
federal securities and Blue Sky Laws and regulations shall be deemed not to be
an Encumbrance. The term "Encumber" shall have the correlative meaning.

"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm, labor organization, unincorporated organization, or
other enterprise, association, organization or business entity.

"Environment" means soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.

"Environmental Claims" means, with respect to any Person, all accusations,
allegations, notices of violation, Encumbrances, claims, demands, suits or
causes of action for any damage, arising out of or related to the presence or
Release of, or exposure to, any Hazardous Substances at any of such Person's
Facilities, or the material failure by such Person to comply with any applicable
Environmental Laws.

"Environmental Laws" means any Law that requires or relates to (i) advising
appropriate authorities, employees or the public of intended, threatened or
actual Environmental Releases of Materials of Environmental Concern, violations
of discharge limits or other prohibitions and the commencement of activities,
such as resource extraction or construction, that could have significant impact
on the Environment, (ii) preventing or reducing to acceptable levels the
Environmental Release of Materials of Environmental Concern into the
Environment, (iii) reducing the quantities, preventing the Environmental Release
or minimizing the hazardous characteristics of wastes that are generated, (iv)
assuring that products are designed, formulated, packaged and used so that they
do not present unreasonable risks to human health or the Environment when used
or disposed of, (v) protecting the Environment, resources, species or ecological
amenities, (vi) reducing to acceptable levels the risks inherent in the
transportation of Materials of Environmental Concern, (vii) cleaning up
Materials of Environmental Concern that have been Environmentally Released,
preventing the threat of Environmental Release or paying the costs of such clean
up or prevention, (viii) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment or
permitting self-appointed representatives of the public interest to recover for
injuries done to public assets, or (ix) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern or the protection of human health or the
Environment.

"Environmental Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching or migration on or into the Environment or into or out of
any property. The related term "Environmentally Released" shall have the
correlative meaning.

"Equity Interest" means (a) with respect to any corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to any general or limited partnership, limited liability company, trust
or similar Entity, any and all units, interests or other partnership/limited
liability company interests, and any Commitments with respect thereto, and (c)


-6-
<PAGE>

with respect to any other Entity, any other direct or indirect equity ownership,
participation or interest therein and any Commitments with respect thereto.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
Amended, and the regulations promulgated thereunder.

"ERISA Affiliate" means, with respect to any Person, any Entity or trade or
business (whether or not incorporated), other than such Person, that together
with such Person is considered under common control and treated as a single
employer under Sections 414(b), (c), (m) or (o) of the Code.

"Event" means any act, omission, occurrence, circumstance, development,
change, condition or other event or effect.

"Escrow Agent" means the escrow agent appointed by Parent to act as escrow
agent under the Escrow Agreement, together with its successors as escrow agent
thereunder.

"Escrow Termination Date" means the last day of the Escrow Period.

"Exchange Act" means the Securities Exchange Act of 1934, as Amended, and
the rules and regulations promulgated thereunder.

"Expenses" includes all reasonable out-of-pocket expenses (including all
reasonable fees and expenses of legal counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
Transactions, including the preparation, printing, filing and mailing of the
Form S-4 and Proxy Statement and the solicitation of stockholder approvals and
all other matters related to the Transactions.

"Facilities" means (i) plants, offices, manufacturing facilities, stores,
warehouses, administration buildings and real property and related facilities,
and (ii) with respect to any Person, all Facilities owned, leased, operated or
occupied at any time by such Person or any of such Person's Subsidiaries.

"Form S-4" means the registration statement on Form S-4 to be filed by
Parent with the SEC in connection with the issuance of the Parent Common Shares
constituting the Merger Consideration in the Merger, including the joint proxy
statement/prospectus forming a part thereof.

"GAAP" means generally accepted accounting principles for financial
reporting, as applied in the United States and in effect from time to time.

"Governmental Entity" means any (i) nation, state, county, city, town,
borough, village, district or other jurisdiction, (ii) supranational, national,
federal, state, local, municipal, foreign or other government, (iii)
governmental or quasi-governmental authority of any nature (including any
legislature, agency, board, bureau, branch, department, division, commission,
instrumentality, court, tribunal, magistrate, justice or other entity exercising
governmental or quasi-governmental powers), (iv) multi-national organization or
body, (v) any body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, military, regulatory or taxing
authority or power, (v) any stock exchange or similar self-regulatory
organization or any quasi-governmental or private body exercising any
regulatory, taxing or any other governmental or quasi-governmental authority, or
(vi) any official of any of the foregoing.


-7-
<PAGE>

"Governmental Permit" means any permit, license, certificate, Consent,
clearance, certificate, registration, approval, accreditation, or other similar
authorization required by any Law or Governmental Entity.

"Group" has the meaning ascribed to such term in Section 13 of the Exchange
Act.

"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other infectious, toxic or otherwise hazardous substances or
materials (whether solids, liquids or gases) subject to regulation, control or
remediation under applicable Environmental Laws, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any
provision of Environmental Law, and including radioactive materials, petroleum,
petroleum products, asbestos, presumed asbestos-containing material or
asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.

"Indebtedness" means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind to such Person, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person upon which interest charges are customarily paid,
(iv) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person, (v) all
obligations of such Person issued or assumed as the deferred purchase price of
Property or services (excluding obligations of such Person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such Person's business), (vi) all capitalized lease obligations of such Person,
(vii) all obligations of others secured by any Encumbrance on Property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (viii) all obligations of such Person under interest rate or
currency swap transactions (valued at the termination value thereof), (ix) all
letters of credit issued for the account of such Person (excluding letters of
credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (x) all obligations of
such Person to purchase Securities (or other Property) that arise out of or in
connection with the sale of the same or substantially similar Securities or
Property, and (xi) all guarantees and arrangements having the economic effect of
a guarantee of such Person of any Indebtedness of any other Person.

"Independent Committee" has the meaning ascribed to such term in the
Management Agreement.

"Intellectual Property" means any and all worldwide intellectual property
and intellectual property rights, including all patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data, proprietary
processes and formulae, algorithms, specifications, customer lists and supplier
lists; all designs and any registrations and applications therefor; all trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor; Internet domain names and
toll-free numbers; all copyrights, copyright registrations and applications
therefor; all computer software, including all source code, object code,
firmware, and development tools, game engines, game rules, scripts, voice-overs,
characters, images, drawings, graphics, files, records and data; all rights in
prototypes; all databases and data collections and all rights therein; all moral
and economic rights of authors and inventors; and all other intellectual
property of any kind or nature.


-8-
<PAGE>

"IRS" means the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.

"Key Employee" means, with respect to any Entity, any employee at the vice
president level or higher, or who is otherwise material to such Entity and such
Entity's Subsidiaries taken as a whole.

"Knowledge" means, with respect to a particular fact or other matter, (a)
in the case of an individual, (i) that such individual is actually aware of such
fact or other matter, or (ii) a prudent individual could be expected to have
discovered or otherwise have become aware of such fact or other matter in the
course of conducting a comprehensive investigation concerning the existence of
such fact or other matter, and (b) in the case of an Entity, that any Person who
is serving, or who has at any time served, as a director, officer,
management-level employee, partner, executor or trustee of such Entity (or, in
all cases above, in any similar or equivalent capacity), or any employee of such
Entity charged with responsibility for a particular functional or regional area
of such Entity's business or operations, has, or at any time had, Knowledge of
such fact or other matter.

"Law" means any federal, state, local, domestic, foreign, international or
multi national law (statutory, common, or otherwise), constitution, treaty,
statute, code, order, writ, injunction, decree, award, stipulation, ordinance or
administrative doctrine, ordinance, equitable principle, code, rule, regulation,
executive order, request, or other similar authority enacted, adopted,
promulgated, or applied by any Governmental Entity, each as Amended.

"Lease" means any lease of real or personal property or any lease or rental
agreement, license, right to use or installment and conditional sale agreement
to which the Company is a party or subject, and any other Contract of the
Company pertaining to the leasing or use of any Tangible Personal Property. The
related terms "Lease" and "Leased" used as a verb shall have the correlative
meanings.

"Liability" or "Liable" means any liability or obligation of any kind,
character or description, whether known or unknown, absolute or contingent,
matured or unmatured, disputed or undisputed, secured or unsecured, conditional
or unconditional, accrued or unaccrued, liquidated or unliquidated, vested or
unvested, joint or several, due or to become due, executory, determined,
determinable or otherwise, and whether or not the same is required to be accrued
on financial statements.

"Lien" means, in respect of any Property, any security interest, deed of
trust, mortgage, pledge, lien, statutory liens of any kind or nature,
hypothecation, charge, claim, lease or other similar interest or right in
respect of such Property.

"Losses" means, without duplication, all damages, losses (including loss
due to business interruption or operation shutdowns, increased costs of
operation, the loss of any available tax deduction, and including special,
exemplary, punitive or incidental loss or damage), deficiencies, costs of
mitigation or avoidance, Liabilities, expenses of whatever nature, costs
(including increased costs of business or operations), obligations, fines,
interest, penalties, and payments, whether incurred by or issued against a
Person, including (i) with respect to environmental liabilities and losses,
clean-up, remedial correction and responsive action, and (ii) with respect to
any Action or threatened Action, amounts paid in defense, settlement and
discovery, costs associated with obtaining injunctive relief, administrative
costs and expenses, reasonable fees and expenses of attorneys, expert witnesses,
accountants and other professional advisors, and other out-of-pocket costs of
investigation, preparation, and litigation in connection therewith. In computing
the amount of Losses, an offset shall be taken into account for tax savings (net
of reasonable costs and expenses incurred in obtaining such savings, and taking
into account the tax effect of any indemnity to which the Person may be
entitled) and for insurance benefits (without duplication of any amounts
credited or repaid pursuant to Section 8.1(d)).


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<PAGE>

"Lock-Up Agreement" means that certain Lock-Up Agreement, made and entered
into as of the date hereof, by and between DGSE and DiGenova.

"Made Available" means (a) in the case of Parent, that either (i) the
Company or its Representatives has delivered such materials to Parent or its
designated representatives via email or otherwise on or before December 31, 2006
(or such later date as Parent and the Company may agree in writing), or (ii)
such material constitutes part of the Parent SEC Reports filed with the SEC
prior to the date of this Agreement which are currently available through the
SEC's EDGAR system, and (b) in the case of the Company, that either (i) Parent
or its Representatives has delivered such materials to the Company or its
designated representatives via email or otherwise on or before December 31, 2006
(or such later date as Parent and the Company may agree in writing), or (ii)
such material constitutes part of the Company SEC Reports filed with the SEC
prior to the date of this Agreement which are currently available through the
SEC's EDGAR system.

"Management Agreement" means that certain Management Agreement, made and
entered into as of the date hereof, by and between Merger Sub and the Company.

"Material" or "Materially" means, with respect to any Person and any Event,
violation or Breach, any of the foregoing which, alone or in combination with
any other Events, violations or Breaches, is reasonably likely to result in or
have a Material Adverse Effect, taken as a whole, on such Person and its
Subsidiaries, taken as a whole.

"Material Adverse Effect" means, with respect to any Person and any Events,
that such Events, taken individually or in the aggregate, (i) have had, or are
reasonably likely to have, a materially adverse effect on the assets (including
intangible assets), Properties, business, financial condition or results of
operations of such Person and its Subsidiaries, taken as a whole, or (ii)
materially impede or delays, or are reasonably likely materially to impede or
delay, the ability of such Person or its Subsidiaries to perform its obligations
under this Agreement or any Related Agreements to which it is a signatory, or to
consummate the Transactions, in accordance with the terms hereof and thereof and
applicable Laws; provided, however, that no such Events to the extent resulting
from or arising out of any of the following shall be deemed to constitute, in
and of itself, a Material Adverse Effect, nor shall it be taken into
consideration when determining whether there has occurred a Material Adverse
Effect: (i) any change in applicable Laws, GAAP, regulations or application or
interpretations of such Laws, GAAP or regulations, but only to the extent that
such changes do not adversely affect such Person and its Subsidiaries in a
disproportionate manner from others in the industry or market generally, (ii)
the negotiation, execution, delivery, pendency or announcement of this
Agreement, the Related Agreements or the consummation of the Transactions,
including any loss of or adverse impact on relationships with employees,
customers, suppliers, licensors, licensees, or distributors of such Person or
its Subsidiaries as a result thereof, (iii) any Events affecting the industry in
which such Person operates generally, but only to the extent that such Events do
not adversely affect such Person and its Subsidiaries in a disproportionate
manner, (iv) changes in United States or world general political, economic or
capital market conditions, but only to the extent that such changes do not
adversely affect such Person and its Subsidiaries in a disproportionate manner,
(v) actual or threatened stockholder litigation arising from allegations of
breach of fiduciary duty relating to this Agreement or the Related Agreements,
including related claims with respect to disclosure of the Merger or this
Agreement, or (vi) any delay in the mailing of the Form S-4 or Proxy Statement
due to the SEC or Blue Sky Laws review process related thereto.

"Materials of Environmental Concern" means chemicals, pollutants,
pollution, contaminants, wastes, Hazardous Substances and any other substance
that is now or hereafter regulated by any applicable Environmental Law or that
is otherwise a danger to health, reproduction or the Environment.


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<PAGE>

"Merger Consideration" means 3,700,000 Parent Common Shares.

"Minimum Company Stockholders Equity" means negative Three Million One
Hundred Twenty-Three Thousand Four Hundred Twenty-Eight Dollars and no cents
(-$3,123,428).

"Minute Books" means, (i) with respect to any corporation, minute books of
such corporation containing records of all proceedings, consents, actions and
meetings of the Board of Directors, committees of the Board of Directors,
stockholders and committees of stockholders of such corporation, or (ii) with
respect to any other Entity, minutes or similar books and records of such Entity
containing records of all proceedings, consents, actions and meetings of the
equivalent governing bodies, including managing members in the case of a limited
liability company or general partners in case of a partnership, and owners of
such Entity.

"Order" means any order, ruling, decision, verdict, decree, writ, subpoena,
award, judgment, injunction, assessment, or other similar determination or
finding by, before, or under the supervision of any Governmental Entity,
arbitrator or mediator.

"Ordinary Course of Business" means, with respect to any action by any
Person, that such action (i) is consistent in nature, scope, quality, frequency
and magnitude with the past customs and practices of such Person, to the extent
practicable if such Person has a rapidly growing business, and is taken in the
ordinary course of the normal, day-to-day operations of such Person, and (ii)
does not require authorization by (1) such Person's board of directors (or any
committee thereof), (2) such Person's stockholders (or by any Person or group of
Persons exercising similar authority), or (3) more than one of such Person's (A)
principal executive officer, (B) principal operating officer, (C) principal
financial officer, and (D) other officer performing substantially similar
functions.

"Organizational Documents" means, with respect to any Entity, (i) if a
corporation, its articles or certificate of incorporation and its bylaws, or
(ii) if another type of Entity, any other charter, regulations or similar
document, including Contracts, adopted or filed in connection with the creation,
formation or organization of such Entity; in each case as Amended.

"OTCBB" means the OTC Bulletin Board.

"Other Filings" means all filings made by, or required to be made by, the
Company or Parent, as the case may be, with the SEC in connection with the
Transactions, other than the Form S-4 and Proxy Statement.

"Open Source Materials" means all software or other copyrightable work that
is distributed as "free software" or "open source software" or under
substantially similar licensing or distribution terms, including any software
licensed under a license approved as "Open Source" by the Open Source
Initiative, http://www.opensource.org/, or as "Free Software" by The Free
Software Foundation, http://www.fsf.org/.

"Parent Balance Sheet" means the balance sheet of Parent as of the Parent
Balance Sheet Date, as contained in the Parent SEC Reports.

"Parent Balance Sheet Date" means September 30, 2006.

"Parent Board Recommendation" means the unanimous recommendation by the
Parent Board that the Parent's stockholders vote in favor of (i) the adoption
and approval of this Agreement and the Merger, and (ii) the Parent Authorized
Stock Increase.


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<PAGE>

"Parent Common Share" means a share of common stock, par value $0.01 per
share, of Parent.

"Parent Information" means the statements regarding Parent, its operations,
business, directors, officers, Subsidiaries and stockholders contained in the
Form S-4, Proxy Statement or Other Filings.

"Parent Option" means any option granted, to the extent not exercised,
expired or terminated, to a current or former employee, director, officer or
consultant of Parent or any Parent Subsidiary, or any predecessor of any of the
foregoing, to purchase or otherwise acquire Parent Common Shares pursuant to any
Parent Stock Option Plan.

"Parent SEC Reports" means all SEC Reports filed by Parent with the SEC,
including those that Parent may file subsequent to the date hereof.

"Parent Stock Option Plan" means any equity incentive, stock option, stock
bonus, stock award or stock purchase plan, program or arrangement, as amended to
date, of Parent or any Parent Subsidiary, or any predecessor of any of the
foregoing, including Parent's Stock Option Plan, effective as of January 1, 2004
and, if approved at Parent's 2006 annual meeting of its stockholders, Parent's
2006 Equity Incentive Plan (as such plan is described in Parent's proxy
statement filed with the SEC on April 27, 2006).

"Parent Warrant" means a warrant or similar right to purchase any Parent
Common Shares.

"PCAOB" means the United States Public Company Accounting Oversight Board.

"Person" means any individual, Group, Governmental Entity or Entity.

"Principal Market" means, with respect to any Entity, the Nasdaq Capital
Market, the New York Stock Exchange, the Nasdaq National Market, the American
Stock Exchange, the OTCBB or any other national securities exchange registered
under Section 6 of the Exchange Act, whichever is at the time the principal
trading exchange, market or inter-dealer or automated quotation system for the
shares of common stock of such Entity.

"Property" means any present or future, legal or equitable, vested or
contingent right to or interest in any fixture, real property, personal property
or any other property or asset, including goods, leases, securities (whether or
not certificated), commercial paper, financial assets, commodities, accounts,
equipment, chattel paper, derivatives, instruments, money, claims, licenses,
Contracts, Intellectual Property, royalties and general intangibles, and any
proceeds of any of the foregoing.

"Proxy Statement" means the proxy materials constituting part of the joint
proxy statement/prospectus forming part of the Form S-4 or otherwise
communicated to Parent or Company stockholders in connection with the Merger or
relating to the Company Stockholders Meeting or the Parent Stockholders Meeting.

"Registered Intellectual Property" means, with respect to any Person, all
United States, international and foreign (i) patents and patent applications
(including provisional applications), (ii) registered trademarks or service
marks, applications to register trademarks or service marks, intent-to-use
applications, or other registrations or applications related to trademarks or
service marks, (iii) registered Internet domain names or toll-free numbers, and
(iv) registered copyrights and applications for copyright registration, in each
case of clauses (i) through (iv) next preceding, that is owned by, registered or
filed in the name of, such Person or any Subsidiary of such Person.


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<PAGE>

"Related Agreements" means the Confidentiality Agreement, the Shared
Expenses Agreement, the Escrow Agreement, the Limited Joinder Agreement, the
Certificate of Merger, the Employment Agreements, the A Warrants, the B
Warrants, the DiGenova Warrant, the Registration Rights Agreement, the
Termination and Release Agreements, the Management Agreement, the Conversion
Agreements, the Note Exchange Agreement, the Securities Exchange Agreement, the
Support Agreements, the Lock-Up Agreement, the Consulting Agreement, the
amendment to the Stanford LOC dated the date hereof, the Forbearance Agreement,
the Amended and Restated Stanford LOC, and any other agreement delivered on the
date hereof or at or in connection with the Closing.

"Representatives" means, with respect to any Person, such Person's
officers, directors, employees, managers, consultants, contractors, agents,
investment bankers, brokers, agents, and other financial, banking and legal
advisors or other representatives.

"Repurchase Rights" means, with respect to any Entity, outstanding rights
held by such Entity to repurchase or redeem Equity Interests in such Entity, or
similar restrictions in such Entity's favor with respect to any of its Equity
Interests.

"SEC" means the United States Securities and Exchange Commission.

"SEC Reports" means any forms, statements, schedules, requests, reports and
documents (including items incorporated by reference) required or authorized to
be filed with the SEC pursuant to the Securities Act or the Exchange Act or the
rule and regulations promulgated by the SEC thereunder.

"SEC Rules" means the rules and regulations promulgated by the SEC under
the Securities Act, the Exchange Act or SOX.

"Securities Act" means the Securities Act of 1933, as Amended, and the
rules and regulations promulgated thereunder.

"Securities" means any stock, capital stock or similar security, shares,
partnership (general or limited) interests, membership or limited liability
company interests or units, interests in a joint venture, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement or business trust, voting trust certificate, investment
contract, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of interest or
participations in, temporary or interim certificates for, receipt for,
guarantees of, warrants or rights to subscribe to, purchase or otherwise
acquire, or any other Commitments, puts or other options, futures, or
certificate of deposit for, any of the foregoing.

"Security Interest" means any Lien, except for (i) liens for taxes,
assessments, governmental charges, or claims that are being contested in good
faith by appropriate Actions promptly instituted and diligently conducted and
only to the extent that a reserve or other appropriate provision, if any, has
been made on the face of the Company Financial Statements in an amount equal to
the Liability for which the lien is asserted, (ii) statutory liens of landlords
and warehousemen's, carriers', mechanics', suppliers', materialmen's,
repairmen's or other like liens (including contractual landlords' liens) arising
in the Ordinary Course of Business and with respect to amounts not yet
delinquent, or with respect to amounts being contested in good faith by
appropriate proceedings, and (iii) liens incurred or deposits made in the
Ordinary Course of Business in connection with workers' compensation,
unemployment insurance and other similar types of social security.


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"SOX" means the Sarbanes-Oxley Act of 2002, as Amended, and the rules and
regulations promulgated thereunder.

"Stockholders" means all of the stockholders of the Company from time to
time, other than stockholders who do not hold any Company Common Shares other
than Dissenting Shares.

"Subsidiary" means, with respect to any Person, (a) any corporation in
which a controlling interest in the total voting power of all classes of the
Equity Interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors of such corporation is owned by such Person
directly or through one or more other Subsidiaries of such Person, and (b) any
Person other than a corporation of which at least a controlling interest of the
Equity Interests (however designated) entitled (without regard to the occurrence
of any contingency) to vote in the election of the governing body, partners,
managers, or others that will control the management of such Entity is owned by
such Person directly or through one or more other Subsidiaries of such Person.

"Superior Offer" means, with respect to the party receiving an offer, any
bona fide written offer, not solicited after the date of this Agreement by the
party or on behalf of the party by any of its Representatives, made by a Person
to acquire, directly or indirectly, pursuant to a tender offer, exchange offer,
merger, consolidation or other business combination (including by means of a
tender offer followed promptly by a back-end merger), all or substantially all
of the assets of the party receiving the offer or all of the total outstanding
voting securities of such party and as a result of which (i) Equity Interests
held by stockholders of such party immediately preceding such transaction would
represent or be converted into less than 50% of the Equity Interests in the
surviving or resulting Entity of such transaction or any direct or indirect
parent or Subsidiary thereof, or (ii) such third party acquiring, directly or
indirectly, all or substantially all of the assets of the party receiving the
offer and such party's Subsidiaries, taken as a whole, in each case for
consideration consisting exclusively of cash or publicly-traded equity
securities, on terms that such party's Board of Directors has in good faith
determined (after consulting with such party's legal counsel and financial
advisors), to be more favorable to its stockholders than the terms of the Merger
and taking into consideration whether such offer is reasonably capable of being
consummated, and whether financing to the extent required by the Person making
such offer, is then fully committed and available, and is not contingent.

"Support Agreements" means those certain Support Agreements, made and
entered into as of the date hereof, by and between certain stockholders of the
Company and Parent, and by and between Dr. L.S. Smith and the Company.

"Tangible Personal Property" means, with respect to any Person, all
machinery, equipment, tools, furniture, office equipment, computer hardware,
supplies, materials, vehicles and other items of tangible personal property
(other than inventories) of every kind owned or leased by such Person, wherever
located and whether or not carried on such Person's books.

"Taxes" means (i) all taxes, levies, assessments, duties, imposts or other
like assessments, charges or fees (including estimated taxes, charges and fees),
including income, profits, corporations, advance corporation, gross receipts,
transfer, excise, property, sales, use value-added, ad valorem, license,
capital, wage, employment, payroll, withholding, social security, severance,
occupation, import, custom, stamp, alternative, add-on minimum, environmental,
franchise or other governmental taxes or charges, imposed by any Governmental
Entity responsible for the imposition of any such tax (each, a "Tax Authority"),
including any interest, penalties or additions to tax applicable or related
thereto, (ii) all liability for the payment of any amounts of the type described
in clause (i) as the result of being (or ceasing to be) a member of an
affiliated, consolidated, combined or unitary group (or being included (or
required to be included) in any Tax Return related thereto), and (iii) all


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liability for the payment of any amounts as a result of an express or implied
obligation to indemnify or otherwise assume or succeed to the liability of any
other person with respect to the payment of any amounts of the type described in
clause (i) or clause (ii).

"Tax Return" means any report, return, statement, declaration, claim for
refund, information return or other written information (including any related
or supporting schedules, statements or information and amended returns) filed or
required to be filed in connection with any Taxes, including the administration
of any Laws, regulations or administrative requirements relating to any Taxes.

"Third Party Intellectual Property Rights" means, with respect to any
Person, any Intellectual Property owned by, or exclusively licensed by, another
Person (other than a Subsidiary of such first Person).

"Transaction Documents" means this Agreement, the Related Agreements and
any certificates, instruments, proxies or documents delivered or to be delivered
pursuant to or in connection with this Agreement, any Related Agreement or any
Transaction.

"Transactions" means all of the transactions contemplated by this
Agreement, including the Merger.

"Transfer" means, with respect to any Property, to sell, deed, dividend,
distribute (including upon liquidation or distribution), exchange, convey,
consign, negotiate, gift, devise, bequeath, pass by intestate succession,
assign, issue, or otherwise alienate, transfer or dispose of such Property or
any interest therein or right thereto, whether directly or indirectly (through
another Person or otherwise), whether voluntarily, involuntarily or by operation
of law, and whether with or without consideration. The related terms
"Transferred" and "Transferring" shall have the correlative meanings.

"U.S. Export and Import Laws" means all United States export and import
Laws and controls, including the Arms Export Control Act (22 U.S.C. ss. 2778),
the International Traffic in Arms Regulations (ITAR) (22 C.F.R. Subchapter M),
the Export Administration Act of 1979, as amended (50 U.S.C. ss.ss. 2401-2420),
the Export Administration Regulations (EAR) (15 C.F.R. 730-774), and all other
laws and regulations of the United States Government regulating the provision of
services to non-U.S. parties or the export and import of articles or information
from and to the United States of America and non-U.S. parties.

Section 1.2. Other Definitions. All other capitalized terms used in
this Agreement and not defined in Section 1.1 shall have the meanings ascribed
to such terms elsewhere in this Agreement.

Section 1.3. Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement with the assistance of legal
counsel, and any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any party shall not apply to
any construction or interpretation hereof. If an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party because of the authorship of any provision of
this Agreement. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has
Breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to a similar subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not


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<PAGE>

detract from or mitigate the fact that the party is in Breach of the first
representation, warranty, or covenant. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

(a) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions, or to designated "Exhibits," "Schedules" or
"Appendices," are to the designated Articles, Sections and other subdivisions
of, or the designated Exhibits, Schedules or Appendices to, this Agreement;

(b) references to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are not
prohibited by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually;

(c) references to any agreement, document or instrument means such
agreement, document or instrument as Amended and in effect from time to time in
accordance with the terms thereof, and shall be deemed to refer as well to all
addenda, annexes, appendices, exhibits, schedules and other attachments thereto;

(d) reference to any Law means such Law as Amended, codified, replaced
or reenacted, in whole or in part, and in effect from time to time, including
rules and regulations promulgated thereunder, and reference to any section or
other provision of any Law means that provision of such Law from time to time in
effect and constituting the substantive Amendment, codification, replacement or
reenactment of such section or other provision;

(e) references to "dollars" or "cash", and the "$" symbol, are
references to the lawful money of the United States of America;

(f) with respect to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding";

(g) the words "include," "includes," and "including" shall be deemed to
be followed by "without limitation";

(h) the term "or" shall not be exclusive;

(i) pronouIns in masculine, feminine, and neuter genders shall be
construed to include any other gender;

(j) whenever the singular number is used, if required by the context,
the same shall include the plural, and vice versa;

(k) the words "this Agreement," "herein," "hereof," "hereby,"
"hereunder," and words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or other subdivision; and

(l) all accounting terms shall be interpreted, and all accounting
determinations hereunder shall be made, in accordance with GAAP.




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ARTICLE II.
THE MERGER

Section 2.1. The Merger. Upon the terms and subject to satisfaction or
waiver of the conditions set forth in this Agreement, and in accordance with the
DGCL, Merger Sub, at the Effective Time, shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (together with its successors, the "Surviving Corporation") and as a
wholly-owned subsidiary of Parent.

Section 2.2. The Closing. The closing of the Merger (the "Closing")
shall take place (i) on the second Business Day after the satisfaction or waiver
of each of the conditions set forth in Article VII, or (ii) at such other time
as Parent and the Company shall agree in writing (the date of the Closing, the
"Closing Date"). The Closing shall take place at the offices of Sheppard,
Mullin, Richter & Hampton LLP, 12275 El Camino Real, Suite 200, San Diego,
California 92130-2006, or at such other location as Parent and the Company agree
in writing.

Section 2.3. Effective Time. On the Closing Date, or on such other date
as may be mutually agreed by Parent and the Company, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger in
substantially the form of Exhibit A (the "Certificate of Merger") with the
Office of the Secretary of State of the State of Delaware, executed and
otherwise filed in accordance with the relevant provisions of the DGCL (the date
and time of such filing, or if another date and time is specified in the
Certificate of Merger, such specified date and time, the "Effective Time").

Section 2.4. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, at the Effective Time, except as otherwise provided herein, all the
Property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all Indebtedness, Liabilities
and duties of the Company and Merger Sub shall become the Indebtedness,
Liabilities and duties of the Surviving Corporation.

Section 2.5. Certificate of Incorporation; Bylaws. The certificate of
incorporation and bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall constitute the certificate of incorporation and bylaws of
the Surviving Corporation at and after the Effective Time; provided, however,
that (i) Article I of the certificate of incorporation of the Surviving
Corporation will be amended at the Effective Time to read "The name of the
corporation is Superior Galleries, Inc." (or as Parent and the Company may
otherwise agree prior to the filing of the Certificate of Merger), and (ii) at
the election of Parent, such election to be made in Parent's sole discretion and
effected by delivery of a notice to the Company on or before the Closing Date,
Article IV of the certificate of incorporation of the Surviving Corporation will
be amended at the Effective Time to read "The total number of shares of capital
stock which the corporation shall have authority to issue is 6,000,000 shares of
common stock, $0.0001 par value per share."; in each case until thereafter
amended.




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<PAGE>

Section 2.6. Directors and Officers. Unless otherwise determined by
Parent prior to the Effective Time, the directors and officers of Merger Sub
immediately prior to the Effective Time shall be the sole directors and officers
of the Surviving Corporation effective as of the Effective Time, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal.

ARTICLE III.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

Section 3.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any of the following securities:

(a) Company Common Shares. Each Closing Company Common Share issued and
outstanding immediately prior to the Effective Time (exclusive of Dissenting
Shares referred to in Section 3.10) shall be automatically be cancelled and
retired and shall cease to exist, and the holder of a stock certificate that,
immediately prior to the Effective Time, represented issued and outstanding
Closing Company Common Shares shall cease to have any rights with respect
thereto, except the right to receive, upon the surrender of such certificates
(or delivery of the affidavit and bond, if any, specified in Section 3.4(i)) and
upon the terms and subject to the conditions set forth in this Article III and
elsewhere in this Agreement, 0.2731 Parent Common Shares for each Company Common
Share (the "Exchange Ratio").

(b) Cancellation of Certain Shares. Each Company Common Share held
immediately prior to the Effective Time by the Company, Parent, Merger Sub or
any Subsidiary of the Company, Parent or Merger Sub, and each share of any class
of capital stock of the Company other than the Company Common Stock (including
each series of preferred stock of the Company), shall be automatically cancelled
and retired and shall cease to exist, without any conversion thereof or
consideration therefor, and no payment shall be made with respect thereto.

(c) Capital Stock of Merger Sub. Each share of capital stock of Merger
Sub that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without further action on the part of the
sole stockholder of Merger Sub, be converted into and become (i) if Article IV
of the certificate of incorporation of the Surviving Corporation is amended at
the Effective Time as provided in clause (ii) in the proviso in Section 2.5,
five thousand, or (ii) otherwise, one; in either case, validly issued, fully
paid and non-assessable share(s) of common stock of the Surviving Corporation
(and the shares of Surviving Corporation into which the shares of Merger Sub
capital stock are so converted shall be the only shares of the Surviving
Corporation's capital stock that are issued and outstanding immediately after
the Effective Time). Each certificate evidencing ownership of shares of Merger
Sub common stock will evidence ownership of such shares of common stock of the
Surviving Corporation.

Section 3.2. Capitalization Adjustments to Shares. In the event of any
Capitalization Adjustment with respect to the Company Common Shares or Parent
Common Shares occurring after the date of this Agreement and prior to the
Effective Time, or with respect to Parent Common Shares being held in the Escrow
Account pursuant to the Escrow Agreement after the Effective Time for so long as
held therein, all references in this Agreement to specified numbers of shares of
any class or series affected thereby, and all calculations provided for that are
based upon numbers of shares of any class or series (or trading prices therefor)


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affected thereby, 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.

Section 3.3. Allocation and Distribution of Merger Consideration.
Subject to Section 3.1(b), Section 3.5, Section 3.14 and other provisions of
this Article III, the Merger Consideration shall be allocated among all
pre-Closing Stockholders pro rata according to the respective number of Closing
Company Common Shares held by each such stockholder. Parent (and, to the extent
applicable, the Stockholder Agent) shall deliver the Merger Consideration to the
Exchange Agent for distribution to such stockholders, provided that Parent may
retain any consideration in respect of any Dissenting Stockholders for
distribution pursuant to Section 3.10 or for paying any settlement, award or
judgment of any Actions relating to such stockholder's Dissenting Shares.

Section 3.4. Surrender of Certificates; Payment.

(a) Exchange Procedures.

(1) Promptly after the Effective Time, Parent shall instruct
the Exchange Agent to mail to each holder of record of Closing Company
Common Shares (i) a letter of transmittal, substantially in the form of
Exhibit B (collectively, the "Letters of Transmittal"), and (ii)
instructions for use in effecting surrender by such holder of its
Certificates to the Exchange Agent in exchange for the Merger
Consideration.

(2) The holder of each Certificate, upon the surrender of such
Certificate by such holder to the Exchange Agent (or the delivery of
the affidavit and bond, if any, specified in Section 3.4(i)), together
with a Letter of Transmittal duly completed and validly executed by
such holder in accordance with the instructions thereto, and such other
documents as may reasonably be required by the Exchange Agent, shall,
subject to Section 3.4(e) and Section 3.14, be entitled to receive in
exchange for such Certificate a certificate representing the number of
Parent Common Shares for which the Company Common Shares theretofore
represented by such Certificate may be exchanged pursuant to Section
3.1, and such surrendered Certificate shall forthwith thereafter be
cancelled and retired.

(3) Each Certificate shall be deemed at all times from and
after the Effective Time to represent only the right to receive, upon
exchange as contemplated in this Section 3.4, the Merger Consideration
to which the holder of the Company Common Shares formerly represented
by such Certificate is entitled to receive in the Merger.

(b) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Shares with a record date thirty or more days after the Effective
Time but prior to the surrender of a Certificate (or the delivery of the
affidavit and bond, if any, specified in Section 3.4(i)) will be paid or due to
the holder of such Certificate in respect of the Parent Common Shares
exchangeable therefor.

(c) Transfers of Ownership. In the event of a transfer of ownership of
Company Common Shares that is not registered on the transfer records of the
Company, the Merger Consideration payable hereunder with respect to such Company
Common Shares may be paid to a Person other than the Person in whose name the
Certificate so surrendered is registered, but only if (i) such Certificate shall
be properly endorsed and otherwise be in proper form for transfer, and (ii) that
the Person requesting such exchange shall have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the issuance
of a certificate for Parent Common Shares in any name other than that of the


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<PAGE>

registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.

(d) Exchange Agent. Prior to the Effective Time, Parent or a direct or
indirect Subsidiary of Parent shall make available to Registrar & Transfer
Company (or such other transfer agent which Parent may appoint to act as the
exchange agent hereunder from time to time), as exchange agent hereunder (in
such capacity, together with its successors in such capacity, the "Exchange
Agent"), for distribution by the Exchange Agent in accordance with this Article
III, certificates representing Parent Common Shares to deliver to the holders of
outstanding Company Common Shares (other than any Company Common Shares to be
canceled pursuant to Section 3.1(b) and Dissenting Shares referred to in Section
3.10), as the aggregate Merger Consideration payable to such holders pursuant to
Section 3.1 in exchange for such Company Common Shares. Parent shall deliver
irrevocable instructions to the Exchange Agent to cause the Exchange Agent to
deliver the Merger Consideration contemplated to be issued pursuant to Section
3.1 as promptly as reasonably practicable upon receipt of the documents,
including Letters of Transmittal and Certificates, described above. Upon
surrender of a Certificate to the Exchange Agent for exchange, together with a
duly executed Letter of Transmittal and such other documents as may be
reasonably required by the Exchange Agent, the Exchange Agent shall (i) deliver
to the holder of such Certificate a certificate representing the number of
Parent Common Shares that such holder has the right to receive as Merger
Consideration pursuant to this Article III, and (ii) deliver to the Escrow Agent
under the Escrow Agreement on behalf of such holder a certificate in the name of
the Escrow Agent with respect to the portion of the Escrow Shares that such
holder has placed in escrow pursuant to this Article III.

(e) No Fractional Shares. No certificate or scrip representing
fractional Parent Common Shares shall be issued upon the surrender of
certificates formerly representing Company Common Shares or otherwise in the
Merger, and in lieu thereof, any fractional Parent Common Share shall be rounded
up to the nearest whole Parent Common Share; provided that, prior to applying
the sentence next preceding with respect to any holder of Company Common Shares,
all Company Common Shares held by such holder shall be aggregated, taking into
account all certificates formerly representing Company Common Shares delivered
by such holder and the aggregate number of Company Common Shares represented
thereby, and after giving effect to the exercise of any Company Options or
Company Warrants to be exercised by such holder in connection with the Closing.

(f) Further Rights in Company Common Shares. All Merger Consideration
issued and paid upon conversion of the Company Common Shares in accordance with
the terms hereof shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such Company Common Shares.

(g) Unclaimed Merger Consideration. The Exchange Agent shall upon
demand promptly return any portion of the Merger Consideration that remains
undistributed six months after the Effective Time, and any holders of Company
Common Shares immediately prior to the Effective Time who have not theretofore
complied with this Article III shall thereafter look only to Parent (subject to
applicable abandoned property, escheat and similar Laws) for the Merger
Consideration. Notwithstanding anything to the contrary contained herein, if any
Certificate has not been surrendered within three years of the Effective Time,
subject to applicable Law, any amounts payable in respect of such Certificate
shall, to the extent permitted by applicable Laws, become the property of the
Parent, free and clear of all claims or interests of any Person previously
entitled thereto.

(h) No Liability. None of Parent, the Company, Merger Sub or the
Surviving Corporation shall be liable to any Person for any Merger Consideration
delivered to a public official pursuant to any abandoned property, escheat or
similar Law.


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<PAGE>

(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon (i) the making of an affidavit of that fact by holder thereof
claiming such Certificate to be lost, stolen or destroyed, and (ii) if required
by Parent or the Exchange Agent in their respective discretion, the posting by
such holder of a bond, in such reasonable amount as Parent or the Exchange Agent
may direct, as indemnity against any claim that may be made against it with
respect to such Certificate; the Exchange Agent or Parent, as applicable, shall
deliver to such holder the appropriate Merger Consideration in exchange for the
Company Common Shares represented by such lost, stolen or destroyed Certificate.

Section 3.5 Withholding Rights. Each of Parent, Merger Sub, the
Surviving Corporation and the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Shares or Company Options such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code and the rules and regulations promulgated thereunder, or
any provision of a Tax Law, or pursuant to other applicable Orders. To the
extent that amounts are so withheld from the Merger Consideration, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Common Shares or Company Options in respect of whom
such deduction and withholding was made.

Section 3.6 Share Transfer Books. At the Effective Time, the share
transfer books of the Company shall be closed, and, thereafter, there shall be
no further registration of Transfers of Company Common Shares theretofore
outstanding on the records of the Company. From and after the Effective Time,
the holders of certificates representing Company Common Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Company Common Shares, except as otherwise provided herein or by
applicable Laws. On and after the Effective Time, any certificates presented to
the Exchange Agent or Parent for any reason shall be cancelled and retired, and
the holder thereof shall only have the right to receive the Merger
Consideration, without interest, upon the terms and subject to the conditions
hereof.

Section 3.7 Company Options.

(a) Before the Effective Time, the Company shall take all action
necessary such that each Company Option that is outstanding and unexercised
immediately prior to the Effective Time and that is not surrendered to Parent as
provided in Section 3.7(b) within 30 days of the Closing Date shall be
cancelled. As soon as practicable following the date hereof, the Company Board
(or, if appropriate, any committee thereof administering the Company Stock
Option Plans) shall adopt such resolutions or take such other actions as may be
required to effect the provisions of this Section 3.7, including making the
appropriate election under Section 8.3 of the Company's 2003 Omnibus Stock
Option Plan or 2000 Omnibus Stock Option Plan. The Company shall use its Best
Efforts to prevent the acceleration of any Company Option in connection with the
Merger or other Transactions.

(b) After the Effective Time, promptly upon the surrender by the
optionee for exchange of a Company Option granted pursuant to any Company Stock
Option Plan, Parent shall grant the optionee thereof a new option (each, a "New
Option") under a Parent Stock Option Plan to purchase Parent Common Shares
subject to, and exercisable upon, the terms and conditions of the Contracts
evidencing such Company Option previously Made Available to Parent, except:

(1) from and after the Effective Time, Parent and the Parent
Board or the Compensation Committee of the Parent Board, as the case
may be, shall be substituted for the Company and the Company
Subsidiaries and their respective Boards of Directors and committees
thereof for the purpose of administering the terms and conditions of
the substituted New Option;


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<PAGE>

(2) all references to the Company (or any Company Subsidiary)
shall be replaced by references to Parent;

(3) all references to the Company (or any Company Subsidiary)
or its state of incorporation, address and similar information shall be
replaced by references to Parent and its state of incorporation,
address and other corresponding information;

(4) all references to Company Common Shares shall be replaced
by references to Parent Common Shares;

(5) the number of Parent Common Shares subject to the
substituted New Option shall equal the product of the number of Company
Common Shares subject to the surrendered Company Option times the
Exchange Ratio (with such product being rounded to the nearest whole
number of Parent Common Shares);

(6) the exercise price per Parent Common Share under the
substituted New Option shall be equal to the quotient of exercise price
per Company Common Share under the surrendered Company Option divided
by the Exchange Ratio (with such exercise price not to be less than the
par value per Parent Common Share); and

(7) any other changes required by Section 3.7(c) shall be
made.

Upon such surrender of a Company Option and the grant of a New Option, such
Company Option shall terminate and be of no further force or effect.

(c) The adjustments provided in this Section 3.7 with respect to any
Company Options that are "incentive stock options" (as defined in Section 422 of
the Code) shall be effected in a manner that complies with Code Section 424(a).
Except as otherwise provided in this Section 3.7, the duration and other terms
of each substituted New Option shall, to the extent permitted by Law and
otherwise reasonably practicable, be the same as the corresponding surrendered
Company Option (taking into account any changes thereto, including acceleration
thereof, provided for in the Company Stock Option Plan by reason of this
Agreement or the Transactions).

(d) Prior to the Effective Time, the Board of Directors of Parent, or
an appropriate committee of non-employee directors thereof, shall adopt a
resolution consistent with the interpretive guidance of the SEC so that the
assumption of the Company Options held by Company Insiders pursuant to Section
3.7(a) shall be an exempt transaction for purposes of Section 16 of the Exchange
Act by any officer or director of the Company who becomes subject to the
provisions of Section 16 of the Exchange Act in respect of Parent (a "Company
Insider").

(e) The Company and Parent shall take all commercially reasonable
actions that are necessary in order to effect the foregoing provisions of this
Section 3.7 as of the Effective Time.

(f) The total number of Parent Common Shares issuable under all Parent
Stock Option Plans immediately after the Effective Time shall not exceed
2,450,000.

Section 3.8 Unvested Company Shares. Parent Common Shares delivered as
Merger Consideration pursuant to this Article III in exchange for Company Common
Shares that immediately prior to the Effective Time were restricted, not fully
vested or subject to Repurchase Rights ("Unvested Company Shares") shall be
subject to the same terms, conditions, restrictions, vesting arrangements or
Repurchase Rights, including rights to dividends and voting rights, that were


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<PAGE>

applicable to such Unvested Company Shares immediately prior to or at the
Effective Time (and, except as set forth in Section 3.8 of the Company
Disclosure Schedules, no vesting, acceleration, or lapse of Repurchase Rights,
shall occur with respect to such Unvested Company Shares by reason of the
Merger), and, notwithstanding any other provision of this Article III, Parent
shall be entitled to place or have placed appropriate legends or other
restrictions on the certificates representing such Parent Common Shares or to
delay the delivery or release of such Parent Common Shares to the holder of such
Unvested Company Shares. By virtue of this Agreement, all outstanding Repurchase
Rights with respect to Unvested Company Shares that the Company may hold
immediately prior to the Effective Time shall be assigned to Parent in the
Merger and shall thereafter be exercisable by Parent upon the same terms and
subject to the same conditions that were in effect immediately prior to the
Effective Time, except that Repurchase Rights may be exercised by Parent for
each Unvested Company Share by paying to the former holder thereof the
repurchase price in effect for such Unvested Company Share immediately prior to
the Effective Time divided by the Exchange Ratio and retaining the Parent Common
Shares for which such Unvested Company Share may have otherwise been exchanged.
Following the Effective Time, no Unvested Company Share, or right thereto, may
be Encumbered or Transferred by any Person, other than Parent, or be taken or
reached by any legal or equitable process in satisfaction of any Indebtedness or
other Liability of such Person, prior to the distribution to such Person of the
Parent Common Shares exchangeable therefor in accordance with this Agreement.

Section 3.9 Company Warrants. At the Effective Time, each
then-outstanding Company Warrant disclosed in Section 4.3(d) of the Company
Disclosure Schedules shall be assumed by Parent (and the Company covenants and
agrees to Amend each Company Warrant to provide for such assumption if necessary
to ensure that no Commitment to acquire any Company Common Shares or any other
Equity Interests of the Company will remain outstanding after the Effective
Time), subject to, and exercisable upon, the same terms and conditions as under
the applicable Company Warrant (as Amended and made available to Parent prior to
the date hereof), except:

(1) all references to the Company shall be replaced by
references to Parent;

(2) all references to the Company or its state of
incorporation, address and similar information shall be replaced by
references to Parent and its state of incorporation, address and other
corresponding information;

(3) all references to Company Common Shares shall be replaced
by references to Parent Common Shares;

(4) the number of Parent Common Shares subject to the Company
Warrant, as assumed, shall equal the product of the number of Company
Common Shares subject to such Company Warrant times the Exchange Ratio
(with such product being rounded to the nearest whole number of Parent
Common Shares);

(5) the exercise price per Parent Common Share under the
Company Warrant, as assumed, shall be equal to the quotient of exercise
price per Company Common Share under such Company Warrant divided by
the Exchange Ratio (with such exercise price not to be less than the
par value per Parent Common Share); and

(6) the anti-dilution provisions, if any, of such Company
Warrant shall not apply to, and the exercise price of such Company
Warrant shall not be effected by, the issuance of the Merger
Consideration.


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<PAGE>

Upon surrender of a Company Warrant to Parent for exchange, Parent shall issue
to the registered holder thereof a new warrant of like tenor, subject to the
changes and other provisions specified in this Section 3.9.

Section 3.10 Appraisal Rights. Notwithstanding anything in this
Agreement to the contrary, Company Common Shares that are outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Company Common Shares in accordance with Section 262 of the
DGCL ("Dissenting Shares") shall not be cancelled and retired or be exchangeable
for the Merger Consideration and will be paid for by the Surviving Corporation
in accordance with Section 262 of the DGCL; provided, however, that if any such
holder shall fail to perfect or otherwise shall waive, withdraw or lose the
right to appraisal and payment under the DGCL, the right of such holder to such
appraisal of its Company Common Shares shall cease, and such Company Common
Shares shall be deemed cancelled and retired as of the Effective Time and the
holder thereof shall have the right to receive the Merger Consideration as
provided in this Article III. The Company shall give Parent (i) prompt notice of
any written demands (or purported demands) for appraisal received by the Company
with respect to shares of capital stock of the Company, withdrawals (or
attempted withdrawals) of such demands, and any other written instruments served
pursuant to Section 262 of the DGCL or other applicable Law and received by the
Company relating to stockholder appraisal rights, and (ii) the opportunity to
direct, in its reasonable business judgment, all negotiations and proceedings
with respect to exercise of such appraisal rights. The Company shall not, except
with Parent's prior written consent, (1) voluntarily make any payment with
respect to any demands for appraisal for Dissenting Shares, (2) offer to settle,
or settle, any such demands, (3) waive any failure to timely deliver a written
demand for appraisal in accordance with the DGCL, or (4) agree to do any of the
foregoing.

Section 3.11 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title, and possession to all Contracts, Property,
rights, privileges and powers of the Company and Merger Sub, the officers and
directors of the Company, Parent and Merger Sub are fully authorized in the name
of their respective corporations or otherwise to take, and the Company and
Parent shall cause them to take, all such lawful and necessary action.

Section 3.12 Tax Consequences. For federal income tax purposes, the
Merger is intended to constitute a reorganization within the meaning of Section
368 of the Code. Nothing in this Section 3.12 shall be interpreted as requiring
any change in the amount or kind of Merger Consideration payable to any Company
stockholder in connection with the Merger.

Section 3.13 Accounting Treatment. For accounting purposes, the Merger
is intended to be treated as a "purchase."


Section 3.14 Escrow Agreement; Escrow Account.

(a) At the Closing, Parent shall deliver to the Escrow Agent, on behalf
of the pre-Merger stockholders of the Company, stock certificates evidencing a
number of shares equal to 15% of (i) the number of Parent Common Shares issuable
at Closing pursuant to Section 3.1(a), and (ii) the total number of Parent
Common Shares for which the DiGenova Warrant may be exercised (collectively, the
"Escrow Stock"); provided, however, that Parent may deduct from the Escrow Stock
the amount, if any, owing to Parent at the time of the Closing pursuant to
Section 8.2(b), using the cash value per share set forth in the sentence next
succeeding. Parent shall cause the Escrow Agent to deposit the Escrow Stock into
an escrow account with the Escrow Agent (the "Escrow Account") for the purpose


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of securing the indemnification obligations set forth in Article VIII, with each
Parent Common Shares being valued at $2.67 per share, subject to equitable
adjustment in the event of any post-Closing Capitalization Adjustment of Parent
Common Shares. The Escrow Agent shall maintain the Escrow Account for such
purposes until the date one calendar year after the Effective Time (the "Escrow
Period"); provided, however, that in the event any Indemnified Parties have made
any claims under Article VIII prior to the end of the Escrow Period, the Escrow
Period and the release of any Escrow Assets shall be tolled, and a number of
Parent Common Shares having an aggregate value up to the sum of the maximum
aggregate amount of such claims shall remain in the Escrow Account as security
and not be released to the pre-Merger Stockholders and Silvano DiGenova
("DiGenova"), until all such claims shall have been fully and finally resolved
and settled, as provided in the Escrow Agreement. The Escrow Account shall be
subject to the terms and provisions of Section 8.2 and the Escrow Agreement.

(b) Releases of Escrow Stock from the Escrow Account shall be subject
to the terms and conditions of an Escrow Agreement substantially in the form of
Exhibit C (with such amendments thereto as DGSE and the Escrow Agent may agree
with the consent of the Stockholder Agent, such consent not to be unreasonably
withheld, conditioned or delayed, the "Escrow Agreement") and Section 3.4(e).

(c) In the event that this Agreement is adopted by the stockholders of
the Company, then all such stockholders shall, without further act of any such
stockholder, be deemed to have consented to and approved (i) the terms and
conditions of the Escrow Agreement, (ii) the use of the Escrow Account as
collateral to secure the rights of the Indemnified Parties under Article VIII,
and (iii) the appointment by the Stockholders receiving Parent Common Shares in
the Merger of the Stockholder Agent as their exclusive agent, attorney-in-fact
and representative for and on behalf of each such Person (other than holders of
Dissenting Shares) under this Agreement and the Escrow Agreement.

(d) In the event of any inconsistency between this Agreement and the
Escrow Agreement regarding the powers, authorities, rights, duties, obligations
or liabilities of the Escrow Agent, the terms and provisions of the Escrow
Agreement shall control.

Section 3.15 Transfer Of Contingent Rights.

(a) The Merger Consideration and the interests in the Escrow Account,
and the provisions of this Article III and the Escrow Agreement related thereto,
are intended solely for the benefit of the Persons who immediately prior to the
Effective Time were Stockholders. Without limiting the generality of Section
10.5, except as expressly provided in Section 3.15(b), no Person may sell,
assign or otherwise Transfer (whether in connection with any sale, assignment or
other Transfer of any Parent Common Shares or otherwise) to any other Person (i)
any interest in any Merger Consideration not distributed to such first Person,
including any interest in the Escrow Account, or in any portion thereof, or (ii)
any right to participate, in whole or in part, in the distribution of any Merger
Consideration or to obtain any proceeds or shares from the Escrow Account
pursuant to Section 3.14 or the Escrow Agreement; and any attempt to do so shall
be null and void ab initio and of no force or effect. In no event shall the
right to receive contingent shares be evidenced by a negotiable instrument or
certificated security, or be readily marketable.

(b) Notwithstanding Section 3.15(a) and Section 10.5, an interest in
Merger Consideration may be assigned or Transferred involuntarily pursuant to
bequest, the laws of intestate succession or the order of a court in connection
with a settlement of property rights incident to divorce.


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<PAGE>

ARTICLE IV.
COMPANY REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to Parent and Merger Sub that the
statements contained in this Article IV are true, correct and complete as of the
date of this Agreement, except as set forth, with respect to any specific
Section or subsection in this Article IV, in the corresponding section or
subsection of the schedules the Company has delivered to Parent concurrently
with the execution and delivery hereof (the "Company Disclosure Schedules") as
follows (it being understood that the disclosure of any matter or item in the
Company Disclosure Schedules shall not be deemed to constitute an
acknowledgement that such matter or item is required to be disclosed therein or
is material to a representation or warranty set forth in this Agreement and
shall not be used as a basis for interpreting the terms "material,"
"materially," "materiality" or "Material Adverse Effect" or any word or phrase
of similar import, and does not mean that such matter or item would, with any
other matter or item, have or be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company):

Section 4.1 Organization and Qualification; Subsidiaries.

(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each Subsidiary of the
Company (each a "Company Subsidiary" and, collectively, the "Company
Subsidiaries") has been duly organized, and is validly existing and in good
standing, under the laws of the jurisdiction of its incorporation or
organization, as the case may be. Each of the Company and each Company
Subsidiary has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted and as currently proposed by it to be conducted.
Each of the Company and each Company Subsidiary is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification, licensing or good standing necessary other than in
such jurisdictions where the failure to be so qualified individually or in the
aggregate would not have a Material Adverse Effect on the Company.

(b) Section 4.1(b) of the Company Disclosure Schedules sets forth a
true, correct and complete list of all of the Company Subsidiaries and the
jurisdictions of their organization. Except as set forth on Section 4.1(b) of
the Company Disclosure Schedules, none of the Company and the Company
Subsidiaries holds an Equity Interest in any other Entity. The Company directly,
or indirectly through the ownership of a Company Subsidiary, is the owner of all
of the issued and outstanding Equity Interests in each Company Subsidiary, and
all such Equity Interests are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 4.1(b) of the Company Disclosure
Schedules, all of the issued and outstanding Equity Interests of each Company
Subsidiary are owned directly by the Company, or indirectly through the
ownership of a Company Subsidiary, free and clear of all Encumbrances and are
not subject to any preemptive right or right of first refusal created by Law or
the Organizational Documents of such Company Subsidiary or any Contract to which
such Company Subsidiary is a party or by which it is bound. There are no
outstanding Commitments or other Contracts of any character relating to the
issued or unissued Equity Interests or other Securities of any Company
Subsidiary, or otherwise obligating the Company or any Company Subsidiary to
issue, transfer, sell, purchase, redeem or otherwise acquire or sell any such
Equity Interests or Securities.

Section 4.2 Certificate of Incorporation and Bylaws; Corporate Books
and Records. The Company has Made Available to Parent a true, correct and
complete copy of the Company's Certificate of Incorporation, as Amended (the
"Company Certificate of Incorporation"), and the Company's Bylaws, as Amended
(the "Company Bylaws"), in each case as now in effect. The Company has Made
Available to Parent a true, correct and complete copy of the Organizational


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<PAGE>

Documents of each Company Subsidiary, in each case as Amended and now in effect.
Neither the Company nor any Company Subsidiary is in material violation of any
of the provisions of its Organizational Documents. Except as set forth in
Section 4.2 of the Company Disclosure Schedules, (i) true, correct and complete
copies of all Minute Books of the Company and the Company Subsidiaries have been
Made Available to Parent, and (ii) the Minute Books of the Company and each
Company Subsidiary Made Available to Parent contain accurate summaries of all
meetings of directors and stockholders (or equivalent managers and owners) or
actions by written consent of the directors and stockholders (or equivalent
managers and owners) of the Company and the respective Company Subsidiaries
through the date of this Agreement or the Closing Date, as the case may be.

Section 4.3 Capitalization.

(a) The authorized capital shares of the Company consist of 20,000,000
Company Common Shares and 10,000,000 shares of preferred stock, par value $0.001
per share (the "Company Preferred Shares"). As of December 31, 2006, 4,808,280
Company Common Shares (other than treasury shares) were issued and outstanding,
all of which are validly issued and fully paid, nonassessable and free of
preemptive rights (excluding shares held in the treasury of the Company). As of
the Closing Date (after giving effect to the conversions pursuant to Stanford's
Conversion Agreement), no Company Preferred Shares will be issued and
outstanding. As of December 31, 2006, the following (and only the following)
Company Preferred Shares were (i) authorized and (ii) issued and outstanding
(all of which issued and outstanding shares were validly issued and are fully
paid, nonassessable and free of preemptive rights, excluding shares held in the
treasury of the Company):

Shares of Series
Issued and
Designation of Series of Company Shares of Series Outstanding on
Preferred Shares Authorized Date Hereof

Series A $5.00 Redeemable 8%
Convertible Preferred Stock 125,000 0
Series B $1.00 Convertible Preferred Stock 3,400,000 3,400,000
Series D $1.00 Convertible Preferred Stock 2,000,000 2,000,000
Series E $1.00 Convertible Preferred Stock 2,500,000 2,500,000

(b) Except for the Company Common Shares reserved for issuance as set
forth in this Section 4.3 or in Section 4.3 of the Company Disclosure Schedules,
there are no Commitments or other rights or Contracts obligating the Company or
any Company Subsidiary to issue or sell any Equity Interests, or Securities
convertible into or exchangeable for Equity Interests, in the Company or any
Company Subsidiary. Since the Company Balance Sheet Date, the Company has not
issued any Equity Interests, or Securities convertible into or exchangeable for
such Equity Interests, other than those Company Common Shares reserved for
issuance as set forth in this Section 4.3 or in Section 4.3 of the Company
Disclosure Schedules. All issued and outstanding Company Common Shares and all
outstanding Company Options were issued, and all repurchases of Company Common
Shares were made, in material compliance with all applicable Laws.

(c) As of December 31, 2006, the Company has reserved 1,145,000 Company
Common Shares for issuance to employees, non-employee directors and consultants
pursuant to the Company Stock Option Plans, of which 356,250 shares are subject
to outstanding and unexercised Company Options and 788,750 shares remain
available for issuance thereunder, and 3,000 Company Common Shares for Company
Options granted outside the Company Stock Option Plans. As of December 31, 2006,
no outstanding Company Common Shares were subject to Repurchase Rights. Section


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4.3(c)(1) of the Company Disclosure Schedules identifies (i) the name and full
address of each Person who held Company Options or Company Common Shares subject
to a Repurchase Right as of December 31, 2006, (ii) the particular Company Stock
Option Plan pursuant to which such Company Option was granted or such Company
Common Shares were issued, (iii) the date on which such Company Option was
granted or such Company Common Shares were issued, (iv) the exercise or base
price of such Company Option or the repurchase price of such Company Common
Shares, (v) the number of Company Common Shares subject to such Company Option
or Repurchase Right or value covered thereby, (vi) the number of Company Common
Shares as to which such Company Option had vested (or such Repurchase Right had
lapsed) at such date, (vii) the applicable vesting schedule for such Company
Option or such Company Common Shares and whether the exercisability or vesting
of such Company Option, or lapsing of the Repurchase Right, will be accelerated
or affected in any way by the Merger or the transactions contemplated hereby
(whether alone or in combination with any other event or condition, such as
termination of employment), (viii) the date on which such Company Option or
Repurchase Right expires, and (ix) in the case of shares subject to a Repurchase
Right, the material terms of any promissory note delivered in payment of the
purchase price for such Company Common Shares (including limitations on
recourse). All Company Options are nonqualified options under the Code. Section
4.3(c)(2) of the Company Disclosure Schedules sets forth a true, correct and
complete list of all holders of outstanding Company Options that are held by
Persons that are not employees of the Company or any Company Subsidiary
(including non-employee directors, consultants, advisory board members, vendors,
service providers or other similar Persons). All of the Company Common Shares
subject to issuance under the Company Stock Option Plans, upon issuance prior to
the Effective Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. The terms of each of
the Company Stock Option Plans and the applicable stock option agreements permit
(or, pursuant to action taken or to be taken by the Company prior to the Closing
Date, will permit) the assumption by Parent of all outstanding Company Options,
whether vested or unvested, as provided in this Agreement, without the consent
or approval of the holders of such securities or any other party. True, correct
and complete copies of each of the Company Stock Option Plans and the standard
form of all agreements and instruments relating to or issued under each Company
Stock Option Plan and all agreements and instruments relating to or issued under
the Company Stock Option Plans or Company Options that differ in any material
respect from such standard form agreements (it being understood that any
extension of the term, acceleration of vesting or reduction in the exercise
price shall be deemed material) have been Made Available to Parent, and such
agreements and instruments have not been Amended since being Made Available to
Parent, and there are no agreements, understandings or commitments to Amend such
agreements or instruments in any case from those Made Available to Parent. Each
Company Option (i) has been granted in accordance with the terms of the
applicable Company Stock Option Plan, (ii) has been granted with an exercise
price at least equal to the fair market value of the Company Common Shares on
the grant date, and (iii) has a grant date that is the date the option would be
considered granted for tax, corporate law and under generally accepted
accounting principles (that is, no Company Option has been backdated).

(d) Section 4.3(d) of the Company Disclosure Schedules sets forth all
outstanding Company Warrants and other Commitments (other than Company Options
disclosed in Section 4.3(c) of the Company Disclosure Schedules). The Company
has Made Available to Parent complete and correct copies of all Company Warrants
and Contracts governing such other Commitments, in each case as Amended to date.
At the Effective Time, no Company Options, Company Warrants or other Commitments
to acquire any Equity Interests of the Company shall be outstanding, except for
(i) Company Options disclosed in Section 4.3(c) of the Company Disclosure
Schedules and to be assumed by Parent pursuant to Section 3.7, and (ii) Company
Warrants disclosed in Section 4.3(d) of the Company Disclosure Schedules and to
be assumed by Parent pursuant to Section 3.9.


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(e) Section 4.3(e) of the Company Disclosure Schedules sets forth all
outstanding Contractual obligations of the Company or any Company Subsidiary (i)
restricting the transfer of, (ii) affecting the voting rights of, (iii)
requiring the repurchase, redemption or disposition of, or (iv) granting any
preemptive or anti-dilutive right with respect to; any Company Common Shares or
any other Equity Interests in the Company or any Company Subsidiary.

(f) After giving effect to the conversion of Preferred Shares pursuant
to the Conversion Agreements on the date hereof, (i) as of the date hereof and
(ii) if each of the Exemption Conditions is then satisfied, as of the record
date for the determination of the stockholders of the Company entitled to vote
at the Company Stockholders Meeting; not more than 25 percent of the Outstanding
Company Common Shares is or will be, as the case may be, held by Persons who
have addresses within the State of California according to the records of the
Company or its transfer agent. If each of the Exemption Conditions are satisfied
as of such record date, the exchange of the Merger Consideration for the
outstanding shares of capital stock of the Company will be exempt from the
qualification requirements of the California Securities Law of 1968, as amended,
by virtue of the exemption provided by Section 25103(c) thereof. "Outstanding
Company Common Shares" means, as of the date of determination, the total number
of outstanding Company Common Shares and Company Common Shares subject to
outstanding Company Options, minus the sum of (1) any Company Common Shares held
to the knowledge of the Company in the names of broker-dealers or nominees of
broker-dealers, and (2) any Company Common Shares and such Company Options
controlled by any one Person who controls directly or indirectly 50 percent or
more of the outstanding Company Common Shares. "Exemption Conditions" means, as
of a date of determination, each of the following conditions: (A) no Equity
Interests (other than Company Common Shares issued upon the exercise of Company
Options outstanding on the date hereof), or Commitments to acquire Equity
Interests, in the Company shall have been issued or redeemed after the date
hereof and prior to or on such date of determination, (B) between the date
hereof and such date of determination, no stockholder of the Company shall have
acquired direct or indirect control of additional Company Common Shares, such
that such stockholder then controls directly or indirectly 50% or more of the
outstanding Company Common Shares, and (C) the sum of (1) the number of Company
Common Shares or Company Options to acquire Company Common Shares held on the
date hereof by Persons who have addresses without the State of California and
which prior to or on such date of determination shall have become held by
Persons who have addresses within the State of California (including by means of
a change of address of record of any such a Person or upon the exercise of any
such Company Option), plus (2) the quotient of (x) the number of Company Common
Shares held on the date hereof by Persons who have addresses without the State
of California which are then held to the knowledge of the Company in the names
of broker-dealers or nominees of broker-dealers, divided by (y) four; shall be
less than 100,000.

Section 4.4 Authority.

(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and each Related Agreement to which it is a
signatory, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby (other than, on the date
hereof, the Company Stockholder Approval), including the filing of the
Certificate of Merger pursuant to the DGCL. The execution and delivery of this
Agreement and each Related Agreement to which it is a signatory by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including said filing of the Certificate of Merger, have been duly and
validly authorized by all necessary corporate action (other than, on the date
hereof, the Company Stockholder Approval). Assuming the due authorization,
execution and delivery by Parent and Merger Sub of this Agreement, this
Agreement and each Related Agreement to which the Company is a signatory has
been duly authorized and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable


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against the Company in accordance with their respective terms, subject only to
the effect, if any, of (i) applicable bankruptcy and other similar Laws
affecting the rights of creditors generally, and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies. The
Company Board has unanimously (A) approved and declared advisable this
Agreement, each Related Agreement to which the Company is a signatory, the
Merger and the other Transactions applicable to it, (B) determined that this
Agreement and each Related Agreement to which it is a signatory and the terms
and conditions of the Merger and other Transactions are fair to, advisable and
in the best interests of the Company and its stockholders, and (C) directed that
the adoption of this Agreement and the approval of this Agreement, the Merger,
and the Stockholder Agent Appointment be submitted to the Company's stockholders
for approval at a meeting of such stockholders and recommended that all of the
Company's stockholders adopt and approve this Agreement and approve the Merger,
and the Stockholder Agent Appointment; provided, however, that after the date
hereof the Company Board acting in good faith may withdraw its recommendation.
The affirmative vote of the holders of a majority of the voting power of all
Company Common Shares and Company Preferred Shares issued and outstanding on the
record date set for the meeting of the Company's stockholders to adopt and
approve this Agreement and approve the Merger (the "Company Stockholders
Meeting") is the only vote of the holders of capital stock of the Company
necessary to adopt this Agreement under applicable Law and the Company's
Organizational Documents (the "Company Stockholder Approval").

(b) Assuming the representation set forth in Section 5.24 is true and
correct, the Company has taken all appropriate actions so that the restrictions
on "business combinations" contained in Section 203 of the DGCL will not apply
with respect to or as a result of this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby, including the Merger, without any
further action on the part of the Company's stockholders or the Company Board.

Section 4.5 No Conflict; Required Filings and Consents.

(a) The execution and delivery of this Agreement and the Related
Agreements to which the Company is a signatory by the Company do not, and the
performance of this Agreement and such Related Agreements by the Company will
not, (i) conflict with or violate any provision of the Organizational Documents
of the Company or any Company Subsidiary, (ii) subject to obtaining the Company
Stockholder Approval and assuming that all Consents described in Section 4.5(b)
have been obtained and all filings and notifications described in Section 4.5(b)
have been made and any waiting periods thereunder have terminated or expired,
conflict with or violate any Law applicable to the Company or any Company
Subsidiary, or by which any Property of the Company or any Company Subsidiary is
bound or affected, (iii) result in the creation of any Encumbrance on any of the
Properties of the Company or any Company Subsidiary, or (iv) require any Consent
under, or result in any Breach of, any Company Material Contract or Company
Permit, in each case except as set forth in Section 4.5 of the Company
Disclosure Schedules.

(b) The execution and delivery of this Agreement and the Related
Agreements to which the Company is a signatory by the Company do not, and the
performance of this Agreement and such Related Agreements by the Company and
then consummation of the Transactions will not, require any Consent of, or
filing with or notification to, any Governmental Entity, except under or in
relation to (i) the Exchange Act, (ii) the Securities Act, (iii) any applicable
Blue Sky Laws, (iv) the rules and regulations of Parent's Principal Market, (v)
the filing and recordation of the Certificate of Merger as required by the DGCL
(together with the Consents, filings and notifications enumerated in clauses (i)
through (iv) next preceding, the "Specified Consents"), and (vi) such other
Consents and filings with or notifications to Governmental Entities the failures
of which to make or obtain, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or Parent.


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Section 4.6 Permits; Compliance With Law.

(a) Each of the Company and each Company Subsidiary is in possession of
all material Governmental Permits, and has made all material filings,
applications and registrations with any Governmental Entity, in each case that
are necessary for the Company and each Company Subsidiary to own, lease or
operate its Properties, or to carry on its respective businesses substantially
in the manner described in the Company SEC Reports filed prior to the date
hereof or the Closing Date, as the case may be, and substantially as it is being
conducted as of the date hereof (the "Company Permits"), and all such Company
Permits are valid and in full force and effect, except where the failure to
have, or the suspension or cancellation of, or failure to be valid or in full
force and effect of, any of the Company Permits would not, individually or in
the aggregate, reasonably be expected to (i) prevent or materially delay
consummation of the Merger or any other transactions contemplated by this
Agreement, (ii) otherwise prevent or materially delay performance by the Company
of any of its material obligations under this Agreement or any Related Agreement
to which it is a signatory, or (iii) have a Material Adverse Effect on the
Company.

(b) None of the Company and the Company Subsidiaries is in conflict
with, or in default or violation of, (A) in any material respect, any Law
applicable to the Company or any Company Subsidiary or by which any Property of
the Company or any Company Subsidiary is bound or affected, or (B) any Company
Permit, except, with respect to clause (A) next preceding, for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, reasonably be expected to (i) prevent or materially delay
consummation of the Merger or any other transactions contemplated by this
Agreement, (ii) otherwise prevent or materially delay performance by the Company
of any of its material obligations under this Agreement or any Related Agreement
to which it is a signatory, or (iii) have a Material Adverse Effect on the
Company. None of the Company Permits will be terminated or impaired or will
become terminable, in whole or in part, as a result of the transactions
contemplated by this Agreement or any Related Agreement to which it is a
signatory.

(c) Neither the Company nor any Company Subsidiary has, within the last
three years, received any warning, notice, notice of violation or probable
violation, notice of revocation or other communication from or on behalf of any
Governmental Entity, alleging (x) any conflict with, or default or violation of,
any Company Permit, or (y) that the Company or any Company Subsidiary requires
any Company Permit for its business as currently conducted that is not currently
held by it. Except as set forth in Section 4.6 of the Company Disclosure
Schedules, to the Company's Actual Knowledge, no investigation or inquiry by any
Governmental Entity with respect to the Company or any Company Subsidiary is
pending or threatened, in each case with respect to any alleged or claimed
violation of Law applicable to the Company or any Company Subsidiary or by which
any Property of the Company or any Company Subsidiary is bound or affected.

(d) Neither the Company nor any of the Company Subsidiaries, nor to the
Company's Actual Knowledge, any director, officer, Affiliate or employee
thereof, has on behalf of or with respect to the Company engaged in any conduct
constituting a violation of the Foreign Corrupt Practices Act of 1977, as
amended.

Section 4.7 SEC Filings; Financial Statements.

(a) The Company has filed all SEC Reports required under applicable Law
to be filed by it with the SEC since the effective date of the filing of the
initial Form 10-SB by the Company. All of the Company SEC Reports have been Made
Available to Parent.


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(b) As of their respective dates, each Company SEC Report (i) complied
as to form in all material respects with the requirements of the Securities Act,
the Exchange Act and the SEC Rules applicable to such Company SEC Report, and
(ii) did not at the time it was filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except to the extent corrected (A) in the
case of a Company SEC Report filed prior to the date of this Agreement that was
amended or superseded prior to the date of this Agreement, by the filing of such
amending or superseding Company SEC Report, and (B) in the case of a Company SEC
Report filed after the date of this Agreement that is amended or superseded
prior to the Effective Time, by the filing of such amending or superseding
Company SEC Report. None of the Company Subsidiaries is required to file any SEC
Reports with the SEC.

(c) As of their respective dates, each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports, including the statement of stockholders' equity, (all of
the foregoing, the "Company Financial Statements") (i) complied as to form in
all material respects with the SEC Rules applicable thereto, (ii) were prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q, Form 8-K or any successor form under the Exchange Act), and (iii) fairly
presented in all material respects the consolidated financial position of the
Company and the Company Subsidiaries as at the respective dates thereof and the
consolidated results of Company's and the Company Subsidiaries' operations and
cash flows for the periods indicated in accordance with GAAP, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments in accordance with GAAP.
Neither the Company nor any Company Subsidiary has any liabilities (absolute,
accrued, contingent or otherwise) required under GAAP to be set forth on a
balance sheet that are, individually or in the aggregate, material to the
business, results of operations or financial condition of the Company and the
Company Subsidiaries taken as a whole, except for (A) liabilities incurred since
the Company Balance Sheet Date in the Ordinary Course of Business which are of
the type that typically recur and which do not result from any Breach of
Contract, tort or default or violation of any Law, (B) those specifically set
forth or specifically and adequately reserved against in the Company Balance
Sheet, and (C) the fees and expenses of investment bankers, attorneys and
accountants incurred in connection with this Agreement and the Transactions
accruing after the Company Balance Sheet Date. Except as reflected in the
Company Financial Statements, neither the Company nor any Company Subsidiary is
a party to any material off-balance sheet arrangements (as defined in Item 303
of Regulation S-K promulgated by the SEC). The Company has not had any
disagreement with any of its auditors regarding accounting matters or policies
during any of its past three full fiscal years or to date during the current
fiscal year. The books and records of the Company and each Company Subsidiary
have been maintained, and are being maintained, in all material respects in
accordance with applicable legal and accounting requirements, and the Company
Financial Statements are consistent in all material respects with such books and
records.

(d) No investigation by the SEC with respect to the Company or any
Company Subsidiary is pending or, to the Knowledge of the Company, threatened.

(e) The Company has established and maintains "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act) that are reasonably designed to ensure that material information
(both financial and non-financial) relating to the Company and the Company
Subsidiaries required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is communicated to the Company's


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principal executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure and to make the certifications of the principal executive
officer and the principal financial officer of the Company required by Section
302 of SOX, with respect to such reports. For purposes of this Section 4.7(e),
"principal executive officer" and "principal financial officer" shall have the
meanings ascribed to such terms in SOX. Each of the principal executive officer
and the principal financial officer of the Company (or each former principal
executive officer and each former principal financial officer of the Company, as
applicable) has made all certifications required by Sections 302 and 906 of SOX
and the rules and regulations promulgated by the SEC thereunder with respect to
the Company SEC Reports.

(f) The Company maintains a system of internal accounting controls
designed to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has Made Available to
Parent accurate and complete copies of all material policies, manuals and other
documents promulgating such internal accounting controls. Except as set forth in
Section 4.7(f) of the Company Disclosure Schedules, to the Company's Knowledge,
there are no "material weaknesses" (as defined by the PCAOB) and there are no
series of multiple "significant deficiencies" (as defined by the PCAOB) that are
reasonably likely to collectively represent a "material weakness" in the design
or operation of the Company's internal controls and procedures, and to the
Company's Knowledge, there are no significant deficiencies in the design or
operation of the Company's internal controls and procedures. To the Company's
Knowledge, since the date of the filing of its initial Form 10-SB, there has
been no fraud that involves management or other employees who have a significant
role in the Company's internal controls and procedures.

(g) To the Company's Knowledge, Singer Lewak Greenbaum & Goldstein LLP,
which has expressed its opinion with respect to the Company Financial Statements
as of June 30, 2004, June 30, 2005 and June 30, 2006 and for each of the
Company's fiscal years in the three-year period ended June 30, 2006, and
included in the Company SEC Reports (including the related notes), is
"independent" with respect to the Company and the Company Subsidiaries within
the meaning of Regulation S-X and, together with the Company's prior independent
public accounting firm Haskell & White LLP, has been "independent" within such
meaning at all times since January 1, 2002. The Company has made such disclosure
of non-audit services performed by Singer Lewak Greenbaum & Goldstein LLP or
Haskell & White LLP in its proxy statements with respect to its annual meetings
of its stockholders as is required under the Exchange Act, Securities Act and
SEC Rules, and all such non-audit services have been approved in advance by the
audit committee of the Company Board. The Company is in compliance with the
applicable criteria for continued listing of the Company Common Shares on the
OTCBB.

Section 4.8 Disclosure Documents.

(a) The Company Information included in, or incorporated by reference
into, the Form S-4, Proxy Statement and any Other Filings, and any amendments or
supplements thereto, will, at the Applicable Times, comply as to form in all
material respects with the applicable requirements of the Securities Act, the
Exchange Act, the SEC Rules and other applicable Laws.

(b) The information supplied or to be supplied by or on behalf of the
Company or any of its officers, directors or stockholders for inclusion or use,
or incorporation by reference, in (i) the Form S-4, (ii) the Proxy Statement, or
(iii) any other document (including any report filed by the Company or Parent
under the Exchange Act) filed with any Governmental Entity in connection with
the Transactions, or in each case any amendment or supplement thereto; in each


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case do not and will not, at the Applicable Times, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein regarding the Company
Information, in light of the circumstances under which they are made, not
misleading. The Company Information provides all information relating to the
Company or its operations, business, directors, officers, Subsidiaries and
stockholders required to be provided by the provisions of the Securities Act,
the Exchange Act and the SEC Rules, including form S-4 and Regulation 14A.

(c) Notwithstanding the foregoing provisions of this Section 4.8, the
Company makes no representation or warranty, and assumes no responsibility, with
respect to statements made or incorporated by reference in the Form S-4, the
Proxy Statement or any Other Filings, or in each case any amendment or
supplement thereto, supplied by Parent (other than Company Information so
supplied) for inclusion or incorporation by reference therein.

Section 4.9 Absence of Certain Changes or Events. Since the Company
Balance Sheet Date, except as specifically disclosed in the Company SEC Reports
filed thereafter or as set forth in Section 4.9 of the Company Disclosure
Schedules, the Company and each Company Subsidiary has conducted its business
only in the Ordinary Course of Business and, since such date:

(a) no Events have caused a Material Adverse Effect on the Company;

(b) there has not been any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, Securities or Property) in
respect of, any of the Company's Equity Interests, or any purchase, redemption
or other acquisition by the Company of any of the Company's Equity Interests or
any other Securities of the Company or any Commitments for any such Equity
Interests of Securities, other than repurchases from employees or consultants
following their termination pursuant to the terms of existing Repurchase Rights;

(c) there has not been any Capitalization Adjustment of any of the
Company's Equity Interests;

(d) there has not been any increase in compensation or fringe benefits
paid or payable to any of the officers, directors or managers or employees of
the Company or any Company Subsidiary at the vice president or director level or
higher, or who earn base salary of more than $75,000 per year, or any payment by
the Company or any of the Company Subsidiaries of any bonus to any of their
officers, directors or managers or employees at the vice president or director
level or higher, or who earn base salary of more than $75,000 per year, or any
granting by the Company or any of the Company Subsidiaries of any increase in
severance or termination pay, or any entry by the Company or any of the Company
Subsidiaries into, or material Amendment of, any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company of the nature of any
Transactions, or any subsequent event, other than increases in the Ordinary
Course of Business in base salary and target bonuses for employees who are not
officers of the Company, in an amount that does not exceed 50% of such base
salary, in connection with periodic compensation or performance reviews or for
ordinary course severance and release agreements as made in connection with the
termination of employment that do not provide severance in excess of the
Company's standard policies;

(e) there has not been any change by the Company or any of the Company
Subsidiaries in its accounting methods, principles or practices (including any
material change in depreciation or amortization policies or rates or revenue
recognition policies), except as required by concurrent changes in GAAP;


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(f) there has not been any sale, transfer, or other disposition of any
Company IP Rights or any other Properties by the Company or any of the Company
Subsidiaries, except in the Ordinary Course of Business;

(g) neither the Company nor any Company Subsidiary has made any loan,
advance or capital contribution to, or investment in, any Person, including any
director, officer or Affiliate of the Company, other than (i) loans, advances or
capital contributions to or investments in wholly-owned Subsidiaries or Entities
that became wholly-owned Subsidiaries made in the Ordinary Course of Business,
(ii) investments made in accordance with the Company's investment guidelines, a
copy of which has been Made Available to Parent, in the Ordinary Course of
Business, (iii) routine travel and entertainment expense advances in the
Ordinary Course of Business and in accordance with the Company's travel and
expense policy, a copy of which has been Made Available to Parent, and (iv)
loans and advances to third party customers made in the Ordinary Course of
Business;

(h) there has not been any material change with respect to the
management or other key personnel of the Company, any termination of employment
of any such employees or a material number of employees, or any material labor
dispute or material claim of unfair labor practices involving the Company or any
Company Subsidiary; and

(i) neither the Company nor any Company Subsidiary has agreed, whether
in writing or otherwise, to take any action described in this Section 4.9.

Section 4.10 Employee Benefit Plans.

(a) Section 4.10(a) of the Company Disclosure Schedules lists as of the
date of this Agreement, with respect to the Company and the Company Subsidiaries
and their respective ERISA Affiliates, (i) all employee benefit plans within the
meaning of Section 3(3) of ERISA, (ii) each loan from the Company, any Company
Subsidiary or any such ERISA Affiliate to an employee in excess of $10,000,
(iii) all stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, salary continuation, sabbatical, employee
relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section
129 of the Code), life insurance or accident insurance plans, programs or
arrangements, (iv) all bonus, pension, profit sharing, savings, retirement,
deferred compensation or incentive plans, programs or arrangements, whether
written or oral, qualified or nonqualified, funded or unfunded, currently
effective or terminated, (v) other fringe or employee benefit plans, programs or
arrangements that apply to senior management and that do not generally apply to
all employees, and (vi) any employment or service agreements (except for offer
letters providing for at-will employment that do not provide for severance,
acceleration or post-termination benefits), compensation agreements or severance
agreements, written or otherwise, for the benefit of, or relating to, any
present or former director, officer, employee, or consultant (provided that, for
(1) former and current consultants, and (2) former directors, officers and
employees; such arrangements need only be listed if unsatisfied obligations of
the Company or any Company Subsidiary of greater than $10,000 remain thereunder)
of the Company or any Company Subsidiary (all of the foregoing described in
clauses (i) through (vi) next preceding, collectively, the "Company Benefit
Plans"). The Company has no liability with respect to any plan, arrangement or
practice of the type described in the preceding sentence other than the Company
Benefit Plans. The Company has not, since July 30, 2002, extended credit,
arranged for the extension of credit, or renewed, modified or forgiven an
extension of credit made prior to such date, in the form of a personal loan to
or for any person who was, at any time since such date, an officer or director
of the Company.

(b) Prior to the date of this Agreement, the Company has Made Available
to Parent a true, correct and complete copy of each Company Benefit Plan and all


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current and prior related plan documents (including adoption agreements, vendor
contracts and administrative services agreements, trust documents, insurance
policies or contracts (including policies relating to fiduciary liability
insurance covering the fiduciaries of such Company Benefit Plans), bonds
required by ERISA, employee booklets, summary plan descriptions and other
authorizing documents, summaries of material modifications and any material
written employee communications relating thereto) and has, with respect to each
Company Benefit Plan that is subject to ERISA reporting requirements, Made
Available to Parent true, correct and complete copies of the Form 5500 reports
filed for the last three plan years (including all audits, financial statements,
schedules and attachments thereto, where applicable). Any Company Benefit Plan
intended to be qualified under Section 401(a) of the Code has (i) obtained from
the IRS a current favorable determination letter as to its qualified status
under the Code and as to the exemption from tax under the provisions of Code
Section 501(a) of each trust created thereunder, or (ii) has been established
under a standardized master and prototype or volume submitter plan for which a
favorable Internal Revenue Service advisory letter or opinion letter has been
obtained by the plan sponsor and is valid as to the adopting employer. The
Company has also Made Available to Parent a true, correct and complete copy of
the most recent such Internal Revenue Service determination letter, advisory
letter or opinion letter issued with respect to each Company Benefit Plan, and,
to the Company's Knowledge, nothing has occurred since the issuance of each such
letter that could reasonably be expected to cause the loss of the tax-qualified
status of any Company Benefit Plan subject to Section 401(a) of the Code. The
Company has also Made Available to Parent all registration statements and
prospectuses and investment policy statements prepared in connection with each
Company Benefit Plan, where applicable. All individuals who, pursuant to the
terms of any Company Benefit Plan, are entitled to participate in such Company
Benefit Plan, are currently participating in such Company Benefit Plan or have
been offered an opportunity to do so. None of the Company and the Company
Subsidiaries and their respective ERISA Affiliates sponsors or maintains any
self-funded employee benefit plan, including any plan to which a stop-loss
policy applies.

(c) None of the Company Benefit Plans promises or provides retiree
medical or other retiree welfare benefits to any person other than as required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as Amended
("COBRA"), or applicable state law. There has been no prohibited transaction
(within the meaning of Section 406 of ERISA and Section 4975 of the Code) with
respect to any Company Benefit Plan that is not exempt under Section 408 of
ERISA. To the Company's Actual Knowledge, each Company Benefit Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by applicable Law (including ERISA and the Code), and
the Company and the Company Subsidiaries, and their respective ERISA Affiliates,
each has performed all obligations required to be performed by it under, is not
in any material respect in default under or in violation of, and has no Actual
Knowledge of any material default or in violation by any other party to, any of
the Company Benefit Plans. None of the Company and the Company Subsidiaries and
their respective ERISA Affiliates is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
of the Company Benefit Plans. All contributions required to be made by the
Company or any Company Subsidiary or any of their respective ERISA Affiliates to
any Company Benefit Plan have been made on or before their due dates and, to the
extent required by GAAP, all amounts have been accrued for the current plan year
(and no further contributions will be due or will have accrued thereunder as of
the Closing Date, other than contributions accrued in the Ordinary Course of
Business after the Company Balance Sheet Date as a result of the operations of
the Company and the Company Subsidiaries after the Company Balance Sheet Date).
In addition, with respect to each Company Benefit Plan intended to include a
Code Section 401(k) arrangement, the Company and each Company Subsidiary and
their respective ERISA Affiliates have at all times made timely deposits of
employee salary reduction contributions and participant loan repayments, as
determined pursuant to regulations issued by the United States Department of
Labor. No Company Benefit Plan that is an employee welfare benefit plan as
defined in