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
---------------
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
-----------------
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 Reg
