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Exhibit 2.7
DGSE COMPANIES, INC.
A Nevada Corporation
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of ___________ __,
2007 (this
"Agreement"), is entered into by and between DGSE COMPANIES, INC, a
Nevada
corporation (the "Company"), and STANFORD INTERNATIONAL BANK LTD.
and its
successors ("SIBL") as the proposed purchaser of certain shares of
the Company's
capital stock.
R E C I T A L S
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WHEREAS, the Company, Superior Galleries, Inc., a Delaware
corporation
(f/k/a Tangible Asset Galleries, Inc., a Nevada corporation)
("Superior"), DGSE
Merger Corp., a Delaware corporation ("Merger Sub"), and SIBL, as
stockholder
agent, have entered into that certain Amended and Restated
Agreement and Plan of
Merger and Reorganization, dated as of January 6, 2007 (the "Merger
Agreement");
WHEREAS, the respective Boards of Directors of the Company, Merger
Sub and
Superior have approved and declared advisable the Merger Agreement
and the
merger of Merger Sub with and into Superior (the "Merger"), with
Superior being
the surviving corporation;
WHEREAS, in the Merger, one hundred percent (100%) of the issued
and
outstanding shares of capital stock of Superior will be converted
into the right
to receive shares of Common Stock of the Company (as set forth in
Article III of
the Merger Agreement), on the terms and subject to the conditions
set forth in
the Merger Agreement and in accordance with the General Corporation
Law of the
State of Delaware (the "DGCL") and Chapters 78 and 92A of Title 7
of the Nevada
Revised Statutes (the "NPCA");
WHEREAS, the Board of Directors of the Company has resolved to
recommend to
its stockholders the adoption and approval of the Merger
Agreement;
WHEREAS, Superior has informed the Company that the affirmative
vote of the
holders of a majority of all issued and outstanding shares of
common stock of
Superior entitled to vote on the Merger has been obtained with
respect to the
adoption of the Merger Agreement and approval of the Merger;
WHEREAS, pursuant to that certain Conversion Agreement, dated as of
January
6, 2007 (the "Conversion Agreement"), by and between Superior and
SIBL, SIBL has
agreed to convert and exchange all of the 7,500,000 shares of
preferred stock of
Superior previously held by SIBL into 3,600,806 shares of the
common stock,
$0.001 par value per share, of Superior (the "Superior Common
Stock");
WHEREAS, pursuant to a Commercial Loan and Security Agreement
originally
dated October 1, 2003 (as amended as of March 29, 2005 and as
further amended as
of March 31, 2006 and on January __, 2007, the "Loan Agreement"),
by and between
Superior and SIBL, SIBL has provided certain credit facilities to
the Company;
WHEREAS, pursuant to that certain Note Exchange Agreement, dated as
of the
date hereof (the "Note Exchange Agreement"), by and between
Superior and SIBL,
SIBL has agreed to exchange $8,392,340 of the amount outstanding
under the Loan
Agreement into 4,936,671 shares of Superior Common Stock;
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WHEREAS, in connection with the Merger, all shares of Superior
Common Stock
held by SIBL (including the shares of Superior Common Stock
received upon
conversion of the preferred shares and upon exchange of the debt,
as described
above) will be converted into and exchanged for shares of the
Company's common
stock, $0.01 par value per share (the "Common Stock");
WHEREAS, pursuant to an amendment and restatement of the Loan
Agreement, to
be made effective immediately prior to the Merger (as so amended
and restated,
the "New Loan Agreement"), SIBL has agreed to provide certain
credit facilities
to Superior and, indirectly, to the Company;
WHEREAS, in connection with the transactions contemplated by the
Note
Exchange Agreement and the New Loan Agreement, the Company has
agreed in Section
6.17(c) of the Merger Agreement to grant to SIBL, and its
assignees, "A"
warrants and "B" warrants (collectively, the "Warrants") to
purchase an
aggregate of 1,708,634 shares of Common Stock (collectively, the
"Warrant
Shares");
WHEREAS, SIBL has assigned Warrants (collectively, the "Assignee
Warrants")
exercisable for an aggregate of 854,317 Warrant Shares
(collectively, the
"Assignee Warrant Shares") to DANIEL T. BOGAR, RONALD M. STEIN,
WILLIAM R.
FUSSELMANN, CHARLES M. WEISER and OSVALDO PI (each, an "Assignee",
and,
collectively, the "Assignees"), as provided in the Merger
Agreement; and
WHEREAS, the Company desires to grant to SIBL and to each of the
Assignees,
as applicable, the registration rights set forth herein with
respect to
Warrants, the Warrant Shares, the shares of Common Stock issuable
upon the
exercise of the warrants issuable in the event of a registration
default
pursuant to Section 5(f) hereof (the "Default Warrant Shares") and
the shares of
Common Stock issued as a dividend or other distribution with
respect to the
Warrant Shares (the "Distribution Shares") (the Warrant Shares, the
Default
Warrant Shares and the Distribution Shares, collectively and
interchangeably,
are referred to herein as the "Securities").
A G R E E M E N T
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NOW, THEREFORE, the parties hereto mutually agree as follows:
1. RECITALS
The foregoing recitals are true and accurate and hereby
incorporated into
this Agreement.
2. CERTAIN DEFINITIONS
As used herein:
(a) "Commission" means the Securities and Exchange Commission.
(b) "Holder" means any Person owning or having the right to
acquire
Registrable Securities or any assignee thereof in accordance with
Section 11
hereof.
(c) "Merger Shares" means the shares of Common Stock issued to SIBL
or
an Assignee in connection with the Merger; provided, however, that
Merger Shares
shall not include any such shares sold, assigned or otherwise
transferred or
disposed of by the Holder (i) to the public either pursuant to a
registration
statement or Rule 144, or (ii) in a private transaction. In the
event of any
merger, reorganization, consolidation, recapitalization or other
change in
corporate structure affecting the Common Stock, such adjustment
shall be deemed
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to be made in the definition of "Merger Shares" as is appropriate
in order to
prevent any dilution or enlargement of the rights granted pursuant
to this
Agreement.
(d) "Registrable Security" means collectively, the Warrant Shares,
the
Default Warrant Shares and the Distribution Shares; provided,
however, that
Registrable Securities shall not include any such shares sold,
assigned or
otherwise transferred or disposed of by the Holder (i) to the
public either
pursuant to a registration statement or Rule 144, or (ii) in a
private
transaction. In the event of any merger, reorganization,
consolidation,
recapitalization or other change in corporate structure affecting
the Common
Stock, such adjustment shall be deemed to be made in the definition
of
"Registrable Security" as is appropriate in order to prevent any
dilution or
enlargement of the rights granted pursuant to this Agreement.
(e) "Rule 144" means Rule 144 (or any similar provision then in
force)
promulgated under the Securities Act.
(f) "Securities Act" means the Securities Act of 1933, as
amended.
(g) "SIBL Warrant Shares" means, collectively, all Warrant Shares
other
than Assignee Warrant Shares.
(h) "SIBL Warrants" means, collectively, all Warrants other
than
Assignee Warrants.
(i) "Trading Day" means any business day on which the primary
market on
which the Common Stock trades is open for business.
3. RESTRICTIONS ON TRANSFER
SIBL acknowledges and understands that prior to the registration of
the
Securities as provided herein, and upon the expiration of the
registration
period provided for herein, the Securities are and will be, as the
case may be,
"restricted securities" as defined in Rule 144. SIBL understands
that no
disposition or transfer of the Securities may be made by SIBL in
the absence of
(i) an opinion of counsel to SIBL, in form and substance reasonably
satisfactory
to the Company, that such transfer may be made without registration
under the
Securities Act, or (ii) such registration.
4. COMPLIANCE WITH REPORTING REQUIREMENTS
As long as SIBL or any Assignee owns any Securities, until the
seventh
anniversary of the date hereof, (i) if the Company is subject to
the periodic
reporting requirements of the Securities Exchange Act of 1934, as
amended (the
"Exchange Act"), the Company covenants to use its commercially
reasonable
efforts to timely file (or obtain extensions in respect thereof and
file within
the applicable grace period) all reports required to be filed by
the Company
after the date hereof pursuant to the Exchange Act which are
required to be
filed in order to satisfy the current public information
requirements of Rule
144(c)(1), or (ii) otherwise, if Rule 144(k) is not available to
SIBL or any
Assignee with respect to any Securities then held, the Company will
prepare and
furnish to SIBL or any Assignee, as applicable, and make publicly
available in
accordance with Rule 144(c)(2), such information as is required for
SIBL or any
Assignee to sell such Registrable Securities under Rule 144.
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5. REGISTRATION RIGHTS
(a) If the Company shall not have prepared and filed with the
Commission a registration statement under the Securities Act
registering the
Registrable Securities for resale by SIBL and the Assignees prior
to the
Effective Time (as such term is defined in the Merger Agreement),
the Company
shall prepare and file such a registration statement with the
Commission on Form
S-3 (or such other form under the Securities Act as the Company
shall then be
entitled to use) to register the resale of the Registrable
Securities within
five (5) calendars days of the Effective Time. The registration
statement
registering the Registrable Securities for resale, including the
prospectus
included therein and as amended or supplemented from time to time,
is
hereinafter referred to as the "Registration Statement".
(b) If the Registration Statement has not become effective prior to
the
Effective Time, the Company shall use its commercially reasonable
efforts to
cause the Registration Statement to become effective not later than
90 calendar
days after the Effective Time. The Company will notify the Holders
and its
transfer agent of the declaration by the Commission of the
effectiveness of the
Registration Statement within a reasonable time thereafter.
(c) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 5 effective under
the
Securities Act until the earliest of (i) the date that none of the
Registrable
Securities covered by such Registration Statement are or may become
issued and
outstanding, (ii) the date that all of the Registrable Securities
have been sold
pursuant to such Registration Statement, (iii) the date that the
Registrable
Securities may be sold under the provisions of Rule 144 without
limitation as to
volume, (iv) the date all Registrable Securities have been
otherwise transferred
to persons who may trade such shares without restriction under the
Securities
Act, and the Company has delivered a new certificate or other
evidence of
ownership for such securities not bearing a restrictive legend, and
(v) three
years from the date the Registration Statement became effective.
Thereafter, if
SIBL or any Assignee owns any Registrable Securities, the Company
shall, if it
continues to be eligible to use a Form S-3 and at the expense of
SIBL and such
Assignees (including, notwithstanding the provisions of Section
5(d), the
payment by SIBL and such Assigns of all Registration Expenses),
maintain the
Registration Statement effective under the Securities Act to
register the resale
of Registrable Securities.
(d) All fees, disbursements and out-of-pocket expenses and
costs
incurred by the Company in connection with the preparation and
filing of the
Registration Statement under this Section 5, or filing any
amendments or
supplements thereto, and in complying with applicable securities
and blue sky
laws (including, without limitation, all attorneys' and auditors'
fees of the
Company) (the "Registration Expenses") shall be borne by the
Company. The
Holders shall bear the cost of underwriting and/or brokerage
discounts, fees and
commissions, if any, applicable to the Registrable Securities being
registered.
The Holders and their counsel shall have a reasonable period, not
to exceed 7
Trading Days, to review the proposed Registration Statement or any
amendment
thereto, prior to filing with the Commission, and the Company shall
provide the
Holders with copies of any comment letters received from the
Commission with
respect thereto within a reasonable time following receipt thereof,
if in the
Company's judgment it is lawful to do so without requiring public
disclosure of
the same under Regulation FD or breaching any of its obligations
under any
agreement with SIBL or its affiliates. The Company shall qualify
any of the
Registrable Securities for sale in such states as the Holders
reasonably
designate and shall furnish indemnification in the manner provided
in Section 8
hereof. However, the Company shall not be required to qualify in
any state which
will require an escrow or other restriction relating to the Company
and/or the
Holders, or which will require the Company to qualify to do
business in such
state or require the Company to file therein any general consent to
service of
process. The Company at its expense will supply SIBL or the
Assignees, as
applicable, with copies of the Registration Statement and the
prospectus
included therein and other related documents in such quantities as
may be
reasonably requested by SIBL or the Assignees.
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(e) The Company shall not be required by this Section 5 to include
the
Registrable Securities in the Registration Statement which is to be
filed if, in
the opinion of counsel for both the Holders and the Company (or,
should they not
agree, in the opinion of another counsel experienced in securities
law matters
acceptable to counsel for the Holders and the Company) the proposed
offering or
other transfer as to which such registration is requested is exempt
from
applicable federal and state securities laws and would result in
all purchasers
or transferees obtaining securities which are not "restricted
securities," as
defined in Rule 144.
(f) Subject to Section 5(i) hereof, in the event that (i) a
Registration Statement is not filed by the Company in a timely
manner as set
forth in this Section 5, (ii) such Registration Statement is not
declared
effective by the Commission in the period set forth in Section 5(b)
hereof, or
(iii) such Registration Statement is not maintained as effective by
the Company
for the applicable period set forth in Section 5(c) hereof (each a
"Registration
Default"), then the Company will issue to each Holder as of the
first day of
such Registration Default and for every consecutive quarter in
which such
Registration Default is occurring, as liquidated damages, and not
as a penalty,
warrants to purchase five percent (5%) of the aggregate number of
shares of
Common Stock of the Company issuable upon the exercise in full of
the A Warrants
then held by such Holder upon the same terms and conditions therein
stated
("Default Warrants") until such corresponding Registration Default
no longer
exists ("Liquidated Damages"); provided, however, that the issuance
of such
Default Warrants shall not relieve the Company from its obligations
to register
the Registrable Securities pursuant to this Section 5(f). As used
herein, the "A
Warrants" means the seven-year warrants, exercisable at $1.89 per
share, issued
to SIBL and its assignees pursuant to the Merger Agreement.
If the Company does not issue the Default Warrants to the Holders
as set
forth above, the Company will pay any Holder's reasonable costs of
any action in
a court of law to cause compliance with this Section 5(f),
including reasonable
attorneys' fees, in addition to the Default Warrants. The
registration of the
Registrable Securities pursuant to this Section 5 shall not affect
or limit a
Holder's other rights or remedies as set forth in this
Agreement.
(g) Upon the occurrence of an Incidental Registration Event (as
defined
below), the Company shall send to each Holder written notice of
such
determination and, if within 20 days after receipt of such notice,
such Holder
shall so request in writing (which request shall specify the
Incidental
Registrable Securities (as defined below) intended to be disposed
of by such
Holder and the intended method of disposition thereof), the Company
shall use
its commercially reasonable efforts to include in such registration
statement
all or any part of such Holder's Incidental Registrable Securities
that such
Holder requests to be registered; provided that if, at any time
after giving
written notice of its intention to register any securities and
prior to the
effective date of the registration statement filed in connection
with such
registration, the Company shall determine for any reason not to
register or to
delay registration of all such securities, the Company may, at its
election,
give written notice of such determination to each requesting Holder
and,
thereupon, (i) in the case of a determination not to register,
shall be relieved
of its obligation to register any Incidental Registrable Securities
in
connection with such registration and (ii) in the case of a
determination to
delay registering, shall be permitted to delay registering any
Incidental
Registrable Securities, for the same period as the delay in
registering such
other securities. Notwithstanding the foregoing, if, in connection
with any
offering involving an underwriting of the Common Stock to be issued
by the
Company, the managing underwriter shall impose a limitation on the
number of
shares of the Common Stock included in any such registration
statement because,
in such underwriter's judgment, such limitation is necessary based
on market
conditions: (A) if the registration statement is for a public
offering of common
stock on a "firm commitment" basis with gross proceeds to the
Company of at
least $15,000,000 (a "Qualified Public Offering"), the Company may
exclude, to
the extent so advised by the underwriters, the Incidental
Registrable Securities
from the underwriting; provided, however, that if the underwriters
do not
entirely exclude the Incidental Registrable Securities from such
Qualified
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Public Offering, the Company shall be obligated to include in such
registration
statement, with respect to any requesting Holder, only an amount of
Incidental
Registrable Securities equal to the product of (i) the total number
of
Incidental Registrable Securities that remain available for
registration after
the underwriter's cutback and (ii) such Holder's percentage of
ownership of all
the Incidental Registrable Securities then outstanding (on an
as-converted
basis) (the "Registrable Percentage"); and (B) if the registration
statement is
not for a Qualified Public Offering, the Company shall be obligated
to include
in such registration statement, with respect to the requesting
Holder, only an
amount of Incidental Registrable Securities equal to the product of
(i) the
number of Incidental Registrable Securities that remain available
for
registration after the underwriter's cutback and (ii) such Holder's
Registrable
Percentage. For purposes of determining the underwriter's cutback
and each
Holder's Registrable Percentage, any shares of Common Stock
beneficially owned
by Smith which are included in any registration statement referred
to in the
preceding sentence shall be included in such calculation and such
shares of
Common Stock beneficially owned by Smith shall be subject to the
underwriter's
cutback on a pro rata basis. If any Holder disapproves of the terms
of any
underwriting referred to in this paragraph, it may elect to
withdraw therefrom
by written notice to the Company and the underwriter. No incidental
right under
this Section 5(g) shall be construed to limit any registration
required under
the other provisions of this Agreement.
(h) "Incidental Registration Event" means the Company determines
to
register under the Securities Act (including pursuant to a demand
of any
stockholder of the Company exercising registration rights) any
shares of its
Common Stock (i) at a time when any Registrable Securities that are
required to
be included in an effective Registration Statement hereunder are
not covered by
any effective Registration Statement, or (ii) beneficially owned by
Dr. L.S.
Smith ("Smith") for resale other than shares acquired by Smith upon
the exercise
of options outstanding on the date hereof, or granted subsequent to
the date
hereof pursuant to a Company employee benefit plan, at a time when
any
Registrable Securities or Merger Shares are outstanding and are not
covered by
any effective Registration Statement; other than, in either case,
on a
registration statement on Form S-4 or Form S-8 or any similar or
successor form
or any other registration statement relating to a merger or other
business
combination transaction, an exchange offer, an offering of
securities solely to
the Company's existing security holders or employees, or to
securities issued
pursuant to a dividend reinvestment plan. "Incidental
Registra
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