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<SEC-DOCUMENT>0001010549-07-000029.txt : 20070109
<SEC-HEADER>0001010549-07-000029.hdr.sgml : 20070109
<ACCEPTANCE-DATETIME>20070109131317
ACCESSION NUMBER:		0001010549-07-000029
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		17
CONFORMED PERIOD OF REPORT:	20070109
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Regulation FD Disclosure
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20070109
DATE AS OF CHANGE:		20070109

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DGSE COMPANIES INC
		CENTRAL INDEX KEY:			0000701719
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-JEWELRY STORES [5944]
		IRS NUMBER:				880097334
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11048
		FILM NUMBER:		07519832

	BUSINESS ADDRESS:	
		STREET 1:		2817 FOREST LANE
		STREET 2:		STE 202
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		9724843662

	MAIL ADDRESS:	
		STREET 1:		2817 FOREST LN
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DALLAS GOLD & SILVER EXCHANGE INC /NV/
		DATE OF NAME CHANGE:	19930114

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AMERICAN PACIFIC MINT INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CANYON STATE CORP
		DATE OF NAME CHANGE:	19860819
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>dgse8k010907.txt
<TEXT>

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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K


                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

        Date of Report (Date of Earliest Event Reported): January 9, 2007
                               (January 6, 2007)



                              DGSE COMPANIES, INC.
               (Exact Name of Registrant as Specified in Charter)


           Nevada                        1-11048                  88-0097334
(State or Other Jurisdiction     (Commission File Number)       (IRS Employer
     of Incorporation)                                       Identification No.)


               2817 Forest Lane, Dallas, Texas             75234
          (Address of Principal Executive Offices)      (Zip Code)


       Registrant's Telephone Number, Including Area Code: (972) 484-3662

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[X]  Written  communications  pursuant to Rule 425 under the  Securities Act (17
     CFR 230.425)

[_]  Soliciting  material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

[_]  Pre-commencement   communications  pursuant  to  Rule  14d-2(b)  under  the
     Exchange Act (17 CFR 240.14d-2(b))

[_]  Pre-commencement   communications  pursuant  to  Rule  13e-4(c)  under  the
     Exchange Act (17 CFR 240.13e-4(c))


                                      -1-
<PAGE>

Item 1.01.  Entry Into a Material Definitive Agreement.

      Amended and Restated Agreement and Plan of Merger and Reorganization

     Overview. On January 6, 2007, DGSE Companies,  Inc. entered into an Amended
and Restated Agreement and Plan of Merger and Reorganization,  which we refer to
as the merger agreement, with Superior Galleries,  Inc., a Delaware corporation,
and  Stanford  International  Bank Ltd.,  which we refer to as SIBL and which is
Superior's  largest  stockholder and principal lender, as stockholder agent. The
merger agreement materially amends the original Agreement and Plan of Merger and
Reorganization  the parties entered into on July 12, 2006,  which we refer to as
the  original  merger  agreement.  Pursuant  to the  terms  and  subject  to the
conditions  of the  merger  agreement,  Superior  will  merge  with  and  into a
newly-created,  wholly-owned  subsidiary  of DGSE,  with  Superior the surviving
corporation. Holders of Superior common stock will become holders of DGSE common
stock  following  the  merger.  The merger  agreement  is subject to a number of
conditions described below,  including  effectiveness of a Form S-4 registration
statement and approval of the respective stockholders of DGSE and Superior. Each
outstanding share of DGSE common stock will remain unchanged in the merger.

     Merger Consideration.  At the effective time of the merger, DGSE will issue
approximately 3.6 million shares of DGSE common stock to the holders of Superior
common stock,  using an exchange ratio of 0.2731 shares of DGSE common stock for
each outstanding share of Superior common stock.

     Escrow.  Fifteen percent (15%) of the number of shares of DGSE common stock
to be issued at the  closing  of the merger and upon  exercise  of the  DiGenova
warrant  described  below will be deposited in an escrow account as security for
the payment of  indemnification  claims made under the merger  agreement  in the
event Superior's  representations  and warranties  concerning its capitalization
are  inaccurate.  The escrow will expire one year after the  consummation of the
merger.  The  stockholder  agent,  which will  initially be SIBL,  will have the
exclusive  right to defend the escrow against claims made by DGSE or its related
parties on behalf of the Superior stockholders.

     Superior  Board  of  Directors.   Upon  the  effectiveness  of  the  merger
agreement,  Silvano  DiGenova,  Paul Biberkraut,  Lee Ittner and Anthony Friscia
resigned from the Superior board of directors,  and the two remaining directors,
Mitchell Stolz and David Rector,  elected William H. Oyster, our chief operating
officer, Scott Williamson,  our executive  vice-president,  and John Benson, our
chief financial officer, to the Superior board to fill the vacancies.

     Treatment of Stock Options. DGSE will assume a number of options (including
options  granted to  Superior  employees,  officers  and  directors  pursuant to
Superior's  stock option  plans)  disclosed by Superior in  connection  with the
merger.  The  Superior  option  holders  will be  required  to  surrender  their
respective  option  agreements  to DGSE after the closing,  whereupon  DGSE will
issue substitute  options.  The substitute  options will have the exercise price
and share coverage  adjusted by the applicable  exchange ratio  specified in the
merger agreement. The holders of all other options, warrants and other rights to
purchase  Superior  common  stock  must  exercise  such  rights on or before the
closing of the  merger,  or those  options,  warrants  or other  rights  will be
cancelled upon the consummation of the merger.

     Exchange of Debt;  Warrants.  As a condition  to the closing of the merger,
SIBL will need to  convert  approximately  $8.4  million in  Superior  debt into
approximately 5 million shares of Superior  common stock, at a conversion  ratio
of $1.70 per share.  As a result,  Superior  will have  significantly  less debt
outstanding at the time of the merger. In consideration of this exchange of debt
and an $11.5 million increase in the SIBL credit facility, at the closing of the
merger, DGSE will issue seven-year warrants,  in the form attached to the merger
agreement,  to SIBL and its designees  entitling the holders thereof to purchase
845,634  shares of DGSE common  stock at $1.89 per share and  863,000  shares of
DGSE common stock at their par value of $0.01 per share.


                                      -2-
<PAGE>

     Representations,  Warranties  and  Covenants.  DGSE and Superior  have made
customary  representations,  warranties  and covenants in the merger  agreement,
including,  among others, covenants (i) not to (A) solicit proposals relating to
alternative  business  combination   transactions  or  (B)  subject  to  certain
exceptions,   enter  into  discussions  concerning  or  provide  information  in
connection with alternative  business  combination  transactions,  (ii) to cause
stockholder  meetings to be held to consider  approval of the merger  agreement,
and (iii) subject to certain exceptions, for the boards of directors of Superior
and DGSE to recommend  adoption by their  respective  stockholders of the merger
agreement.

     Conditions  to  Closing.  Consummation  of the merger is subject to certain
closing conditions,  including, among others, stockholder approval of the merger
agreement by the stockholders of DGSE and Superior; DGSE stockholder approval of
an increase in the number of authorized shares of common stock of DGSE;  absence
of governmental  restraints;  effectiveness of a Form S-4 registration statement
registering the shares of common stock to be issued as merger consideration; the
exchange by SIBL of  approximately  $8.4  million in debt for shares of Superior
common stock; the effectiveness of a DGSE corporate  governance  agreement;  and
the provision by SIBL or an affiliate of a new secured credit  facility of $11.5
million to Superior.  The merger agreement allows DGSE and Superior to terminate
the merger agreement upon the occurrence (or  non-occurrence) of certain events.
DGSE and Superior expect the acquisition to close late in March 2007, subject to
the  satisfaction  or waiver of the  various  closing  conditions  in the merger
agreement.

     Stockholder  Changes.  Upon  consummation  of the  merger,  SIBL  will  own
approximately   29  percent  of  the  outstanding   shares  of  DGSE  (and  will
beneficially  own  approximately  28  percent  on a fully  diluted  basis);  all
pre-merger  Superior  stockholders  will own  approximately  43  percent  of the
outstanding  shares of DGSE (and will  beneficially own approximately 39 percent
on a fully diluted basis);  and Dr. L.S. Smith, our chairman and chief executive
officer,  will own  approximately  26 percent of the outstanding  shares of DGSE
(and will beneficially own approximately 26 percent on a fully-diluted basis).

     DGSE Board of Directors. Following the effective time of the merger, DGSE's
board of directors  will be comprised of the following  individuals:  Dr. Smith;
Mr. Oyster;  David Rector, a current director of Superior nominated by SIBL; two
current  "independent"  directors  of the  DGSE  board;  and  two  "independent"
directors to be designated by SIBL. In connection with the closing, SIBL and Dr.
Smith will enter into a corporate governance agreement,  in the form attached to
the merger agreement, with DGSE. Pursuant to this agreement, for so long as SIBL
and its affiliates  beneficially own at least 15% of the outstanding DGSE common
shares, SIBL will have the right to nominate two "independent"  directors to the
DGSE board;  for so long as Dr. Smith and his  affiliates  and immediate  family
beneficially own at least 10% of the outstanding  DGSE common shares,  Dr. Smith
will have the right to nominate two  "independent"  directors to the DGSE board;
for so long as Dr. Smith is an executive officer of DGSE, he will have the right
to be  nominated  to the DGSE board;  and for so long as William H. Oyster is an
executive  officer of DGSE,  he will have the right to be  nominated to the DGSE
board. The DGSE board will consist of seven members.

     A copy of the merger  agreement,  and  certain  exhibits  thereto,  and the
limited  joinder  agreement,  pursuant  to  which  SIBL is  joining  the  merger
agreement, are attached hereto as Exhibits 2.1 through 2.9, and are incorporated
herein by  reference.  The  foregoing  description  of the merger  agreement  is
qualified in its entirety by reference to the full text of the merger agreement,
the exhibits and the limited joinder agreement.

     Securities Exchange Agreement

     In addition,  on January 6, 2007,  DGSE entered into a securities  exchange
agreement with Silvano  DiGenova,  the former chairman,  chief executive officer
and interim chief  financial  officer of Superior.  Pursuant to this  agreement,
DGSE issues Mr. DiGenova a warrant to acquire 96,951 shares of DGSE common stock
upon  consummation  of the merger for an exercise  price of $0.01 per share,  in
exchange for 355,000  shares of Superior  common stock,  which reflects the same
exchange  ratio being used in the  merger.  The  exchange  was made in a private
placement pursuant to Regulation D promulgated under the Securities Act of 1933.


                                      -3-
<PAGE>

     Copies of the securities  exchange  agreement and the warrant issued to Mr.
DiGenova are attached  hereto as Exhibits 99.2 and 99.3,  respectively,  and are
incorporated herein by reference.  The foregoing  descriptions of the securities
exchange  agreement and warrant are qualified in their  entirety by reference to
the full text of the securities exchange agreement and warrant.

     Management Agreement

     On  January 6,  2007,  in  connection  with DGSE  entering  into the merger
agreement, DGSE Merger Corp., a wholly-owned subsidiary of DGSE which will merge
into Superior as part of the merger,  entered into a management  agreement  with
Superior.  Under the management  agreement,  DGSE Merger Corp.  will provide the
senior management to Superior on a part-time basis until the consummation of the
merger or the  earlier  termination  of the merger  agreement.  Pursuant  to the
management  agreement,  Mr. Oyster has been  appointed  interim chief  executive
officer of Superior,  Mr.  Oyster has been  appointed  interim  chief  operating
officer of Superior and Mr. Benson has been  appointed vice  president,  finance
and interim chief  financial  officer of Superior.  All three officers will work
part-time  pursuant to the  management  agreement,  and will continue to provide
services to DGSE as part of senior management.  Superior will pay DGSE a monthly
fee of $50,000, plus its expenses, for its services.

     A copy of the management  agreement is attached  hereto as Exhibit 99.4 and
is incorporated herein by reference. The foregoing description of the management
agreement  is  qualified  in its  entirety by  reference to the full text of the
management agreement.

     Support Agreements

     In connection with the merger  agreement,  Dr. L.S. Smith, our chairman and
chief  executive  officer and our largest  stockholder,  and our company entered
into a support  agreement with  Superior,  pursuant to which Dr. Smith agreed to
vote all of his shares of DGSE  common  stock in favor of the merger and related
transactions,  and against  any  proposal  or action  that could  reasonably  be
expected to delay,  impede or  interfere  with the approval of the merger or any
related transaction. Dr. Smith owns approximately 46% of our outstanding shares.

     SIBL and Superior have entered into a corresponding  support agreement with
our company, pursuant to which SIBL and some individual stockholders of Superior
have agreed to vote all of their shares of Superior common stock in favor of the
merger and related  transactions,  and against any proposal or action that could
reasonably  be expected to delay,  impede or interfere  with the approval of the
merger or any related  transaction.  These stockholders own approximately 57% of
Superior's outstanding shares, which represents sufficient shares to approve the
merger.

     Copies of the support  agreements are attached  hereto as Exhibits 99.1 and
99.5, and are incorporated herein by reference. The foregoing description of the
support agreements is qualified in its entirety by reference to the full text of
the support agreements.

     While SIBL has agreed to all of the terms of the  agreements  to which SIBL
is a party and has  satisfied  all of its current  obligations  relating to such
agreements,  SIBL has not yet  delivered  executed  copies of those  agreements.
SIBL's signatures are expected this week.

Additional Information and Where to Find It

     In connection  with the proposed  acquisition,  DGSE and Superior intend to
file  relevant  materials  with the SEC.  DGSE  intends  to file a  registration
statement on Form S-4, which will contain a prospectus and related  materials to
register  the DGSE common  stock to be issued in the  merger,  and a joint proxy
statement, which DGSE and Superior plan to mail to their respective stockholders
in  connection  with the  approval of the  proposed  merger by their  respective
stockholders.    The    registration    statement    and   the    joint    proxy
statement/prospectus  included therein will contain important  information about


                                      -4-
<PAGE>

DGSE, Superior, the proposed merger and related matters.  Investors and security
holders are urged to read this filing when it becomes  available because it will
contain  important  information  about the  merger  transaction.  Investors  and
security  holders will be able to obtain free copies of this  document  (when it
becomes  available) and other documents filed with the SEC at the SEC's web site
at www.sec.gov or by calling the SEC at 1-800-SEC-0330.  In addition,  investors
and security  holders may obtain free copies of the documents filed by DGSE with
the SEC by contacting DGSE Investor Relations at (972) 484-3662.

Participation in Solicitations

     DGSE and its  directors  and  executive  officers  also may be deemed to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection  with the proposed  merger  transaction.  Information  regarding  the
special  interests  of these  directors  and  executive  officers  in the merger
transaction will be included in the joint proxy  statement/prospectus  described
above.  Additional  information regarding these directors and executive officers
is also  included  in DGSE's  proxy  statement  for its 2006  Annual  Meeting of
Stockholders,  which  was filed  with the SEC on or about  June 23,  2006.  This
document is available  free of charge at the SEC's web site at  www.sec.gov  and
from DGSE by contacting DGSE Investor Relations at (972) 484-3662.

     Superior and its directors and executive  officers also may be deemed to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection  with the proposed  merger  transaction.  Information  regarding  the
special  interests  of these  directors  and  executive  officers  in the merger
transaction will be included in the joint proxy  statement/prospectus  described
above.  Additional  information regarding these directors and executive officers
is also included in Superior's  proxy  statement for its 2005 Annual  Meeting of
Stockholders,  which was filed with the SEC on or about  October  6, 2005.  This
document is available  free of charge at the SEC's web site at  www.sec.gov  and
from Superior by contacting Superior Investor Relations at (800) 421-0754.

Item 7.01.  Regulation FD Disclosure.

     On January 9, 2007,  DGSE  issued a press  release  announcing  that it had
entered into the merger agreement with Superior.  A copy of the press release is
attached as Exhibit 99.6 to this report.

     On January 9, 2007,  Superior issued a press release announcing that it had
entered  into the merger  agreement  with DGSE.  A copy of the press  release is
attached as Exhibit 99.7 to this report.

     The  disclosure in this Item 7.01,  and the press  releases  being filed as
exhibits, are being furnished and will not be deemed "filed" for the purposes of
Section 18 of the  Securities  Exchange  Act of 1934,  as amended,  or otherwise
subject to the liabilities of that section.

Item 9.01.  Financial Statements and Exhibits.


     (c)  Exhibits.

      2.1 Amended and Restated  Agreement and Plan of Merger and  Reorganization
          dated January 6, 2007 (a)
      2.2 Form of Escrow Agreement
      2.3 Form of Amended and Restated Commercial Loan and Security Agreement
      2.4 Form of Warrant
      2.5 Form of Note Exchange Agreement
      2.6 Form of Termination and Release Agreement
      2.7 Form of Registration Rights Agreement
      2.8 Form of Corporate Governance Agreement
      2.9 Limited Joinder Agreement dated January 6, 2007
     99.1 Support Agreement - DGSE Stockholders dated January 6, 2007


                                      -5-
<PAGE>

     99.2 Securities Exchange Agreement dated January 6, 2007
     99.3 Warrant to DiGenova issued January 6, 2007
     99.4 Management Agreement dated January 6, 2007
     99.5 Support Agreement - Superior Stockholders dated January 6, 2007
     99.6 DGSE Press Release dated January 9, 2007 (b)
     99.7 Superior Press Release dated January 9, 2007 (b)

- ------------------------
(a)  Certain exhibits and schedules have been omitted and DGSE agrees to furnish
     supplementally  to the SEC a copy of any omitted exhibits or schedules upon
     request.

(b)  This  exhibit is being  furnished  and will not be deemed  "filed"  for the
     purposes of Section 18 of the Securities  Exchange Act of 1934, as amended,
     or otherwise subject to the liabilities of that section.















                                      -6-
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.



                                           DGSE COMPANIES, INC.

Date:  January 9, 2007                     By: /s/ Dr. L.S. Smith
                                              ----------------------------------
                                              Dr. L.S. Smith
                                              Chairman & Chief Executive Officer




















                                      -7-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>2
<FILENAME>dgse8kex21010907.txt
<DESCRIPTION>AMENDED & RESTATED AGREEMENT AND PLAN OF MERGER
<TEXT>

                                                                     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.










                                      -1-
<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

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












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




                                      -1-
<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

                                      -i-
<PAGE>

          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

                                      -ii-
<PAGE>

          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



                                     -iii-
<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






                                      -iv-
<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>

                                      -v-
<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>

                                      -vi-
<PAGE>
<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>








                                     -vii-
<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



                                      -1-
<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.


                                      -2-
<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,


                                      -3-
<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


                                      -5-
<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)).


                                      -9-
<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.


                                      -10-
<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.


                                      -11-
<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.


                                      -12-
<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.


                                      -13-
<PAGE>

     "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


                                      -14-
<PAGE>

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


                                      -15-
<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.




                                      -16-
<PAGE>

                                  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.




                                      -17-
<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)


                                      -18-
<PAGE>

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


                                      -19-
<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.


                                      -20-
<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;


                                      -21-
<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


                                      -22-
<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.


                                      -23-
<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


                                      -24-
<PAGE>

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.


                                      -25-
<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


                                      -26-
<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


                                      -27-
<PAGE>

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.


                                      -28-
<PAGE>

         (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


                                      -29-
<PAGE>

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.


                                      -30-
<PAGE>

         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.


                                      -31-
<PAGE>

         (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


                                      -32-
<PAGE>

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


                                      -33-
<PAGE>

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;


                                      -34-
<PAGE>

         (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


                                      -35-
<PAGE>

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 Section 3(1) of ERISA is a self-insured plan. No Company Benefit Plan
is covered by, and none of the Company  and the Company  Subsidiaries  and their


                                      -36-
<PAGE>

respective ERISA Affiliates has incurred or expects to incur any liability under
Title IV of ERISA or  Section  412 of the Code.  With  respect  to each  Company
Benefit Plan subject to ERISA as either an employee  pension benefit plan within
the meaning of Section 3(2) of ERISA or an employee  welfare benefit plan within
the meaning of Section 3(1) of ERISA, the Company has prepared in good faith and
timely filed all requisite  governmental  reports (which were true,  correct and
complete as of the date filed),  including any required audit  reports,  and has
properly and timely filed and  distributed  or posted all notices and reports to
employees required to be filed,  distributed or posted with respect to each such
Company Benefit Plan. No Action has been brought,  or to the Actual Knowledge of
the Company or any Company Subsidiary, is threatened, against the Company or any
Company  Subsidiary or with respect to any such Company Benefit Plan,  including
any audit or inquiry by the IRS or United States Department of Labor.

         (d)  None  of the  Company  and  the  Company  Subsidiaries  and  their
respective  ERISA  Affiliates is a party to, or has made any  contribution to or
otherwise incurred any obligation under, any  "multiemployer  plan" as such term
is defined in Section  3(37) of ERISA or any  "multiple  employer  plan" as such
term is defined in Section 413(c) of the Code.  There has been no termination or
partial  termination  of any Company  Benefit Plan within the meaning of Section
411(d)(3) of the Code.

         (e) Each  compensation  and benefit plan  required by Law or applicable
custom or rule of the relevant  jurisdiction  to be maintained or contributed to
outside of the United  States (each such plan, a "Foreign  Plan") by the Company
or any Company Subsidiary is listed in Section 4.10(e) of the Company Disclosure
Schedules, except for plans maintained by Governmental Entities. As regards each
such Foreign Plan, (i) such Foreign Plan is in compliance with the provisions of
the laws of each  jurisdiction in which such Foreign Plan is maintained,  to the
extent those laws are applicable to such Foreign Plan, (ii) the Company and each
Company Subsidiary,  and each of their respective ERISA Affiliates, has complied
with all applicable reporting and notice requirements, and such Foreign Plan has
obtained from the Governmental  Entity having  jurisdiction with respect to such
Foreign Plan any required  determinations,  if any, that such Foreign Plan is in
compliance with the laws of the relevant jurisdiction if such determinations are
required in order to give effect to such  Foreign  Plan,  and (iii) such Foreign
Plan has been administered in accordance with its terms and applicable Law.

         (f) Section  4.10(f) of the  Company  Disclosure  Schedules  lists each
person who the Company  reasonably  believes  is, with respect to the Company or
any  Company  Subsidiary  or  any  of  their  respective  ERISA  Affiliates,   a
"disqualified  individual"  (within the meaning of Section  280G of the Code and
the regulations promulgated thereunder) determined as of the date hereof.

         (g) Section 4.10(g) of the Company Disclosure Schedules lists as of the
date of this  Agreement  each employee of the Company or any Company  Subsidiary
who is not fully  available to perform work because of disability or other leave
and also lists, with respect to each such employee, the basis of such disability
or leave and the anticipated date of return to full service.

         (h) Except as set forth in Section  4.10(h) of the  Company  Disclosure
Schedules,  none  of  the  execution  and  delivery  of  this  Agreement  or the
consummation of the  Transactions  (or the  Transactions in combination with any
subsequent  transactions or events,  other than transactions or events initiated
solely by Parent) will (i) result in any employee, director or consultant of the
Company  or  any  Company   Subsidiary   becoming   entitled  to  any   deferred
compensation, bonus or severance pay or materially increase or otherwise enhance
any benefits  otherwise payable by the Company or any Company  Subsidiary,  (ii)
result in the acceleration of the time of payment or vesting,  or an increase in
the amount of any  compensation  due to any employee,  director or consultant of
the Company or any Company  Subsidiary,  except as may be required under Section
411(d)(3) of the Code,  (iii) result in  forgiveness  in whole or in part of any
outstanding loans made by the Company or any Company  Subsidiary to any of their
employees,  directors or consultants,  or (iv) result in a payment that would be


                                      -37-
<PAGE>

considered  an "excess  parachute  payment" and treated as  nondeductible  under
Section 280G of the Code or subject to the excise Tax under  Section 4999 of the
Code.

         (i) To the Company's Knowledge, the Company has neither granted, nor is
a party to, any Contract that grants any  compensation,  equity award, or bonus,
that fails to comply in good faith with the  provisions  of Section  409A of the
Code.

         (j) Each of the Company and the Company  Subsidiaries  is in compliance
in  all  material  respects  with  all  currently   applicable  Laws  respecting
employment,  discrimination  in employment,  terms and conditions of employment,
worker  classification  (including  the  proper  classification  of  workers  as
independent  contractors and consultants),  wages, hours and occupational safety
and  health and  employment  practices,  including  the  Immigration  Reform and
Control  Act. The Company and each  Company  Subsidiary  has paid in full to all
employees,   independent   contractors  and  consultants  all  wages,  salaries,
commissions,  bonuses,  benefits,  and other compensation due to or on behalf of
such employees,  independent contractors or consultants. Neither the Company nor
any Company  Subsidiary  is liable for any payment to any trust or other fund or
to any Governmental Entity, with respect to unemployment  compensation benefits,
social  security or other  benefits or  obligations  for  employees  (other than
routine  payments to be made in the Ordinary  Course of Business).  There are no
controversies  pending or, to the Actual  Knowledge of the Company,  threatened,
between  the  Company  or any  Company  Subsidiary  and any of their  respective
employees, which controversies have or could reasonably be expected to result in
an Action before any Governmental Entity.

         (k) Neither the  Company  nor any of the Company  Subsidiaries  has any
obligation  to pay any amount or provide any  benefit to any former  employee or
officer,  other than  obligations  (i) for which the Company has  established  a
reserve for such amount on the Company  Balance Sheet in  accordance  with GAAP,
and (ii) pursuant to Contracts entered into after the Company Balance Sheet Date
and disclosed on Section 4.10(k) of the Company  Disclosure  Schedules.  Neither
the Company nor any Company  Subsidiary is a party to or bound by any collective
bargaining  agreement or other labor union  contract,  no collective  bargaining
agreement  is being  negotiated  by the  Company or any Company  Subsidiary  and
neither the Company nor any Company  Subsidiary has any duty to bargain with any
labor  organization.  There is no pending  demand for  recognition  or any other
request or demand  from a labor  organization  for  representative  status  with
respect to any person  employed by the Company or any  Company  Subsidiary.  The
Company has no Actual  Knowledge of any  activities or  proceedings of any labor
union to organize the employees of the Company or any Company Subsidiary.  There
is no labor  dispute,  strike or group work stoppage  against the Company or any
Company  Subsidiary pending or to the Actual Knowledge of the Company threatened
that may interfere with the respective business activities of the Company or any
Company Subsidiary.

         (l) To the Knowledge of the Company,  no employee of the Company or any
Company  Subsidiary  is in  violation of any term of any  employment  agreement,
patent  disclosure  agreement,  non-competition  agreement,  or any  restrictive
covenant to a former  employer  relating to the right of any such employee to be
employed by the Company or any Company  Subsidiary  because of the nature of the
business  conducted or presently  proposed to be conducted by the Company or any
Company Subsidiary or to the use of trade secrets or proprietary  information of
others.  No Key  Employee  of the Company or any  Company  Subsidiary  has given
notice of termination  or resignation to the Company or any Company  Subsidiary,
nor does the Company  otherwise have Actual Knowledge that any such Key Employee
intends to  terminate  his or her  employment  with the  Company or any  Company
Subsidiary.  The  employment  of each of the  employees  of the  Company  or any
Company Subsidiary is "at will" and the Company and each Company Subsidiary does
not have any obligation to provide any particular form or period of notice prior
to terminating  the  employment of any of their  respective  employees,  and the
employment  of each employee of the Company and each Company  Subsidiary  may be


                                      -38-
<PAGE>

terminated  without prior notice and without financial  liability to the Company
or any Company Subsidiary (other than as provided under applicable Law or as set
forth in Section 4.10(a) of the Company Disclosure Schedule).

         (m) The  Company  has Made  Available  to  Parent a true,  correct  and
complete list of the names of all current officers,  directors,  consultants and
employees of the Company and each Company  Subsidiary showing each such person's
name,  position,  rate of annual remuneration,  status as exempt/non-exempt  and
bonuses for the current fiscal year and the most recently completed fiscal year.

         (n) The  Company  has Made  Available  to Parent,  with  respect to the
Company and the Company Subsidiaries,  true, correct and complete copies of each
of the following:  (i) all forms of offer letters,  (ii) all forms of employment
agreements and severance agreements,  (iii) all forms of services agreements and
forms of  agreements  with  current and former  consultants  or  advisory  board
members,  (iv)  all  forms  of  confidentiality,  non-competition  or  invention
agreements by and between  current and former  employees,  consultants or others
and the Company or any Company Subsidiary (and a true, correct and complete list
of employees,  consultants  or others not subject  thereto),  (v) all management
organization charts, (vi) all agreements or insurance policies providing for the
indemnification  of any  officers  or  directors  of the  Company or any Company
Subsidiary, (vii) a summary of the Company's standard severance policy, (viii) a
summary of  outstanding  liability  for  termination  payments  and  benefits to
current and former directors, officers, employees and consultants of the Company
or any  Company  Subsidiary,  and (ix) a schedule of bonus  commitments  made to
employees of the Company or any Company Subsidiary.

         (o) The Company and each Company  Subsidiary  is in  compliance  in all
material  respects with the Worker  Adjustment  Retraining  Notification  Act of
1988, as Amended ("WARN Act"), or any similar Law. In the past two years (i) the
Company  has not  effectuated  a "plant  closing"  (as  defined in the WARN Act)
affecting any site of employment  or one or more  facilities or operating  units
within any site of employment  or facility of its  business,  (ii) there has not
occurred a "mass  layoff"  (as  defined in the WARN Act)  affecting  any site of
employment or facility of the Company of any Company  Subsidiary,  and (iii) the
Company  has not been  affected  by any  transaction  or  engaged  in layoffs or
employment  terminations  sufficient  in number to  trigger  application  of any
similar state,  local or foreign law or  regulation.  The Company has not caused
any of its employees to suffer an "employment loss" (as defined in the WARN Act)
during the 90-day period prior to the date of this Agreement.

         Section  4.11  Customers.  Neither  the  Company nor any of the Company
Subsidiaries  has any  outstanding  material  dispute  concerning  its  goods or
services with any coin or jewelry  dealer,  auction house,  third party website,
independent  sales agent or other customer,  retailer or distributor who, in the
twelve months ending  September 30, 2006,  was one of the 20 largest  sources of
consolidated  revenue for the Company  and the  Company  Subsidiaries,  based on
amounts  paid or payable  during such  periods  (each,  a  "Significant  Company
Customer").  Each Significant  Company Customer is listed on Section 4.11 of the
Company  Disclosure  Schedules.  Neither  the  Company  nor  any of the  Company
Subsidiaries  has  received  any  written  notice from any  Significant  Company
Customer that such Person (i) will not continue as a customer or  distributor of
the  Company  or any  Company  Subsidiary  after the  Merger,  (ii)  intends  to
terminate or materially  modify  existing  Contracts or  relationships  with the
Company or any Company  Subsidiary,  or (iii) intends to  materially  reduce the
amount of business conducted with the Company and the Company Subsidiaries.

         Section  4.12  Contracts.   Section  4.12  of  the  Company  Disclosure
Schedules specifically  identifies (by the applicable subsection set forth below
in this Section 4.12) each Company Material  Contract (other than this Agreement
or any Related  Agreement).  The term "Company Material  Contract" shall include


                                      -39-
<PAGE>

each of the following  Contracts to which the Company or any Company  Subsidiary
is a party to or by which the  Company or any  Company  Subsidiary  is bound (in
each case, other than this Agreement or any Related Agreement):

         (a) any Contract with any Significant Company Customer;

         (b) any Contract generating,  or that is reasonably likely to generate,
more than 5% of revenues for the Company and the Company  Subsidiaries  over the
twelve month period from the date of this Agreement,  other than those set forth
on Section 4.12(j) of the Company Disclosure Schedules;

         (c) any Contract  with any  director,  officer,  employee or consultant
that would require the Company or any Company Subsidiary to make any payments in
connection with the Merger, or upon termination of employment, but excluding any
Contract (i) that is terminable at-will or, in the case of consultants,  with 30
or fewer  days of  notice  by the  Company  or any of the  Company  Subsidiaries
without cost,  liability or financial  obligations  (other than accrued  regular
compensation  and benefits  through the date of termination,  including any such
notice  period),  or (ii) under which the  Company and the Company  Subsidiaries
collectively have paid or are obligated to pay less than $10,000;

         (d)   any   Contract   for   indemnification   (other   than   standard
indemnification  provisions  in  Contracts  entered  into by the  Company or any
Company Subsidiary in the Ordinary Course of Business) or any guaranty;

         (e) any Contract  containing  any covenant  limiting in any respect the
right  of  the  Company  or  any  of the  Company  Subsidiaries  to (i)  engage,
participate or compete in any line of business,  market or geographic area, (ii)
develop, market or distribute products or services,  (iii) conduct business with
any Person,  (iv) solicit the employment of, or hire, any Person, or (v) compete
with any Person;  or granting any exclusive  sales,  distribution,  marketing or
other exclusive rights,  rights of first refusal,  "most favored nation" rights,
rights of first  negotiation or other  exclusive  rights or similar terms to any
Person, but in each case excluding Contracts containing limitations that (A) are
not material to the Company or any Company Subsidiary,  and (B) do not limit the
ability of the Company or any Company Subsidiary to develop or market additional
products or services;

         (f) any  Lease for real or  personal  property  in which the  amount of
payments that the Company or any of the Company Subsidiaries is required to make
on an annual basis exceeds $25,000;

         (g) any Contract  pursuant to the express terms of which the Company or
any of the  Company  Subsidiaries  is  currently  obligated  to pay in excess of
$25,000 (or, in the case of a Contract for the purchase of inventory made in the
Ordinary  Course  of  Business,  $50,000)  in any one  year  period  that is not
terminable  by the  Company or the Company  Subsidiaries  without  penalty  upon
notice of ninety (90) days or less;

         (h) any Contract  currently  in force  relating to the  disposition  or
acquisition  by the  Company or any of the Company  Subsidiaries  after the date
hereof of (i) assets with a book value exceeding $25,000 (or, in the case of the
sale of inventory  made in the Ordinary  Course of Business,  $50,000) , or (ii)
Equity Interests in an Entity;

         (i)  any  Contract  pursuant  to  which  the  Company  or  any  Company
Subsidiary  is a licensor of  Intellectual  Property or agrees to Encumber,  not
assert, Transfer or sell rights in or with respect to any Intellectual Property,
except for distribution contracts with retail outlets, independent sales agents,
other  distributors  and end users  entered  into by the  Company or any Company
Subsidiary in the Ordinary Course of Business;


                                      -40-
<PAGE>

         (j) any joint  venture  Contract or any other  Contract that involves a
sharing of revenues in excess of $10,000, or involves a sharing of profits, cash
flows,  expenses or losses,  with other Persons,  or the payment of royalties to
any other Person,  other than  Contracts  identified  in Section  4.12(a) of the
applicable Company Disclosure Schedule;

         (k) any Contract  currently required to be filed as an exhibit pursuant
to Item 601(b)(10) of Regulation S-K promulgated under the Securities Act, other
than those currently on file with the SEC (including any Amendments to Contracts
filed as of the Company Balance Sheet Date that are required to be filed);

         (l) any Contract  containing a  "standstill"  provision with respect to
any Equity Interests of the Company;

         (m) any Contract in effect on the date of this Agreement, including any
Company  Stock Option Plan,  relating to the sale,  issuance,  grant,  exercise,
award,  purchase,  repurchase or redemption of any Company  Common Shares or any
other  Equity  Interests  or  Securities  of the  Company or any of the  Company
Subsidiaries,  or any  Commitments  to  purchase or  otherwise  acquire any such
Company Common Shares,  Equity  Interests or Securities,  except for the Company
Stock  Option  Plans,  the Company  Options and Company  Warrants  disclosed  in
Section 4.3 of the applicable Company Disclosure Schedule;

         (n) any Contract  under which the Company or any Company  Subsidiary is
obligated to provide consulting  services,  development  services,  professional
services or support  services  (other  than  maintenance  and  support  customer
contracts on the Company's  standard,  unmodified forms), in each case excluding
(i) Contracts that are terminable by the Company or Company Subsidiary on notice
of thirty (30) days or less without  penalty in excess of $25,000,  individually
or in the  aggregate,  and without any ongoing  material  obligations,  and (ii)
Contracts  that generated less than $25,000 in revenue to the Company during the
12 months preceding the date of this Agreement;

         (o) any Contract with any investment banker, broker, advisor or similar
Person,  or any  accountant,  legal  counsel  or other  Person  retained  by the
Company, in connection with this Agreement and the Transactions,  other than (i)
the Company Engagement Letter, and (ii) Contracts with service providers entered
into in the Company's  Ordinary Course of Business with fees to be paid based on
the provider's customary hourly rates;

         (p) any  Contract  pursuant  to which the Company or any of the Company
Subsidiaries  has  acquired a business  or  Entity,  or assets of a business  or
Entity, whether by way of merger, consolidation,  purchase of stock, purchase of
assets,  license or  otherwise,  or any  Contract  pursuant  to which it has any
material  ownership  interest  in any  other  Entity  (other  than  the  Company
Subsidiaries),  in either  case which was  entered  into  within the three years
preceding the date hereof or under which any Liabilities exist;

         (q) all loan or credit agreements, notes, bonds, mortgages,  indentures
and other  agreements and instruments  pursuant to which any Indebtedness of the
Company or any of the Company  Subsidiaries in an aggregate  principal amount in
excess of $25,000 is outstanding  or may be incurred on the terms  thereof,  and
the respective principal amounts currently outstanding thereunder as of the date
hereof; or

         (r) any other Contract not listed in subsections (a)-(q) next preceding
that  individually  provides  for  payments  to or by the Company or any Company
Subsidiary in excess of $50,000, or pursuant to which the Company or any Company


                                      -41-
<PAGE>

Subsidiary  have been  paid,  or expects  to be paid,  more than  $50,000 in any
consecutive  12-month period, or that individually  provides for payments by the
Company or any Company  Subsidiary in excess of $50,000 or is otherwise material
to the  Company or the  Company  Subsidiaries  or their  respective  businesses,
operations, financial condition, properties or assets (other than employee offer
letters in the Ordinary Course of Business).

Except as set forth on Section  4.12 of the Company  Disclosure  Schedules,  all
Company  Material  Contracts are in written form. The Company has Made Available
to Parent true,  correct and complete copies of each Company Material  Contract,
as Amended to date. Each Company  Material  Contract is (i) valid and binding on
the Company and each Company  Subsidiary  party  thereto  and, to the  Company's
Knowledge,  each other party  thereto,  and (ii) in full force and  effect.  The
Company and each Company  Subsidiary has in all material respects  performed all
material  obligations  required to be  performed  by it to the date hereof under
each Company Material Contract and, to the Company's Knowledge, each other party
to each Company  Material  Contract has in all material  respects  performed all
obligations required to be performed by it under such Company Material Contract.
As of the date  hereof,  none of the Company and the  Company  Subsidiaries  has
Knowledge of, or has received  notice from the other  contracting  party of, any
actual or alleged material Breach of any Company Material Contract. There exists
no Breach  with  respect to the  Company or any  Company  Subsidiary  or, to the
Knowledge of the Company,  with respect to any other contracting  party,  which,
with the  giving of notice or the  lapse of time or both,  would  reasonably  be
expected to constitute a material Breach of such Company Material Contract.

         Section  4.13  Litigation.  Except as set forth in Section  4.13 of the
Company  Disclosure  Schedules,  (i)  there  is no  Action  pending  or,  to the
Company's  Actual  Knowledge,  threatened  against  the  Company or any  Company
Subsidiary or, to the Company's Actual  Knowledge,  for which the Company or any
Company  Subsidiary  is obligated  to indemnify a third party,  (ii) none of the
Company and the Company  Subsidiaries is subject to any outstanding  Order,  and
(iii) to the  Company's  Knowledge,  there has been no refusal to  indemnify  or
denial of  indemnification  and no intention to refuse  indemnification,  by any
third  party in  connection  with any past,  pending or  threatened  Action with
respect to which the Company or any Company  Subsidiary is or may be entitled to
indemnification from any third party. Except as set forth in Section 4.13 of the
Company Disclosure Schedules, neither the Company nor any Company Subsidiary has
any Action pending  against any other Person.  There has not been since June 30,
2005, nor are there currently,  any internal  investigations  or inquiries being
conducted by the Company,  the Company Board (or any  committee  thereof) or any
third party at the request of any of the  foregoing  concerning  any  financial,
accounting, tax, conflict of interest, illegal activity, fraudulent or deceptive
conduct, violation of Company policy or other misfeasance or malfeasance issues.

         Section 4.14 Environmental Matters.

         (a) The Company and each Company  Subsidiary is in material  compliance
with all Environmental Laws.

         (b)  Neither  the  Company  nor any  Company  Subsidiary  has  received
notification  regarding any existing or potential  Environmental  Claims against
the Company or any Company Subsidiary, nor have any of them received any written
notification of any allegation of any actual or potential responsibility for, or
any Action  regarding,  (i) any  violation of  Environmental  Laws,  or (ii) any
Environmental  Release or threatened  Environmental Release at any Facilities of
any Materials of Environmental  Concern  generated or transported by the Company
or any Company Subsidiary.

         (c) There has been no  Environmental  Release at any  Facilities of the
Company or any Company  Subsidiary of any Materials of Environmental  Concern in
quantities that could trigger the need for investigation or remediation pursuant
to any Environmental Laws.


                                      -42-
<PAGE>

         Section 4.15 Intellectual Property.

         (a) Unless otherwise  expressly  provided herein,  the following terms,
whenever  used in this  Agreement,  shall have the meanings  ascribed to them in
this Section 4.15(a):

                  (1) "Company IP" means (i) all  Intellectual  Property used in
         the conduct of the business of the Company or any Company Subsidiary as
         currently  conducted by the Company and the Company  Subsidiaries,  and
         (ii) all other Company-Owned IP.

                  (2) "Company-Owned  IP" means all Intellectual  Property owned
         by the Company or any Company Subsidiary.

                  (3) "Company Products" means,  collectively,  (i) all products
         and services that are currently being  published,  marketed,  licensed,
         sold,  leased,  auctioned,  distributed  or  performed,  or offered for
         publication,  licensing, sale, lease, distribution or performance or at
         auction, by or on behalf of the Company or any Company Subsidiary,  and
         (ii) all  products  or  services  currently  under  development  by the
         Company or any  Company  Subsidiary  or that the  Company or any of the
         Company Subsidiaries are Contractually obligated to develop.

         (b)  The  Company  and  the  Company  Subsidiaries  (i)  own  and  have
independently  developed  or  acquired,  or (ii) have the valid right or license
(exclusive or  non-exclusive,  as applicable) to, all Company IP. The Company IP
is  sufficient  for the  conduct of the  business of the Company and the Company
Subsidiaries as currently  conducted and to the Company's Knowledge as currently
proposed to be conducted by the Company or any Company Subsidiary.

         (c) Neither the  Company  nor any of the Company  Subsidiaries  has (i)
transferred ownership of any material  Company-Owned IP to any third party, (ii)
knowingly permitted any material Company-Owned IP to enter the public domain, or
(iii)  permitted  any  material  Company  Registered  Intellectual  Property  or
application  therefor to lapse (other than through the  expiration of Registered
Intellectual  Property  at  the  end  of  its  maximum  statutory  term  or  the
abandonment  of trademarks  or service marks in the Ordinary  Course of Business
using reasonable business judgment).

         (d) Except as set forth in Section  4.15(d) of the  Company  Disclosure
Schedules,  the  Company  and the  Company  Subsidiaries  own and have  good and
exclusive title to all Company-Owned IP and all Company Registered  Intellectual
Property,  free and clear of any  Encumbrances.  Except as set forth in  Section
4.15(d) of the Company Disclosure Schedules,  the right, license and interest of
the Company and the Company  Subsidiaries in and to all Third Party Intellectual
Property  Rights  licensed by the Company or a Company  Subsidiary  are free and
clear of all Encumbrances  (excluding  restrictions  contained in the applicable
license agreements with such third parties).

         (e) Except as set forth in Section  4.15(e) of the  Company  Disclosure
Schedules,  none  of  the  execution  and  delivery  or  effectiveness  of  this
Agreement,  the  consummation  of the  Transactions  and the  performance by the
Company of its  obligations  under this  Agreement or the Related  Agreements to
which it is a signatory,  will cause the forfeiture or  termination  of, or give
rise to a right of forfeiture or termination of, any Company-Owned IP, or impair
the right of the Company, any Company Subsidiary or Parent to use, possess, sell
or license any Company-Owned IP or any portion thereof.  After the Closing,  all
Company-Owned  IP will be fully  transferable,  alienable or  licensable  by the
Surviving Corporation without restriction and without payment of any kind to any
third party subject to any existing  license and  distribution  agreements  with
third parties.


                                      -43-
<PAGE>

         (f)  Section  4.15(f)  of the  Company  Disclosure  Schedule  lists all
Company Registered  Intellectual  Property, and for each item of such Registered
Intellectual   Property,   (i)  the   jurisdictions  in  which  such  Registered
Intellectual  Property has been issued or registered or in which any application
for such issuance and  registration  has been filed,  and (ii) the legal counsel
(if any)  assisting  in the  initial  registration  or the  maintenance  of such
Registered Intellectual Property.

         (g) Each item of Company Registered Intellectual Property is subsisting
(or, in the case of applications,  applied for), all  registration,  maintenance
and renewal fees currently due in connection with such  Registered  Intellectual
Property have been or will be timely paid, and all documents,  recordations  and
certificates in connection with such Registered  Intellectual Property currently
required  to be filed  have been or will be  timely  submitted  to the  relevant
patent,  copyright,  trademark  or other  authorities  in the  United  States or
foreign  jurisdictions,  as the case may be, for the  purposes  of  prosecuting,
maintaining and perfecting such Registered  Intellectual  Property and recording
the Company's and the Company Subsidiaries' ownership interests therein.

         (h) Except as set forth in Section  4.15(h) of the  Company  Disclosure
Schedules,  to the Company's  Actual  Knowledge,  there is no unauthorized  use,
unauthorized  disclosure,  infringement or misappropriation of any Company-Owned
IP by any third party,  including any employee or former employee of the Company
or any Company Subsidiary. Except as set forth in Section 4.15(h) of the Company
Disclosure  Schedules,  neither  the  Company  nor any  Company  Subsidiary  has
initiated  any  lawsuit,   mediation  or   arbitration   for   infringement   or
misappropriation of any Intellectual Property.

         (i) Except as set forth in Section  4.15(i) of the  Company  Disclosure
Schedules,  neither the Company nor any Company  Subsidiary has (i) been sued in
any Action (or  received any written  notice or, to the Actual  Knowledge of the
Company,  threat) that involves a claim of infringement or  misappropriation  of
any Third Party  Intellectual  Property  Right or which  contests the  validity,
ownership  or right of the Company or any  Company  Subsidiary  to exercise  any
Intellectual  Property  right, or (ii) received any written  communication  that
puts the Company or any Company  Subsidiary on notice of or involves an offer to
license or grant any Third Party  Intellectual  Property  Right or immunities in
respect thereof.

         (j) The  operation  of the  business  of the  Company  and the  Company
Subsidiaries  as  such  business  is  currently  conducted  and,  to the  Actual
Knowledge of the Company,  as currently  proposed to be conducted by the Company
or any Company Subsidiary, including (i) the design, development, manufacturing,
reproduction,   marketing,   licensing,   sale,  offer  for  sale,  importation,
distribution, provision or use of any Company Product, and (ii) the Company's or
any  Company  Subsidiary's  use of any  product,  device or process  used in the
business of the Company or the Company  Subsidiaries as currently conducted and,
to the Actual Knowledge of the Company, as currently proposed to be conducted by
the  Company  or any  Company  Subsidiary,  does not and will  not  infringe  or
misappropriate any Third Party Intellectual Property Rights and does not and, to
the Actual Knowledge of the Company,  will not constitute unfair  competition or
unfair trade practices  under the Laws of any  jurisdiction in which the Company
or any of the Company Subsidiaries conducts business.

         (k) None of the Company-Owned IP, the Company Products, the Company and
the Company  Subsidiaries is subject to any judicial or  governmental  Action or
outstanding Order (A) restricting in any manner the use, transfer,  or licensing
by the Company or any Company  Subsidiary of any Company-Owned IP or any Company
Product,  or which may affect the validity,  use or  enforceability  of any such
Company-Owned  IP or Company  Product,  or (B)  restricting  the  conduct of the
business of the Company or any Company  Subsidiary in order to accommodate Third
Party Intellectual Property Rights.


                                      -44-
<PAGE>

         (l) Neither the Company nor any Company  Subsidiary  has  received  any
written  opinion of legal  counsel that any Company  Product or the operation of
the  business  of the  Company  or any  Company  Subsidiary,  as  previously  or
currently  conducted,  infringes or misappropriates any Third Party Intellectual
Property Rights.

         (m) Except as set forth in Section  4.15(m) of the  Company  Disclosure
Schedules, each of the Company and the Company Subsidiaries has secured from all
of its consultants,  employees and independent  contractors who independently or
jointly  contributed  to the  conception,  reduction  to  practice,  creation or
development  of any material  Company-Owned  IP, an assignment of inventions and
ownership  agreement,  in the form Made Available to Parent,  assigning all such
third party's Intellectual Property in such contribution that the Company or any
Company  Subsidiary  does not already own by operation of Law, and no such third
party has retained any rights or licenses with respect thereto.

         (n)  To  the  Company's  Knowledge,  no  current  or  former  employee,
consultant or  independent  contractor of the Company or any Company  Subsidiary
(i) is in  violation  of any  term  or  covenant  of any  Contract  relating  to
employment,  invention  disclosure,  invention  assignment,   non-disclosure  or
non-competition  or any other  Contract  with any other  party by virtue of such
employee's,  consultant's  or  independent  contractor's  being  employed by, or
performing  services  for, the Company or any Company  Subsidiary or using trade
secrets or proprietary  information of others  without  permission,  or (ii) has
developed  any  technology,  software  or  other  copyrightable,  patentable  or
otherwise  proprietary  work for the Company or any Company  Subsidiary  that is
subject to any Contract  under which such  employee,  consultant or  independent
contractor  has  assigned  or  otherwise  granted to any third  party any rights
(including  Intellectual Property rights) in or to such technology,  software or
other copyrightable, patentable or otherwise proprietary work.

         (o) To the Company's  Knowledge,  the employment of any employee of the
Company or any  Company  Subsidiary  or the use by the  Company  or any  Company
Subsidiary of the services of any consultant or independent  contractor does not
subject the  Company or any Company  Subsidiary  to any  liability  to any third
party  for  improperly  soliciting  such  employee,  consultant  or  independent
contractor  to work for the  Company or any  Company  Subsidiary,  whether  such
liability  is based on  contractual  or other  legal  obligations  to such third
party.

         (p) Except as set forth in Section  4.15(p) of the  Company  Disclosure
Schedules, to the Company's Knowledge, no current or former employee, consultant
or  independent  contractor  of the  Company or any Company  Subsidiary  has any
right,  license,  claim  or  interest  whatsoever  in or  with  respect  to  any
Company-Owned IP.

         (q) The Company and the Company  Subsidiaries  have taken  commercially
reasonable  steps to protect and  preserve the  confidentiality  of all material
confidential or non-public  information  included in the Company IP Rights.  All
use, disclosure or appropriation of such information owned by the Company or any
Company  Subsidiary  by or to a third party has been  pursuant to the terms of a
written  agreement or other legal binding  arrangement  between the Company or a
Company Subsidiary and such third party. All use, disclosure or appropriation of
such  information by the Company and the Company  Subsidiaries  not owned by the
Company or any Company  Subsidiary  has been  pursuant to the terms of a written
agreement  between the Company or such Company  Subsidiary and the owner of such
information, or is otherwise lawful.

         (r) Except as set forth in Section  4.15(r) of the  Company  Disclosure
Schedules,  to the  Company's  Knowledge,  neither  the  Company nor any Company
Subsidiary has (i)  incorporated  Open Source  Materials  into, or combined Open
Source Materials with,  Company IP, or (ii) distributed Open Source Materials in
conjunction with any Company IP.


                                      -45-
<PAGE>

         (s)  To  the  Company's  Knowledge,  no (i)  government  funding,  (ii)
facilities of a university,  college, other educational  institution or research
center,  or  (iii)  funding  from any  Person  (other  than  funds  received  in
consideration  for the Company  Equity  Interests  or  Indebtedness  incurred on
commercially  reasonable terms) was used in the development of the Company-Owned
IP.

         Section 4.16 Taxes.

         (a) The  Company  and the  Company  Subsidiaries  and each  affiliated,
combined,  consolidated  or unitary  group of which the  Company or any  Company
Subsidiary is or has been a member (each,  a "Company  Group") have timely filed
all material federal, state, local, and foreign Tax Returns required to be filed
by it in the manner  prescribed by applicable Laws and all such Tax Returns were
true,  complete  and correct in all  material  respects.  Except with respect to
Taxes that are  immaterial  in amount,  all Taxes of the Company and the Company
Subsidiaries  (whether  or not shown or  required to be shown on any Tax Return)
that are due and  payable  have been timely  paid in full and the  accruals  and
reserves for Taxes (rather than any reserve for deferred  Taxes  established  to
reflect timing difference  between book and Tax income) reflected in the Company
Balance  Sheet (rather than any notes  thereto) are adequate in accordance  with
GAAP to cover all unpaid  Taxes of the  Company  and the  Company  Subsidiaries.
Except with  respect to Taxes that are  immaterial  in amount,  all reserves for
Taxes as  adjusted  for  operations  and  transactions  and the  passage of time
through the Effective  Time in  accordance  with past custom and practice of the
Company and the Company  Subsidiaries  are adequate in  accordance  with GAAP to
cover all unpaid  Taxes of the  Company and the  Company  Subsidiaries  accruing
through the Effective Time.

         (b) The Company and the Company  Subsidiaries  have  withheld  and paid
over all material Taxes required to have been withheld and paid over, and to the
Knowledge of the Company, the Company and the Company Subsidiaries have withheld
and paid over all other Taxes  required to have been withheld and paid over, and
the  Company  and the  Company  Subsidiaries  have  complied  with all  material
information  reporting  and  backup  withholding  requirements,   including  the
maintenance of required records with respect thereto, in each case in connection
with amounts paid or owing to any employee, creditor,  independent contractor or
other third party.  There are no  Encumbrances  on any of the  Properties of the
Company or any Company Subsidiary with respect to Taxes.

         (c) Except as set forth in Section  4.16(c) of the  Company  Disclosure
Schedules, no audit of material Tax Returns or other examination of the Company,
any  Company  Subsidiary  or any  member  of any  Company  Group is  pending  or
threatened in writing. No deficiencies have been asserted against the Company or
any Company  Subsidiary as a result of  examinations by any Tax Authority and no
issue has been raised by any examination conducted by any Tax Authority that, by
application of the same  principles,  might result in a proposed  deficiency for
any other period not so examined.  Each  deficiency  resulting from any audit or
examination  relating to Taxes of the Company or any Company  Subsidiary  by any
Tax  Authority  has  been  paid  or is  being  contested  in good  faith  and in
accordance  with the Law and is fully reserved for on the Company  Balance Sheet
in  accordance  with  GAAP.  No claim has ever been  made by an  authority  in a
jurisdiction where the Company or any of the Company  Subsidiaries does not file
Tax Returns that the Company or any Company  Subsidiary,  as the case may be, is
or may be subject  to Tax in such  jurisdiction.  Neither  the  Company  nor any
Company  Subsidiary  is  subject  to any  private  letter  ruling  of the IRS or
comparable  rulings of other Tax Authorities that will be binding on the Company
or any Company  Subsidiary  with respect to any period  following  the Effective
Time.  Neither the Company nor any of the Company  Subsidiaries  has granted any
power of attorney that is currently in force with respect to any material  Taxes
or Tax Returns.

         (d) Neither the Company nor any Company  Subsidiary  has  requested any
extension  of time within which to file any material Tax Return which Tax Return


                                      -46-
<PAGE>

has not yet  been  filed.  There  are no  agreements,  waivers  of  statutes  of
limitations,  or other arrangements  providing for extensions of time in respect
of the  assessment  or collection of any unpaid Taxes against the Company or any
Company Subsidiary.

         (e) The Company and each  Company  Subsidiary  have  disclosed on their
federal income tax returns all material  positions  taken therein that could, if
not so disclosed,  give rise to a substantial  understatement penalty within the
meaning  of  Section  6662 of the Code.  Neither  the  Company  nor any  Company
Subsidiary has been a party to or participated in any way in a transaction  that
would be defined as a  "reportable  transaction"  within the meaning of Treasury
Regulation  Section  1.6011-4(b)  (including  any "listed  transaction")  or any
confidential  corporate  tax shelter  within the meaning of Treasury  Regulation
Section 1.6111-2.

         (f) Except as set forth in Section  4.16(f) of the  Company  Disclosure
Schedules,  neither the Company nor any Company  Subsidiary has been a member of
any  Company  Group  other than the  Company  Group of which the  Company is the
parent.  None of the Company or any Company Subsidiary has any liability for, or
any  indemnification  or reimbursement  obligation with respect to, (i) Taxes of
any Person under Treasury  Regulation Section 1.1502-6 (or any similar provision
under  foreign,  state or local  Law),  (ii)  material  Taxes of any  Person  as
transferee or successor,  or (iii)  material Taxes of any Person by contract for
Taxes.  Neither the Company  nor any  Company  Subsidiary  is a party to any Tax
sharing agreement, Tax indemnity obligation or similar Contract or practice with
respect to Taxes (including any advance pricing agreement,  closing agreement or
other agreement relating to Taxes with any Tax Authority).

         (g) Except as set forth in Section  4.16(g) of the  Company  Disclosure
Schedules,  neither the Company nor any Company  Subsidiary  (nor any officer of
the Company or any Company  Subsidiary)  is a party to any  Contract  (including
this Agreement,  the Related Agreement and the arrangements  contemplated hereby
and thereby) that, individually or collectively,  could give rise to the payment
of any amount (whether in cash or property,  including  shares of capital stock)
that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m)
or 162(n) of the Code.

         (h) Neither the  Company  nor any Company  Subsidiary  has agreed or is
required to make any adjustment  under Code Section 481(a) or Section 482 (or an
analogous  provision  of state,  local or foreign  Law) by reason of a change in
accounting method or otherwise.  Neither the Company nor any Company  Subsidiary
will be required to include in income,  or exclude any item of  deduction  from,
taxable  income for any taxable  period (or portion  thereof)  ending  after the
Closing Date as a result of any "closing agreement" as described in Code Section
7121 (or any  corresponding  or  similar  provision  of state,  local or foreign
income Tax Law).

         (i) Neither the  Company  nor any Company  Subsidiary  is or has been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code).

         (j)  Neither  the  Company  nor  any  Company  Subsidiary  has  had  or
maintained a permanent establishment other than in its country of organization.

         (k)  Section  4.16(k) of the  Company  Disclosure  Schedule  sets forth
information with respect to each of the Company and the Company  Subsidiaries as
of the most recent  practicable  date  regarding  any  material  Tax holidays or
foreign rulings to which the Company or any Company  Subsidiary (as the case may
be) is subject.


                                      -47-
<PAGE>

         (l) Neither the Company nor any Company Subsidiary has incurred, and no
state  of  affairs  exist  that  could  result  in the  Company  or any  Company
Subsidiary incurring, any penalty under Section 6662(e) of the Code.

         Section  4.17  Insurance.   Section  4.17  of  the  Company  Disclosure
Schedules  contains a true,  correct and complete  list of policies and bonds of
insurance maintained by the Company and each Company Subsidiary, and the Company
has Made Available to Parent true,  correct and complete copies of such policies
and bonds of  insurance.  There is no material  claim  pending under any of such
policies or bonds as to which coverage has been  questioned,  denied or disputed
by the  underwriters  of such  policies or bonds.  All  premiums due and payable
under all such  policies  and bonds have been  paid,  and the  Company  and each
Company  Subsidiary is otherwise in compliance in all material respects with the
terms of such policies and bonds.  To the Knowledge of the Company,  neither the
Company nor any Company  Subsidiary  has received  written  notification  of any
threatened  termination  of, or material  premium  increase with respect to, any
such policies or bonds.

         Section  4.18  Opinion of  Financial  Advisor.  The  Company  Board has
received  the  written  opinion of Stenton  Leigh  Valuation  Group,  Inc.  (the
"Company Financial  Advisor") addressed to the Company Board, to the effect that
the Merger  Consideration  is fair from a financial point of view to the holders
of Company Common Shares (other than Affiliates of the Company), and the Company
has delivered to Parent a true, correct and complete copy of such opinion solely
for informational purposes.

         Section 4.19 Brokers.  Except for any fees set forth in Section 4.19 of
the Company Disclosure  Schedules,  neither the Company nor any Affiliate of the
Company is obligated  for the payment of any fees or expenses of any  investment
banker,  broker,  advisor  or  similar  party in  connection  with  the  origin,
negotiation or execution of this  Agreement or in connection  with the Merger or
any other  Transaction.  The  Company is not  obligated  to  continue to use the
services of the Company  Financial  Advisor  following  the Merger or to pay the
fees or  expenses  of the  Company  Financial  Advisor  in  connection  with any
transaction other than the Merger following consummation of the Merger.

         Section  4.20  Properties.  Neither the Company nor Company  Subsidiary
owns  any  real  property  interests.  Section  4.12 of the  Company  Disclosure
Schedules  lists all material real  property  Leases to which the Company or any
Company  Subsidiary is a party and each Amendment thereto that is now in effect.
All such current Leases are in full force and effect, are valid and effective in
accordance with their respective terms, and, except as set forth in Section 4.20
of the  Company  Disclosure  Schedules,  none of the  Company  and  the  Company
Subsidiaries and, to the Actual Knowledge of the Company,  no other party, is in
Breach of any such Lease that would give rise to a material  claim  against  the
Company or any Company Subsidiary.

         Section 4.21 Interested Party Transactions.  Except as disclosed in the
Company SEC  Reports,  since  December  31,  2005,  no event has occurred and no
relationship  exists  that  would be  required  to be  reported  by the  Company
pursuant to Item 404 of Regulation S-K.

         Section  4.22 Export and Import  Laws.  The  Company  and each  Company
Subsidiary has conducted its export  transactions  in accordance in all material
respects  with  applicable  provisions of U.S.  Export and Import Laws.  Without
limiting  the  generality  of the  foregoing,  (i) the Company and each  Company
Subsidiary has obtained all export licenses and other approvals required for its
exports of products,  Intellectual Property,  software and technologies from the
United  States,  (ii) the Company  and each  Company  Subsidiary  is in material
compliance with the terms of all applicable  export licenses or other approvals,
(iii) there are no pending or, to the  Company's  Actual  Knowledge,  threatened
claims against the Company or any Company Subsidiary with respect to such export
licenses  or other  approvals,  (iv) to the  Company's  Knowledge,  there are no


                                      -48-
<PAGE>

conditions  or  circumstances   pertaining  to  the  Company's  or  any  Company
Subsidiary's  export  transactions that may give rise to any future claims,  and
(v) no Consents in respect of any export licenses of the Company are required in
connection  with the Merger or the change in  control  of the  Company,  or such
Consents can be obtained expeditiously without material cost.

         Section 4.23 Pseudo-Foreign  Corporation.  The Company is not as of the
date hereof, and will not be as of the date of the Company Stockholder  Meeting,
the Closing Date or the Effective Time, a "foreign  corporation"  subject to the
requirements of Section 2115(b) of the California General Corporation Law.

         Section 4.24 Representations  Complete.  Except as set forth in Section
4.24  of the  Company  Disclosure  Schedules,  none  of the  representations  or
warranties  made by the  Company,  and no  financial  statement,  other  written
financial information or statements made in any exhibit, schedule or certificate
Made Available or furnished by the Company to Parent  pursuant to this Agreement
or any Related  Agreement,  or furnished by the Company in or in connection with
documents  mailed or delivered to the  stockholders of the Company or Parent for
use in soliciting  their approval of this Agreement and the Merger,  contains or
will  contain at the Closing  Date any untrue  statement  of a material  fact or
omits or will omit at the Closing Date to state any material  fact  necessary in
order  to make the  statements  contained  herein  or  therein,  in light of the
circumstances under which they were made, not misleading.

                                   ARTICLE V.
             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

         Parent  and  Merger  Sub each  jointly  and  severally  represents  and
warrants to the Company  that the  statements  contained  in this Article V (or,
with respect to Merger Sub, the statements contained in Section 5.1(a),  Section
5.4,  Section 5.5 and Section  5.23,  to the extent  applicable to it) 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  V, in the
corresponding section or subsection of the schedules Parent (on behalf of itself
and Merger Sub) has delivered to the Company concurrently with the execution and
delivery  hereof  (the  "Parent  Disclosure  Schedules")  as  follows  (it being
understood  that the  disclosure of any matter or item in the Parent  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
Parent):

         Section 5.1 Organization and Qualification; Subsidiaries.

         (a) Parent is a corporation  duly  organized,  validly  existing and in
good  standing  under  the laws of the  State of  Nevada,  and  Merger  Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Each Subsidiary of Parent (each a "Parent Subsidiary"
and, collectively,  the "Parent  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  Parent  and each
Parent  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 Parent  and each  Parent  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


                                      -49-
<PAGE>

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 Parent.

         (b)  Section  5.1(b) of the Parent  Disclosure  Schedules  sets forth a
true,  correct  and  complete  list of all of the  Parent  Subsidiaries  and the
jurisdictions  of their  organization.  Except as set forth on Section 5.1(b) of
the Parent  Disclosure  Schedules,  none of the Parent or any Parent  Subsidiary
holds an Equity  Interest in any other Entity.  Parent  directly,  or indirectly
through the ownership of a Parent Subsidiary,  is the owner of all of the issued
and outstanding Equity Interests in each Parent Subsidiary,  and all such Equity
Interests are duly  authorized,  validly issued,  fully paid and  nonassessable.
Except as set forth in Section 5.1(b) of the Parent Disclosure Schedules, all of
the issued and outstanding  Equity Interests of each Parent Subsidiary are owned
directly by Parent, or indirectly  through the ownership of a Parent 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
Parent  Subsidiary or any Contract to which such Parent 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 Parent  Subsidiary,  or  otherwise  obligating  Parent or any
Parent  Subsidiary  to issue,  transfer,  sell,  purchase,  redeem or  otherwise
acquire or sell any such Equity Interests or Securities.

         Section 5.2 Certificate of  Incorporation  and Bylaws;  Corporate Books
and  Records.  Parent has Made  Available  to the  Company a true,  correct  and
complete  copy of Parent's  Articles of  Incorporation,  as Amended (the "Parent
Certificate of Incorporation"), and the Parent's Bylaws, as Amended (the "Parent
Bylaws"),  in each  case as now in  effect.  Parent  has Made  Available  to the
Company a true,  correct and complete  copy of the  Organizational  Documents of
each  Parent  Subsidiary,  in each case as Amended  and now in  effect.  Neither
Parent  nor  any  Parent  Subsidiary  is in  material  violation  of  any of the
provisions of its Organizational  Documents.  Except as set forth in Section 5.2
of the Parent Disclosure Schedules, (i) true, correct and complete copies of all
Minute Books of Parent and the Parent  Subsidiaries  have been Made Available to
the Company, and (ii) the Minute Books of Parent and each Parent Subsidiary Made
Available to the Company 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
Parent and the respective Parent Subsidiaries through the date of this Agreement
or the Closing Date, as the case may be.

         Section 5.3 Capitalization.

         (a) The  authorized  capital  shares of Parent  consist  of  10,000,000
Parent Common Shares.  As of December 31, 2006,  4,913,290  Parent 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 Parent).

         (b) Except for (i) Parent  Common  Shares  reserved for issuance as set
forth in this Section 5.3 or in Section 5.3 of the Parent Disclosure  Schedules,
and (ii) Commitments under the Transaction  Documents;  there are no Commitments
or other rights or Contracts obligating Parent or any Parent Subsidiary to issue
or sell any Equity Interests, or Securities convertible into or exchangeable for
Equity Interests,  in Parent or any Parent Subsidiary.  Since the Parent Balance
Sheet  Date,  Parent  has  not  issued  any  Equity  Interests,   or  Securities
convertible  into or exchangeable  for such Equity  Interests,  other than those
Parent Common  Shares  reserved for issuance as set forth in this Section 5.3 or
in Section 5.3 of the Parent  Disclosure  Schedules.  All issued and outstanding
Parent Common Shares and all  outstanding  Parent  Options were issued,  and all
repurchases of Parent Common Shares were made, in material  compliance  with all
applicable Laws.


                                      -50-
<PAGE>

         (c) As of December  31,  2006,  Parent has  reserved  2,450,000  Parent
Common Shares for issuance to employees,  non-employee directors and consultants
pursuant to Parent Stock Option Plans, of which 1,403,134  shares are subject to
outstanding and unexercised Parent Options and 1,046,866 shares remain available
for issuance  thereunder.  As of December 31, 2006, no outstanding Parent Common
Shares  were  subject to  Repurchase  Rights.  Section  5.3(c)(1)  of the Parent
Disclosure Schedules identifies (i) the name and full address of each Person who
held Parent Options or Parent Common Shares subject to a Repurchase  Right as of
December  31, 2006,  (ii) the  particular  Parent Stock Option Plan  pursuant to
which such Parent  Option was granted or such Parent  Common Shares were issued,
(iii) the date on which such Parent  Option was  granted or such  Parent  Common
Shares were issued, (iv) the exercise or base price of such Parent Option or the
repurchase  price of such Parent Common Shares,  (v) the number of Parent Common
Shares  subject  to such  Parent  Option or  Repurchase  Right or value  covered
thereby,  (vi) the number of Parent Common Shares as to which such Parent Option
had  vested  (or such  Repurchase  Right had  lapsed)  at such  date,  (vii) the
applicable  vesting schedule for such Parent Option or such Parent Common Shares
and whether the  exercisability  or vesting of such Parent 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 Parent 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  Parent
Common Shares  (including  limitations  on recourse).  Section  5.3(c)(2) of the
Parent Disclosure  Schedules sets forth a true, correct and complete list of all
holders of  outstanding  Parent  Options  that are held by Persons  that are not
employees of Parent or any Parent Subsidiary (including  non-employee directors,
consultants, advisory board members, vendors, service providers or other similar
Persons). All of the Parent Common Shares subject to issuance under Parent 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. True, correct and complete copies of each of the Parent Stock
Option Plans and the standard form of all agreements and instruments relating to
or issued under each Parent Stock Option Plan and all agreements and instruments
relating to or issued under  Parent  Stock  Option Plans or Parent  Options that
differ in any material respect from such standard form agreements have been Made
Available to the Company,  and such  agreements  and  instruments  have not been
Amended since being Made Available to the Company,  and there are no agreements,
understandings  or  commitments  to Amend such  agreements or instruments in any
case from those Made Available to the Company.

         (d) Section  5.3(d) of the Parent  Disclosure  Schedules sets forth all
outstanding  Parent  Warrants and other  Commitments  (other than Parent Options
disclosed in Section 5.3(c) of the Parent Disclosure Schedules). Parent has Made
Available to the Company  complete and correct copies of all Parent Warrants and
Contracts governing such other Commitments, in each case as Amended to date.

         (e) Section  5.3(e) of the Parent  Disclosure  Schedules sets forth all
outstanding  Contractual  obligations  of Parent or any  Parent  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 Parent Common Shares or
any other Equity Interests in Parent or any Parent Subsidiary.

         Section 5.4 Authority.  Each of Parent and Merger Sub 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 Parent  Stockholder  Approval),
including,  with respect to Merger Sub, the filing of the  Certificate of Merger
pursuant to the DGCL.  The  execution  and delivery of this  Agreement  and each
Related  Agreement  to which  Parent or Merger Sub is a  signatory  by Parent or


                                      -51-
<PAGE>

Merger Sub, as the case may be, and the consummation by Parent and Merger Sub of
the  transactions  contemplated  hereby and thereby,  including,  in the case of
Merger Sub, 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 Parent Stockholder Approval). Assuming the due authorization,  execution and
delivery by the  Company of this  Agreement,  this  Agreement  and each  Related
Agreement to which Parent or Merger Sub is a signatory has been duly  authorized
and validly  executed and delivered by Parent or Merger Sub, as the case may be,
and constitutes its legal,  valid and binding  obligation,  enforceable  against
Parent or Merger Sub, as the case may be, 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 Parent  Board and the Board of  Directors  of Merger Sub each has
unanimously  (A) approved and declared  advisable this  Agreement,  each Related
Agreement to which Parent or Merger Sub, as the case may be, is a signatory, the
Merger and the other  Transactions  applicable to it, (B)  determined  that this
Agreement and each Related  Agreement to which Parent or Merger Sub, as the case
may be, is a  signatory  and the terms and  conditions  of the  Merger and other
Transactions  are fair to,  advisable  and in the best  interests  of  Parent or
Merger Sub, as the case may be, and its stockholders,  and (C) directed that the
adoption of this  Agreement and the approval of this  Agreement,  the Merger and
the Parent  Authorized  Stock Increase be submitted to Parent's or Merger Sub's,
as the case may be and as applicable,  stockholders for approval at a meeting of
such  stockholders  and recommended that all of Parent's or Merger Sub's, as the
case may be,  stockholders  adopt and  approve  this  Agreement  and approve the
Merger  and,  in the case of  Parent,  the  Parent  Authorized  Stock  Increase;
provided,  however,  that after the date hereof the Parent  Board acting in good
faith may withdraw its recommendation.  The affirmative vote of the holders of a
majority of all Parent Common Shares present in person or by proxy and voting at
the meeting of Parent's  stockholders  to adopt and approve this  Agreement  and
approve the Merger (the "Parent  Stockholders  Meeting") is the only vote of the
holders of capital  stock of Parent  necessary  to adopt  this  Agreement  under
applicable Law,  including the NPCA, the Nasdaq  Marketplace  Rules and Parent's
Organizational Documents (the "Parent Stockholder Approval").

         Section 5.5 No Conflict; Required Filings and Consents.

         (a) The  execution  and  delivery  of this  Agreement  and the  Related
Agreements to which Parent or Merger Sub is a signatory by Parent or Merger Sub,
as the case may be,  do not,  and the  performance  of this  Agreement  and such
Related  Agreements  by Parent or Merger Sub, as the case may be, will not,  (i)
subject to obtaining approval by Parent's stockholders for the Parent Authorized
Stock  Increase,  conflict with or violate any  provision of the  Organizational
Documents of Parent or any Parent  Subsidiary,  (ii)  subject to  obtaining  the
Parent  Stockholder  Approval and approval of the sole stockholder of Merger Sub
and assuming  that all Consents  described in Section  5.5(b) have been obtained
and all filings and notifications described in Section 5.5(b) have been made and
any waiting  periods  thereunder  have  terminated or expired,  conflict with or
violate any Law applicable to Parent or any Parent  Subsidiary,  or by which any
Property of Parent or any Parent  Subsidiary is bound or affected,  (iii) result
in the creation of any  Encumbrance  on any of the  Properties  of Parent or any
Parent  Subsidiary,  or (iv) require any Consent under,  or result in any Breach
of, any Parent  Material  Contract or Parent Permit,  in each case except as set
forth in Section 5.5 of the Parent Disclosure Schedules.

         (b) The  execution  and  delivery  of this  Agreement  and the  Related
Agreements to which Parent or Merger Sub is a signatory by Parent or Merger Sub,
as the case may be,  do not,  and the  performance  of this  Agreement  and such
Related  Agreements  by  Parent  or  Merger  Sub,  as the case may be,  and then
consummation  of the  Transactions  will not,  require any Consent of, or filing
with or  notification  to, any  Governmental  Entity,  except for the  Specified
Consents  and  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 Parent.


                                      -52-
<PAGE>

         Section 5.6 Permits; Compliance With Law.

         (a) Each of Parent and each Parent  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 Parent and each Parent  Subsidiary to own, lease or operate its  Properties,
or to carry on its respective  businesses  substantially in the manner described
in Parent 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 "Parent Permits"),  and all such Parent 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 Parent 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 Parent of any of its material obligations under this Agreement or
any Related Agreement to which it or Merger Sub is a signatory,  or (iii) have a
Material Adverse Effect on Parent.

         (b) None of Parent and the Parent  Subsidiaries is in conflict with, or
in default or violation of, (A) in any material  respect,  any Law applicable to
Parent or any Parent Subsidiary or by which any Property of Parent or any Parent
Subsidiary is bound or affected, or (B) any Parent Permit,  except, with respect
to clause (B) 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 Parent of any of its material obligations under this Agreement or
any Related Agreement to which it or Merger Sub is a signatory,  or (iii) have a
Material Adverse Effect on Parent. None of the Parent 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
or Merger Sub is a signatory.

         (c) Neither Parent nor any Parent 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 Parent  Permit,  or (y) that Parent or any Parent  Subsidiary  requires  any
Parent Permit for its business as currently conducted that is not currently held
by it.  Except as set forth in Section 5.6 of Parent  Disclosure  Schedules,  to
Parent's  Actual  Knowledge,  no  investigation  or inquiry by any  Governmental
Entity with respect to Parent or any Parent Subsidiary is pending or threatened,
in each case with respect to any alleged or claimed  violation of Law applicable
to Parent or any Parent  Subsidiary  or by which any  Property  of Parent or any
Parent Subsidiary is bound or affected.

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

         Section 5.7 SEC Filings; Financial Statements.

         (a) Parent has filed all SEC Reports  required under  applicable Law to
be filed  by it with  the SEC in the last  five  years.  All of the  Parent  SEC
Reports have been Made Available to the Company.

         (b) As of their respective  dates,  each Parent 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 Parent SEC Report,  and
(ii) did not at the time it was filed contain any untrue statement of a material


                                      -53-
<PAGE>

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 Parent 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  Parent SEC Report,  and (B) in the case of a Parent 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
Parent SEC Report.  None of the Parent  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
Parent SEC Reports (the "Parent Financial Statements"),  (i) complied as to form
in all material respects with the published SEC Rules applicable  thereto,  (ii)
was 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
Parent and the Parent  Subsidiaries  as at the respective  dates thereof and the
consolidated  results of Parent's and the Parent  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 Parent nor any Parent 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 Parent and the Parent Subsidiaries taken as
a whole, except for (A) liabilities incurred since the Parent 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 Parent Balance Sheet,  and (C) the fees and
expenses of investment bankers, attorneys and accountants incurred in connection
with this  Agreement  and the  Transactions.  Except as  reflected in the Parent
Financial Statements, neither Parent nor any Parent Subsidiary is a party to any
material  off-balance  sheet  arrangements (as defined in Item 303 of Regulation
S-K  promulgated  by the SEC).  Except as set forth in the Parent  SEC  Reports,
Parent  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 Parent and each
Parent  Subsidiary  have  been  maintained,  and are  being  maintained,  in all
material   respects  in  accordance   with   applicable   legal  and  accounting
requirements, and the Parent Financial Statements are consistent in all material
respects with such books and records.

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

         (e) Parent 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  Parent  and  the  Parent
Subsidiaries  required to be disclosed by Parent in the reports that it files or
submits  under  the  Exchange  Act is  communicated  to the  Parent's  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 Parent required by Section 302 of SOX, with
respect  to such  reports.  For  purposes  of this  Section  5.7(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


                                      -54-
<PAGE>

principal  financial  officer  of Parent  (or each  former  principal  executive
officer and each former principal  financial  officer of Parent,  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
Parent SEC Reports.

         (f) Parent 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.  Parent has Made Available to the Company  accurate
and  complete  copies of all  material  policies,  manuals  and other  documents
promulgating such internal accounting  controls.  Except as set forth in Section
5.7(f) of the Parent Disclosure Schedules,  to Parent'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 Parent's  internal  controls  and  procedures,  and to Parent's
Knowledge,  there are no significant  deficiencies in the design or operation of
Parent's internal controls and procedures.  To Parent's  Knowledge,  in the last
five years, there has been no fraud that involves  management or other employees
who have a significant role in Parent's internal controls and procedures.

         (g)  To  Parent's  Knowledge,  (A)  BKR  Cornwell  Jackson,  which  has
expressed  its opinion with  respect to the Parent  Financial  Statements  as of
December 31, 2004 and as of December 31, 2005,  and for each of Parent's  fiscal
years in the two-year period ended December 31, 2005, and (B) CF & Co.,  L.L.P.,
which has expressed its opinion with respect to the Parent Financial  Statements
as of December  31, 2003 and for  Parent's  fiscal year in the  one-year  period
ended  December  31,  2003;  in each case  included  in the Parent  SEC  Reports
(including the related notes),  is "independent"  with respect to Parent and the
Parent   Subsidiaries  within  the  meaning  of  Regulation  S-X  and  has  been
"independent" within such meaning at all times since January 1, 2002. Parent has
made such disclosure of non-audit  services performed by BKR Cornwell Jackson or
CF & Co., L.L.P. 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 Parent Board. Parent is in compliance with the applicable
criteria  for  continued  listing of the Parent  Common  Shares on the  Parent's
Principal Market.

         Section 5.8 Disclosure Documents.

         (a) The Parent  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
Parent 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
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  Parent
Information,  in light of the  circumstances  under  which  they are  made,  not
misleading.  The Parent Information  provides all information relating to Parent
or its operations,  business, directors, officers, Subsidiaries and stockholders


                                      -55-
<PAGE>

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 5.8,
Parent 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 the Company (other than Parent  Information so
supplied) for inclusion or incorporation by reference therein.

         Section  5.9  Absence  of Certain  Changes or Events.  Since the Parent
Balance Sheet Date,  except as specifically  disclosed in the Parent SEC Reports
filed thereafter,  as contemplated  hereby or as set forth in Section 5.9 of the
Parent Disclosure Schedules, Parent and each Parent 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 Parent;

         (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 Parent's  Equity  Interests,  or any purchase,  redemption or
other  acquisition  by Parent of any of Parent's  Equity  Interests or any other
Securities  of  Parent  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 Parent'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
Parent or any Parent  Subsidiary  at the vice  president  or  director  level or
higher,  or who earn base salary of more than  $100,000 per year, or any payment
by  Parent  or any of the  Parent  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 $100,000 per year, or any
granting  by  Parent  or any of  the  Parent  Subsidiaries  of any  increase  in
severance  or  termination  pay,  or any entry by  Parent  or any of the  Parent
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  Parent 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 Parent,  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 Parent's
standard policies;

         (e)  there  has not been any  change  by  Parent  or any of the  Parent
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;

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


                                      -56-
<PAGE>

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

         (h)  there  has not  been  any  material  change  with  respect  to the
management or other key personnel of Parent,  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  Parent or any
Parent Subsidiary; and

         (i) neither  Parent nor any Parent  Subsidiary  has agreed,  whether in
writing or otherwise, to take any action described in this Section 5.9.

         Section 5.10 Employee Benefit Plans.

         (a) Section 5.10(a) of the Parent Disclosure  Schedules lists as of the
date of this Agreement,  with respect to Parent and the Parent  Subsidiaries and
their  respective  ERISA  Affiliates,  (i) all employee benefit plans within the
meaning  of  Section  3(3) of ERISA,  (ii) each loan  from  Parent,  any  Parent
Subsidiary or any such ERISA Affiliate to an employee in excess of $5,000, (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
Parent or any Parent  Subsidiary  of greater than $5,000 remain  thereunder)  of
Parent or any Parent  Subsidiary (all of the foregoing  described in clauses (i)
through (vi) next preceding,  collectively,  the "Parent Benefit Plans"). Parent
has no liability  with respect to any plan,  arrangement or practice of the type
described in the preceding sentence other than the Parent Benefit Plans.  Parent
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 Parent.

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


                                      -57-
<PAGE>

Parent  Benefit  Plan that is  subject  to ERISA  reporting  requirements,  Made
Available  to the Company  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 Parent
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.  Parent has also Made  Available  to the  Company 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 Parent
Benefit  Plan,  and,  to Parent'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 Parent Benefit Plan subject to Section 401(a)
of the Code.  Parent has also Made  Available  to the Company  all  registration
statements  and  prospectuses  and  investment  policy  statements  prepared  in
connection with each Parent Benefit Plan, where applicable. All individuals who,
pursuant to the terms of any Parent Benefit Plan, are entitled to participate in
such Parent  Benefit Plan,  are currently  participating  in such Parent Benefit
Plan or have been offered an opportunity to do so. None of Parent and the Parent
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)  Except as set forth in Section  5.10(c)  of the Parent  Disclosure
Schedules, none of the Parent Benefit Plans promises or provides retiree medical
or other  retiree  welfare  benefits to any person other than as required  under
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 Parent  Benefit  Plan that is not exempt under  Section 408 of ERISA.  To
Parent's  Actual  Knowledge,  each Parent 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  Parent  and the  Parent
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 Parent  Benefit Plans.
None of Parent and the Parent 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 Parent  Benefit  Plans.  All
contributions  required to be made by Parent or any Parent  Subsidiary or any of
their  respective  ERISA Affiliates to any Parent 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 Parent Balance Sheet Date
as a result of the  operations of Parent and the Parent  Subsidiaries  after the
Parent  Balance Sheet Date).  In addition,  with respect to each Parent  Benefit
Plan intended to include a Code Section 401(k) arrangement,  the Parent and each
Parent  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 Parent Benefit Plan that is an employee  welfare benefit
plan as defined  in  Section  3(1) of ERISA is a  self-insured  plan.  No Parent
Benefit Plan is covered by, and none of Parent and the Parent  Subsidiaries  and
their respective ERISA Affiliates has incurred or expects to incur any liability
under Title IV of ERISA or Section 412 of the Code.  With respect to each Parent
Benefit Plan subject to ERISA as either an employee  pension benefit plan within
the meaning of Section 3(2) of ERISA or an employee  welfare benefit plan within
the  meaning of Section  3(1) of ERISA,  Parent has  prepared  in good faith and
timely filed all requisite  governmental  reports (which were true,  correct and
complete as of the date filed),  including any required audit  reports,  and has
properly and timely filed and  distributed  or posted all notices and reports to
employees required to be filed,  distributed or posted with respect to each such


                                      -58-
<PAGE>

Parent Benefit Plan. No Action has been brought,  or to the Actual  Knowledge of
Parent or any Parent  Subsidiary,  is  threatened,  against Parent or any Parent
Subsidiary or with respect to any such Parent Benefit Plan,  including any audit
or inquiry by the IRS or United States Department of Labor.

         (d) None of Parent and the  Parent  Subsidiaries  and their  respective
ERISA  Affiliates  is a party to, or has made any  contribution  to or otherwise
incurred any obligation under, any "multiemployer  plan" as such term is defined
in  Section  3(37) of  ERISA or any  "multiple  employer  plan" as such  term is
defined in Section 413(c) of the Code.  There has been no termination or partial
termination of any Parent  Benefit Plan within the meaning of Section  411(d)(3)
of the Code.

         (e) Each Foreign Plan of Parent or any Parent  Subsidiary  is listed in
Section 5.10(e) of the Parent Disclosure Schedules,  except for plans maintained
by  Governmental  Entities.  As regards each such Foreign Plan, (i) such Foreign
Plan is in compliance  with the provisions of the laws of each  jurisdiction  in
which such Foreign Plan is  maintained,  to the extent those laws are applicable
to such Foreign Plan, (ii) Parent and each Parent Subsidiary,  and each of their
respective  ERISA  Affiliates,  has complied with all  applicable  reporting and
notice  requirements,  and such Foreign Plan has obtained from the  Governmental
Entity  having  jurisdiction  with  respect to such  Foreign  Plan any  required
determinations, if any, that such Foreign Plan is in compliance with the laws of
the relevant  jurisdiction if such  determinations are required in order to give
effect to such Foreign Plan,  and (iii) such Foreign Plan has been  administered
in accordance with its terms and applicable Law.

         (f)  Section  5.10(f) of the  Parent  Disclosure  Schedules  lists each
person who Parent  reasonably  believes is, with respect to Parent or any Parent
Subsidiary  or  any  of  their  respective  ERISA  Affiliates,  a  "disqualified
individual"  (within the meaning of Section 280G of the Code and the regulations
promulgated thereunder) determined as of the date hereof.

         (g) Section 5.10(g) of the Parent Disclosure  Schedules lists as of the
date of this Agreement  each employee of Parent or any Parent  Subsidiary who is
not fully  available to perform work  because of  disability  or other leave and
also lists, with respect to each such employee,  the basis of such disability or
leave and the anticipated date of return to full service.

         (h)  Except as set forth in Section  5.10(h)  of the Parent  Disclosure
Schedules,  none  of  the  execution  and  delivery  of  this  Agreement  or the
consummation of the  Transactions  (or the  Transactions in combination with any
subsequent  transactions or events,  other than transactions or events initiated
solely by the Company) will (i) result in any  employee,  director or consultant
of  Parent  or  any  Parent   Subsidiary   becoming  entitled  to  any  deferred
compensation, bonus or severance pay or materially increase or otherwise enhance
any benefits otherwise payable by Parent or any Parent  Subsidiary,  (ii) result
in the  acceleration  of the time of payment or  vesting,  or an increase in the
amount of any compensation due to any employee, director or consultant of Parent
or any Parent  Subsidiary,  except as may be required under Section 411(d)(3) of
the Code,  (iii) result in  forgiveness  in whole or in part of any  outstanding
loans  made by  Parent  or any  Parent  Subsidiary  to any of  their  employees,
directors or  consultants,  or (iv) result in a payment that would be considered
an "excess parachute payment" and treated as nondeductible under Section 280G of
the Code or subject to the excise Tax under Section 4999 of the Code.

         (i) To Parent's Knowledge,  Parent has neither granted,  nor is a party
to, any Contract  that grants any  compensation,  equity award,  or bonus,  that
fails to comply in good faith with the provisions of Section 409A of the Code.

         (j) Each of Parent and the Parent  Subsidiaries is in compliance in all
material  respects with all currently  applicable  Laws  respecting  employment,


                                      -59-
<PAGE>

discrimination  in  employment,  terms  and  conditions  of  employment,  worker
classification  (including the proper  classification  of workers as independent
contractors and consultants),  wages,  hours and occupational  safety and health
and  employment  practices,  including the  Immigration  Reform and Control Act.
Parent and each Parent Subsidiary has paid in full to all employees, independent
contractors and consultants all wages, salaries, commissions, bonuses, benefits,
and  other  compensation  due to or on  behalf  of such  employees,  independent
contractors or consultants.  Neither Parent nor any Parent  Subsidiary is liable
for any payment to any trust or other fund or to any Governmental  Entity,  with
respect to unemployment compensation benefits, social security or other benefits
or  obligations  for  employees  (other than routine  payments to be made in the
Ordinary  Course of  Business).  There are no  controversies  pending or, to the
Actual Knowledge of Parent, threatened,  between Parent or any Parent Subsidiary
and any of  their  respective  employees,  which  controversies  have  or  could
reasonably be expected to result in an Action before any Governmental Entity.

         (k)  Neither  Parent  nor  any  of  the  Parent  Subsidiaries  has  any
obligation  to pay any amount or provide any  benefit to any former  employee or
officer,  other than  obligations (i) for which Parent has established a reserve
for such amount on the Parent  Balance Sheet in accordance  with GAAP,  and (ii)
pursuant  to  Contracts  entered  into after the Parent  Balance  Sheet Date and
disclosed on Section 5.10(k) of the Parent Disclosure Schedules.  Neither Parent
nor any Parent  Subsidiary is a party to or bound by any  collective  bargaining
agreement or other labor union contract,  no collective  bargaining agreement is
being  negotiated by Parent or any Parent  Subsidiary and neither Parent nor any
Parent Subsidiary has any duty to bargain with any labor organization.  There is
no pending  demand for  recognition  or any other request or demand from a labor
organization  for  representative  status with respect to any person employed by
Parent  or  any  Parent  Subsidiary.  Parent  has  no  Actual  Knowledge  of any
activities or proceedings of any labor union to organize the employees of Parent
or any  Parent  Subsidiary.  There is no labor  dispute,  strike  or group  work
stoppage  against  Parent or any  Parent  Subsidiary  pending  or to the  Actual
Knowledge of Parent  threatened that may interfere with the respective  business
activities of Parent or any Parent Subsidiary.

         (l) To the  Knowledge  of Parent,  no  employee of Parent or any Parent
Subsidiary  is in  violation  of any term of any  employment  agreement,  patent
disclosure agreement,  non-competition agreement, or any restrictive covenant to
a former  employer  relating to the right of any such employee to be employed by
Parent or any Parent Subsidiary  because of the nature of the business conducted
or presently  proposed to be conducted by Parent or any Parent  Subsidiary or to
the use of trade secrets or proprietary  information of others.  No Key Employee
of  Parent  or  any  Parent  Subsidiary  has  given  notice  of  termination  or
resignation to Parent or any Parent  Subsidiary,  nor does Parent otherwise have
Actual  Knowledge  that any such Key Employee  intends to  terminate  his or her
employment with Parent or any Parent  Subsidiary.  The employment of each of the
employees  of Parent or any Parent  Subsidiary  is "at will" and Parent and each
Parent Subsidiary does not have any obligation to provide any particular form or
period of notice prior to terminating the employment of any of their  respective
employees,  and the  employment  of each  employee  of  Parent  and each  Parent
Subsidiary  may  be  terminated  without  prior  notice  and  without  financial
liability to the Parent or any Parent  Subsidiary  (other than as provided under
applicable  Law or as set forth in  Section  5.10(a)  of the  Parent  Disclosure
Schedules).

         (m)  Parent  has Made  Available  to the  Company a true,  correct  and
complete list of the names of all current officers,  directors,  consultants and
employees of Parent and each Parent Subsidiary  showing each such person's name,
position,  rate of annual remuneration,  status as exempt/non-exempt and bonuses
for the current fiscal year and the most recently completed fiscal year.

         (n) Parent has Made  Available to the  Company,  with respect to Parent
and the Parent  Subsidiaries,  true,  correct and complete copies of each of the
following:  (i) all  forms  of offer  letters,  (ii)  all  forms  of  employment
agreements and severance agreements,  (iii) all forms of services agreements and


                                      -60-
<PAGE>

forms of  agreements  with  current and former  consultants  or  advisory  board
members,  (iv)  all  forms  of  confidentiality,  non-competition  or  invention
agreements by and between  current and former  employees,  consultants or others
and Parent or any Parent  Subsidiary  (and a true,  correct and complete list of
employees,  consultants  or others  not  subject  thereto),  (v) all  management
organization charts, (vi) all agreements or insurance policies providing for the
indemnification of any officers or directors of Parent or any Parent Subsidiary,
(vii) a summary  of  Parent's  standard  severance  policy,  (viii) a summary of
outstanding  liability  for  termination  payments  and  benefits to current and
former  directors,  officers,  employees and consultants of Parent or any Parent
Subsidiary, and (ix) a schedule of bonus commitments made to employees of Parent
or any Parent Subsidiary.

         (o) Parent and each Parent  Subsidiary is in compliance in all material
respects  with the WARN Act or any similar Law. In the past two years (i) Parent
has not effectuated a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more  facilities or operating units within any site
of employment  or facility of its business,  (ii) there has not occurred a "mass
layoff"  (as  defined  in the WARN  Act)  affecting  any site of  employment  or
facility  of Parent of any  Parent  Subsidiary,  and (iii)  Parent  has not been
affected by any  transaction  or engaged in layoffs or  employment  terminations
sufficient  in number to trigger  application  of any  similar  state,  local or
foreign law or regulation.  Parent has not caused any of its employees to suffer
an "employment loss" (as defined in the WARN Act) during the 90-day period prior
to the date of this Agreement.

         Section  5.11   Customers.   Neither  Parent  nor  any  of  the  Parent
Subsidiaries  has any  outstanding  material  dispute  concerning  its  goods or
services with any jewelry dealer or other wholesale customer or distributor who,
in the six months ending  September 30, 2006, was one of the 20 largest  sources
of consolidated revenue for Parent and the Parent Subsidiaries, based on amounts
paid or payable during such periods (each,  a  "Significant  Parent  Customer").
Each  Significant  Parent  Customer  is listed  on  Section  5.11 of the  Parent
Disclosure  Schedules.  Neither  Parent nor any of the Parent  Subsidiaries  has
received  any written  notice from any  Significant  Parent  Customer  that such
Person (i) will not  continue  as a  customer  or  distributor  of Parent or any
Parent  Subsidiary  after the Merger,  (ii) intends to  terminate or  materially
modify existing Contracts or relationships with Parent or any Parent Subsidiary,
or (iii)  intends to  materially  reduce the amount of business  conducted  with
Parent and the Parent Subsidiaries.

         Section 5.12 Contracts. Section 5.12 of the Parent Disclosure Schedules
specifically  identifies (by the  applicable  subsection set forth below in this
Section 5.12) each Parent  Material  Contract  (other than this Agreement or any
Related  Agreement).  The term "Parent Material  Contract" shall include each of
the following  Contracts to which Parent or any Parent  Subsidiary is a party to
or by which Parent or any Parent  Subsidiary is bound (in each case,  other than
this Agreement or any Related Agreement):

         (a) any Contract with any Significant Parent Customer;

         (b) any Contract generating,  or that is reasonably likely to generate,
more than $100,000 in revenues for Parent and the Parent  Subsidiaries  over the
twelve month period from the date of this Agreement,  other than those set forth
on Section 5.12(i) of the Parent Disclosure Schedules;

         (c) any Contract  with any  director,  officer,  employee or consultant
that would  require  Parent or any Parent  Subsidiary  to make any  payments  in
connection with the Merger, or upon termination of employment, but excluding any
Contract (i) that is terminable at-will or, in the case of consultants,  with 30
or fewer  days of notice by Parent  or any of the  Parent  Subsidiaries  without
cost,   liability  or  financial   obligations   (other  than  accrued   regular


                                      -61-
<PAGE>

compensation  and benefits  through the date of termination,  including any such
notice  period),  or  (ii)  under  which  Parent  and  the  Parent  Subsidiaries
collectively have paid or are obligated to pay less than $100,000;

         (d)   any   Contract   for   indemnification   (other   than   standard
indemnification  provisions  in  Contracts  entered into by Parent or any Parent
Subsidiary in the Ordinary Course of Business) or any guaranty;

         (e) any Contract  containing  any covenant  limiting in any respect the
right of Parent or any of the Parent Subsidiaries to (i) engage,  participate or
compete in any line of business, market or geographic area, (ii) develop, market
or distribute products or services, (iii) conduct business with any Person, (iv)
solicit the employment of, or hire, any Person,  or (v) compete with any Person;
or granting any  exclusive  sales,  distribution,  marketing or other  exclusive
rights,  rights of first refusal,  "most favored nation" rights, rights of first
negotiation  or other  exclusive  rights or similar terms to any Person,  but in
each case excluding Contracts  containing  limitations that (A) are not material
to Parent or any Parent  Subsidiary,  and (B) do not limit the ability of Parent
or any Parent Subsidiary to develop or market additional products or services;

         (f) any  Lease for real or  personal  property  in which the  amount of
payments that Parent or any of the Parent Subsidiaries is required to make on an
annual basis exceeds $25,000;

         (g) any Contract  pursuant to the express  terms of which Parent or any
of the Parent Subsidiaries is currently obligated to pay in excess of $25,000 in
any one year period that is not terminable by Parent or the Parent  Subsidiaries
without penalty upon notice of ninety (90) days or less;

         (h) any Contract  currently  in force  relating to the  disposition  or
acquisition by Parent or any of the Parent Subsidiaries after the date hereof of
(i) assets with a book value exceeding  $25,000;  or (ii) Equity Interests in an
Entity;

         (i) any Contract pursuant to which Parent or any Parent Subsidiary is a
licensor of Intellectual Property or agrees to Encumber, not assert, Transfer or
sell  rights  in or  with  respect  to any  Intellectual  Property,  except  for
distribution  contracts with retail  outlets,  independent  sales agents,  other
distributors  and end users  entered into by Parent or any Parent  Subsidiary in
the Ordinary Course of Business;

         (j) any joint  venture  Contract or any other  Contract that involves a
sharing of revenues in excess of $25,000, or involves a sharing of profits, cash
flows,  expenses or losses,  with other Persons,  or the payment of royalties to
any other Person,  other than  Contracts  identified  in Section  5.12(a) of the
applicable Parent Disclosure Schedule;

         (k) any Contract  currently required to be filed as an exhibit pursuant
to Item 601(b)(10) of Regulation S-K promulgated under the Securities Act, other
than those currently on file with the SEC (including any Amendments to Contracts
filed as of the Parent Balance Sheet Date that are required to be filed);

         (l) any Contract  containing a  "standstill"  provision with respect to
any Equity Interests of Parent;

         (m) any Contract in effect on the date of this Agreement, including any
Parent Stock  Option  Plan,  relating to the sale,  issuance,  grant,  exercise,
award,  purchase,  repurchase  or  redemption of any Parent Common Shares or any
other  Equity   Interests  or   Securities  of  Parent  or  any  of  the  Parent
Subsidiaries,  or any  Commitments  to  purchase or  otherwise  acquire any such


                                      -62-
<PAGE>

Parent Common  Shares,  Equity  Interests or  Securities,  except for the Parent
Stock Option Plans, the Parent Options and Parent Warrants  disclosed in Section
5.3 of the applicable Parent Disclosure Schedule;

         (n) any  Contract  under  which  Parent  or any  Parent  Subsidiary  is
obligated to provide consulting  services,  development  services,  professional
services or support  services  (other  than  maintenance  and  support  customer
contracts on Parent's  standard,  unmodified  forms), in each case excluding (i)
Contracts  that are  terminable by Parent or the Parent  Subsidiary on notice of
thirty (30) days or less without  penalty in excess of $25,000,  individually or
in the  aggregate,  and  without  any  ongoing  material  obligations,  and (ii)
Contracts  that  generated  less than $25,000 in revenue to Parent during the 12
months preceding the date of this Agreement;

         (o) any Contract with any investment banker, broker, advisor or similar
Person, or any accountant,  legal counsel or other Person retained by Parent, in
connection with this Agreement and the  Transactions,  other than Contracts with
service providers entered into in Parent's Ordinary Course of Business with fees
to be paid based on the provider's customary hourly rates;

         (p)  any  Contract  pursuant  to  which  Parent  or any  of the  Parent
Subsidiaries  has  acquired a business  or  Entity,  or assets of a business  or
Entity, whether by way of merger, consolidation,  purchase of stock, purchase of
assets,  license or  otherwise,  or any  Contract  pursuant  to which it has any
material  ownership  interest  in  any  other  Entity  (other  than  the  Parent
Subsidiaries),  in either  case which was  entered  into  within the three years
preceding the date hereof or under which any Liabilities exist;

         (q) all loan or credit agreements, notes, bonds, mortgages,  indentures
and other  agreements  and  instruments  pursuant to which any  Indebtedness  of
Parent or any of the Parent  Subsidiaries  in an aggregate  principal  amount in
excess of $100,000 is outstanding  or may be incurred on the terms thereof,  and
the respective principal amounts currently outstanding thereunder as of the date
hereof; or

         (r) any other Contract not listed in subsections (a)-(q) next preceding
that individually provides for payments to or by Parent or any Parent Subsidiary
in excess of $50,000,  or pursuant to which Parent or any Parent Subsidiary have
been paid, or expects to be paid, more than $50,000 in any consecutive  12-month
period,  or that  individually  provides  for  payments  by Parent or any Parent
Subsidiary in excess of $50,000 or is otherwise material to Parent or the Parent
Subsidiaries or their respective  businesses,  operations,  financial condition,
properties or assets (other than employee  offer letters in the Ordinary  Course
of Business).

Except as set forth on Section 5.12 of the Parent Disclosure Schedules, all
Parent Material Contracts are in written form. Parent has Made Available to the
Company true, correct and complete copies of each Parent Material Contract, as
Amended to date. Each Parent Material Contract is (i) valid and binding on
Parent and each Parent Subsidiary party thereto and, to the Parent's Knowledge,
each other party thereto, and (ii) in full force and effect. Parent and each
Parent Subsidiary has in all material respects performed all material
obligations required to be performed by it to the date hereof under each Parent
Material Contract and, to Parent's Knowledge, each other party to each Parent
Material Contract has in all material respects performed all obligations
required to be performed by it under such Parent Material Contract. As of the
date hereof, none of Parent and the Parent Subsidiaries has Knowledge of, or has
received notice from the other contracting party of, any actual or alleged
material Breach of any Parent Material Contract. There exists no Breach with
respect to Parent or any Parent Subsidiary or, to the Knowledge of Parent, with
respect to any other contracting party, which, with the giving of notice or the
lapse of time or both, would reasonably be expected to constitute a material
Breach of such Parent Material Contract.


                                      -63-
<PAGE>

         Section  5.13  Litigation.  Except as set forth in Section  5.13 of the
Parent  Disclosure  Schedules,  (i) there is no Action  pending  or, to Parent's
Actual  Knowledge,  threatened  against  Parent or any Parent  Subsidiary or, to
Parent's  Actual  Knowledge,  for  which  Parent  or any  Parent  Subsidiary  is
obligated  to  indemnify  a third  party,  (ii)  none of Parent  and the  Parent
Subsidiaries  is  subject  to any  outstanding  Order,  and  (iii)  to  Parent's
Knowledge,  there has been no refusal to indemnify or denial of  indemnification
and no intention  to refuse  indemnification,  by any third party in  connection
with any past,  pending or threatened Action with respect to which Parent or any
Parent Subsidiary is or may be entitled to indemnification from any third party.
Except as set forth in Section 5.13 of the Parent Disclosure Schedules,  neither
Parent  nor any  Parent  Subsidiary  has any Action  pending  against  any other
Person. There has not been since December 31, 2005, nor are there currently, any
internal investigations or inquiries being conducted by Parent, the Parent Board
(or any  committee  thereof)  or any third  party at the  request  of any of the
foregoing  concerning  any  financial,  accounting,  tax,  conflict of interest,
illegal activity, fraudulent or deceptive conduct, violation of Parent policy or
other misfeasance or malfeasance issues.

         Section 5.14 Environmental Matters.

         (a) Parent and each Parent  Subsidiary is in material  compliance  with
all Environmental Laws.

         (b) Neither Parent nor any Parent Subsidiary has received  notification
regarding any existing or potential  Environmental  Claims against Parent or any
Parent Subsidiary, nor have any of them received any written notification of any
allegation  of any  actual  or  potential  responsibility  for,  or  any  Action
regarding,  (i) any violation of Environmental  Laws, or (ii) any  Environmental
Release or threatened  Environmental  Release at any Facilities of any Materials
of  Environmental  Concern  generated  or  transported  by Parent or any  Parent
Subsidiary.

         (c) There has been no Environmental Release at any Facilities of Parent
or any Parent Subsidiary of any Materials of Environmental Concern in quantities
that could trigger the need for  investigation  or  remediation  pursuant to any
Environmental Laws.

         Section 5.15 Intellectual Property.

         (a) Unless otherwise  expressly  provided herein,  the following terms,
whenever  used in this  Agreement,  shall have the meanings  ascribed to them in
this Section 5.15(a):

                  (1) "Parent IP" means (i) all  Intellectual  Property  used in
         the  conduct  of the  business  of Parent or any Parent  Subsidiary  as
         currently conducted by Parent and the Parent Subsidiaries, and (ii) all
         other Parent-Owned IP.

                  (2) "Parent-Owned IP" means all Intellectual Property owned by
         Parent or any Parent Subsidiary.

                  (3) "Parent  Products" means,  collectively,  (i) all products
         and services that are currently being  published,  marketed,  licensed,
         sold,  leased,  auctioned,  distributed  or  performed,  or offered for
         publication,  licensing, sale, lease, distribution or performance or at
         auction,  by or on behalf of Parent or any Parent Subsidiary,  and (ii)
         all products or services  currently under  development by Parent or any
         Parent Subsidiary or that Parent or any of the Parent  Subsidiaries are
         Contractually obligated to develop.


                                      -64-
<PAGE>

         (b) Parent and the Parent  Subsidiaries (i) own and have  independently
developed or  acquired,  or (ii) have the valid right or license  (exclusive  or
non-exclusive, as applicable) to, all Parent IP. The Parent IP is sufficient for
the conduct of the business of Parent and the Parent  Subsidiaries  as currently
conducted  and to Parent's  Knowledge as  currently  proposed to be conducted by
Parent or any Parent Subsidiary.

         (c)  Neither  Parent  nor  any  of  the  Parent  Subsidiaries  has  (i)
transferred  ownership of any material  Parent-Owned IP to any third party, (ii)
knowingly permitted any material  Parent-Owned IP to enter the public domain, or
(iii)  permitted  any  material  Parent  Registered   Intellectual  Property  or
application  therefor to lapse (other than through the  expiration of Registered
Intellectual  Property  at  the  end  of  its  maximum  statutory  term  or  the
abandonment  of trademarks  or service marks in the Ordinary  Course of Business
using reasonable business judgment).

         (d)  Except as set forth in Section  5.15(d)  of the Parent  Disclosure
Schedules,  Parent and the Parent  Subsidiaries  own and have good and exclusive
title to all Parent-Owned IP and all Parent  Registered  Intellectual  Property,
free and clear of any  Encumbrances.  Except as set forth in Section  5.15(d) of
the Parent Disclosure  Schedules,  the right, license and interest of Parent and
the Parent  Subsidiaries in and to all Third Party Intellectual  Property Rights
licensed by Parent or a Parent Subsidiary are free and clear of all Encumbrances
(excluding restrictions contained in the applicable license agreements with such
third parties).

         (e)  Except as set forth in Section  5.15(e)  of the Parent  Disclosure
Schedules,  none  of  the  execution  and  delivery  or  effectiveness  of  this
Agreement, the consummation of the Transactions and the performance by Parent of
its obligations under this Agreement or the Related  Agreements to which it is a
signatory,  will cause the forfeiture or termination of, or give rise to a right
of forfeiture or  termination  of, any  Parent-Owned  IP, or impair the right of
Parent  or  any  Parent  Subsidiary  to  use,  possess,   sell  or  license  any
Parent-Owned IP or any portion thereof.

         (f) Section 5.15(f) of the Parent Disclosure  Schedule lists all Parent
Registered   Intellectual  Property,  and  for  each  item  of  such  Registered
Intellectual   Property,   (i)  the   jurisdictions  in  which  such  Registered
Intellectual  Property has been issued or registered or in which any application
for such issuance and  registration  has been filed,  and (ii) the legal counsel
(if any)  assisting  in the  initial  registration  or the  maintenance  of such
Registered Intellectual Property.

         (g) Each item of Parent Registered  Intellectual Property is subsisting
(or, in the case of applications,  applied for), all  registration,  maintenance
and renewal fees currently due in connection with such  Registered  Intellectual
Property have been or will be timely paid, and all documents,  recordations  and
certificates in connection with such Registered  Intellectual Property currently
required  to be filed  have been or will be  timely  submitted  to the  relevant
patent,  copyright,  trademark  or other  authorities  in the  United  States or
foreign  jurisdictions,  as the case may be, for the  purposes  of  prosecuting,
maintaining and perfecting such Registered  Intellectual  Property and recording
Parent's and the Parent Subsidiaries' ownership interests therein.

         (h)  Except as set forth in Section  5.15(h)  of the Parent  Disclosure
Schedules,  to  Parent's  Actual  Knowledge,   there  is  no  unauthorized  use,
unauthorized disclosure, infringement or misappropriation of any Parent-Owned IP
by any third party,  including any employee or former  employee of Parent or any
Parent  Subsidiary.  Except  as set  forth  in  Section  5.15(h)  of the  Parent
Disclosure Schedules, neither Parent nor any Parent Subsidiary has initiated any
lawsuit,  mediation or arbitration for infringement or  misappropriation  of any
Intellectual Property.


                                      -65-
<PAGE>

         (i)  Except as set forth in Section  5.15(i)  of the Parent  Disclosure
Schedules,  neither  Parent nor any Parent  Subsidiary  has (i) been sued in any
Action (or  received any written  notice or, to the Actual  Knowledge of Parent,
threat) that involves a claim of infringement or  misappropriation  of any Third
Party Intellectual  Property Right or which contests the validity,  ownership or
right of Parent or any Parent  Subsidiary to exercise any Intellectual  Property
right, or (ii) received any written communication that puts Parent or any Parent
Subsidiary on notice of or involves an offer to license or grant any Third Party
Intellectual Property Right or immunities in respect thereof.

         (j) The operation of the business of Parent and the Parent Subsidiaries
as such business is currently  conducted and, to the Actual Knowledge of Parent,
as  currently  proposed  to be  conducted  by Parent or any  Parent  Subsidiary,
including (i) the design, development,  manufacturing,  reproduction, marketing,
licensing, sale, offer for sale, importation,  distribution, provision or use of
any Parent  Product,  and (ii)  Parent's or any Parent  Subsidiary's  use of any
product,  device  or  process  used in the  business  of  Parent  or the  Parent
Subsidiaries as currently  conducted and, to the Actual Knowledge of Parent,  as
currently proposed to be conducted by Parent or any Parent Subsidiary,  does not
and will not infringe or misappropriate  any Third Party  Intellectual  Property
Rights and does not and, to the Actual Knowledge of Parent,  will not constitute
unfair  competition or unfair trade practices under the Laws of any jurisdiction
in which Parent or any of the Parent Subsidiaries conducts business.

         (k) None of the Parent-Owned  IP, the Parent  Products,  Parent and the
Parent  Subsidiaries  is  subject  to any  judicial  or  governmental  Action or
outstanding Order (A) restricting in any manner the use, transfer,  or licensing
by Parent or any Parent Subsidiary of any Parent-Owned IP or any Parent Product,
or which may affect the validity, use or enforceability of any such Parent-Owned
IP or Parent  Product,  or (B) restricting the conduct of the business of Parent
or any  Parent  Subsidiary  in order to  accommodate  Third  Party  Intellectual
Property Rights.

         (l) Neither  Parent nor any Parent  Subsidiary has received any written
opinion  of legal  counsel  that any  Parent  Product  or the  operation  of the
business  of  Parent  or any  Parent  Subsidiary,  as  previously  or  currently
conducted,  infringes or misappropriates  any Third Party Intellectual  Property
Rights.

         (m)  Except as set forth in Section  5.15(m)  of the Parent  Disclosure
Schedules,  each of Parent and the Parent  Subsidiaries  has secured from all of
its  consultants,  employees and independent  contractors who  independently  or
jointly  contributed  to the  conception,  reduction  to  practice,  creation or
development  of any material  Parent-Owned  IP, an assignment of inventions  and
ownership  agreement,  in the form Made Available to the Company,  assigning all
such third party's Intellectual Property in such contribution that Parent or any
Parent  Subsidiary  does not already own by  operation of Law, and no such third
party has retained any rights or licenses with respect thereto.

         (n) To Parent's Knowledge, no current or former employee, consultant or
independent contractor of Parent or any Parent Subsidiary (i) is in violation of
any  term  or  covenant  of  any  Contract  relating  to  employment,  invention
disclosure, invention assignment, non-disclosure or non-competition or any other
Contract  with any other  party by virtue of such  employee's,  consultant's  or
independent  contractor's being employed by, or performing  services for, Parent
or any Parent  Subsidiary or using trade secrets or  proprietary  information of
others without  permission,  or (ii) has developed any  technology,  software or
other copyrightable,  patentable or otherwise proprietary work for Parent or any
Parent  Subsidiary  that is subject to any Contract  under which such  employee,
consultant or independent  contractor  has assigned or otherwise  granted to any
third party any rights  (including  Intellectual  Property rights) in or to such
technology, software or other copyrightable, patentable or otherwise proprietary
work.


                                      -66-
<PAGE>

         (o) To Parent's Knowledge,  the employment of any employee of Parent or
any  Parent  Subsidiary  or the use by Parent or any  Parent  Subsidiary  of the
services of any consultant or independent  contractor does not subject Parent or
any  Parent  Subsidiary  to any  liability  to any third  party  for  improperly
soliciting  such  employee,  consultant  or  independent  contractor to work for
Parent or any Parent Subsidiary,  whether such liability is based on contractual
or other legal obligations to such third party.

         (p)  Except as set forth in Section  5.15(p)  of the Parent  Disclosure
Schedules, to Parent's Knowledge,  no current or former employee,  consultant or
independent  contractor  of  Parent  or any  Parent  Subsidiary  has any  right,
license, claim or interest whatsoever in or with respect to any Parent-Owned IP.

         (q)  Parent  and  the  Parent   Subsidiaries  have  taken  commercially
reasonable  steps to protect and  preserve the  confidentiality  of all material
confidential  or non-public  information  included in the Parent IP Rights.  All
use,  disclosure or  appropriation  of such  information  owned by Parent or any
Parent  Subsidiary  by or to a third  party has been  pursuant to the terms of a
written agreement or other legal binding  arrangement between Parent or a Parent
Subsidiary and such third party.  All use,  disclosure or  appropriation of such
information  by Parent  and the Parent  Subsidiaries  not owned by Parent or any
Parent  Subsidiary has been pursuant to the terms of a written agreement between
Parent  or such  Parent  Subsidiary  and the  owner of such  information,  or is
otherwise lawful.

         (r)  Except as set forth in Section  5.15(r)  of the Parent  Disclosure
Schedules,  to Parent's Knowledge,  neither Parent nor any Parent Subsidiary has
(i)  incorporated  Open Source Materials into, or combined Open Source Materials
with,  Parent IP, or (ii)  distributed Open Source Materials in conjunction with
any Parent IP.

         (s) To Parent's Knowledge,  no (i) government funding,  (ii) facilities
of a university,  college, other educational  institution or research center, or
(iii) funding from any Person (other than funds  received in  consideration  for
the Parent Equity Interests or Indebtedness incurred on commercially  reasonable
terms) was used in the development of the Parent-Owned IP.

         Section 5.16 Taxes.

         (a) Parent and the Parent  Subsidiaries and each affiliated,  combined,
consolidated or unitary group of which Parent or any Parent Subsidiary is or has
been a member (each, a "Parent  Group") have timely filed all material  federal,
state,  local,  and foreign Tax Returns required to be filed by it in the manner
prescribed by applicable  Laws and all such Tax Returns were true,  complete and
correct  in all  material  respects.  Except  with  respect  to  Taxes  that are
immaterial in amount, all Taxes of Parent and the Parent  Subsidiaries  (whether
or not shown or required to be shown on any Tax Return) that are due and payable
have been timely paid in full and the accruals  and  reserves for Taxes  (rather
than any reserve for deferred Taxes  established  to reflect  timing  difference
between book and Tax income)  reflected in the Parent Balance Sheet (rather than
any notes  thereto)  are  adequate in  accordance  with GAAP to cover all unpaid
Taxes of Parent and the Parent  Subsidiaries.  Except with respect to Taxes that
are immaterial in amount,  all reserves for Taxes as adjusted for operations and
transactions  and the passage of time through the  Effective  Time in accordance
with past custom and practice of Parent and the Parent Subsidiaries are adequate
in  accordance  with GAAP to cover all  unpaid  Taxes of Parent  and the  Parent
Subsidiaries accruing through the Effective Time.

         (b) Parent and the Parent  Subsidiaries have withheld and paid over all
material  Taxes  required  to have  been  withheld  and  paid  over,  and to the
Knowledge of Parent,  Parent and the Parent  Subsidiaries have withheld and paid


                                      -67-
<PAGE>

over all other Taxes  required to have been  withheld and paid over,  and Parent
and  the  Parent  Subsidiaries  have  complied  with  all  material  information
reporting and backup  withholding  requirements,  including the  maintenance  of
required records with respect  thereto,  in each case in connection with amounts
paid or owing to any employee,  creditor,  independent contractor or other third
party.  There  are no  Encumbrances  on any of the  Properties  of Parent or any
Parent Subsidiary with respect to Taxes.

         (c)  Except as set forth in Section  5.16(c)  of the Parent  Disclosure
Schedules,  no audit of material Tax Returns or other examination of Parent, any
Parent  Subsidiary or any member of any Parent Group is pending or threatened in
writing.  No  deficiencies  have been  asserted  against  Parent  or any  Parent
Subsidiary  as a result of  examinations  by any Tax  Authority and no issue has
been  raised  by  any  examination  conducted  by any  Tax  Authority  that,  by
application of the same  principles,  might result in a proposed  deficiency for
any other period not so examined.  Each  deficiency  resulting from any audit or
examination  relating  to Taxes of Parent or any  Parent  Subsidiary  by any Tax
Authority  has been paid or is being  contested in good faith and in  accordance
with the Law and is fully reserved for on the Parent Balance Sheet in accordance
with GAAP. No claim has ever been made by an authority in a  jurisdiction  where
Parent or any of the Parent  Subsidiaries  does not file Tax Returns that Parent
or any  Parent  Subsidiary,  as the case may be, is or may be  subject to Tax in
such  jurisdiction.  Neither Parent nor any Parent  Subsidiary is subject to any
private letter ruling of the IRS or comparable  rulings of other Tax Authorities
that will be  binding  on Parent or any Parent  Subsidiary  with  respect to any
period following the Effective Time.

         (d)  Neither  Parent  nor  any  Parent  Subsidiary  has  requested  any
extension  of time within which to file any material Tax Return which Tax Return
has not yet  been  filed.  There  are no  agreements,  waivers  of  statutes  of
limitations,  or other arrangements  providing for extensions of time in respect
of the assessment or collection of any unpaid Taxes against Parent or any Parent
Subsidiary.

         (e) Parent and each Parent  Subsidiary  have disclosed on their federal
income tax returns all material  positions  taken therein that could,  if not so
disclosed, give rise to a substantial  understatement penalty within the meaning
of Section 6662 of the Code. Neither Parent nor any Parent Subsidiary has been a
party to or participated in any way in a transaction  that would be defined as a
"reportable  transaction"  within the  meaning of  Treasury  Regulation  Section
1.6011-4(b)  (including any "listed transaction") or any confidential  corporate
tax shelter within the meaning of Treasury Regulation Section 1.6111-2.

         (f)  Except as set forth in Section  5.16(f)  of the Parent  Disclosure
Schedules,  neither  Parent nor any Parent  Subsidiary  has been a member of any
Parent Group other than the Parent Group of which Parent is the parent.  None of
Parent or any Parent Subsidiary has any liability for, or any indemnification or
reimbursement obligation with respect to, (i) Taxes of any Person under Treasury
Regulation  Section 1.1502-6 (or any similar  provision under foreign,  state or
local Law),  (ii) material  Taxes of any Person as  transferee or successor,  or
(iii) material Taxes of any Person by contract for Taxes. Neither Parent nor any
Parent  Subsidiary  is a  party  to any Tax  sharing  agreement,  Tax  indemnity
obligation or similar  Contract or practice with respect to Taxes (including any
advance pricing  agreement,  closing  agreement or other  agreement  relating to
Taxes with any Tax Authority).

         (g)  Except as set forth in Section  5.16(g)  of the Parent  Disclosure
Schedules,  neither Parent nor any Parent  Subsidiary (nor any officer of Parent
or any Parent Subsidiary) is a party to any Contract  (including this Agreement,
the Related  Agreement  and the  arrangements  contemplated  hereby and thereby)
that, individually or collectively, could give rise to the payment of any amount
(whether in cash or property,  including shares of capital stock) that would not
be deductible pursuant to the terms of Sections  162(a)(1),  162(m) or 162(n) of
the Code.


                                      -68-
<PAGE>

         (h) Neither Parent nor any Parent  Subsidiary has agreed or is required
to make any adjustment under Code Section 481(a) or Section 482 (or an analogous
provision of state,  local or foreign  Law) by reason of a change in  accounting
method or otherwise.  Neither Parent nor any Parent  Subsidiary will be required
to include in income, or exclude any item of deduction from,  taxable income for
any  taxable  period (or portion  thereof)  ending  after the Closing  Date as a
result of any  "closing  agreement"  as  described  in Code Section 7121 (or any
corresponding or similar provision of state, local or foreign income Tax Law).

         (i) Neither  Parent nor any Parent  Subsidiary  is or has been a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code).

         (j) Neither  Parent nor any Parent  Subsidiary  has had or maintained a
permanent establishment other than in its country of organization.

         (k)  Section   5.16(k)  of  Parent   Disclosure   Schedule  sets  forth
information with respect to each of Parent and the Parent Subsidiaries as of the
most recent  practicable  date  regarding  any  material Tax holidays or foreign
rulings  to  which  Parent  or any  Parent  Subsidiary  (as the  case may be) is
subject.

         (l) Neither Parent nor any Parent Subsidiary has incurred, and no state
of affairs exist that could result in Parent or any Parent Subsidiary incurring,
any penalty under Section 6662(e) of the Code.

         Section 5.17 Insurance.  Section 5.17 of the Parent Disclosure Schedule
contains a true,  correct and  complete  list of policies and bonds of insurance
maintained  by  Parent  and each  Parent  Subsidiary,  and the  Parent  has Made
Available to the Company true,  correct and complete copies of such policies and
bonds of  insurance.  There  is no  material  claim  pending  under  any of such
policies or bonds as to which coverage has been  questioned,  denied or disputed
by the  underwriters  of such  policies or bonds.  All  premiums due and payable
under all such  policies  and bonds have been paid,  and Parent and each  Parent
Subsidiary is otherwise in compliance in all material respects with the terms of
such  policies and bonds.  To the  Knowledge of Parent,  neither  Parent nor any
Parent   Subsidiary  has  received   written   notification  of  any  threatened
termination of, or material  premium increase with respect to, any such policies
or bonds.

         Section 5.18 Opinion of Financial Advisor. In the event that the Parent
Board has  resolved  to retain a  financial  advisor  and a fairness  opinion in
connection with the Merger, the Parent Board has received the written opinion of
such financial advisor (the "Parent Financial  Advisor") addressed to the Parent
Board,  to the effect  that the Merger  Consideration  is fair from a  financial
point of view to the holders of Parent Common  Shares,  and Parent has delivered
to the Company a true,  correct and  complete  copy of such  opinion  solely for
informational purposes.

         Section 5.19  Brokers.  Neither  Parent nor any  Affiliate of Parent is
obligated  for the  payment of any fees or expenses  of any  investment  banker,
broker,  advisor or similar party in connection with the origin,  negotiation or
execution  of this  Agreement  or in  connection  with the  Merger  or any other
Transaction.

         Section 5.20 Properties.

         (a) Section 5.20(a) of the Parent  Disclosure  Schedules lists all real
property owned by Parent or any Parent Subsidiary.


                                      -69-
<PAGE>

         (b)  Section  5.20(b)  of the  Parent  Disclosure  Schedules  lists all
material  real  property  Leases to which Parent or any Parent  Subsidiary  is a
party and each Amendment thereto that is now in effect.  All such current Leases
are in full force and effect,  are valid and effective in accordance  with their
respective  terms,  and,  except as set forth in  Section  5.20(b) of the Parent
Disclosure  Schedules,  none of Parent and the Parent  Subsidiaries  and, to the
Actual Knowledge of Parent,  no other party, is in Breach of any such Lease that
would give rise to a material claim against Parent or any Parent Subsidiary.

         Section 5.21 Interested Party Transactions.  Except as disclosed in the
Parent SEC  Reports,  since  December  31,  2005,  no event has  occurred and no
relationship  exists that would be required to be reported by Parent pursuant to
Item 404 of Regulation S-K.

         Section 5.22 Export and Import Laws.  Parent and each Parent Subsidiary
has conducted  its export  transactions  in accordance in all material  respects
with applicable  provisions of U.S. Export and Import Laws. Without limiting the
generality of the foregoing,  (i) Parent and each Parent Subsidiary has obtained
all export  licenses and other  approvals  required for its exports of products,
Intellectual  Property,  software and technologies from the United States,  (ii)
Parent and each Parent  Subsidiary is in material  compliance  with the terms of
all applicable  export licenses or other  approvals,  (iii) there are no pending
or, to Parent's Actual Knowledge, threatened claims against Parent or any Parent
Subsidiary with respect to such export licenses or other approvals,  and (iv) to
Parent's  Knowledge,  there are no  conditions  or  circumstances  pertaining to
Parent's or any Parent  Subsidiary's  export  transactions that may give rise to
any future claims.

         Section 5.23  Capitalization,  Ownership and Prior Activities of Merger
Sub.

         (a) The authorized capital shares of Merger Sub consist of 1,000 shares
of common stock, par value $0.0001 per share. As of the date hereof, all of such
shares were issued and outstanding,  all of which are held and owned directly by
Parent  and are  validly  issued  and  fully  paid,  nonassessable  and  free of
preemptive  rights.  There  are no  Commitments  or other  rights  or  Contracts
obligating  Parent  or  Merger  Sub to issue or sell any  Equity  Interests,  or
Securities convertible into or exchangeable for Equity Interests, in Merger Sub.

         (b) Except for  obligations or liabilities  incurred in connection with
its  incorporation or organization,  the execution and deliver of this Agreement
and the  Related  Agreement  to which it is a  signatory  and the  Transactions,
Merger Sub has not and, prior to the Effective Time, will not have (i) incurred,
directly or indirectly  through any  Subsidiary or Affiliate,  any  Liabilities,
(ii) engaged in any business  activities,  or (iii)  entered into any  Contracts
with any Person.

         Section  5.24  Interested  Stockholders.  None of  Parent or any of its
Affiliates  is an  "interested  stockholder"  (as  defined in Section 203 of the
DGCL) of the Company.

         Section 5.25 Representations  Complete.  Except as set forth in Section
5.25  of  the  Parent  Disclosure  Schedules,  none  of the  representations  or
warranties made by Parent, and no financial  statement,  other written financial
information  or statements  made in any exhibit,  schedule or  certificate  Made
Available or furnished  by Parent to the Company  pursuant to this  Agreement or
any Related Agreement, or furnished by Parent in or in connection with documents
mailed or  delivered  to the  stockholders  of Parent or the  Company for use in
soliciting  their  approval of this  Agreement and the Merger,  contains or will
contain at the Closing Date any untrue  statement of a material fact or omits or
will omit at the Closing Date to state any material  fact  necessary in order to
make the statements  contained herein or therein,  in light of the circumstances
under which they were made, not misleading.


                                      -70-
<PAGE>

                                   ARTICLE VI.
                                    COVENANTS

         Section 6.1 SEC Reports; Preparation of Form S-4 and Proxy Statement.

         (a) As promptly as practicable  after the execution of this  Agreement,
Parent  shall,  subject to the full and prompt  assistance  of the  Company  and
Stanford,  prepare and file with the SEC the Proxy  Statement,  and Parent shall
prepare and file with the SEC the Form S-4, in which the Proxy  Statement  shall
be included as a  prospectus  (it being  understood  by the parties  that Parent
intends  to file a  post-effective  amendment  to the  Form S-4 to  include  the
Company FY 2006 Financial  Statements and updated Parent and pro forma financial
statements  therein prior to requesting the  effectiveness of the Form S-4). The
Company  shall  promptly  provide,  and shall use its Best  Efforts to cause the
other  stockholders  of the  Company  promptly  to  supply,  to  Parent  and its
Representatives  any and all information in writing concerning the Company,  its
business,  operations,  directors, officers,  Subsidiaries,  stockholders or any
other  matters  which may in Parent's  reasonable  discretion  be  required  for
inclusion in the Form S-4 or Proxy Statement, or to respond to any comments from
the SEC thereon, or reasonably requested by Parent in connection therewith.  The
Company and Stanford  shall promptly  provide to Parent and its  Representatives
any and all information in writing concerning  Stanford's business,  controlling
persons or any other  matters  which may in Parent's  reasonable  discretion  be
required for inclusion in the Form S-4 or Proxy Statement,  or to respond to any
comments from the SEC thereon,  or reasonably  requested by Parent in connection
therewith.  Parent and the Company shall additionally  prepare and file with the
SEC any Other Filings as and when required or requested by the SEC in connection
with this  Agreement,  the Related  Agreements or the  Transactions  (the "Other
Merger Filings"). Prior to filing the Proxy Statement or any Other Merger Filing
with the SEC or any other  Governmental  Entity,  Parent and the  Company  shall
provide the other of them with  reasonable  opportunity to review and comment on
each such filing in advance.

         (b) Each of  Parent  and the  Company  shall  use its  reasonable  Best
Efforts to have the Form S-4 declared  effective under the Securities Act by the
SEC as promptly as  practicable  after the filing  thereof with the SEC. Each of
Parent and the Company shall advise the other of them promptly after it receives
notice of any SEC request for an  amendment or  supplement  to the Form S-4, the
Proxy  Statement or any Other Merger  Filing or comments  thereon and  responses
thereto  or  requests  by the SEC for  additional  information.  Parent  and the
Company  shall use their  respective  Best  Efforts to  promptly  respond to any
comments  from the SEC on the Form S-4,  Proxy  Statement  or any  Other  Merger
Filing.

         (c) The Proxy  Statement  shall solicit proxies for the approval by the
stockholders of Parent of (i) this Agreement and the Merger, (ii) an increase in
the number of Parent  Common  Shares  authorized  in the Parent  Certificate  of
Incorporation to 30,000,000 Parent Common Shares (or such other number as Parent
in its discretion deems will provide  sufficient  reserve  authorized shares for
the issuance of the Merger  Consideration,  the issuance of Parent Common Shares
upon the exercise of Company  Warrants assumed pursuant to Section 3.9, and such
additional  shares as the Parent Board in its sole  discretion  deems prudent to
have authorized) (the "Parent Authorized Stock Increase"),  and (iii) subject to
the consent of the Company  (which consent shall not be  unreasonably  withheld,
conditioned  or delayed),  such other  matters as Parent deems  appropriate  for
approval of its stockholders in furtherance of the Transactions.

         (d) The Proxy  Statement  shall solicit proxies for the approval by the
stockholders  of the  Company of (i) this  Agreement  and the  Merger,  (ii) the
irrevocable appointment and constitution of the Stockholder Agent (for avoidance
of  doubt,   including  its  successors   hereunder)  as  the  exclusive  agent,
attorney-in-fact  and  representative  of the  Stockholders in relation to or in
connection  with this  Agreement,  the  Escrow  Agreement  and the  Transactions


                                      -71-
<PAGE>

contemplated  hereby and  thereby,  and (iii)  subject to the  consent of Parent
(which consent shall not be unreasonably withheld, conditioned or delayed), such
other matters as the Company deems  appropriate for approval of its stockholders
in furtherance of the Transactions.

         (e) Parent and the Company shall each use its  reasonable  Best Efforts
to cause the Proxy  Statement  to be mailed to its  stockholders  as promptly as
practicable  after the Form S-4 is declared  effective under the Securities Act.
Parent shall promptly  provide the Proxy  Statement,  as amended or supplemented
from time to time, to the Company for use in connection  with the meeting of the
stockholders of the Company to approve,  among other matters, this Agreement and
the Merger.

         (f) Parent  shall use its Best  Efforts to take any action  (other than
qualifying to do business or registering as a broker-dealer  in any jurisdiction
in which it is not now so  qualified or  registered)  required to be taken under
any  applicable  Blue Sky Laws in connection  with the issuance of Parent Common
Shares in the Merger,  and the Company shall furnish all information  concerning
the Company and its  stockholders  as may be reasonably  requested in connection
with any such action.

         (g) Parent agrees that the Form S-4 and the Proxy Statement (other than
with respect to Company  Information) shall not, at any Applicable Time, contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the  circumstances  under  which they were made,  not  misleading.  The
Company  agrees  that the Form S-4 and the  Proxy  Statement  (other  than  with
respect to Parent  Information)  shall not, at any Applicable Time,  contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements  therein,  in light of the
circumstances  under which they were made, not misleading.  If at any time prior
to  the  final  conclusion  of  the  Parent  Stockholders   Meeting  or  Company
Stockholders  Meeting any Events occur relating to Parent or the Company, or any
of their  respective  officers,  directors,  stockholders  or  Subsidiaries,  is
discovered or learned by Parent, the Company or Stanford which,  individually or
together, (i) should be set forth in an amendment or supplement to the Form S-4,
the Proxy  Statement or any Other  Merger  Filing,  so that the Form S-4,  Proxy
Statement  or Other Merger  Filing  would not include any untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not  misleading,  (ii) cause the Form S-4, Proxy Statement
or Other Merger  Filing to become  incorrect,  incomplete  or  misleading in any
material respect, or (iii) under the Securities Act, the Exchange Act or the SEC
Rules,  are otherwise  required to be set forth in an amendment or supplement to
the Form S-4, Proxy  Statement or Other Merger  Filing;  then in each such case,
the Person which  discovers or learns of such Events shall  promptly  inform the
other of them of such  Events in  writing,  and  Parent  and the  Company  shall
cooperate with each other,  including by providing each other with any necessary
or desirable corrected,  updated or supplemental information, in promptly filing
with the SEC or its  staff  or any  other  Governmental  Entities  or  officials
thereof,  and, to the extent  required by the Securities  Act, the Exchange Act,
the SEC Rules or other  applicable  Law,  Parent and the Company shall cooperate
with each other in mailing to the their respective stockholders, any appropriate
amendment or  supplement  to the Form S-4,  the Proxy  Statement or Other Merger
Filing in order to cause the Form S-4,  the  Proxy  Statement  and Other  Merger
Filing to comply with the  Securities  Act, the Exchange  Act, the SEC Rules and
other applicable Law, and not to contain any untrue statement of a material fact
or omit to state a material fact  required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

         (h) The parties  shall notify each other  promptly of the time when the
Form S-4 has become  effective,  of the issuance of any stop order or suspension
of the  qualification  or  registration  of the Parent Common Shares issuable in
connection with the Merger for offering or sale in any  jurisdiction,  or of the
receipt of any comments  from the SEC or the staff of the SEC for  amendments or
supplements to the Proxy Statement or the Form S-4 or for additional information


                                      -72-
<PAGE>

and shall supply each other with copies of (i) all correspondence  between it or
any of its Representatives, on the one hand, and the SEC or staff of the SEC, on
the other hand, with respect to the Proxy  Statement,  the Form S-4 or any Other
Merger Filing, and (ii) all orders of the SEC relating to the Form S-4.

         (i) The  Parties  hereto  acknowledge  and agree that  Parent  shall be
responsible  for directing and  controlling the gathering of information for and
the  preparation  of all  disclosures  (including  information  relating  to the
Company)  to be  included  in the Form S-4,  the Proxy  Statement  and the Other
Merger Filings and the filing thereof with the SEC.  Parent hereby  covenants to
use its Best  Efforts to do so on its own behalf and on behalf of the Company at
the earliest  practicable  date and to proceed with due  diligence to respond to
any  comments  from the SEC or the staff of the SEC as promptly  as  practicable
with a  view  to  having  the  Form  S-4  declared  effective  at  the  earliest
practicable date. Without limiting the generality of the foregoing, Parent shall
use its Best Efforts (and,  with respect to the Company,  shall cause Merger Sub
to use its Best Efforts under the Management Agreement) (i) to promptly complete
and file, or cause to be filed,  the Form S-4, the Proxy Statement and the Other
Merger  Filings along with any  amendments or  supplements  thereto  required or
requested by the SEC, (ii) to have the Form S-4 be declared effective,  (iii) to
call, arrange and hold the respective special  stockholders'  meetings of Parent
and the Company to seek the stockholder  approvals described herein, and (iv) to
take such other  actions as may be  reasonable  or necessary to  effectuate  the
foregoing.

         Section 6.2 Parent Stockholders Meeting.

         (a) Promptly after the date on which the Form S-4 is declared effective
by the SEC and mailed to Parent's stockholders, Parent shall take all lawful and
commercially  reasonable action necessary in accordance with the NPCA, the rules
and  regulations  of its Principal  Market and its  Organizational  Documents to
call, notice, convene and hold the Parent Stockholders Meeting. Parent shall use
its Best Efforts to hold the Parent Stockholders  Meeting within forty-five days
of the date the SEC  declares the Form S-4  effective.  In  connection  with the
Parent  Stockholders  Meeting,  Parent shall (i) subject to applicable Laws, use
its Best Efforts  (including  postponing or adjourning  the Parent  Stockholders
Meeting  to obtain a quorum or to  solicit  additional  proxies)  to obtain  the
Parent Stockholder  Approval,  and (ii) otherwise comply with all applicable Law
pertaining to the Parent Stockholders Meeting.  Notwithstanding  anything to the
contrary contained in this Agreement,  Parent may adjourn, delay or postpone the
Parent  Stockholders  Meeting  (i) to the extent  necessary  to ensure  that any
required  supplement or amendment to the Form S-4 or Proxy Statement is provided
to its stockholders, or (ii) if as of the time for which the Parent Stockholders
Meeting is originally  scheduled (as set forth in the Proxy Statement) there are
insufficient  Parent Common Shares represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Parent Stockholders
Meeting.

         (b) Until the  termination  of this  Agreement in  accordance  with its
terms,  Parent's  obligation to call, give notice or convene and hold the Parent
Stockholders Meeting in accordance with this Section 6.2 shall not be limited or
otherwise affected by the commencement,  disclosure,  announcement or submission
to  the  Company  of any  Acquisition  Proposal  or  Superior  Offer,  or by any
withholding,  withdrawal or  modification of the  recommendation  of the Company
Board in favor of the Company Stockholder Approval.

         (c) Prior to the Closing Date,  Parent shall take all necessary  action
as the sole  stockholder  of Merger  Sub to  effect  the due  authorization  and
approval  of this  Agreement  and the  approval  of the  Merger  by the Board of
Directors and the stockholders of Merger Sub.

         Section 6.3 Company Stockholders Meeting.


                                      -73-
<PAGE>

         (a) Promptly after the date on which the Form S-4 is declared effective
by the SEC and mailed to the Company's stockholders,  the Company shall take all
lawful and commercially reasonable action necessary in accordance with the DGCL,
the  rules  and  regulations  of its  Principal  Market  and its  Organizational
Documents to call, notice,  convene and hold the Company  Stockholders  Meeting.
The Company shall use its Best Efforts to hold the Company  Stockholders Meeting
within  forty-five days of the date the SEC declares the Form S-4 effective.  In
connection with the Company Stockholders  Meeting, the Company shall (i) subject
to applicable Laws, use its Best Efforts (including postponing or adjourning the
Company  Stockholders  Meeting  to  obtain a  quorum  or to  solicit  additional
proxies)  to obtain the  Company  Stockholder  Approval  and  Stockholder  Agent
Appointment, and (ii) otherwise comply with all applicable Law pertaining to the
Company Stockholders Meeting. Notwithstanding anything to the contrary contained
in this  Agreement,  the Company  may  adjourn,  delay or  postpone  the Company
Stockholders  Meeting (i) to the extent  necessary  to ensure that any  required
supplement  or amendment  to the Form S-4 or Proxy  Statement is provided to its
stockholders,  (ii) at Parent's  request to permit Parent to register or qualify
the Parent Common Shares to be issued as Merger  Consideration  under applicable
Blue Sky Laws,  or (iii) if as of the time for which  the  Company  Stockholders
Meeting is originally  scheduled (as set forth in the Proxy Statement) there are
insufficient  the  Company  Common  Shares  represented  (either in person or by
proxy) to  constitute a quorum  necessary to conduct the business of the Company
Stockholders Meeting.

         (b) Until the  termination  of this  Agreement in  accordance  with its
terms,  the Company's  obligation  to call,  give notice or convene and hold the
Company  Stockholders  Meeting in accordance  with this Section 6.3 shall not be
limited or otherwise affected by the commencement,  disclosure,  announcement or
submission to the Company of any  Acquisition  Proposal or Superior Offer, or by
any withholding, withdrawal or modification of the recommendation of the Company
Board in favor of the Company Stockholder Approval.

         Section 6.4 Access to Information; Confidentiality.

         (a) From the date of this Agreement to the Effective  Time, the Company
shall, and shall cause each Company  Subsidiary and each of its and each Company
Subsidiary's   Representatives   to,  (i)   provide   to  Parent  and   Parent's
Representatives  access, at reasonable times upon prior notice, to the officers,
employees,  agents,  properties,  offices  and  other  facilities  and books and
records of the Company and the Company  Subsidiaries,  and (ii) furnish promptly
such  information  concerning the business,  properties,  insurance,  Contracts,
prospects,  Property,  Liabilities,  Tax Returns,  Tax  elections  and all other
workpapers  and  studies  relating  to  Taxes,  personnel,   internal  financial
statements  and other  aspects of the Company and the  Company  Subsidiaries  as
Parent or Parent's  Representatives may reasonably request.  Notwithstanding the
foregoing,  the Company may restrict the foregoing access to the extent that (A)
any Law of any  Governmental  Entity  applicable  to the  Company  requires  the
Company or any Company  Subsidiary  to  restrict or prohibit  such access to any
such  Properties or information,  (B) Parent's  access to the information  would
breach the Company's confidentiality obligations to a third party (provided that
upon Parent's reasonable request the Company shall use its reasonable efforts to
obtain such third party's  consent to permit Parent access to such  information,
subject to appropriate  confidentiality  protections),  or (C) disclosure of any
such  information  or document  would result in the loss of the Company's or any
Company  Subsidiary's  attorney-client  privilege.  Subject to  compliance  with
applicable  Laws,  from the date of this  Agreement  until  the  earlier  of the
termination of this  Agreement and the Effective  Time, the Company shall confer
from  time to time as  reasonably  requested  by Parent to meet with one or more
Representatives of Parent to discuss any material changes or developments in the
operational  matters of the Company and each Company  Subsidiary and the general
status of the ongoing operations of the Company and the Company Subsidiaries.


                                      -74-
<PAGE>

         (b) From the  date of this  Agreement  to the  Effective  Time,  Parent
shall,  and shall cause each Parent  Subsidiary  and each of its and each Parent
Subsidiary's  Representatives  to, (i) provide to the Company and the  Company's
Representatives  access, at reasonable times upon prior notice, to the officers,
employees,  agents,  properties,  offices  and  other  facilities  and books and
records  of Parent and  Parent  Subsidiaries,  and (ii)  furnish  promptly  such
information   concerning  the  business,   properties,   insurance,   Contracts,
prospects,  Property,  Liabilities,  Tax Returns,  Tax  elections  and all other
workpapers  and  studies  relating  to  Taxes,  personnel,   internal  financial
statements  and other  aspects  of Parent  and the  Parent  Subsidiaries  as the
Company or the Company's Representatives may reasonably request. Notwithstanding
the foregoing,  Parent may restrict the foregoing  access to the extent that (A)
any Law of any Governmental  Entity  applicable to Parent requires Parent or any
Parent  Subsidiary to restrict or prohibit such access to any such Properties or
information,  (B) the Company's access to the information  would breach Parent's
confidentiality  obligations to a third party  (provided that upon the Company's
reasonable  request Parent shall use its reasonable efforts to obtain such third
party's  consent to permit the Company  access to such  information,  subject to
appropriate  confidentiality   protections),  or  (C)  disclosure  of  any  such
information  or  document  would  result in the loss of  Parent's  or any Parent
Subsidiary's  attorney-client  privilege.  Subject to compliance with applicable
Laws,  from the date of this Agreement  until the earlier of the  termination of
this Agreement and the Effective Time,  Parent shall confer from time to time as
reasonably  requested by the Company to meet with one or more Representatives of
the Company to discuss any material  changes or  developments in the operational
matters of Parent  and each  Parent  Subsidiary  and the  general  status of the
ongoing operations of Parent and the Parent Subsidiaries.

         (c) The  parties  hereto  acknowledge  that  Parent,  the  Company  and
Stanford have previously executed that certain Mutual Confidentiality Agreement,
effective  April 1, 2006 (as  Amended  from time to time,  the  "Confidentiality
Agreement"),  which shall  continue in full force and effect in accordance  with
its terms.

         Section  6.5 Notice of  Acquisition  Proposals.  Each of Parent and the
Company  agrees  that,  as  promptly as  practicable  (but in no event more than
twenty-four  hours after receipt),  it shall advise the other of them orally and
in writing of (i) an  Acquisition  Proposal,  (ii) any  inquiry,  expression  of
interest, proposal or offer that constitutes, or could reasonably be expected to
lead to, an Acquisition Proposal,  (iii) any request for non-public  information
that could reasonably be expected to lead to an Acquisition Proposal, including,
in each such case,  (1) the material  terms and  conditions of such  Acquisition
Proposal, inquiry,  expression of interest,  proposal, offer, notice or request,
and (2) the  identity  of the  Person  making  any  such  Acquisition  Proposal,
inquiry,  expression of interest,  proposal,  offer, notice or request.  Each of
Parent and the Company shall (x) keep the other of them informed, as promptly as
practicable,  of the status and details  (including  any  Amendments or proposed
Amendments) of any such Acquisition Proposal,  inquiry,  expression of interest,
proposal,  offer,  notice or request,  and (y) provide to the other of them,  as
promptly as practicable,  a copy of all written  materials and other information
provided  to it in  connection  with any  such  Acquisition  Proposal,  inquiry,
expression  of  interest,  proposal,  offer,  notice or request.  Parent and the
Company  each shall  provide the other of them with at least three (3)  Business
Days prior  written  notice (or such  lesser  prior  notice as  provided  to the
members of its Board of  Directors  but in no event less than  twenty-four  (24)
hours)  of any  meeting  of its  Board of  Directors  at which  the its Board of
Directors is reasonably expected to discuss any Acquisition Proposal,  including
to determine whether such Acquisition Proposal is a Superior Offer.

         Section 6.6  Affiliate  Letters.  At least 30 days prior to the Closing
Date, the Company shall deliver to Parent a list of names and addresses of those
Persons who were,  in the Company's  reasonable  judgment at the record date for
the Company  Stockholders  Meeting,  "affiliates"  (each such Person, a "Company
Affiliate")  of the  Company  within  the  meaning  of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall use its Best
Efforts to  deliver or cause to be  delivered  to Parent,  prior to the  Closing


                                      -75-
<PAGE>

Date, from each Company Affiliate,  and Stanford agrees to deliver, an affiliate
letter (an "Affiliate  Letter") in a customary form  reasonably  satisfactory to
Parent.  Parent  shall  be  entitled  to  place  legends  as  specified  in such
Affiliates Letters on the certificates  representing any Parent Common Shares to
be  received by such  Company  Affiliates  pursuant to the Merger,  and to issue
appropriate  stop  transfer  instructions  to the transfer  agent for the Parent
Common Shares, consistent with the terms of such Affiliate Letters.

         Section 6.7 Certain  Notices.  Parent and the Company  shall notify the
other of them in  writing  promptly  after  learning  of (i) any notice or other
communication from any Person alleging that the Consent of such Person is or may
be required in  connection  with the Merger or any other  Transaction,  (ii) any
notice or other  communication  from any Governmental  Entity in connection with
the  Merger  or any  other  Transaction,  (iii)  any  Action  by or  before  any
Governmental  Entity initiated by or against it or any of its  Subsidiaries,  or
known by it or any of its  Subsidiaries to be threatened  against it or any such
Subsidiary  or  any  of  their  respective  directors,  officers,  employees  or
stockholders   in  their   capacity  as  such,  or  of  any  verbal  or  written
correspondence  from any Person  asserting or implying a claim against it or any
of its  Subsidiaries  or  with  respect  to any  of  its  Properties  (including
Intellectual Property), (iv) any Event not in the Ordinary Course of Business of
it or any of its  Subsidiaries  that,  individually or in the aggregate with any
other  such  Events,  (A)  have a  Material  Adverse  Effect  on  it,  or (B) is
reasonably likely to cause any of the conditions to closing set forth in Article
VII not to be satisfied,  or (v) any claim,  or any verbal or written inquiry by
any Tax  Authority  regarding  Taxes  payable by it or any of its  Subsidiaries.
Parent  and the  Company  shall give  prompt  notice to the other of them of any
representation or warranty made by it contained in this Agreement or any Related
Agreement  to which it is a  signatory  becoming  untrue or  inaccurate,  or its
failure  to  comply  with or  satisfy  in any  material  respect  any  covenant,
condition  or  agreement  to be  complied  with or  satisfied  by it under  this
Agreement  or any  Related  Agreement  to  which  it is a  signatory,  provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the  conditions to the  obligations of
the parties under this Agreement.

         Section  6.8 Public  Announcements.  Parent and the  Company  shall use
their  respective  Best  Efforts  to  agree  to the  text of the  press  release
announcing the execution and delivery of this Agreement.  Parent and the Company
shall provide to each other any  subsequent  press  releases and public  written
statements or filings related to this  Agreement,  the Related  Agreements,  the
Merger or the  other  Transactions  and shall  consult  with each  other  before
issuing  or making  any such  release or  written  public  statement  or filing.
Neither the Company  nor the Parent  shall issue any such press  release or make
any such public written statement or filing without the prior written consent of
the other of them (such  consent  not to be  unreasonably  withheld,  delayed or
conditioned);  provided that either Parent of the Company may, without obtaining
the prior  consent of the other of them,  issue such press  release or make such
public statements or filings, including the filing of SEC Reports, as such party
determines  in good  faith,  following  consultation  with  legal  counsel,  are
required by applicable Law or the rules and regulations of its Principal Market,
if it has used reasonable  efforts under the  circumstances to first consult and
reach agreement with the other of them. The Company and Parent shall cause their
respective employees, officers and directors to comply with this Section 6.8.

         Section 6.9 Certain  Litigation.  Parent and the Company shall promptly
advise the other of them orally and in writing of any Action commenced after the
date  hereof  against  it or  any of its  directors  by any of its  stockholders
relating  to this  Agreement,  any  Related  Agreement,  the Merger or the other
Transactions, and shall keep the other of them reasonably informed regarding any
such Action. Parent and the Company shall give the other of them the opportunity
to consult with it regarding  the defense or  settlement  of any such Action and
shall  consider  the views of the other of them with  respect to such Action and
shall not settle any such Action without the prior written  consent of the other
of them (which consent shall not be unreasonably withheld).


                                      -76-
<PAGE>

         Section 6.10 Employees.

         (a) From and after the Effective Time,  Parent and the Merger Sub shall
have the rights and  obligations  described in this Section 6.10  regarding  the
individuals who were employees of the Company immediately prior to the Effective
Time and who continue employment with the Company, a Parent Subsidiary or Parent
following  the  Effective  Time  ("Continuing  Employees").  With respect to any
potential  Continuing  Employee (i) Parent and the Company shall confer and work
together in good faith to determine  appropriate  employment terms, and (ii) the
Company shall,  in good faith,  cooperate with Parent and assist Parent with its
efforts to enter into offer  letters,  assignment  of invention  agreements  and
related documents after the date of this Agreement and in any event prior to the
Closing Date.

         (b) Within a reasonable  period of time after the last  Business Day of
each  calendar  month after the date of this  Agreement and on or about the date
that is five  Business  Days prior to the expected  Closing Date, if there shall
have been any  change in the  information  required  to be set forth in  Section
4.10(f) of the  Company  Disclosure  Schedules,  the Company  shall,  deliver to
Parent a revised Section 4.10(f) of the Company Disclosure Schedules, which sets
forth each person who the Company  reasonably  believes  is, with respect to the
Company or any of its ERISA Affiliates, a "disqualified  individual" (within the
meaning of Section 280G of the Code and the regulations promulgated thereunder),
as of the date such revised Section 4.10(f) is delivered to Parent.

         (c) Parent,  in the event it does not  continue  the  employee  welfare
benefit plans  sponsored and maintained by the Company,  will take  commercially
reasonable efforts after the Effective Time to cause Continuing  Employees to be
eligible for employee  welfare  benefits that are  substantially  similar in the
aggregate to the benefits provided to similarly  situated employees of Parent or
its Subsidiaries.  To the extent Parent elects to have Continuing Employees, and
their eligible  dependents where  applicable,  participate in Parent's  employee
benefit  plans,  programs or policies  following the Effective  Time, (i) Parent
shall allow such  Continuing  Employees,  and their  eligible  dependents  where
applicable,  to  participate  in such  plans,  programs  and  policies  on terms
substantially  similar to those  provided to  similarly  situated  employees  of
Parent or its  Subsidiaries,  (ii) each Continuing  Employee will, to the extent
reasonably   practicable,   receive   credit  for  purposes  of  eligibility  to
participate  and vesting  under such plans,  programs  and policies for years of
service with the Company or any Company  Subsidiary prior to the Effective Time,
provided  such  credit does not result in  duplication  of  benefits,  and (iii)
Parent,  to the extent  required by applicable Law and as permitted by the terms
of the applicable  group health plans,  shall give credit for any co-payments or
deductibles  paid during the year in which the Closing Date occurs and shall use
is  commercially   reasonable  efforts  to  cause  any  pre-existing   condition
limitations,   eligibility   waiting   periods  and  evidence  of   insurability
requirements  under  any  group  health  plans of  Parent  in  which  Continuing
Employees and their eligible dependents will participate to be waived.

         Section 6.11  Termination  of Benefit  Plans.  Unless  Parent  provides
contrary  written  notice to the Company,  effective  as of the day  immediately
preceding  the Closing  Date,  the Company  shall  terminate any and all Company
Benefit Plans  intended to include a Code Section  401(k)  arrangement  (each, a
"401(k) Plan").  The Company shall provide Parent with a reasonable  opportunity
to review and comment on the resolutions to be adopted by the Company's Board of
Directors and other action to be taken to effect the  termination  of the 401(k)
Plans.

         Section 6.12 Parent Board.  Subject to the applicable  fiduciary duties
of the Parent Board,  or any  applicable  committee  thereof,  and compliance by
Parent and the Parent Board,  or such  committee,  in good faith with applicable
Law, including the SEC Rules and the listing rules of Parent's Principal Market,
Parent shall  recommend the following  directors to constitute  the Parent Board
upon the consummation of the Merger (the "Post-Merger  Parent Board"):  Dr. L.S.


                                      -77-
<PAGE>

Smith; William H. Oyster; two current Independent directors of the Parent Board;
two Independent nominees to be designated by Stanford prior to the filing of the
Form S-4; and David Rector.  Effective as of the Effective  Time, (i) the Parent
Board, if necessary, shall resolve to change the number of directors to serve on
the  Parent  Board,  within  the  range  permitted  by  Parent's  Organizational
Documents, to effectuate the Post-Merger Parent Board, (ii) each director of the
Parent Board not included in the  Post-Merger  Parent  Board shall  resign,  and
(iii) the  remaining  directors of the Parent Board shall fill any  vacancies on
the Parent Board as necessary to effectuate the Post-Merger Parent Board.

         Section 6.13 Company Board.

         (a) Subject to the applicable fiduciary duties of the Company Board, or
any applicable  committee thereof, and compliance by the Company and the Company
Board, or such committee,  in good faith with applicable Law,  including the SEC
Rules and the listing rules of the Company's Principal Market, the Company shall
recommend the following directors to constitute the Company Board promptly after
the effectiveness of this Agreement:  Scott Williamson,  John Benson, William H.
Oyster, Mitchell Stolz and David Rector (the "Interim Company Board"). Effective
as of the date hereof,  (i) each  director of the Company  Board not included in
the Interim Company Board shall resign, and (ii) the remaining  directors of the
Company  Board shall fill any  vacancies  on the Company  Board as  necessary to
effectuate the Interim Company Board.

         (b) Parent shall have the right to appoint a designee as an observer to
the Company Board and any committee thereof. Such designee shall be given notice
of all regular  and special  meetings at the same time and in the same manner as
the directors of the Company.

         Section  6.14 Tax Matters.  None of Parent,  Merger Sub and the Company
shall,  and none of them shall permit any of their  respective  Subsidiaries to,
take any action  prior to or  following  the Closing  that would  reasonably  be
expected to cause the Merger to fail to qualify as a  reorganization  within the
meaning of Section 368(a) of the Code.

         Section 6.15 Third Party Consents.

         (a) The Company  shall use its  reasonable  Best  Efforts to obtain and
deliver to Parent at or prior to the Closing all Consents and waivers under each
Contract  listed or described (or required to be listed or described) in Section
4.5 of the Company Disclosure Schedule.

         (b) Parent shall use its reasonable  Best Efforts to obtain and deliver
to the Company at or prior to the Closing all  Consents  and waivers  under each
Contract  listed or described (or required to be listed or described) in Section
5.5 of the Parent Disclosure Schedule.

         Section 6.16 Best Efforts.  Subject to Article IX, each Party agrees to
use its Best Efforts, and to cooperate with the other Parties, to take, or cause
to be taken, all actions,  and to do, or cause to be done, all things reasonably
necessary,  appropriate  or desirable to consummate and make  effective,  in the
most  expeditious  manner  practicable,  the Merger and the other  Transactions,
including (i) taking all reasonable actions to satisfy the respective conditions
set forth in Article VII,  including  (A)  promptly  completing  and filing,  or
causing to be filed,  the Form S-4,  the Proxy  Statement  and the Other  Merger
Filings,  and any necessary  amendments or  supplements  thereto,  (B) using its
commercially reasonable efforts to have the Form S-4 declared effective, and (C)
arranging,  convening  and  holding the Parent  Stockholders  Meeting or Company
Stockholders  Meeting to seek the approvals described herein, and (ii) executing
and delivering  such other  instruments and doing and performing such other acts
and things as may be necessary or reasonably  desirable to effect completely the
consummation of the Merger and the other Transactions.


                                      -78-
<PAGE>

         Section 6.17 Refinancings.

         (a) The Company  shall use its Best  Efforts to amend and restate  that
certain  Commercial  Loan and  Security  Agreement,  dated  October  1, 2003 (as
Amended from time to time,  including on the date hereof,  the "Stanford  LOC"),
with  Stanford,  as lender,  subject to and effective  immediately  prior to the
consummation  of the  Merger,  in the form  attached  hereto  as  Exhibit D (the
"Amended and Restated  Stanford LOC"). The Company shall not Amend the terms and
provisions of the Amended and Restated  Stanford LOC without the written consent
of Parent.

         (b) Parent shall use its Best Efforts to amend and restate that certain
Loan  Agreement,  dated as of December 22, 2005, by and between Parent and Texas
Capital Bank, National  Association,  and any applicable Loan Documents (as such
term is defined in such Loan Agreement),  to permit (i) the Merger, and (ii) the
Surviving  Corporation  to grant to  Stanford  under the  Amended  and  Restated
Stanford LOC a security  interest in and other Liens on all of the Properties of
the Surviving  Corporation and its Subsidiaries,  including all Equity Interests
of the  Subsidiaries  of the Surviving  Corporation,  and to take all reasonable
further  action as required by Stanford to perfect  such  security  interest and
Liens  (including  the  delivery of any stock  certificates  to Stanford and the
amendment of UCC-1 financing statements).

         (c) In consideration  of the amendments and  restatements  specified in
Section  6.17(a)  and for  the  exchange  of  outstanding  Company  Indebtedness
pursuant to the Note Exchange Agreement, at the Closing or as soon thereafter as
reasonably  practicable,  Parent shall issue to (i)  Stanford and its  assignees
specified  in  Schedule  1,  warrants  substantially  in the form of  Exhibit E,
exercisable for a period of seven years from the date hereof for an aggregate of
845,634  Parent  Common  Shares at an exercise  price of $1.89 per share (the "A
Warrants");  and (ii)  Stanford  and its  assignees  specified  in  Schedule  2,
warrants  substantially  in the form of Exhibit E,  exercisable  for a period of
seven  years from the date  hereof for an  aggregate  of 863,000  Parent  Common
Shares at an exercise price of $0.001 per share (the "B Warrants").  As promptly
as practicable  after the execution of this Agreement,  Parent shall prepare and
file with the SEC a  registration  statement  registering  the issuance of the A
Warrants  and B Warrants,  and Parent shall use its  reasonable  Best Efforts to
have such registration  statement declared effective under the Securities Act by
the SEC as promptly as  practicable  after the filing  thereof  with the SEC (it
being  agreed  that  Parent  shall be deemed  to have  prepared  and filed  such
registration  statement  as promptly as  practicable  if Parent  includes  the A
Warrants and the B Warrants on the Form S-4 as initially filed with the SEC).

         Section 6.18 Indemnification.

         (a) For four years after the Effective  Time,  Parent shall cause to be
maintained   directors'  and  officers'   liability   insurance  policies  ("D&O
Insurance")  in respect of acts or omissions  occurring  prior to the  Effective
Time covering each  individual  who is an officer or director of the Company and
is listed on Section  6.18 of the Company  Disclosure  Schedules  (the  "Insured
Parties") and is covered as of the date hereof or hereafter by the Company's D&O
Insurance  on  terms  with  respect  to  coverage  and  amounts,  to the  extent
reasonably  available to Parent,  no less favorable than those of such policy in
effect on the date hereof;  provided,  however, that in no event shall Parent or
the  Surviving  Corporation  be required to expend more than an amount per annum
equal  to 150% of the  current  annual  premiums  paid by the  Company  for such
insurance  (the  "Maximum  Amount") to maintain  or procure  insurance  coverage
pursuant hereto;  provided,  further,  that if the amount of the annual premiums
necessary to maintain or procure  such  insurance  coverage  exceeds the Maximum
Amount, Parent and the Surviving Corporation shall procure and maintain for such
four-year  period as much coverage as is reasonably  practicable for the Maximum
Amount; and, provided,  further, that Parent and the Surviving Corporation shall
have the right  (and  prior to the  Effective  Time the  Company  shall take any


                                      -79-
<PAGE>

action  reasonably  requested by Parent to perfect such right) to cause coverage
to be extended under the Company's D&O Insurance by obtaining a four-year "tail"
policy on terms and conditions no less  advantageous,  to the extent  reasonably
available to Parent,  than the Company's  existing D&O Insurance provided by one
or more commercial insurance providers,  and such "tail" policy shall satisfy in
full the obligations of Parent and the Surviving  Corporation under this Section
6.18.

         (b) In the event the Surviving  Corporation or any of its successors or
assigns (i)  consolidates  with or merges into any other Entity and shall not be
the  continuing or surviving  Entity of such  consolidation  or merger,  or (ii)
transfers all or substantially all of its Properties to any Person; then in each
such case, proper provisions shall be made so that the successors and assigns of
the Surviving Corporation,  or at Parent's option, Parent, shall assume, fulfill
and honor in all respects the obligations set forth in this Section 6.18.

         (c) This Section 6.18 shall survive the consummation of the Merger,  is
intended  to  benefit  each of the  Insured  Parties,  shall be  binding  on all
successors  and  assigns  of the  Surviving  Corporation  and  Parent,  shall be
enforceable by each Insured Party and his or her heirs and representatives,  and
may not be amended,  altered or repealed with respect to any Insured Party after
the  Effective  Time without the prior  written  consent of such Insured  Party;
provided that until the Effective Time, any Amendment of this Agreement shall be
exclusively governed by Section 9.3.

                                  ARTICLE VII.
                               CLOSING CONDITIONS

         Section  7.1  Conditions  to  Obligations  of  Each  Party  Under  This
Agreement.  The respective  obligations of Parent, Merger Sub and the Company to
consummate  the  Merger  and the  other  Transactions  shall be  subject  to the
satisfaction,  at or prior to the Closing, of each of the following  conditions,
any or all of which may be waived in  writing by Parent (on behalf of itself and
Merger Sub) or the  Company,  in whole or in part,  to the extent  permitted  by
applicable Law:

         (a) Company Stockholder Approval.  (i) The Company Stockholder Approval
shall have been  obtained,  and (ii) the  Stockholders  shall have  approved the
Stockholder Agent Appointment.

         (b) Parent  Stockholder  Approval.  (i)  Either the Parent  Stockholder
Approval shall have been obtained, or such approval shall not be required either
under the NPCA or for continued listing by the rules and regulations of Parent's
Principal  Market,  and (ii) the  stockholders of Parent shall have approved the
Parent Authorized Stock Increase.

         (c) No Adverse Law or Order. No Governmental Entity shall have enacted,
issued,  promulgated,  enforced or entered any Law or Order (whether  temporary,
preliminary  or  permanent)  which  is  in  effect  and  prevents  or  prohibits
consummation of any Transaction.

         (d)  Registration and  Qualification  of Parent Common Shares.  The SEC
shall (i) have declared the Form S-4 effective  under the  Securities  Act, (ii)
not have issued a stop order  suspending the  effectiveness of the Form S-4, and
not have initiated or threatened to initiate any  proceedings  for that purpose.
Any  material  Blue Sky Laws  applicable  to the  issuance of the Parent  Common
Shares  constituting  Merger  Consideration shall have been complied with and no
stop order or similar  Order shall have been issued or  threatened in respect of
any Parent Common Shares  constituting  Merger  Consideration  by any applicable
state securities commissioner or court of competent jurisdiction.


                                      -80-
<PAGE>

         (e) No Adverse Order.  No Order shall be in effect which (i) prohibits,
restrains or substantially interferes with the consummation of the Merger or any
other  Transaction;  (ii)  relates to any  Transaction  and imposes upon Parent,
Merger Sub or the Company damages that are material to Parent, Merger Sub or the
Company;  (iii)  prohibits  or limits in any respect  Parent's  right,  power or
ability  to vote,  receive  dividends  with  respect  to or  otherwise  exercise
ownership  rights  with  respect  to  any  Equity  Interests  in  the  Surviving
Corporation  or to own,  operate or control  the  Surviving  Corporation  or any
material  portion  of the  business  or  Property  of  Parent  or the  Surviving
Corporation;  or (iv) has or would have a material adverse effect on the Company
or on Parent's ability to operate the Surviving  Corporation's  business,  or to
own, use and enjoy the Property of the Surviving Corporation, after consummation
of the Transactions.

         Section 7.2  Additional  Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger and the other
transactions  contemplated  herein are also subject to the  satisfaction,  at or
prior to the Effective  Time, of the following  conditions,  any or all of which
may be waived, in whole or in part:

         (a) Preferred Stock  Conversions.  All issued and  outstanding  Company
Preferred  Shares shall have been tendered for  conversion  into Company  Common
Shares  immediately  prior to the  Effective  Time,  such that, at the Effective
Time, no Company Preferred Shares shall be issued and outstanding.

         (b)  Conversion  Agreements.  Stanford  and  DiGenova  shall each be in
compliance with their respective Conversion  Agreements,  which shall each be in
full force and effect.

         (c) Note  Exchange  Agreement.  (i) Stanford and the Company shall have
executed and delivered to Parent the Note Exchange  Agreement,  substantially in
the form of Exhibit F (the "Note Exchange Agreement"), to be entered into by and
between Parent, the Company and Stanford,  and (ii) Stanford shall have tendered
to the Company an amount of outstanding  Company debt, and the notes  evidencing
such debt, for exchange for Company  Common Shares,  all as provided in the Note
Exchange Agreement.

         (d) Stanford  LOC  Refinancings.  The Company and  Stanford  shall have
executed and delivered the Amended and Restated Stanford LOC, as contemplated by
Section 6.17(a).

         (e) Termination  and Release.  (i) Stanford,  Stanford  Financial Group
Company  ("SFG"),  Stanford Venture Capital  Holdings,  Inc.  ("SVCH"),  and the
Company shall have executed and delivered the Termination and Release Agreement,
substantially   in  the  form  of  Exhibit  G  (the   "Termination  and  Release
Agreement"),  and (ii) DiGenova shall have executed and delivered the supplement
attached as Exhibit A to that certain  Termination and Release  Agreement,  made
and entered into as of the date hereof,  by and between Parent,  Merger Sub, the
Company, DiGenova, Stanford, SFG and Stanford Venture Capital Holdings, Inc.

         (f) Escrow Agreement. The Stockholder Agent shall have entered into the
Escrow  Agreement,  which  shall be in full force and  effect as of the  Closing
Date.

         (g) Corporate  Governance  Agreement.  Stanford shall have executed and
delivered  the  Corporate  Governance  Agreement,  substantially  in the form of
Exhibit I, which shall be in full force and effect as of the Closing Date.


                                      -81-
<PAGE>

         (h)  Other  Related  Agreements.  Stanford,  SFG and  SVCH  shall  have
executed and delivered to Parent and the Company each other Related Agreement to
which such Person is to be a party or signatory.

         (i) Legal Opinion.  The Company shall have delivered a legal opinion of
Rutan & Tucker LLP, counsel to the Company, in substantially the form of Exhibit
K, with such standard and customary  procedures,  qualifications and limitations
as are in form and substance reasonably satisfactory to Parent and its counsel.

         (j) Stanford  Deliverables.  Stanford shall have delivered or caused to
be  delivered  to  Parent  all  of the  following  agreements,  instruments  and
documents:

                  (1) an executed  officers'  certificate,  substantially in the
         form of  Exhibit  J,  dated  the  Closing  Date,  signed  by the  Chief
         Executive   Officer  or  the  Chief  Financial   Officer  of  Stanford,
         certifying the fulfillment of certain conditions specified therein;

                  (2) a legal opinion of Adorno & Yoss LLP, counsel to Stanford,
         in  substantially  the  form of  Exhibit  L,  with  such  standard  and
         customary procedures, qualifications and limitations as are in form and
         substance reasonably satisfactory to DGSE and its counsel; and

                  (3) an Affiliate Letter from Stanford.

         Section 7.3 Additional  Conditions to  Obligations of the Company.  The
obligation  of the  Company  to effect  the  Merger  and the other  transactions
contemplated  herein are also  subject to the  satisfaction,  at or prior to the
Effective Time, of the following conditions,  any or all of which may be waived,
in whole or in part:

         (a) Parent Line of Credit Modifications. Parent shall have executed and
delivered  an  amendment  to  its  loan  agreement  and  related  documents,  as
contemplated by Section 6.17(b).

         (b) Registration Rights Agreement.  Parent shall have duly executed and
delivered a registration rights agreement,  substantially in the form of Exhibit
H (the "Registration Rights Agreement"),  in respect of the Parent Common Shares
issuable  upon the  exercise  of the A Warrants  and the B Warrants  and certain
other Parent Common Shares.

         (c) Parent  Officers'  Certificate.  Parent shall have delivered to the
Company an executed officers' certificate,  substantially in the form of Exhibit
M, dated the Closing  Date,  signed by the Chief  Executive  Officer,  the Chief
Financial  Officer and the Chief  Operations  Officer of Parent,  certifying the
fulfillment of the conditions specified in Section 7.3(a) and Section 7.3(b).

         (d)  Warrants.  Parent shall have duly  executed and tendered  (subject
only to the exchange of the debt contemplated by the Note Exchange Agreement) to
Stanford and its assignees the A Warrants and the B Warrants pursuant to Section
6.17(c),  and the SEC shall have declared a registration  statement covering the
issuance  by Parent of the A Warrants  and the B Warrants  to  Stanford  and its
assignees effective under the Securities Act.

         (e) Other  Deliverables.  Parent  shall have  delivered or caused to be
delivered  to the  Company  all of the  agreements,  instruments  and  documents
required to be delivered to the Company pursuant to the foregoing  provisions of
this Section 7.3, together with:


                                      -82-
<PAGE>

                  (1) a legal  opinion of Sheppard,  Mullin,  Richter & Hampton,
         LLP, special counsel to the Company, in substantially the form attached
         hereto as  Exhibit  N, with such  standard  and  customary  procedures,
         qualifications and limitations as are in form and substance  reasonably
         satisfactory to Superior and its counsel;

                  (2) certificates dated as of a date within a reasonable period
         of time prior to the  Closing  Date as to the good  standing of Parent,
         Merger  Sub  and  each  material  Parent  Subsidiary,  executed  by the
         appropriate   officials  of  the  applicable  state  of  incorporation,
         organization or formation,  and each other jurisdiction in which Parent
         or each  material  Parent  Subsidiary  is licensed or  qualified  to do
         business as a foreign corporation;

                  (3)  a  certificate   executed  by  the  secretary  of  Parent
         certifying,  as complete and accurate as of the Closing  Date,  (i) the
         complete  Organizational  Documents of Parent and each material  Parent
         Subsidiary,  and  (ii)  the  resolutions  or  actions  of  each  of the
         stockholders  of Parent and the Board of Directors of Parent  approving
         this Agreement or the Merger; and

                  (4) the written resignations of directors of the Parent Board,
         if any, as required by Section 6.12.

                                 ARTICLE VIII.
     SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION

         Section 8.1 Survival of Representations, Warranties and Covenants.

         (a) The  representations,  warranties  and  certifications  of  Parent,
Merger Sub and the Company contained in this Agreement, or in any certificate or
other instrument  delivered  pursuant to this Agreement by such Person or on its
behalf,  shall remain in effect  until,  and shall expire on, the Closing  Date,
except that:

                  (1) the  representations  and warranties  contained in Section
         4.3  (Capitalization)  shall  survive  until the date one calendar year
         after the Closing Date;

                  (2) neither the Escrow  Termination  Date nor any of the other
         foregoing time limits shall apply to claims based upon fraud or willful
         misrepresentation; and

                  (3) the representation,  warranty, covenant or obligation that
         is the subject matter of a Claim Notice made in accordance with Section
         8.1(c) on or before the Escrow  Termination Date, or such later date as
         applies to the survival of such representation,  warranty,  covenant or
         obligation  pursuant to this Section  8.1(a),  shall not so expire with
         respect to such Claim  Notice or any  subsequent  Claim  Notice that is
         reasonably  related to the subject matter of such initial Claim Notice,
         but rather  shall  remain in full  force and effect  until such time as
         each and every claim that is based upon the claims or alleged  facts or
         circumstances  of such initial  Claim Notice has been fully and finally
         resolved,  either by means of a written settlement  agreement or by the
         dispute resolution procedure set forth in Section 8.6.


                                      -83-
<PAGE>

         (b) The  representations,  warranties,  certifications,  covenants  and
obligations of Parent,  Merger Sub and the Company,  and the rights and remedies
that may be exercised by any Person having a right to  indemnification  pursuant
to this  Article  VIII,  shall not be limited or  otherwise  affected by or as a
result of any  information  furnished  to, or any  investigation  made by or any
Knowledge of, any of the Indemnified Parties or any of their Representatives.

         (c) For  purposes of this  Agreement,  a "Claim  Notice"  relating to a
particular representation,  warranty,  covenant or obligation shall be deemed to
have been delivered if any Indemnified Party, acting in good faith,  delivers to
the Stockholder Agent (with a copy to the Escrow Agent) a written notice stating
that such Indemnified Party believes that there is or has been a possible breach
of such  representation,  warranty,  covenant or obligation and containing (i) a
brief  description of the  circumstances  supporting  such  Indemnified  Party's
belief that there is or has been such a possible breach; and (ii) a non-binding,
preliminary  estimate of the aggregate dollar amount of the actual and potential
Losses  that have  arisen and may arise as a direct or  indirect  result of such
possible breach.

         (d) It is the intent of the  parties  hereto  that all  indemnification
obligations under this Article VIII shall apply without regard to whether or not
(x) any  Indemnifying  Party was  negligent or otherwise at fault in any respect
with regard to the existence or occurrence of any of the matters  covered by any
such indemnification  obligation, or (y) any Indemnifying Party otherwise caused
or created, or is claimed to have caused or created, the existence or occurrence
of any of the matters covered by any such  indemnification  obligation,  whether
through its own acts or omissions or otherwise.  Notwithstanding  the foregoing,
the indemnification  obligation of the Indemnifying  Parties shall be reduced to
the extent  that an  Indemnified  Party  receives  insurance  proceeds  or other
payment  from a third  party that  specifically  covers the Losses for which the
Indemnifying  Parties  otherwise would be required to indemnify such Indemnified
Party pursuant to this Article VIII. If an Indemnified Party receives  insurance
proceeds or other payment from a third party that specifically covers Losses for
which one or more of the Indemnifying  Parties  previously paid such Indemnified
Party pursuant to this Article VIII, then such Indemnified Party shall refund to
the  Indemnifying  Parties an amount  equal to the lesser of (i) the amount that
the Indemnifying  Parties  previously paid to such Indemnified Party relating to
such Losses, and (ii) the amount of such insurance proceeds or other payment.

         Section 8.2 Indemnification; Closing Balance Sheet; Escrow Account.

         (a) From and after the  Closing  Date,  the  Stockholders  entitled  to
Merger  Consideration and DiGenova  (collectively,  the "Indemnifying  Parties")
shall,  subject to Section 8.3 (including the limitations on recourse),  defend,
indemnify and hold Parent and its Representatives and Affiliates  (including the
Surviving  Corporation)  (collectively,   the  "Indemnified  Parties")  harmless
against all Losses incurred by the Indemnified Parties directly or indirectly as
a  result  of any  inaccuracy  or  Breach  of any  representation,  warranty  or
certification  of the Company  specified in Section  8.1(a)(1)  (without  giving
effect to (i) any Updated Disclosure  Schedules,  or (ii) to any sections of the
Disclosure  Schedules,  or portions  thereof,  identified  in Section 8.2 of the
Parent Disclosure Schedules delivered on or prior to the date hereof);  provided
that the Indemnifying  Parties shall have no obligation to defend,  indemnify or
hold the Indemnified  Parties  harmless against Losses (A) to the extent accrued
for in the  Closing  Balance  Sheet,  or (B) for  avoidance  of  doubt,  for any
inaccuracy or Breach of any  representation,  warranty or  certification  of the
Company not specified in Section 8.1(a)(1).

         (b) The Company shall use its Best Efforts to prepare and file with the
SEC a  quarterly  report on Form 10-Q for the  Company's  fiscal  quarter  ended
December 31, 2006 prior to February 15, 2007 (or, if not then filed, as promptly
thereafter  as  practicable).  On or prior to such  filing  date,  Parent  shall
prepare and  deliver to the  Stockholder  Agent a  certificate  calculating  the
difference  of (x)  the  Minimum  Company  Stockholders  Equity,  minus  (y) the


                                      -84-
<PAGE>

stockholders'   equity  reflected  in  the  consolidated   financial  statements
contained in such Form 10-Q (such difference,  the "Balance Sheet  Correction").
For example,  if such  stockholders'  equity were -$4,000,000,  then the Balance
Sheet  Correction  would be  $876,572,  but if such  stockholders'  equity  were
- -$3,000,000,  the Balance Sheet  Correction  would be $0 and no payment would be
made under this  Section  8.2(b).  Notwithstanding  clause (A) to the proviso in
Section 8.2(a),  if the Balance Sheet Correction is a positive number,  then the
Indemnifying Parties shall, subject to Section 8.3 (including the limitations on
recourse),  pay to  Parent  as an  indemnity  hereunder  the full  amount of the
Balance Sheet Correction.  If the Balance Sheet Correction is a negative number,
no  adjustment  will be made  and no  payments  will  be due to any  Party.  The
Parties,  and, by approval of this  Agreement  or the Merger,  the  Stockholders
entitled to Merger  Consideration,  (i)  acknowledge  that the  Minimum  Company
Stockholders Equity, which is based on financial information  represented by the
Company to be true and correct, constitutes the basis for calculating the amount
of the Exchanged Debt (as such term is defined in the Note Exchange  Agreement),
and (ii) agree that the amount of the Balance  Sheet  Correction,  if  positive,
constitutes a Loss to Parent.

         (c) The Indemnifying  Parties shall,  subject to Section 8.3 (including
the limitations on recourse),  pay to the Company as an indemnity  hereunder any
amounts  paid by the  Company  to or at the  request  of the  Stockholder  Agent
pursuant to Section 8.5(i).  The Parties,  and, by approval of this Agreement or
the Merger, the Stockholders  entitled to Merger  Consideration,  agree that any
payments to or at the request of the  Stockholder  Agent  under  Section  8.5(i)
constitutes a Loss to the Company.

         (d) As security for the indemnity  provided to the Indemnified  Parties
in this  Article VIII and by virtue of this  Agreement  and the  Certificate  of
Merger,  Parent shall deposit the Escrow Stock into the Escrow Account  pursuant
to the terms set forth in Section 3.14 and the Escrow Agreement.

         Section 8.3 Limitation on Indemnification.

         (a)  Notwithstanding  any provision of this  Agreement to the contrary,
after the Closing  Date,  the  Indemnifying  Parties shall have no obligation to
indemnify any Indemnified  Parties until the aggregate of all Losses suffered by
the Indemnified  Parties exceeds $100,000 (the "Basket  Amount"),  in which case
the  Indemnified  Parties shall be entitled to recover all Losses  including the
Basket Amount;  provided,  however,  that any Losses resulting from a willful or
intentional Breach of this Agreement or any Transaction Document or fraud by any
party hereto shall not be subject to such Basket Amount.

         (b) Notwithstanding any provision of this Agreement to the contrary, in
the  event any  Indemnified  Party  shall  suffer  any  Losses  for  which  such
Indemnified Party is entitled to  indemnification  under this Article VIII, such
Indemnified  Party  shall be entitled  to recover  such  Losses  solely from the
Escrow  Account  pursuant  to the terms and  conditions  set forth in the Escrow
Agreement,  at the rate per share of Escrow Stock specified in Section  3.14(a),
until no additional  amounts  remain in the Escrow  Account.  Subject to Section
8.8, the  Indemnifying  Parties  shall have no liability for Losses in excess of
the Escrow Stock  deposited in the Escrow  Account  under Section  3.14(a),  the
DiGenova Warrant,  and the Escrow Agreement  (including the proceeds thereof and
distributions  thereon),  and the Indemnified Parties shall have recourse solely
against the Escrow Stock and the other Escrow Assets.

         (c)  Subject  to  Section  8.8 and any  claim  based on the  enumerated
representations  set  forth in  Section  8.1(a),  no claim  for  indemnification
hereunder or otherwise with respect to a breach of this Agreement may be made by
any Indemnified Party after the Escrow Termination Date.

         Section 8.4 Indemnification  Procedures. All claims for indemnification
under this Article VIII shall be asserted and resolved as follows:


                                      -85-
<PAGE>

         (a) Third Party Claims.

                  (1) Notice. In the event an Indemnified Party becomes aware of
         a third-party  claim that such Indemnified Party believes may result in
         a demand against the Escrow Account,  such Indemnified Party (or Parent
         on its behalf)  shall  promptly  notify the  Stockholder  Agent of such
         claim;  provided  that the failure to so notify the  Stockholder  Agent
         shall not relieve any  Indemnifying  Party of any liability that it may
         have  to  any  Indemnified  Party,   except  to  the  extent  that  the
         Indemnifying  Party  demonstrates  that the defense of such third-party
         claim is prejudiced by the failure to give such notice.

                  (2) Defense. If an Indemnified Party (or Parent on its behalf)
         provides notice to the Stockholder  Agent pursuant to Section 8.4(a)(1)
         of the assertion of a third-party claim, the Stockholder Agent shall be
         entitled to participate in the defense of such  third-party  claim and,
         to the extent that it wishes (unless (i) the Stockholder  Agent is also
         a Person against whom the third-party claim is made and the Indemnified
         Party  determines  in good  faith that  joint  representation  would be
         inappropriate,   or  (ii)  the  Stockholder   Agent  fails  to  provide
         reasonable assurance to the Indemnified Party of both (x) its financial
         capacity  to defend  such  third-party  claim,  and (y) its  ability to
         provide  indemnification,  including  against the Escrow Account,  with
         respect  to such  third-party  claim),  to assume  the  defense of such
         third-party claim with counsel  satisfactory to the Indemnified  Party.
         After notice from the Stockholder Agent to the Indemnified Party of its
         election  to  assume  the  defense  of  such  third-party   claim,  the
         Stockholder  Agent shall not, so long as it  diligently  conducts  such
         defense,  be liable to the Indemnified Party under Article VIII for any
         fees of other counsel or any other expenses with respect to the defense
         of such third-party  claim, in each case  subsequently  incurred by the
         Indemnified  Party in connection  with the defense of such  third-party
         claim, other than reasonable costs of investigation. If the Stockholder
         Agent assumes the defense of a third-party  claim,  (A) such assumption
         shall  establish  conclusively  for purposes of this Agreement that the
         claims  made in that  third-party  claim  are  within  the scope of and
         subject to indemnification, and (B) no compromise or settlement of such
         third-party claims may be effected by the Stockholder Agent without the
         Indemnified  Party's  written consent unless (1) there is no finding or
         admission of any violation of Law or any violation of the rights of any
         Person,  (2) the sole relief provided is monetary damages that are paid
         in full by the Stockholder  Agent (including with Escrow Stock from the
         Escrow Account),  and (3) the Indemnified Party shall have no liability
         with respect to any compromise or settlement of such third-party claims
         effected  without  its  written  consent.  If  notice  is  given  to  a
         Stockholder  Agent of the  assertion of any  third-party  claim and the
         Stockholder  Agent  does not,  within  ten days  after the  Indemnified
         Party's notice is provided,  provide notice to the Indemnified Party of
         its  election  to assume the  defense of such  third-party  claim,  the
         Stockholder  Agent  and  Indemnifying  Parties  shall  be  bound by any
         determination  made in such  third-party  claim  or any  compromise  or
         settlement effected by the Indemnified Party.

                  (3)   Exception.   Notwithstanding   the   foregoing,   if  an
         Indemnified  Party  determines in good faith that there is a reasonable
         probability  that a third-party  claim may  adversely  affect it or its
         Related Persons other than as a result of monetary damages for which it
         would  be  entitled  to  indemnification  under  this  Agreement,   the
         Indemnified Party may, by notice to the Stockholder  Agent,  assume the
         exclusive right to defend, compromise or settle such third-party claim,
         but the Stockholder  Agent shall not be bound by any  determination  of
         any  third-party  claim  (including  the Losses  incurred in connection


                                      -86-
<PAGE>

         therewith)  so  defended  for the  purposes  of this  Agreement  or any
         compromise or settlement effected without its written consent.

                  (4) Disputes.  Any dispute between any  Indemnified  Party and
         the  Stockholder  Agent  under this  Section  8.4(a)  shall be resolved
         pursuant  to the dispute  resolution  procedures  described  in Section
         8.4(b) and Section 8.6.

                  (5)  Finality.  In the event  that the  Stockholder  Agent has
         conducted any defense or consented to any settlement under this Section
         8.4(a),  neither  the  Stockholder  Agent  nor any of the  Indemnifying
         Parties  shall  have the  right,  power or  authority  to object to the
         amount of any claim by any Indemnified Party against the Escrow Account
         or otherwise with respect to and in accordance with such settlement.

         (b) Non-Third Party Claims.

                  (1) In the event an  Indemnified  Party has a claim  hereunder
         that does not  involve a claim being  asserted  against or sought to be
         collected  by  a  third  party,   such  Indemnified  Party  shall  with
         reasonable promptness deliver a Claim Notice with respect to such claim
         to the  Stockholder  Agent  (with a copy to the Escrow  Agent).  If the
         Stockholder  Agent does not notify such Indemnified Party within thirty
         (30)  calendar  days from the date of receipt of such Claim Notice that
         the  Stockholder  Agent  disputes such claim,  the amount of such claim
         shall be conclusively  deemed a liability of the  Indemnifying  Parties
         hereunder. In case the Stockholder Agent shall object in writing to any
         claim made in accordance with this Section  8.4(b)(1),  the Indemnified
         Party shall have  fifteen  (15)  calendar  days to respond in a written
         statement to the  objection  of the  Stockholder  Agent.  If after such
         fifteen  (15)  calendar  day period  there  remains a dispute as to any
         claim,  the Indemnified  Party and  Stockholder  Agent shall attempt in
         good faith for sixty (60) calendar days to agree upon the rights of the
         respective  parties  with  respect  to  each  of  such  claims.  If the
         Indemnified  Party and Stockholder  Agent should so agree, a memorandum
         setting  forth  such  agreement  shall be  prepared  and signed by both
         parties.  If such parties do not so agree,  the  Indemnified  Party and
         Stockholder Agent shall resolve such dispute pursuant to Section 8.6.

                  (2) If  Parent  or any  Indemnified  Party  is  making a claim
         against  the  Escrow  Account,  the Escrow  Agent  shall  refrain  from
         disbursing any portion of the Escrow  Account until  resolution of such
         dispute pursuant to this Section 8.4 (including, if applicable, Section
         8.6).

         (c) Failure to Provide Notice.  An Indemnified  Party's failure to give
reasonably prompt notice to the Stockholder  Agent of any actual,  threatened or
possible  claim or  demand  which  may give  rise to a right of  indemnification
hereunder shall not relieve the Indemnifying  Parties of any liability which the
Indemnifying  Parties may have to such Indemnified Party,  unless the failure to
give such notice materially and adversely prejudiced the Indemnifying Parties.

         Section 8.5 Stockholder Agent.

         (a)  Appointment.  By adopting and approving this Agreement,  approving
the Merger,  and  appointing and  constituting  the  Stockholder  Agent as their
exclusive  agent,  attorney-in-fact  and  representative  for  purposes  of this
Agreement,  the Escrow  Agreement and the Transactions  contemplated  hereby and
thereby at the Company  Stockholder  Meeting,  the  stockholders  of the Company
shall have (i) appointed and constituted  the Stockholder  Agent their exclusive


                                      -87-
<PAGE>

agent,  attorney-in-fact and representative in relation to or in connection with
this Agreement,  the Escrow Agreement and the Transactions  contemplated  hereby
and thereby,  (ii) consented to and authorized the Stockholder  Agent to take or
omit  to  take  any and  all  actions  and to  make or omit to make  any and all
decisions  required or permitted  to be taken by it under this  Agreement or the
Escrow  Agreement,  and (iii) consented to and approved the terms and provisions
of the Escrow Agreement;  in each case without any further action on the part of
any such  stockholder.  As  evidenced by the  execution  of the Limited  Joinder
Agreement  or  by  countersigning  the  Escrow  Agreement,  as  applicable,  the
Stockholder Agent accepts such appointment as stockholder agent to act on behalf
of the Stockholders  with respect to the matters  contemplated by this Agreement
and the Escrow Agreement.

         (b)  Rights  and  Duties.  The  Stockholder  Agent  shall  serve as the
exclusive agent,  attorney-in-fact  and  representative  for the Stockholders in
relation to or in connection with this Agreement,  the Merger  Agreement and the
Transactions,  including the following rights,  authorities,  powers, duties and
obligations:

                  (1) to provide and receive notices and other communications;

                  (2)  to  agree  to,  negotiate,  enter  into  settlements  and
         compromises  of,  make  claims and demand  arbitration  and comply with
         orders of courts and awards of arbitrators  with respect to claims made
         or any other  action  to be taken by or on  behalf of any  Indemnifying
         Parties,  or on its own behalf in its  capacity as  Stockholder  Agent,
         under this Article VIII or under the Escrow Agreement,  and to take all
         actions  necessary or  appropriate  in the judgment of the  Stockholder
         Agent for the accomplishment of the foregoing;

                  (3) to use the  Escrow  Stock,  cash,  investments  and  other
         assets  held  from  time to time in the  Escrow  Account  (the  "Escrow
         Assets") as collateral to secure the rights, and to demand and withdraw
         Escrow Assets to satisfy the claims,  of the Indemnified  Parties under
         this Article VIII and the Escrow Agreement;

                  (4) to demand, withdraw and use the Escrow Assets to reimburse
         certain  reasonable  out-of-pocket fees and expenses of the Stockholder
         Agent as provided in Section 3.14(b) and in the Escrow Agreement; and

                  (5) to  take  all  actions  necessary  or  appropriate  in the
         judgment of the Stockholder Agent for the  accomplishment of any of the
         foregoing.

         (c)  Actions of the  Stockholder  Agent.  A  decision,  act,  omission,
agreement, settlement, claim, consent or instruction of the Stockholder Agent in
relation to any matter referred to in Section 3.14(b) or this Article VIII or in
the Escrow  Agreement shall  constitute a decision,  act,  omission,  agreement,
settlement,  claim,  consent or instruction,  as the case may be, for all of the
Stockholders,  and shall be final,  binding and  conclusive  upon each and every
Stockholder,  and Parent and the Escrow  Agent  may,  without  further  inquiry,
conclusively rely upon any such decision, act, omission, agreement,  settlement,
claim,  consent or instruction of the  Stockholder  Agent as being the decision,
act, omission, agreement, settlement, claim, consent or instruction, as the case
may be, of each and every  Stockholder.  Parent  and the  Escrow  Agent  each is
hereby  relieved  from any  liability to any Person for any acts done by them in
accordance  with or in reliance upon any  decision,  act,  omission,  agreement,
settlement,  claim,  consent or instruction of the Stockholder Agent;  provided,
however,  that if Parent  has in fact  received  a valid  written  notice of the
appointment of a successor  Stockholder  Agent,  upon the  effectiveness of such
appointment,  Parent, and upon notification of such successor  Stockholder Agent
from  Parent,  the Escrow  Agent,  and the  Stockholders  shall be  obligated to
recognize,  and  shall  be  able to so  rely  only  upon  the  decisions,  acts,


                                      -88-
<PAGE>

omissions,  agreements,  settlements, claims, consents and instructions of, such
successor Stockholder Agent as the Stockholder Agent for all purposes under this
Agreement and the Escrow  Agreement.  Neither  Parent nor the Escrow Agent shall
incur any  liability  to any Person with respect to any action taken or suffered
by it in good faith in reliance on the Stockholder Agent as aforesaid.

         (d)  Resignation and Removal.  The Stockholder  Agent may resign at any
time by written notice to Parent and the Escrow Agent effective not earlier than
twenty  days  after  receipt  thereof  by DGSE  and the  Escrow  Agent,  and the
Stockholder  Agent  may be  removed  at any time by  written  notice  signed  by
Stockholders  holding  not less than a majority of the  Closing  Company  Common
Shares (exclusive of Dissenting Shares), as conclusively  evidenced by Exhibit A
to the Escrow  Agreement,  effective  not  earlier  than ten days after  receipt
thereof by Parent and the Escrow Agent.

         (e) Successors.  The Stockholders  shall have the sole right, power and
authority to appoint a successor Stockholder Agent. The Stockholders may appoint
a new or  substitute  Stockholder  Agent in a written  instrument  delivered  to
Parent and the Escrow Agent;  provided that such successor Stockholder Agent (A)
was an Affiliate of the Company immediately  preceding the Merger, (B) was or is
a director or officer of the  Company or the  Surviving  Corporation,  or (C) is
reasonably acceptable to Parent. Such instrument shall (1) represent and warrant
that (i) it is signed by  Stockholders  holding  not less than a majority of the
Closing  Company  Common  Shares,  exclusive of Dissenting  Shares,  and (B) the
successor  Stockholder Agent is qualified to act as such pursuant to the proviso
next preceding, (2) irrevocably appoint and constitute the successor Stockholder
Agent (for  avoidance  of doubt,  including  its  successors  hereunder)  as the
exclusive  agent,  attorney-in-fact  and  representative  of the Stockholders in
relation to or in connection with this Agreement,  the Escrow  Agreement and the
Transactions  contemplated  hereby and  thereby,  (3) be  countersigned  by such
successor  Stockholder  Agent,  accepting such  appointments  and agreeing to be
fully bound by the duties and  obligations,  and to exercise the rights,  powers
and  authorities,  of the Stockholder  Agent under this Agreement and the Escrow
Agreement, and (4) otherwise be in form and substance reasonably satisfactory to
Parent.  Parent  shall be under no  obligation  whatsoever  to  investigate  the
accuracy of any  representation  made in such  written  instrument  and shall be
fully protected in relying on the accuracy  thereof in good faith,  irrespective
of any notice by any Person other than the Stockholder Agent to the contrary. If
the  Stockholders  shall have  failed to appoint a successor  Stockholder  Agent
within  ten days of the  resignation  or  removal  of the  Stockholder  Agent as
provided in this  Section  8.5(e),  Parent may  petition  any court of competent
jurisdiction for the appointment of a successor  Stockholder  Agent or for other
appropriate  relief,  with due  regard  to the  qualifications  for a  successor
Stockholder Agent specified in the proviso to the first sentence of this Section
8.5(e),   and  any  such  resulting   appointment  shall  be  binding  upon  all
Stockholders,  all parties  hereto and all  beneficiaries  hereof.  Upon such an
appointment of a successor Stockholder Agent, the Stockholder Agent shall accept
such appointment,  and thereby be effectively  constituted the Stockholder Agent
for  all  purposes  of  this  Agreement  and  the  Escrow   Agreement,   by  (i)
countersigning this Agreement and the Escrow Agreement,  agreeing to be bound by
and subject hereto and thereto,  or (ii)  executing a joinder  agreement in form
and substance satisfactory to Parent.

         (f) Vacancy.  If at any time there is no Stockholder  Agent,  Parent or
the Escrow  Agent may in its sole  discretion,  but shall not be  obligated  to,
serve notices on all Stockholders at the address of such Stockholders  appearing
on Exhibit A to the Escrow  Agreement,  and such service  shall be deemed notice
for all purposes hereof, but shall under no circumstances be obligated to accept
any notices from, or to negotiate with, any Stockholder.

         (g) Exculpation.  The Stockholder Agent shall not be liable for any act
done or omitted  under this  Agreement or the Escrow  Agreement  as  Stockholder
Agent while  acting in good faith,  and any act done or omitted  pursuant to the
advice of counsel shall be conclusive evidence of such good faith. In performing
any  duties  hereunder  or under the Escrow  Agreement,  to the  maximum  extent


                                      -89-
<PAGE>

permitted  by  applicable  law, the  Stockholder  Agent shall not be directly or
indirectly  liable to any party,  or any  Affiliates of any party,  for damages,
losses,  expenses or other  Liabilities,  whether sounding in tort,  contract or
otherwise,  arising  from its acts or  omissions,  including  for  their  active
negligence or other wrongful act of the Stockholder  Agent,  except for the acts
of gross negligence or willful misconduct of the Stockholder Agent.

         (h)  No  Bond  or  Compensation.  No  bond  shall  be  required  of the
Stockholder  Agent, and the Stockholder  Agent shall receive no compensation for
its services.

         (i)  Reimbursement  of  Fees  and  Expenses.   Subject  to  the  terms,
limitations and conditions of this Section 8.5(i),  the Stockholder  Agent shall
be entitled to reimbursement from the Company for the out-of-pocket  fees, costs
and  expenses  reasonably  incurred  by the  Stockholder  Agent on behalf of the
Stockholders  in  connection  with the exercise and  performance  of its powers,
rights,  authorities,  duties  and  obligations  under the  agency  granted  and
appointments made, or deemed granted or made, in this Section 8.5.

                  (1) The Company shall reimburse the Stockholder  Agent in cash
         for the out-of-pocket  fees, costs and expenses,  including  reasonable
         attorneys'  fees,  reasonably  incurred  by the  Stockholder  Agent  in
         connection  with  performing and  exercising  its rights,  authorities,
         powers, duties and obligations on behalf of the Stockholders under this
         Agreement  and the  Escrow  Agreement  up to  (but  not  exceeding)  an
         aggregate  amount of $100,000,  or such greater amount as Parent may in
         its  sole  and  absolute   discretion  agree  at  the  request  of  the
         Stockholder Agent (such amount, the "Stockholder Agent Expense Cap").

                  (2) The  Stockholder  Agent  may  request  reimbursement  from
         Parent only upon the  presentation  of invoices  and  receipts  for the
         amount requested and upon written  certification that (i) such invoices
         and receipts are true and correct,  (ii) such amount has been and shall
         be used  strictly in accordance  with the terms and  provisions of this
         Article VIII and the Escrow Agreement,  and (iii) such amount, together
         with (x) all amounts  theretofore  paid to the  Stockholder  Agent (for
         avoidance  of  doubt,  including  any  predecessors  in such  capacity)
         pursuant to this Agreement,  and (y) all amounts theretofore  requested
         by the  Stockholder  Agent from Parent  pursuant to this Section 8.5(i)
         and not paid or finally  denied;  do not exceed the  Stockholder  Agent
         Expense Cap.

                  (3) Any  dispute  between  Parent  and the  Stockholder  Agent
         regarding a claim by the  Stockholder  Agent for  reimbursement  of its
         fees,  costs and expenses,  whether arising under this  Agreement,  the
         Escrow  Agreement  or  otherwise,  shall be  resolved  pursuant  to the
         dispute resolution procedures described in Section 8.6.

                  (4) The Stockholder  Agent shall not have recourse against the
         Escrow  Account,  Parent,  any  Stockholder or, except for an aggregate
         amount not to exceed the  Stockholder  Agent  Expense Cap, the Company,
         for any of its fees, costs or expenses hereunder or otherwise.

         Section 8.6 Resolution of Conflicts.

         (a)  Arbitration.  If no  agreement  can be  reached  after  good faith
negotiation  between the Indemnified  Parties and the Stockholder Agent pursuant
to Section  8.4(b)(1),  or if a dispute arises  concerning the  reimbursement of
Stockholder  Agent  fees and  expenses,  the  Person  defending  the claim  (the
"Defending  Party"),  may, by written  notice to the Person  asserting the claim


                                      -90-
<PAGE>

(the "Prosecuting  Party"),  demand arbitration of the matter, which arbitration
shall be  conducted  by a  single  arbitrator.  The  Prosecuting  Party  and the
Defending  Party  shall  use  their  respective  Best  Efforts  to  agree on the
arbitrator,  provided that if they cannot so agree within ten (10) Business Days
(or such longer period as they may agree),  either the Prosecuting  Party or the
Defending  Party can request that Judicial  Arbitration  and Mediation  Services
("JAMS") select the arbitrator.  The arbitrator  shall set a limited time period
and  establish  procedures  designed  to reduce the cost and time for  discovery
while  allowing  the  Defending  Party  and  Prosecuting  Party an  opportunity,
adequate  in  the  sole  judgment  of  the  arbitrator,   to  discover  relevant
information from the other of them about the subject matter of the dispute.  The
arbitrator  shall rule upon motions to compel or limit  discovery and shall have
the authority to impose sanctions,  including  attorneys' fees and costs, to the
same  extent  as a court of  competent  law or  equity,  should  the  arbitrator
determine that discovery was sought without  substantial  justification  or that
discovery  was  refused or objected to without  substantial  justification.  The
decision  of the  arbitrator  shall  be  written,  shall be in  accordance  with
applicable  Law and with this  Agreement,  and  shall be  supported  by  written
findings of fact and conclusions of law, which shall set forth the basis for the
decision of the  arbitrator.  The decision of the  arbitrator as to the validity
and amount of any claim in a Claim Notice shall be binding and  conclusive  upon
the  Prosecuting   Party,  the  Defending   Party,   the  parties  hereto,   the
Stockholders,   the  Indemnified   Parties,  the  Indemnifying   Parties,   and,
notwithstanding  any other  provision of this Article VIII, the Escrow Agent, if
applicable, and each of such Persons shall be entitled to act in accordance with
such decision and the Escrow Agent, if applicable,  shall be entitled to make or
withhold payments out of the Escrow Account in accordance therewith.

         (b)  Judgment;  Venue;  Arbitration  Expenses.  Judgment upon any award
rendered by the arbitrator may be entered in any court having jurisdiction.  Any
such arbitration shall be held in Dallas,  Texas under the commercial rules then
in effect for JAMS. The non-prevailing party to an arbitration shall pay its own
expenses,  the fees of the arbitrator,  any  administrative fee of JAMS, and the
expenses,  including attorneys' fees and costs, reasonably incurred by the other
party to the arbitration.

         Section 8.7 No Contribution.  The Stockholder  Agent herby  irrevocably
waives,  and  acknowledges  and  agrees  that it shall  not,  on  behalf  of the
Indemnifying  Parties,  or otherwise,  have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other right or remedy against the Surviving  Corporation in connection  with any
indemnification  or other  rights  any  Indemnified  Party may have  under or in
connection with this Agreement.

         Section  8.8  Fraud;  Willful  Misrepresentation.  Notwithstanding  any
provision in this  Agreement to the  contrary,  the  liability of any Person for
fraud or  willful  misrepresentation  on the part of such  Person  shall  not be
subject to any limitations set forth in this Article VIII.  Without limiting the
generality of the  foregoing,  any claim with respect to such liability need not
be presented within the time limits set forth in Section  8.1(a)(1) and shall be
subject  only to the  applicable  statutes of  limitation,  and  notwithstanding
Section 8.9, any such claim shall be cumulative to any remedies provided in this
Article VIII.

         Section 8.9 Exclusive Remedies. Except as set forth in Section 8.8, the
remedies set forth in this Article VIII and elsewhere in this Agreement shall be
the sole and  exclusive  remedies  of the  parties  hereto  and the  Indemnified
Parties  against any  Indemnifying  Party,  Stockholder or any party hereto with
respect to any claim  relating to this Agreement or the Merger and the facts and
circumstances relating and pertaining thereto.

         Section 8.10 Purchase Price  Adjustment.  Any payments made pursuant to
this  Article  VIII shall be treated for tax  purposes as an  adjustment  to the
Merger Consideration.


                                      -91-
<PAGE>

                                  ARTICLE IX.
                        TERMINATION, AMENDMENT AND WAIVER

         Section 9.1  Termination.  This  Agreement may be  terminated,  and the
Merger  and  the  other  transactions  contemplated  by  this  Agreement  may be
abandoned, at any time prior to the Effective Time, by written notice explaining
the reason for such termination  (without  prejudice to other remedies which may
be available to the Parties under this Agreement, at law or in equity):

         (a) by the mutual written  consent of Parent and the Company,  pursuant
to resolutions adopted by their respective Boards of Directors;

         (b) by either Parent or by resolution of the Independent Committee:

                  (1) if (i) the Merger shall not have been consummated prior to
         (A) March 31, 2007,  or (B) if Parent has received  notice from the SEC
         that the SEC will review the Form S-4 or any other Parent SEC Report or
         Company SEC Report,  which review is responsible for a delay in the SEC
         declaring  the Form S-4  effective,  the date six months after the date
         Parent  first filed the Form S-4 with the SEC (such date,  the "Outside
         Date"),  (ii) the terminating party is not, on the date of termination,
         in Material Breach of this Agreement,  and (iii) the terminating  party
         has not Breached this  Agreement in a manner which is  responsible  for
         delaying the effectiveness of the Form S-4;

                  (2) if (i)  Stanford or its assigns  declares or notifies  the
         Company  of  an  "Event  of  Default"  under  the  Stanford  LOC  or an
         "Additional Default" under that certain Forbearance Agreement,  made as
         of the date hereof (the  "Forbearance  Agreement"),  by and between the
         Company and Stanford,  (ii) Stanford or its assigns  demands payment of
         any principal due under the Amended and Restated Commercial Note issued
         by the Company to  Stanford in  connection  with the  amendment  of the
         Stanford  LOC  on the  date  hereof,  (iii)  Stanford  or  its  assigns
         exercises  any rights or remedies  against the  Company,  or seizes any
         collateral  of the  Company,  under the  Stanford  LOC (other  than for
         collection  of accrued and unpaid  interest),  or (iv) the  Forbearance
         Period (as defined in the Forbearance  Agreement) expires or terminates
         and is not  extended  upon the request of Parent or the Company  within
         five days of such request;

                  (3) if (i) any Governmental  Entity of competent  jurisdiction
         shall have  issued an Order or taken any other  action  (including  the
         failure to take action) permanently restraining, enjoining or otherwise
         prohibiting any Transaction,  and such Order or other action shall have
         become final and  nonappealable,  (ii) the terminating party is not, on
         the date of  termination,  in Material  Breach of this  Agreement;  and
         (iii) the terminating party has not Breached this Agreement in a manner
         which is  responsible  for such Order having been issued or such action
         having been taken;

                  (4) if (i) the Company  Stockholder  Approval  or  Stockholder
         Agent   Appointment  shall  not  have  been  obtained  at  the  Company
         Stockholders  Meeting or at any  adjournment or  postponement  thereof,
         (ii) the  terminating  party is not,  on the  date of  termination,  in
         Material Breach of this Agreement,  and (iii) the terminating party has
         not Breached this  Agreement in a manner which is  responsible  for the
         failure to obtain the Company Stockholder Approval or Stockholder Agent
         Appointment, as the case may be; or


                                      -92-
<PAGE>

                  (5) if (i) the  satisfaction  of a  closing  condition  of the
         terminating  party in Article VII is impossible;  (ii) the  terminating
         party is not, on the date of  termination,  in Material  Breach of this
         Agreement;  and  (iii) the  terminating  party  has not  Breached  this
         Agreement in a manner  causing the  impossibility  of  satisfying  such
         closing condition; and

         (c) by Stanford if the Merger shall not have been consummated  prior to
the Outside Date.

         Section 9.2 Effect of Termination.  In the event of termination of this
Agreement by either the Company,  Parent or Stanford as provided in Section 9.1,
all obligations and Liabilities of the parties hereto under this Agreement shall
forthwith  terminate  and  become  void  and  there  shall  be no  Liability  or
obligation  on the part of any party  hereto or their  respective  Subsidiaries,
officers, directors or stockholders,  except (i) with respect to any breaches of
Section  6.4  or  Section  6.8,  (ii)  for  the  terms  and  provisions  of  the
Confidentiality  Agreement or Section 9.5, (iii) with respect to any Liabilities
or damages  incurred or suffered by a party as a result of the willful breach by
any other party of any of its  representations,  warranties,  covenants or other
agreements  set forth in this  Agreement,  (iv) for avoidance of doubt,  amounts
owed under the Shared  Expenses  Agreement,  and (v) the provisions of Article I
and Article X, to the extent applicable to clauses (i)-(iv) next preceding.

         Section 9.3 Amendment.  This Agreement may be amended,  supplemented or
otherwise  modified at any time prior to the  Effective  Time upon the execution
and  delivery of a written  instrument  executed by each of the parties  hereto;
provided,  however,  that, after the Company Stockholder  Approval or the Parent
Stockholder  Approval has been  obtained,  if required by applicable  Law or the
rules and regulations of the applicable party's Principal Market, such amendment
shall require an additional Company  Stockholder  Approval or Parent Stockholder
Approval, as the case may be.

         Section 9.4 Waiver.  At any time prior to the Effective Time, any party
hereto may (i) extend the time for the  performance of any of the obligations or
other  acts of any  other  party  hereto,  (ii)  waive any  inaccuracies  in the
representations  and  warranties of any other party  contained  herein or in any
document  delivered  pursuant hereto,  (iii) waive compliance by any other party
with any of its  agreements  and covenants  set forth herein,  or (iv) waive the
satisfaction of any conditions to its obligations  contained  herein;  provided,
however,  that, after the Company Stockholder Approval or the Parent Stockholder
Approval  has been  obtained,  if  required by  applicable  Law or the rules and
regulations of the applicable party's Principal Market, such extension or waiver
shall require an additional Company  Stockholder  Approval or Parent Stockholder
Approval,  as the case may be. Any such  extension or waiver shall be valid only
if set forth in an  instrument  in writing  signed by the party or parties to be
bound thereby,  but neither such a written extension or waiver,  nor the failure
to  insist on strict  compliance  with an  obligation,  covenant,  agreement  or
condition,  shall  operate  as a waiver of, or  estoppel  with  respect  to, any
subsequent or other failure.

         Section 9.5 Fees and Expenses.  Subject to the terms and  provisions of
that  certain  letter  agreement,  dated  April 3,  2006 (the  "Shared  Expenses
Agreement"),  by and among  Parent,  the Company  and  Stanford,  regarding  the
sharing of certain  expenses  related to the exploration of a possible  business
combination  between Parent and the Company,  which  agreement  shall remain and
continue in full force and effect in  accordance  with its terms,  all  Expenses
incurred by the parties  hereto  shall be borne solely and entirely by the party
that has incurred the same.


                                      -93-
<PAGE>

                                   ARTICLE X.
                               GENERAL PROVISIONS

         Section 10.1  Notices.  All notices,  requests,  instructions  or other
documents to be given or delivered  under this Agreement shall be in writing and
shall  be  deemed  given:  (i) five  Business  Days  following  the  deposit  of
registered or certified mail in the United States mails,  postage prepaid,  (ii)
when  confirmed  by telephone  confirmation,  if sent by facsimile or email (but
only if followed by transmittal by reputable  national  courier  service or hand
delivery  on  the  next  Business  Day),  (iii)  when  delivered,  if  delivered
personally  to the  intended  recipient,  and (iv) one  Business  Day  following
delivery to a reputable national courier service for overnight delivery, postage
prepaid;  and in each case,  addressed to a party at the  following  address for
such party:

     If to Parent, Merger Sub or the Surviving Corporation, addressed to it at:

                  DGSE Companies, Inc.
                  2817 Forest Lane
                  Dallas, Texas  75234
                  Attn:  Dr. L.S. Smith
                  Facsimile:  [omitted]
                  Email:  [omitted]

     with a copy  (which  shall not  constitute  notice  and which  shall not be
required for delivery to be effective) to:

                  Sheppard, Mullin, Richter & Hampton LLP
                  12275 El Camino Real, Suite 200
                  San Diego, California  92130-2006
                  Attn:  John J. Hentrich, Esq.
                  Facsimile:  [omitted]
                  Email:  [omitted]

     If to the Company, addressed to it at:

                  Superior Galleries, Inc.
                  9478 W. Olympic Boulevard
                  Beverly Hills, California  90212
                  Attn: Chair, Special Independent Committee
                  Facsimile:  [omitted]
                  Email:  [omitted]

     with  copies  (which  shall not  constitute  notice and which  shall not be
required for delivery to be effective) to Stanford and to:

                  Rutan & Tucker LLP
                  611 Anton Boulevard Suite 1400
                  Costa Mesa, California  92626-1931
                  Attn: Thomas Brockington, Esq.
                  Facsimile:  [omitted]
                  Email:  [omitted]

     If to Stanford, addressed to it at:


                                      -94-
<PAGE>

                  Stanford International Bank Ltd.
                  c/o Stanford Financial Group
                  6075 Poplar Avenue
                  Memphis, Tennessee  38119
                  Attn: James M. Davis, Chief Financial Officer
                  Facsimile: [omitted]
                  Email:  [omitted]

     with a copy  (which  shall not  constitute  notice  and which  shall not be
required for delivery to be effective) to:

                  Adorno & Yoss LLP
                  2525 Ponce de Leon Blvd., Suite 400
                  Miami, Florida  33134-6012
                  Attn: Seth P. Joseph, Esq.
                  Facsimile:  [omitted]
                  Email:  [omitted]

Any party  hereto  may  change  its  address,  email  address  or fax number for
purposes hereof to such other address, email address or fax number as such party
may have  previously  furnished  to the  other  parties  hereto  in  writing  in
accordance with this Section 10.1.

         Section 10.2 Headings. The headings contained in this Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         Section  10.3  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of Law
or  public  policy,  all other  terms and  provisions  of this  Agreement  shall
nevertheless  remain in full force and effect so long as the  economic  or legal
substance of the transactions  contemplated hereby is not affected in any manner
materially  adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall  negotiate  in good  faith to modify  this  Agreement  so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that  transactions  contemplated  hereby  are  fulfilled  to the  extent
possible.

         Section  10.4  Entire  Agreement.  This  Agreement  (together  with the
Exhibits,  Schedules,  Company Disclosure Schedules,  Parent Disclosure Schedule
and the other documents  delivered pursuant hereto) and the Related  Agreements,
and any  certificates,  schedules  and  proxies  delivered  pursuant  hereto  or
thereto, constitute the entire agreement and understanding of the parties hereto
in respect of its and their subject  matter and  supersede all prior  agreements
and  undertakings  by or among the  parties,  both  written and oral,  among the
parties,  or any of them,  with respect to the subject  matter hereof or thereof
(including the Original  Agreement and that certain Limited  Joinder  Agreement,
made and entered  into as of July 12,  2006,  by and among the  Parties  hereto,
which  agreements  are  superseded in their  entirety by this  Agreement and the
Limited Joinder Agreement, respectively).


                                      -95-
<PAGE>

         Section 10.5 Assignment.  Neither this Agreement nor any of the rights,
interests,  Liabilities or obligations  hereunder or under the Escrow  Agreement
shall be  assigned  by any of the  parties  hereto,  in  whole  or in  part,  by
operation of Law or otherwise,  without the prior  written  consent of the other
parties hereto, and any attempt to make any such assignment without such consent
shall be null and void and of no force or effect. Notwithstanding the foregoing,
Merger Sub may, in its sole discretion, assign any and all rights, interests and
obligations   under  this  Agreement  or  under  the  Escrow  Agreement  to  any
wholly-owned Subsidiary of Parent.

         Section 10.6 Parties in Interest.  This Agreement shall be binding upon
and inure  solely to the  benefit  of each  party  hereto  and their  respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is  intended  to or shall  confer  upon any other  Person any right,  benefit or
remedy of any nature whatsoever under or by reason of this Agreement,  except as
provided in (i) Section 6.18 with respect to Insured Parties,  (ii) Article VIII
with respect to Indemnified  Parties,  and (iii) Section 8.5 with respect to the
Escrow Agent.

         Section 10.7 Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury.

         (a)  This  Agreement  and the  performance  of the  obligations  of the
parties  hereunder  shall be governed by, and construed in accordance  with, the
laws of the State of Texas applicable to contracts  negotiated,  executed and to
be  performed  entirely  within  such  State,  except  that the Merger  shall be
governed  by,  and  construed  in  accordance  with,  the  laws of the  State of
Delaware.

         (b) Each of the parties hereto hereby  irrevocably and  unconditionally
submits, for itself and its property, to the exclusive jurisdiction and venue of
any Texas  district court and any state  appellate  court  therefrom  within the
County of Dallas in the State of Texas (or, if the Texas district court declines
to accept  jurisdiction  over a particular  matter,  any state or federal  court
within said  County) in any action or  proceeding  arising out of or relating to
this  Agreement or the  Transactions  or for  recognition  or enforcement of any
judgment relating hereto,  and each of the parties hereto hereby irrevocably and
unconditionally  (i) agrees not to commence any such action or proceeding except
in such  courts,  (ii)  agrees  that any claim in respect of any such  action or
proceeding  may be heard and  determined  in such Texas  state  court or, to the
extent  permitted by law, in such federal  court,  (iii) waives,  to the fullest
extent it may legally and  effectively  do so, any objection  that it may now or
hereafter  have to the laying of venue of any such action or  proceeding  in any
such Texas  state or federal  court,  and (iv)  waives,  to the  fullest  extent
permitted by law, the defense of an  inconvenient  forum to the  maintenance  of
such action or proceeding in any such Texas state or federal court.  Each of the
parties  hereto  agrees that a final  judgment in any such action or  proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner provided by law.

         (c) Each party to this  Agreement  irrevocably  consents  to service of
process in the manner  provided  for  notices in Section  10.1.  Nothing in this
Agreement shall affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

         (d) EACH PARTY  ACKNOWLEDGES  AND AGREES THAT ANY CONTROVERSY  THAT MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY  HAVE  TO A TRIAL  BY  JURY IN  RESPECT  OF ANY  LITIGATION  DIRECTLY  OR
INDIRECTLY  ARISING  OUT OF OR RELATING TO THIS  AGREEMENT  OR THE  TRANSACTIONS
CONTEMPLATED   HEREBY.  EACH  PARTY  CERTIFIES  AND  ACKNOWLEDGES  THAT  (1)  NO
REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,  SEEK


                                      -96-
<PAGE>

TO ENFORCE  EITHER OF SUCH WAIVERS,  (2) IT  UNDERSTANDS  AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY,  AND (4) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS Section 10.7(d).

         Section  10.8  Disclosure.  Any  matter  set forth in any  section of a
party's disclosure schedule shall be considered  disclosed for other sections of
such  disclosure  schedule,  but only to the  extent  that it  would be  readily
apparent that such matter on its face would apply to a particular  other section
of such  disclosure  schedule.  The provision of monetary or other  quantitative
thresholds for disclosure  does not and shall not be deemed to create or imply a
standard of materiality hereunder.

         Section 10.9  Counterparts.  This  Agreement  may be executed in two or
more original or facsimile counterparts,  and by the different parties hereto in
separate  counterparts,  each of which  when  executed  shall be deemed to be an
original but all of which taken together  shall  constitute but one and the same
agreement.

         Section  10.10  Facsimile  Execution.  A  facsimile,  telecopy or other
reproduction  of this  Agreement may be executed by one or more Parties,  and an
executed  copy of this  Agreement  may be  delivered  by one or more  Parties by
facsimile, email or similar electronic or digital transmission pursuant to which
the signature of or on behalf of such Party can be seen,  and such execution and
delivery shall be considered valid,  binding and effective for all purposes.  At
the  request of any Party,  all  Parties  agree to execute an  original  of this
Agreement as well as any facsimile, telecopy or other reproduction hereof.

         Section 10.11 Remedies Cumulative. Except as otherwise provided herein,
any and all remedies  herein  expressly  conferred  upon a party hereto shall be
deemed  cumulative with and not exclusive of any other remedy conferred  hereby,
or by law or equity upon such party,  and the  exercise by a party hereto of any
one remedy  shall not  preclude  the exercise of any other remedy and nothing in
this  Agreement  shall be deemed a waiver by any party of any right to  specific
performance or injunctive relief.

         Section  10.12  Specific  Performance.   Each  of  the  parties  hereto
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions  hereof would cause  substantial and irreparable
damage  to the  other  parties  hereto,  and  that  money  damages  would  be an
inadequate remedy therefor.  Accordingly, each of the parties hereto agrees that
each of them shall be  entitled to seek  equitable  relief,  including  specific
performance   and  injunctive   relief,   in  the  event  of  any  such  breach,
non-performance or default in any action,  suit or proceeding  instituted in any
court of the United States or any State having competent jurisdiction, or before
any  arbitrator or referee,  in addition to any other remedy to which such party
may be  entitled,  at law or in equity.  Each party  hereto  agrees to waive any
requirement  for the posting of, or securing of, a bond in  connection  with any
such remedy.

         Section 10.13 Time.  Time is of the essence in the  performance of this
Agreement.

         Section 10.14 Certain Taxes.  All transfer,  documentary,  sales,  use,
stamp,  registration  and other such Taxes and fees (including any penalties and
interest)  incurred in connection with the Merger,  if any, shall be paid by the
stockholders of the Company.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]



                                      -97-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                   DGSE COMPANIES, INC.


                                   By:  /s/ Dr. L.S. Smith
                                      ------------------------------------------
                                      Dr. L.S. Smith
                                      Chairman and Chief Executive Officer


                                   DGSE MERGER CORP.


                                   By:  /s/ William H. Oyster
                                      ------------------------------------------
                                      William H. Oyster
                                      Chief Executive Officer


                                   SUPERIOR GALLERIES, INC.


                                   By:  /s/ Silvano DiGenova
                                      ------------------------------------------
                                      Silvano DiGenova
                                      Chief Executive Officer









<PAGE>

                                                                      EXHIBIT A.

                          FORM OF CERTIFICATE OF MERGER
                          -----------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT B.

                          FORM OF LETTER OF TRANSMITTAL
                          -----------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT C.

                            FORM OF ESCROW AGREEMENT
                            ------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT D.

       FORM OF AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT
       -------------------------------------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT E.

                                 FORM OF WARRANT
                                 ---------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT F.

                         FORM OF NOTE EXCHANGE AGREEMENT
                         -------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT G.

               FORM OF STANFORD TERMINATION AND RELEASE AGREEMENT
               --------------------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT H.

                      FORM OF REGISTRATION RIGHTS AGREEMENT
                      -------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT I.

                     FORM OF CORPORATE GOVERNANCE AGREEMENT
                     --------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT J.

                     FORM OF STANFORD OFFICER'S CERTIFICATE
                     --------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT K.

                          FORM OF COMPANY LEGAL OPINION
                          -----------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT L.

                         FORM OF STANFORD LEGAL OPINION
                         ------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT M.

                      FORM OF PARENT OFFICERS' CERTIFICATE
                      ------------------------------------

                                   (Attached)














<PAGE>

                                                                      EXHIBIT N.

                          FORM OF PARENT LEGAL OPINION
                          ----------------------------

                                   (Attached)














<PAGE>

                                                                      SCHEDULE 1

                      A WARRANT DISTRIBUTION AND ALLOCATION
                      -------------------------------------

                                                                        % of
                                                                      Underlying
             Name                           Address                     Shares

Stanford International Bank, Ltd.     No. 11 Pavilion Drive               50.00%
                                      St. John's, Antigua
                                      West Indies

Daniel T. Bogar                       1016 Sanibel Drive                  11.56%
                                      Hollywood, Fl. 33019

William R. Fusselmann                 141 Crandon Blvd. # 437             11.56%
                                      Key Biscayne, FL 33149

Osvaldo Pi                            6405 SW 104th Street                11.56%
                                      Pinecrest, FL 33156

Ronald M. Stein                       6520 Allison Road                   11.56%
                                      Miami Beach, Fl. 33141

Charles M. Weiser                     3521 N. 55th Ave.                    1.87%
                                      Hollywood, FL 33021

Tal Kimmel                            201 South Biscayne Blvd              1.87%
                                      Miami, FL 33131








                                     Sch.1
<PAGE>

                                                                      SCHEDULE 2

                      B WARRANT DISTRIBUTION AND ALLOCATION
                      -------------------------------------


                                                                        % of
                                                                      Underlying
             Name                           Address                     Shares

Stanford International Bank, Ltd.     No. 11 Pavilion Drive                50.0%
                                      St. John's, Antigua
                                      West Indies

Daniel T. Bogar                       1016 Sanibel Drive                   12.5%
                                      Hollywood, Fl. 33019

William R. Fusselmann                 141 Crandon Blvd. # 437              12.5%
                                      Key Biscayne, FL 33149

Osvaldo Pi                            6405 SW 104th Street                 12.5%
                                      Pinecrest, FL 33156

Ronald M. Stein                       6520 Allison Road                    12.5%
                                      Miami Beach, Fl. 33141








                                     Sch.2






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.2
<SEQUENCE>3
<FILENAME>dgse8kex22010907.txt
<DESCRIPTION>FORM OF ESCROW AGREEMENT
<TEXT>

                                                                     Exhibit 2.2

                                ESCROW AGREEMENT

     THIS ESCROW AGREEMENT is made and entered into as of ___________ ____, 2007
(this "Agreement"),  by and among (i) DGSE Companies, Inc., a Nevada corporation
(together  with its  successors and permitted  assigns,  "DGSE"),  (ii) Stanford
International  Bank,  Ltd.,  a company  organized  under the laws of Antigua and
Barbuda, as agent and representative for the stockholders of Superior Galleries,
Inc., a Delaware  corporation  (f/k/a Tangible Asset  Galleries,  Inc., a Nevada
corporation)  ("Superior")  listed  from time to time on  Exhibit A hereto  (the
"Stockholders")  (in  such  capacity,  together  with  any  successors  in  such
capacity,  the "Stockholder  Agent"),  and (iii)  ________________,  a _________
_______,  as securities  intermediary  and escrow agent (in such  capacity,  the
"Escrow  Agent").  Capitalized  terms used but not defined herein shall have the
respective  meanings  ascribed  thereto in that  certain  Amended  and  Restated
Agreement  and Plan of Merger and  Reorganization,  made and entered  into as of
January 6, 2007 (the "Merger Agreement"),  by and among DGSE, DGSE Merger Corp.,
a Delaware corporation ("Merger Sub"), Superior and the Stockholder Agent.

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

     WHEREAS,  the Merger Agreement provides for the merger of Superior with and
into  Merger Sub,  with  Superior as the  surviving  company and a  wholly-owned
subsidiary of DGSE (the "Merger");

     WHEREAS,  pursuant to the Merger, all outstanding capital stock of Superior
may be exchanged for shares of common stock,  par value $0.01 per share, of DGSE
(the "DGSE Common Stock"),  subject to the terms and conditions set forth in the
Merger Agreement;

     WHEREAS, Section 3.14 and ARTICLE VIII of the Merger Agreement provide that
a separate  escrow account (the "Escrow  Account")  shall be established for the
purpose of securing the  indemnification  obligations  of the  Stockholders  set
forth in Article VIII of the Merger Agreement;

     WHEREAS,  the  Stockholders  have adopted and approved the Merger Agreement
and  irrevocably  appointed  and  constituted  the  Stockholder  Agent  as their
exclusive agent and representative for purposes of the Merger Agreement and this
Agreement;

     WHEREAS,  simultaneously  with the  effectiveness  of this Agreement,  DGSE
shall deliver to the Escrow Agent, on behalf of the Stockholders, shares of DGSE
Common  Stock as provided in Section 1, which  shares  shall be deposited in the
Escrow Account;

     WHEREAS,  pursuant to the DiGenova Warrant,  (i) DiGenova has agreed that a
portion of the shares to be issued upon the  exercise of such  warrant  shall be
subject to the escrow  provisions of the Merger  Agreement  and this  Agreement,
(ii) upon  exercise of the  DiGenova  Warrant,  DGSE is  obligated  to deposit a
portion  of the  shares for which  such  warrant  is  exercised  into the Escrow
Account for the  purpose of  securing  the  indemnification  obligations  of the
Stockholders and DiGenova set forth in Article VIII of the Merger Agreement (the
"Warrant  Shares"),  and  (iii)  the  holder  of such  warrant  has  irrevocably
appointed and  constituted  the  Stockholder  Agent as their exclusive agent and
representative for purposes of the applicable provisions of the Merger Agreement
and this Agreement;

     WHEREAS, the Escrow Agent desires to act as the escrow agent as provided in
this Agreement; and

     WHEREAS,  the Parties desire to establish the terms and conditions pursuant
to which the Escrow Account shall be established and maintained.

<PAGE>

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

     NOW, THEREFORE,  in consideration of the premises, the mutual covenants and
agreements  herein  contained  and other good and  valuable  consideration,  the
receipt and sufficiency of which are hereby expressly acknowledged,  the parties
hereto  (collectively,  the  "Parties"),  intending to be legally bound,  hereby
agree as follows:

     1. Commencement of Duties; Escrow Account.

         1.1  Commencement  of Duties.  Upon  receipt by the Escrow Agent of the
shares of DGSE Common Stock  provided in Section 1.2, (i) the Escrow Agent shall
deliver  a  notice  to DGSE  and to the  Stockholder  Agent  acknowledging  such
receipt,  and (ii) the Escrow Agent shall hold any Escrow Cash  (defined  below)
the Escrow  Shares  (defined  below) and any proceeds of the foregoing in escrow
pursuant  to the  terms of this  Agreement.  The  Escrow  Agent  shall  hold and
safeguard the Escrow Account  during the Escrow Period  (defined  below),  shall
treat  such  accounts  as trust  funds  in  accordance  with  the  terms of this
Agreement and not as the property of the Escrow Agent, DGSE, the Stockholders or
the  Stockholder  Agent and shall hold and dispose of the cash and shares in the
Escrow Account only in accordance with the terms set forth in this Agreement.

         1.2 Initial Share Deposits.  Simultaneously  with the  effectiveness of
this  Agreement,  DGSE  shall  deliver  to the  Escrow  Agent,  on behalf of the
Stockholders  and for the  benefit  of the  Indemnified  Parties,  including  as
beneficiaries and secured parties,  stock certificates  evidencing the number of
shares of DGSE Common Stock as determined in accordance  with Section 3.14(a) of
the Merger Agreement, issued in the name of the Escrow Agent, in its capacity as
escrow agent hereunder,  or its nominee,  and containing the restrictive  legend
set forth on Exhibit C, for deposit in the Escrow  Account as  security  for the
Indemnified  Parties,  as further  provided  herein.  Upon the  exercise  of the
DiGenova Warrant,  DGSE shall deliver to the Escrow Agent, on behalf of DiGenova
and for the benefit of the Indemnified  Parties,  including as beneficiaries and
secured  parties,  stock  certificates  evidencing  the number of shares of DGSE
Common Stock as determined in accordance with Section 6 of the DiGenova Warrant,
issued  in the  name of the  Escrow  Agent,  in its  capacity  as  escrow  agent
hereunder,  or its nominee,  and containing the restrictive  legend set forth on
Exhibit C, for  deposit in the Escrow  Account as security  for the  Indemnified
Parties, as further provided herein. The shares of DGSE Common Stock held in the
Escrow  Account  from time to time  shall  collectively  be  referred  to as the
"Escrow Shares".

         1.3 Investment of Escrow Cash. Upon receipt of any cash, including upon
the  sale  or  liquidation  of,  or the  declaration  of any  cash  dividend  or
distribution  in respect  of,  any Escrow  Shares  (any such cash,  the  "Escrow
Cash"),  the Escrow Agent shall invest and re-invest such cash (i) solely at the
risk of the beneficiaries of the Escrow Account;  (ii) in the name of the Escrow
Agent  or  its  nominee;  and  (iii)  in  such  amounts  and in  such  Permitted
Investments  (as defined  below) as DGSE may  designate  in writing from time to
time.  Income,  if any,  resulting from the investment of the Escrow Cash or the
liquidation of Permitted  Investments  shall be retained by the Escrow Agent and
will be considered, for all purposes of this Agreement, to be part of the Escrow
Cash  deposited  in  the  Escrow  Account.   "Permitted  Investments"  means  an
investment in any of the following  accounts,  securities and  instruments:  (i)
demand deposits, certificates of deposit, bankers acceptances, time deposits and
other deposit  accounts with  commercial  banks  organized under the laws of the
United States of American, or any State thereof, having an aggregate capital and
surplus  in excess of  $100,000,000  and,  to the  extent  applicable,  having a
maturity  of not more than 180 days from the date of  investment  therein;  (ii)
investments in marketable direct obligations of, or obligations  unconditionally
and fully  guaranteed by, the United States of America (or by any agency thereof
to the extent  such  obligations  are backed by the full faith and credit of the
United  States of America)  and maturing not more than one year from the date of
investment  therein;  (iii) open market  commercial paper rated at least "A1" or
"P1" or better by a nationally  recognized  statistical rating  organization and


                                      -2-
<PAGE>

maturing not more than one year from the issuance thereof; (iv) money market and
other mutual  funds  invested  solely in (A) the types of Permitted  Investments
described  in clauses  (i)  through  (iii),  inclusive,  of this  definition  of
Permitted Investments, and (B) investments pursuant to or arising under currency
agreements or interest rate  agreements  entered into in the ordinary  course of
business.  Any interest earnings from any Permitted Investment shall be credited
upon receipt by the Escrow Agent to the Escrow Fund. [ DGSE and the  Stockholder
Agent each hereby acknowledges that pursuant to national banking regulations, it
has been informed that it is entitled to receive separate  written  notification
of every  security  transaction  effected  for the Escrow  Account and wishes to
waive receipt of such  notification in view of the inclusion of such information
in the transaction statements to be provided to it by the Escrow Agent. ]

         1.4 Share  Dividends,  Etc.  Any shares of DGSE  Common  Stock or other
equity  securities  issued or  distributed by DGSE  (including  shares issued in
connection  with a stock  split or other  reclassification)  ("New  Shares")  in
respect of Escrow  Shares that have not been  released  from the Escrow  Account
shall be deposited in the Escrow Account and become a part thereof, and shall be
considered  Escrow Shares for all purposes of this Agreement.  New Shares issued
in respect of shares of DGSE Common  Stock that have been paid or released  from
the Escrow  Account shall not be deposited in the Escrow  Account,  but shall be
distributed to the respective record holders of such paid or released shares.

         1.5 Voting of Shares.  The Stockholders shall be entitled to vote their
respective  pro rata  portion  of  Escrow  Shares,  based  on  their  respective
percentage  interest  as  set  forth  on  Exhibit  A.  DGSE  shall  deliver  any
communications  it distributes to its stockholders qua  stockholders,  including
notices of meetings,  annual reports and proxy  statements,  to the  Stockholder
Agent at the time such  communications are delivered to its other  stockholders.
The  Stockholder  Agent shall  deliver  such  communications  to the  respective
Stockholders  and,  in  accordance  with  the  instructions  received  from  the
Stockholders,  direct the Escrow  Agent in writing as to the  exercise of voting
rights pertaining to the Escrow Shares as to which such voting instructions have
been received,  and not to act with respect to any Escrow Shares for which no or
invalid  instructions have been received from any  Stockholders,  and the Escrow
Agent  shall  comply with any such  written  instructions  from the  Stockholder
Agent.  To the extent of the absence of such  instructions  from the Stockholder
Agent,  the  Escrow  Agent  shall  vote the  Escrow  Shares in the same  manner,
including  abstaining  from  voting,  as broker  non-votes  with respect to each
matter being acted upon.  Beyond the delivery of DGSE proxies or consents to the
Stockholders  as aforesaid,  the  Stockholder  Agent shall have no obligation to
solicit consents or proxies from the Stockholders for purposes of any such vote.

         1.6 Issued and  Outstanding.  The Escrow  Shares shall appear as issued
and outstanding shares on the books and records of DGSE.

         1.7 Transferability of Interests by Stockholders.  The interests of the
Stockholders in the Escrow Account, or the Escrow Cash, Escrow Shares, Permitted
Investments  and  other  assets  from time to time  held in the  Escrow  Account
(collectively,  the "Escrow  Assets"),  may not be sold,  assigned or  otherwise
Transferred,  other than  strictly in  accordance  with the  limited  exceptions
provided in Section 3.15 of the Merger  Agreement.  The  applicable  Stockholder
effecting,  or any Party who has  actual  notice of,  any such  permitted  sale,
assignment or other Transfer shall promptly  provide notice to the Escrow Agent,
Stockholder  Agent  and DGSE  thereof,  and no such  sale,  assignment  or other
Transfer shall be valid or effective until such notice has been duly provided.


                                      -3-
<PAGE>

     2. Escrow Account.

         2.1 Escrow Period.  The Escrow Agent shall establish the Escrow Account
immediately  upon the  effectiveness  of this Agreement,  and will terminate the
Escrow  Account at 5:00 p.m.,  Pacific time,  on the date (as adjusted  pursuant
hereto,  the  "Expiration  Date") that is one calendar  year after the Effective
Time (such period of time, as adjusted  pursuant hereto,  the "Escrow  Period");
provided,  however,  that in the event DGSE  notifies  the Escrow Agent that any
Indemnified  Party has made a claim under  Article VIII of the Merger  Agreement
prior to the  Expiration  Date which  claim has not yet been  fully and  finally
resolved and settled on the Expiration Date (an "Unresolved  Claim"), the Escrow
Period shall be extended,  the Expiration  Date,  the  termination of the Escrow
Account,  and the release of shares of DGSE  Common  Stock  having an  aggregate
value of the maximum aggregate amount of all Unresolved Claims shall be delayed,
until the  earlier to occur of (i) ten  Business  Days after DGSE  notifies  the
Escrow  Agent  and the  Stockholder  Agent  that  it has  determined  that  each
Unresolved Claim has been fully and finally resolved, settled and satisfied, and
(ii) the date no Escrow Assets remain in or are due to the Escrow Account.

         2.2 Funding. The Escrow Agent shall deposit cash (if any) and shares of
DGSE Common Stock in the Escrow Account as provided in Section 1.

         2.3 Use of Account.

             (a)  Indemnified  Party  Claims.  The  Stockholders  have agreed to
indemnify,  defend and hold harmless DGSE and its Representatives and Affiliates
(including the Surviving Corporation) (collectively,  the "Indemnified Parties")
in Section 8.2 of the Merger Agreement from and against any Losses, as set forth
in Article VIII of the Merger  Agreement.  DiGenova has  additionally  agreed to
indemnify,  defend and hold harmless the Indemnified Parties in Section 6 of the
DiGenova  Warrant.  The  Stockholder  Agent,  on  behalf  of  the  Stockholders,
expressly  agrees,  and by virtue of the  approval  of the Merger and the Merger
Agreement each Stockholder has agreed and consented,  and by virtue of accepting
the DiGenova Warrant  DiGenova has agreed and consented,  that the Escrow Assets
(i) shall be available to satisfy,  including as security  for,  such  indemnity
obligations,  subject to the  limitations and in the manner provided for in this
Agreement,  and  (ii)  are  subject  to  release  and  payment  to DGSE or other
Indemnified  Parties  upon the terms and  subject  to the  conditions  set forth
herein and in the Merger Agreement.

             (b)  Distributions.  The Escrow Agent shall  establish and maintain
the Escrow Account solely for the purposes of (i) satisfying the indemnification
obligations of the stockholders of Superior under the Merger Agreement, and (ii)
distributing  any assets  remaining in the Escrow Account upon the expiration of
the Escrow Period as provided in Section 2.7.

         2.4 Claims.

             (a) Indemnified  Party.  The Escrow Agent shall  distribute  assets
from the Escrow Account to satisfy the claim of an  Indemnified  Party only upon
receipt of: (i) joint  instructions  executed by DGSE and the Stockholder Agent;
(ii) a final written  decision of an  arbitrator  submitted by DGSE on behalf of
the applicable  Indemnified  Party, or (iii) a final  non-appealable  order of a
court of competent  jurisdiction  submitted by DGSE on behalf of the  applicable
Indemnified  Party;  in each case  containing  instructions  to the Escrow Agent
concerning the release of assets from the Escrow Account  (including the name of
the payee and the  amount of the  payment).  Upon  payment in full of a claim so
received pursuant to Section 2.5, the Escrow Agent shall deem such claim finally
resolved,  settled and  satisfied for purposes of this  Agreement.  In the event
there are insufficient assets to pay the claims of all Indemnified  Parties, the


                                      -4-
<PAGE>

claims  made by DGSE  shall be  satisfied  first and all other  claims  shall be
satisfied on a pro rata basis from the remaining assets.

         2.5 Payments from Escrow Account. In the event any Indemnified Party is
entitled to payment on a claim from the Escrow  Account,  the Escrow Agent shall
make such payment:

             (a) first, out of any Escrow Cash then held in the Escrow Account,

             (b) second, if commercially  reasonable or upon the written request
of DGSE, out of cash received upon the liquidation of any Permitted  Investments
or other assets (other than Escrow Shares) then held in the Escrow Account;  and


         (c) finally, out of the Escrow Shares by delivering to such Indemnified
Party a number of Escrow Shares from the Escrow  Account having a value equal to
the  remaining  amount of the payment due,  with such shares being valued at the
per-share value equal to $2.67 (the "Share Value");  provided,  however, that in
the event of any Capitalization Adjustment with respect to the DGSE Common Stock
occurring after the Effective Time, the Share Value shall be equitably  adjusted
to the extent  necessary  to provide  the parties  the same  economic  effect as
contemplated by this Section 2.5(c) prior to such Capitalization Adjustment.

Any  distribution  of Escrow  Assets to an  Indemnified  Party  pursuant to this
Section  2  shall  be  deemed  paid by the  Stockholders  on a pro  rata  basis.
calculated in accordance  with the percentages set forth opposite the respective
Stockholder names on Exhibit A.

         2.6 Release.  During the ten Business  Days prior to the  expiration of
the  Escrow  Period,  the Escrow  Agent  shall use its  commercially  reasonable
efforts to  liquidate  all Escrow  Assets  (other than Escrow  Shares and Escrow
Cash) held in the  Escrow  Account so that no Escrow  Assets  other than  Escrow
Shares and Escrow Cash will remain in the Escrow  Account upon the expiration of
the Escrow  Period.  Upon the  expiration  of the Escrow  Period,  or as soon as
reasonably  practicable  thereafter,  subject to Section 4.11,  the Escrow Agent
shall distribute all of the Escrow Assets then held in the Escrow Account to the
Stockholders pursuant to Section 2.7.

         2.7  Distribution.  Any  distribution of all or a portion of the Escrow
Assets then held in the Escrow Account to the  Stockholders  pursuant to Section
2.6 shall be  distributed  on a pro rata basis to the  stockholders  of Superior
immediately  prior to the Merger,  and to DiGenova  with  respect to the Warrant
Shares, in accordance with the percentages set forth opposite such stockholders'
respective  names on Exhibit A; provided,  however,  that the Escrow Agent shall
withhold  the  distribution  of the  portion  of  the  Escrow  Assets  otherwise
distributable  to any stockholder who (i) is a Dissenting  Stockholder,  or (ii)
has not,  according to a written  notice  provided by DGSE to the Escrow  Agent,
prior to such  distribution,  surrendered  pursuant  to the terms of the  Merger
Agreement its stock certificates formerly representing Company Common Shares (or
delivered the affidavit  and bond,  if any,  specified in Section  3.4(i) of the
Merger  Agreement).  Any such withheld  Escrow Assets shall be delivered to DGSE
promptly after the  expiration of the Escrow  Period,  and, with respect to such
Stockholders other than Dissenting  Stockholders,  shall be delivered by DGSE to
the   Stockholders  to  whom  such  Escrow  Assets  would  have  otherwise  been
distributed  upon surrender of their  certificates  representing  Company Common
Shares (or delivery of such  affidavit and bond, if any). The Escrow Agent shall
distribute  Escrow  Assets to the  respective  Stockholders  by  mailing a check
representing  the funds,  or directing  the  transfer  agent for the DGSE Common
Stock to deliver a stock  certificate  representing  such Escrow Shares,  due to
such  Stockholder  at its address shown on Exhibit A by certified  mail,  return
receipt  requested.  No  fractional  Escrow Shares shall be  distributed  to the
Stockholders  pursuant to this Agreement and, upon  notification  of a permitted
distribution  to the  Stockholders,  DGSE shall  provide,  or cause its transfer


                                      -5-
<PAGE>

agent to provide,  stock  certificates  evidencing  a number of shares that each
Stockholder shall receive rounded up to the nearest whole number of shares.

         2.8  Securities  Accounts.  The Escrow  Account  shall be a "securities
account" (as defined in Section 8-501 of the Uniform Commercial Code).

         2.9 Calculations.  Notwithstanding anything herein to the contrary, the
Person requesting a distribution shall make any and all calculations required to
be made pursuant to this Section 2,  including  the value of the Escrow  Shares,
and certify the same to the Escrow Agent.

     3.  Stockholder  Agent.  The  parties  hereto  acknowledge  and  accept the
provisions of Section 8.5 of the Merger  Agreement  concerning  the  Stockholder
Agent,  which are incorporated  herein by reference.  Any successor  Stockholder
Agent under the Merger  Agreement shall become the Stockholder  Agent hereunder,
as provided in such Section 8.15.

     4. Escrow Agent.

         4.1 Appointment and Acceptance.  DGSE and the Stockholder  Agent hereby
appoint the Escrow  Agent as escrow agent in relation to or in  connection  with
this  Agreement  and the Merger  Agreement.  The  approval of the Merger and the
approval and adoption of the Merger  Agreement by the  stockholders  of Superior
constitutes,  without any further  action on the part of any such  stockholders,
the consent and  authorization of each of such stockholders for the Escrow Agent
to act as the escrow  agent  pursuant to the terms and  provisions  hereof.  The
Escrow Agent hereby accepts such appointments.

         4.2  Duties.   The  Escrow  Agent  shall  be  obligated  only  for  the
performance  of such duties as are  specifically  set forth  herein,  and as set
forth in any additional  written escrow  instructions  that the Escrow Agent may
receive  from  DGSE and the  Stockholder  Agent  from  time to time as  provided
herein, upon which instructions the Escrow Agent may conclusively rely.

         4.3  Compliance  with Orders,  Etc. The Escrow Agent is  authorized  to
comply with and obey orders, awards, judgments or decrees of any court of law or
arbitration   tribunal,   notwithstanding   any   notices,   warnings  or  other
communications  from any party  hereto or any other Person to the  contrary.  In
case the Escrow Agent obeys or complies with any such order,  judgment or decree
of any court or  arbitration  tribunal,  the Escrow Agent shall not be liable to
any of the parties  hereto or to any other Person by reason of such  compliance,
notwithstanding any such order, judgment or decree being subsequently  reversed,
modified,  annulled,  set aside,  vacated or found to have been entered  without
jurisdiction.

         4.4  Additional  Instructions.  The Escrow  Agent may from time to time
request  further  information,  instructions  or  direction  from  DGSE  or  the
Stockholder  Agent, as the case may be, as it reasonably  deems necessary in the
performance  of its duties  hereunder,  and DGSE or the  Stockholder  Agent,  as
applicable,  shall use their respective commercially reasonable efforts promptly
to provide such  information,  instructions or direction,  upon which the Escrow
Agent may conclusively rely.

         4.5 Limitation of Liability.  In performing any duties  hereunder,  the
Escrow  Agent  shall not be liable to any party  hereto for  damages,  losses or
expenses,  except for gross negligence or willful  misconduct on the part of the
Escrow Agent. The Escrow Agent shall not incur any such liability for any action
taken  or  omitted  in  reliance  upon any  instrument,  including  any  written
statement or affidavit provided for in this Agreement,  that the Escrow Agent in
good  faith  believes  to be  genuine,  nor will the  Escrow  Agent be liable or
responsible  if acting in good faith for  forgeries,  fraud,  impersonations  or
determining the scope of any representative  authority.  In addition, the Escrow
Agent may consult  with legal  counsel  (whether  such counsel will be regularly
retained or specifically  employed) in connection with the Escrow Agent's duties


                                      -6-
<PAGE>

under this Agreement and shall be fully protected in any act taken, suffered, or
permitted  by it in good faith in  accordance  with the advice of  counsel.  The
Escrow Agent is not  responsible  for determining and verifying the authority of
any  Person  acting  or  purporting  to act on  behalf  of any  party  hereto or
beneficiary  hereof.  The Escrow Agent shall not be liable for the expiration of
any rights under any statute of  limitations  with respect to this  Agreement or
any  documents  deposited  with the Escrow  Agent.  IN NO EVENT SHALL THE ESCROW
AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING
OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE
ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS
AGREEMENT,  OR (ii) SPECIAL OR CONSEQUENTIAL  DAMAGES,  EVEN IF THE ESCROW AGENT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

         4.6 Disputes.  If any  controversy  arises  between the parties to this
Agreement,  or with any other  Person,  concerning  the  subject  matter of this
Agreement,  the Escrow Agent shall not be required to determine the  controversy
or to take any action  regarding it.  Furthermore,  the Escrow Agent may file an
action of  interpleader  requiring the parties hereto to answer and litigate any
claims and rights amongst themselves.  The Escrow Agent is authorized to deposit
with the clerk of the court all documents and Escrow Assets; provided,  however,
that all costs,  expenses,  charges and reasonable attorney fees incurred by the
Escrow Agent due to the interpleader  action shall be reimbursed  equally by the
Stockholders  (subject to Section 4.12), on the one hand, and DGSE, on the other
hand,  it being agreed and  understood  that the Escrow Agent shall have a prior
lien upon the Escrow  Assets with  respect to its costs,  expenses,  charges and
reasonable  attorney fees  incurred by the Escrow Agent due to the  interpleader
action,  superior to the interests of any other  Person.  Upon  initiating  such
action,  the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement, except for any
liability for obligations or acts or omissions that have already  occurred,  and
only to the extent set forth herein.

         4.7  Indemnification.  DGSE and the  Stockholders  (subject  to Section
4.12), and their respective successors and assigns,  shall jointly and severally
indemnify and hold the Escrow Agent harmless against any and all losses, claims,
damages,  liabilities and expenses, including reasonable costs of investigation,
attorneys  fees and  disbursements,  that may be imposed on the Escrow  Agent or
incurred by the Escrow Agent in connection  with the  performance  of its duties
under this  Agreement.  Such  indemnification  shall survive the  resignation or
removal of the Escrow Agent, or the termination of this Agreement.

         4.8  Resignation  and Removal.  The Escrow Agent may resign at any time
upon sixty days written notice to DGSE and the Stockholder Agent, and the duties
of the Escrow Agent shall  terminate  at the time  specified in such notice (but
not less than sixty  days  after  delivery  to DGSE).  The  Escrow  Agent may be
removed  at any time by notice  from DGSE,  and the  duties of the Escrow  Agent
shall  terminate at the time specified in such notice.  Upon the  termination of
its duties hereunder, the Escrow Agent shall promptly deliver the balance of the
Escrow Assets, and any documentation or notices or other communications relating
to the  Escrow  Account,  the  Escrow  Assets  or  this  Agreement,  then in its
possession  to a successor  escrow  agent,  as  identified  by a written  notice
delivered by DGSE to the Escrow Agent.

         4.9 Successors. DGSE may appoint the successor escrow agent (i) without
the consent of the  Stockholder  Agent if such  successor is a  commercial  bank
organized under the laws of the United States of America,  or any State thereof,
having an  aggregate  capital and surplus in excess of  $50,000,000  and being a
"securities  intermediary"  for purposes of the  applicable  Uniform  Commercial
Code, or (ii) with the consent of the  Stockholder  Agent (which the Stockholder
Agent may not  unreasonably  withhold,  delay or condition).  If DGSE shall have
failed to appoint a  successor  escrow  agent  prior to the  termination  of the


                                      -7-
<PAGE>

Escrow  Agent's  duties as provided in this  Section  4.9,  the Escrow Agent may
petition any court of competent  jurisdiction for the appointment of a successor
escrow  agent  or  for  other  appropriate   relief,  with  due  regard  to  the
qualifications  for a  successor  escrow  agent  specified  in  clause  (i) next
preceding,  and any such resulting  appointment shall be binding upon all of the
parties  hereto and  beneficiaries  hereof.  The  successor  escrow  agent shall
execute and deliver an  instrument  accepting  such  appointment,  and it shall,
without further acts, be vested with all the estates, properties, rights, powers
and duties (but not accrued  liabilities) of the predecessor  escrow agent as if
originally  named as escrow agent.  Upon  resignation  in  accordance  with this
Section 4.9, the Escrow Agent shall be  discharged  from any further  duties and
liability under this Agreement, except for any liability for obligations or acts
or  omissions  that have  already  occurred,  and only to the  extent  set forth
herein.

         4.10 Fees.  All fees of the Escrow Agent for  performance of its duties
under this  Agreement  shall be paid  one-half  by DGSE and  (subject to Section
4.12)  one-half  by the  Stockholders.  Exhibit B sets  forth the usual fees and
charges  agreed upon for  services of the Escrow Agent as  contemplated  by this
Agreement. In the event the Escrow Agent renders any service not provided for in
Exhibit B, or if the parties request a substantial modification of its terms, or
if the  Escrow  Agent is made a party  to,  or  intervenes  in,  any  litigation
pertaining  to the Escrow  Account,  the  Escrow  Agent's  reasonable  costs and
expenses  shall be paid (i) in the case the Escrow  Agent is made a party to any
litigation by DGSE or the Stockholder Agent, by DGSE or the Stockholders, as the
case may be, or (ii)  otherwise,  one-half by DGSE and (subject to Section 4.12)
one-half by the Stockholders.

         4.11 Set-Off.  In the event that the Escrow Agent is authorized to make
disbursements  to any party to or beneficiary of this Agreement  pursuant to and
in accordance  with the terms of this  Agreement,  and fees and expenses are due
and payable to the Escrow Agent  pursuant to the terms of this  Agreement by the
party or  beneficiary  receiving such  disbursement,  the Escrow Agent is hereby
authorized   to  offset  such  amounts  due  and  payable  to  it  against  such
disbursement to such party or beneficiary.

         4.12  Limitations  on  Stockholder  Payments.  The  obligations  of the
Stockholders to make payments to the Escrow Agent hereunder, other than pursuant
to Section 5 (as to which the limitations of this Section 4.12 shall not apply),
shall be strictly and  exclusively  limited to the Escrow Assets.  If the Escrow
Assets  shall be  insufficient  to pay the fees of or other  amounts  due to the
Escrow  Agent  hereunder,  DGSE  shall  make  such  payments  on  behalf  of the
Stockholders (subject to reimbursement in the event any Escrow Assets thereafter
become available).

     5. Tax Matters.  The Escrow Agent shall be  responsible  for  reporting any
interest earned, as of each calendar  year-end,  on the Escrow Cash or Permitted
Investments, or any cash dividends or other distributions made in respect of the
Escrow  Shares,  to the IRS,  whether or not such income was  distributed by the
Escrow Agent during any particular  year. The Stockholder  Agent shall provide a
completed  IRS Form W-8 (an  original W-8 is required) or Form W-9 to the Escrow
Agent upon the signing of this  Agreement.  The Escrow Agent may delay accepting
any Escrow  Cash until the IRS forms shall have been  provided.  Notwithstanding
Section 4.12, each Stockholder,  severally but not jointly, covenants and agrees
to indemnify  and hold the Escrow Agent  harmless  against all liability for tax
withholding  or  reporting  for any  payments  made by the Escrow  Agent to such
Stockholder  pursuant  to  this  Agreement.  The  Escrow  Agent  shall  have  no
responsibility  for the  preparation  and/or  filing  of any tax or  information
return, other than 1099-INT reporting, with respect to any transaction,  whether
or not related to the Agreement or any Related  Agreements,  that occurs outside
of the Escrow Account.


                                      -8-
<PAGE>

     6. Miscellaneous.

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

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

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

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

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

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

             (j) 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.

         6.2 Titles and Headings.  The section and paragraph titles and headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

         6.3  Voluntary  Execution  of  Agreement.  This  Agreement  is executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the parties  hereto.  Each of the parties  hereto  acknowledges,  represents and
warrants  that (i) it has read  and  fully  understood  this  Agreement  and the
implications  and  consequences  thereof;  (ii) it has been  represented  in the
preparation,  negotiation,  and execution of this  Agreement by legal counsel of
its own choice,  or it has made a voluntary and informed  decision to decline to


                                      -9-
<PAGE>

seek such counsel;  and (iii) it is fully aware of the legal and binding  effect
of this Agreement.

         6.4  Assignment.  DGSE may assign  any or all of its rights  under this
Agreement,  in whole or in part,  to any  other  Person  without  obtaining  the
consent or approval of any other party  hereto or of any other  Person.  Without
limiting the generality of Section 1.7, none of the  Stockholders may assign any
of its rights or interests or delegate  any of its duties or  obligations  under
this Agreement  without the prior written consent of DGSE,  which consent may be
withheld in DGSE's  sole and  absolute  discretion.  The  Stockholder  Agent may
assign and  delegate  its  rights,  powers,  obligations  and duties  under this
Agreement  only as provided in Section 8.5 of the Merger  Agreement.  The Escrow
Agent may assign and delegate its rights,  powers,  obligations and duties under
this Agreement only as provided in Section 4.9. Any purported  assignment not in
full  compliance with this Section 6.4 shall be null and void and of no force or
effect ab initio.  Subject to the sentence next preceding,  this Agreement shall
be binding  upon,  inure to the benefit of, and be  enforceable  by, the parties
hereto and express  beneficiaries  hereof and their  respective  successors  and
permitted assigns

         6.5  Amendments and  Modification.  This Agreement may not be modified,
amended,  altered or  supplemented  except upon the  execution and delivery of a
written  agreement  executed by DGSE,  the  Stockholder  Agent and, if adversely
affected thereby, the Escrow Agent; provided,  however, that DGSE shall have the
right to amend Exhibit A by written  notice to the Escrow Agent and  Stockholder
Agent to the extent (i) Exhibit A does not  accurately  or  completely  list the
Stockholders  of  Superior  or their stock  ownership  immediately  prior to the
Merger,  (ii) any  Stockholder  changes  its current  mailing  address (it being
agreed  that the  Stockholder  Agent may certify to DGSE from time to time a new
address of any Stockholder),  (iii) any Stockholder  delivers the required stock
certificate or affidavit in lieu thereof,  or (iv) a Stockholder sells,  assigns
or otherwise  Transfers its interests in the Escrow Account, or any Escrow Cash,
Escrow  Stocks,  Permitted  Investments  or other  assets from time to time held
therein, as permitted by Section 1.7. Any modification, amendment, alteration or
supplement to the Merger  Agreement which has or may have an adverse effect upon
the Escrow Agent shall not be effective  for purposes of this  Agreement  absent
the written  consent of the Escrow  Agent,  such consent not to be  unreasonably
withheld.

         6.6  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

         6.7 No Waiver.  The failure of any party  hereto to exercise any right,
power or remedy provided under this Agreement or otherwise  available in respect
hereof at law or in equity,  or to insist  upon  compliance  by any other  party
hereto with its obligations hereunder,  or any custom or practice of the parties
at variance with the terms hereof shall not constitute a waiver by such party of
its right to exercise any such or other right, power or remedy or to demand such
compliance.  No waiver by any party of any default,  misrepresentation or breach
hereunder,  whether intentional or not, shall be effective unless in writing and
signed by the party  against whom such waiver is sought to be  enforced,  and no
such  waiver  shall be deemed to  extend  to any  prior or  subsequent  default,
misrepresentation  or breach  hereunder or affect in any way any rights  arising
because of any prior or subsequent such occurrence.


                                      -10-
<PAGE>

         6.8 Notices. All notices, requests,  instructions or other documents to
be given under this Agreement shall be in writing and shall be deemed given, (i)
upon receipt if sent via registered or certified mail, return receipt requested,
in the U.S.  mails,  postage  prepaid,  (ii) when sent if sent by  facsimile  or
email;  provided,  however, that the facsimile or email is promptly confirmed by
telephone confirmation thereof, (iii) when delivered, if delivered personally to
the  intended  recipient,  and (iv) one  business  day  following  delivery to a
reputable  national  courier service for overnight  delivery;  and in each case,
addressed to a party (1) with respect to DGSE or the  Stockholder  Agent, at the
address set forth for it in Section 10.1 (Notices) of the Merger Agreement,  and
(2) with respect to the Escrow Agent, at the following address:

             [ ESCROW AGENT ]
             [address]
             Tel:
             Fax:
             Email:

Or in each case to such other address,  email address or fax number as the party
to whom the notice,  request,  instruction  or other  document is given may have
previously  furnished to the other parties in writing in the manner set forth in
this Section 6.8.

         6.9  Governing  Law.  This   Agreement  and  the   performance  of  the
transactions  and obligations of the parties  hereunder shall be governed by and
construed  in  accordance  with the laws of the  State  of Texas  applicable  to
contracts negotiated, executed and to be performed entirely within such State.

         6.10  Entire  Agreement.  This  Agreement,  and  to the  extent  of the
definitions  defined  in the  Merger  Agreement  and  used  herein,  the  Merger
Agreement,  constitute  the entire  agreement and  understanding  of the parties
hereto  in  respect  of the  subject  matter  hereof  and  supersedes  all prior
understandings,  agreements or  representations  by or among the parties hereto,
written or oral,  to the extent  they  relate in any way to the  subject  matter
hereof  or the  transactions  contemplated  by  this  Agreement.  In case of any
conflict  between  the  Merger  Agreement  and this  Agreement,  the  terms  and
provisions of this Agreement shall prevail.

         6.11 Third-Party  Beneficiaries.  This Agreement is made solely for the
benefit of the  parties  to this  Agreement,  the  Indemnified  Parties  and the
Stockholders,  and their  respective  permitted  successors and assigns,  and no
other Person shall have or acquire any right or remedy by virtue  hereof  except
as otherwise expressly provided herein.

         6.12  Jurisdiction;  No Jury Trial;  Service of Process.  The terms and
provisions of Section 10.7 (d) (Waiver of Trial by Jury) of the Merger Agreement
are hereby  incorporated  by reference  herein and shall apply to this Agreement
mutatis mutandis, as if expressly set forth herein.

         6.13 Submission to  Jurisdiction;  No Jury Trial.  Any suit,  action or
proceeding  with respect to this Agreement  shall be brought  exclusively in any
court of  competent  jurisdiction  in the County of Dallas,  Texas.  ALL PARTIES
HERETO AND EXPRESS  BENEFICIARIES HEREOF HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS
WHICH THEY MAY NOW OR HEREAFTER  HAVE TO THE PERSONAL  JURISDICTION  OR VENUE OF
ANY SUIT,  ACTION OR  PROCEEDING  ARISING OUT OF OR  RELATING TO THIS  AGREEMENT
BROUGHT IN ANY SUCH COURT AND HEREBY  FURTHER  IRREVOCABLY  WAIVE ANY CLAIM THAT
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT  FORUM. TO THE MAXIMUM EXTENT  PERMITTED BY LAW, THE PARTIES HERETO


                                      -11-
<PAGE>

AND EXPRESS BENEFICIARIES HEREOF HEREBY FURTHER IRREVOCABLY WAIVE ANY RIGHT TO A
JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

         6.14  Counterparts.  This  Agreement  may be  executed  in two or  more
original or  facsimile  counterparts,  each of which shall be deemed an original
but all of which together shall constitute but one and the same instrument.

         6.15 Facsimile Execution.  A facsimile,  telecopy or other reproduction
of this Agreement may be executed by one or more parties hereto, and an executed
copy  of this  Agreement  may be  delivered  by one or more  parties  hereto  by
facsimile  or  similar  electronic  transmission  device  pursuant  to which the
signature  of or on behalf of such  party can be seen,  and such  execution  and
delivery shall be considered valid,  binding and effective for all purposes.  At
the request of any party hereto, all parties hereto agree to execute an original
of this  Agreement  as well as any  facsimile,  telecopy  or other  reproduction
hereof.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]















                                      -12-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.

                                           DGSE COMPANIES, INC.


                                           By:
                                              ----------------------------------
                                              Dr. L.S. Smith
                                              Chief Executive Officer


                                           STANFORD INTERNATIONAL BANK, LTD., as
                                             Stockholder Agent


                                           By:
                                              ----------------------------------
                                              James M. Davis
                                              Chief Financial Officer


                                           [ ESCROW AGENT ]


                                           By:
                                              ----------------------------------
                                              Name:
                                              Title:









                                      -13-
<PAGE>

                                                                       EXHIBIT A

                              SUPERIOR STOCKHOLDERS

                          Superior Share            Delivered Stock Certificates
Stockholder    Address      Ownership       TIN     or Affidavit in Lieu Thereof

                                                                 [_]

                                                                 [_]














<PAGE>

                                                                       EXHIBIT B

                                ESCROW AGENT FEES














<PAGE>

                                                                       EXHIBIT C

                               RESTRICTIVE LEGEND

THE  SECURITIES  REPRESENTED BY THIS  CERTIFICATE  ARE SUBJECT TO FORFEITURE AND
OTHER ESCROW PROVISIONS SET FORTH IN: (1) AN AMENDED AND RESTATED  AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION, MADE AND ENTERED INTO AS OF JANUARY __, 2007,
BY AND AMONG DGSE COMPANIES,  INC., DGSE MERGER CORP., SUPERIOR GALLERIES, INC.,
AND STANFORD  INTERNATIONAL  BANK, LTD., AS STOCKHOLDER AGENT (TOGETHER WITH ITS
SUCCESSOR  IN  SUCH  CAPACITY,  THE  "STOCKHOLDER  AGENT");  AND  (2) AN  ESCROW
AGREEMENT,  BY AND AMONG DGSE COMPANIES,  INC., [ESCROW AGENT], AS ESCROW AGENT,
AND THE  STOCKHOLDER  AGENT,  MADE AND ENTERED INTO AS OF  __________  __, 2007.
COPIES OF THE AFORESAID  AGREEMENTS ARE ON FILE AT THE PRINCIPAL  OFFICE OF DGSE
COMPANIES,  INC. AND SHALL BE PROVIDED TO THE HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE UPON WRITTEN REQUEST.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.3
<SEQUENCE>4
<FILENAME>dgse8kex23010907.txt
<DESCRIPTION>FORM OF AMENDED & RESTATED COMMERICAL LOAN
<TEXT>

                                                                     Exhibit 2.3

           AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT

     THIS IS AN AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT made
this ____ day of ___________, 2007 (this "Agreement"), by and between:

     Stanford  International  Bank Ltd., a company  organized  under the laws of
Antigua and Barbuda having its principal office at c/o Stanford  Financial Group
Company, 6075 Poplar Avenue,  Memphis,  Tennessee 38119 (hereinafter referred to
as "Lender"), and Superior Galleries,  Inc., a Delaware corporation with a place
of  business  at  9478  W.  Olympic  Blvd.,  Beverly  Hills,   California  90212
(hereinafter referred to as "Borrower"), with reference to the following facts:

                                    RECITALS
                                    --------

         A.  Pursuant to a  Commercial  Loan and Security  Agreement  originally
dated  October 1, 2003, as amended (the  "Existing  Loan  Agreement"),  Stanford
Financial  Group  Company  ("SFG") has provided  certain  credit  facilities  to
Borrower.  On November  30,  2004,  the Lender was  assigned all of SFG's right,
title and interest in the Existing Loan Agreement and the promissory note issued
thereunder.

         B. Pursuant to the Existing Loan Agreement,  Lender provides Borrower a
revolving  credit  facility of up to Nineteen  Million Eight Hundred  Ninety Two
Thousand Three Hundred and Forty Dollars ($19,892,340).

         C. Borrower and Lender wish to enter into this  Agreement,  which shall
amend  and  restate  the  Existing  Loan  Agreement  in its  entirety  and which
hereinafter  shall  govern the terms and  conditions  under which  Lender  shall
provide credit facilities to Borrower.

     NOW,  THEREFORE,  THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS  (reference
being hereby made to Section 10 below for the definition of certain  capitalized
terms used herein):

     Section 1. The Loans,  Advances,  Interest,  Security  Interest,  Financing
                ----------------------------------------------------------------
Statements, Collateral, Subordinations.
- ---------------------------------------

     1.1 Loan Authorization

         (a) The First Revolving Loan

         Subject to all the terms and  conditions of this  Agreement,  including
the  preconditions  to loan  advances  as herein  provided  and so long as there
exists no Event of Default  nor any event  which with the  passage of time,  the
giving of notice or both would constitute an Event of Default,  Lender will make
advances to Borrower  (the "First  Revolving  Loan") in an  aggregate  principal
amount outstanding at any time not to exceed the lesser of (i) Five Million Five
Hundred Thousand Dollars ($5,500,000) or (ii) the Borrowing Base. Advances under
the  First  Revolving  Loan  shall be made in  minimum  amounts  of One  Hundred
Thousand Dollars ($100,000) for each advance.  The First Revolving Loan shall be
evidenced  by the  First  Revolving  Loan  Note in the  form of  Schedule  "A-1"
attached  hereto  and made a part  hereof  (referred  to  herein  as the  "First


                                      -1-
<PAGE>

Revolving  Loan Note").  The aforesaid  First  Revolving  Loan Note and advances
thereunder  may be  continued  or extended by mutual  agreement  of the parties;
provided, however, the parties acknowledge that Lender is under no obligation to
extend the term of the First  Revolving  Loan and  whether or not to continue or
extend the term of the First Revolving Loan is in the Lender's sole and absolute
discretion.  Notwithstanding the above provisions, the security interest granted
to Lender in the Collateral as herein defined shall not in any way be limited to
such amount or be  dependent  upon the use to which such funds are put but shall
at all times fully secure the Obligations (as hereinafter defined).

         (b) The Second Revolving Loan

         Subject to all the terms and  conditions of this  Agreement,  including
the  preconditions  to loan  advances  as herein  provided  and so long as there
exists no Event of Default  nor any event  which with the  passage of time,  the
giving of notice or both would constitute an Event of Default,  Lender will make
advances to Borrower  (the "Second  Revolving  Loan") in an aggregate  principal
amount  outstanding at any time not to exceed Six Million Dollars  ($6,000,000).
Advances under the Second Revolving Loan shall be made in minimum amounts of One
Hundred Thousand Dollars ($100,000) for each advance.  The Second Revolving Loan
shall be evidenced by a Second Revolving Loan Note in the form of Schedule "A-2"
attached  hereto  and made a part  hereof  (referred  to herein  as the  "Second
Revolving  Loan Note").  The aforesaid  Second  Revolving Loan Note and advances
thereunder  may be  continued  or extended by mutual  agreement  of the parties;
provided, however, the parties acknowledge that Lender is under no obligation to
extend the term of the Second  Revolving  Loan and whether or not to continue or
extend  the  term of the  Second  Revolving  Loan is in the  Lender's  sole  and
absolute discretion. Notwithstanding the above provisions, the security interest
granted to Lender in the  Collateral (as  hereinafter  defined) shall not in any
way be limited to such amount or be  dependent  upon the use to which such funds
are put but shall at all times  fully  secure the  Obligations  (as  hereinafter
defined).  It is the  specific  intent of the parties  that  advances  under the
Second  Revolving  Loan shall be made without  regard to the Borrowing  Base and
that the entire principal amount of the Second Revolving Loan shall be available
to Borrower.

     1.2 Obligations

         It is specifically agreed by Borrower and Lender that in the event that
further  financial  accommodations of any type,  including,  but not limited to,
letters of credit,  coverage of  overdrafts  and the like,  are now or hereafter
extended by Lender to Borrower,  the parties  intend that this  Agreement  shall
govern any and all such financial accommodations. An extension of the foregoing,
all  advances  now or  hereafter  made by Lender to  Borrower  pursuant  to this
Agreement and/or any of the other Documents or any renewal or extensions thereof
or otherwise,  whether or not evidenced by notes, and all liability  whether now
existing or hereafter arising,  absolute or contingent,  direct or indirect with
respect to or under letters of credit, banker's acceptances or guarantees now or
hereafter  established by Lender pursuant to this  Agreement,  together with all
other  obligations  and  indebtedness  of every  kind and  nature,  whether  now
existing or hereafter arising, absolute or contingent, direct or indirect, under
or pursuant to this  Agreement or any of the other  Documents or  otherwise,  of
Borrower to Lender,  to the extent the same are  outstanding  from time to time,
are sometimes collectively referred to herein as the "Obligations".


                                      -2-
<PAGE>

     1.3 Interest

         All  amounts  outstanding  from time to time under  either of the Notes
shall bear  interest  at a per annum rate equal to a daily  average of the Prime
Rate as reported in the Wall Street Journal.  Upon the occurrence of an Event of
Default,  interest shall accrue for the period of time for which any payment was
due,  during any  applicable  grace or cure period,  and at all times while such
default shall continue at a rate of five percent (5%) per annum greater than the
rate then in effect.  In the event that the total amount of any payment required
under  either of the Notes is not  received by Lender  within  fifteen (15) days
after its due date,  Borrower  shall pay to Lender a late  charge  equal to five
percent (5%) of any such late payment.

     1.4 Repayment

         (a) The First  Revolving  Loan Note and the Second  Revolving Loan Note
shall  provide that the payment of interest  only for the actual  number of days
elapsed in each payment period on the daily outstanding principal balance of the
First Revolving Loan and the Second Revolving Loan,  respectively,  shall be due
and  payable  in  monthly  payments  in  arrears  on the 10th day of each  month
commencing  __________  10, 2007 and  continuing on the tenth (10th) day of each
month  thereafter  until the entire  outstanding  principal  balance and accrued
interest has been paid in full.

         (b) For all advances  under the First  Revolving  Loan,  Borrower shall
repay said advances in full upon  disposition  of the Collateral on the basis of
which such advances were made, with the understanding that  "disposition"  shall
be defined as follows: (i) for auctions,  the settlement date for the auction or
whenever  the  Collateral  is  shipped,  whichever  is  later,  (ii) for  dealer
inventory  financing,  when Borrower receives good funds from the dealer;  (iii)
for  loans to  Borrower  itself,  as  necessary  to  repay  advances  which  are
outstanding in an aggregate amount in excess of the limitations set forth in the
first sentence of Section 1.1(a).

         (c) Notwithstanding  anything herein, the entire outstanding  principal
balance of all advances under the First Revolving Loan and the Second  Revolving
Loan and  accrued  and  unpaid  interest  thereon  shall be due and  payable  on
____________,  2011  unless said  maturity  date shall be extended in writing by
Lender in accordance with this Agreement.

Payment of  principal or interest  shall be deemed  received by Lender only upon
receipt of good funds as determined by Lender.

     1.5 Limitation on Use of Funds

         Borrower  may use advances of proceeds of the Loan only for (a) general
corporate  purposes of Borrower and (b)  Permitted  Inter-Company  Transactions.
Borrower agrees that to the extent any funds are made available to it under this
Agreement,  they shall be used in strict  accordance with the policies set forth
in Schedule  "B" hereof,  and that a material  violation by Borrower of any such
policy,  which  violation is not cured within ten (10) days after written notice
of same is given by Lender to Borrower,  shall be an Event of Default hereunder.
Borrower  shall  certify  to  Lender  quarterly,   on  each  of  the  compliance
certificates  that  Borrower  delivers to Lender  under  clauses (i) and (ii) of
Section  3.5,  that  Borrower  has used the  proceeds  of each  advance  made to
Borrower  hereunder  during the relevant  fiscal quarter for purposes  permitted


                                      -3-
<PAGE>

under this Section 1.5. In addition,  Borrower  hereby  agrees that Lender,  not
more frequently than once each year,  following at least thirty (30) days notice
to Borrower,  shall have the option to engage an independent accounting firm, at
Borrower's expense,  to conduct an independent  compliance audit with respect to
Borrower's obligations hereunder.

     1.6 Security

         As security for the performance of Borrower's  Obligations  pursuant to
this Agreement, and the other Documents,  Borrower hereby mortgages, pledges and
assigns to Lender,  and gives and grants to Lender a security interest in all of
its  right,  title  and  interest  in and to the  items  and  types of  property
described or referred to below, whether now owned or hereafter acquired, and the
proceeds and  products  thereof  (all of which  property is herein  collectively
called the "Collateral"), which security interest has and shall remain first and
prior to all other security  interests therein and which Collateral shall remain
free and clear of all mortgages,  pledges,  security interests,  liens and other
encumbrances  and restrictions on the transfer  thereof,  except as specifically
set forth below and in Schedule "D" attached hereto:

                  (i) Accounts

                  All   accounts  (as  such  term  is  defined  in  the  Uniform
         Commercial Code) of Borrower.

                  (ii) Third-Party Owned Inventory

                  All   inventories  of  every  kind  owned  by  third  parties,
         presently existing or hereafter acquired,  wherever located,  including
         all goods intended for auction sale or owned by third parties,  against
         which Borrower has loaned funds and which serve as collateral therefor,
         and  all  contract  rights  with  respect  to any of the  same  and all
         documents representing any of the same, all whether now or hereafter in
         Borrower's  possession  or in  which  Borrower  may  now  have  or  may
         hereafter  acquire any interest,  all whether now existing or hereafter
         arising  (the  "Third-Party-Owned  Inventory").  (For the  avoidance of
         doubt,  the Third-Party  Owned  Inventory  shall not include  inventory
         owned by third parties and consigned to Borrower,  as to which Borrower
         has not  made any  loans to the  consignor  and with  respect  to which
         Borrower has no payment  obligation to the consignor  prior to the sale
         of  such   consigned   inventory.)   The   security   interest  in  the
         Third-Party-Owned  Inventory shall continue in all Collateral described
         in this paragraph (except goods sold as provided in Section 9-307(1) of
         the Uniform  Commercial Code),  notwithstanding  the sale,  exchange or
         other  disposition   hereof  by  Borrower  (sale,   exchange  or  other
         disposition  of any of said  Collateral  is not  authorized  by Lender,
         other than sale in the ordinary course of business).

                  (iii) Borrower-Owned Inventory

                  All  items  of  Borrower's  wholesale  and  retail  inventory,
         presently  existing or hereafter  acquired,  wherever located,  and all
         contract  rights  with  respect  to any of the same  and all  documents
         representing  any of the  same,  all  whether  now  owned or  hereafter
         acquired by Borrower or in which Borrower may now have or may hereafter


                                      -4-
<PAGE>

         acquire any ownership  interest,  all whether now existing or hereafter
         arising (the "Borrower-Owned  Inventory"). The security interest in the
         Borrower-Owned  Inventory shall continue in all Collateral described in
         this  paragraph  (except goods sold as provided in Section  9-307(1) of
         the Uniform  Commercial Code),  notwithstanding  the sale,  exchange or
         other  disposition   hereof  by  Borrower  (sale,   exchange  or  other
         disposition  of any of said  Collateral  is not  authorized  by Lender,
         other than sale in the ordinary course of business).

                  (iv) Notes and Liens

                  All promissory  notes and related loan and security  documents
         relating to or evidencing any loans made by Borrower, whether presently
         existing or hereafter  acquired by Borrower,  or in which  Borrower may
         now have or may  hereafter  acquire  any  interest,  including  without
         limitation,  any ownership interest or security or collateral interest,
         all whether now existing or hereafter arising.

                  (v) Documents

                  All  documents and  instruments  relating to any and all loans
         made by Borrower,  whether presently  existing or hereafter acquired by
         Borrower,  or in which  Borrower may now have or may hereafter  acquire
         any interest,  including without limitation,  any ownership interest or
         security or collateral interest,  all whether now existing or hereafter
         arising.

                  (vi) Records

                  All  books,  records  and  other  documents  of  every  nature
         relating to the above described types of property,  including,  without
         limitation,  all tapes, cards, discs, cassettes,  papers, documents and
         computer  software in the  possession  or control of  Borrower,  or any
         Affiliate of Borrower,  all whether now owned or hereafter  acquired by
         Borrower  or in which  Borrower  now has or may  hereafter  acquire any
         interest,  including  without  limitation,  any  ownership  interest or
         security or collateral interest,  all whether now existing or hereafter
         arising.

                  (vii) Insurance Policies

                  All  rights in, to and under  policies  of  insurance  on said
         Inventory,   including   claims  or  rights  to  payment  and  proceeds
         heretofore or hereafter arising  therefrom,  with respect to the herein
         described  types of  property,  all  whether  now  owned  or  hereafter
         acquired by Borrower or in which Borrower may now have or may hereafter
         acquire any  interest,  including  without  limitation,  any  ownership
         interest or security or collateral  interest,  all whether now existing
         or hereafter arising.

                  (viii) Proceeds and Products

                  All  proceeds  and all  products of all  Collateral  described
         above.


                                      -5-
<PAGE>

     1.7 Financing Statements

         Borrower hereby authorizes Lender to file financing statements pursuant
to the provisions of the Uniform  Commercial Code with respect to the Collateral
in which Lender has been granted a security interest by Borrower pursuant to the
provisions of this Agreement and the other Documents.  Borrower hereby agrees to
execute any and all further  documents deemed  necessary by Lender,  in its sole
discretion,  to perfect its security  interest in the  Collateral and authorizes
the Lender to file any and all further  documents deemed necessary by Lender, in
its sole  discretion,  to perfect  its  interest  in the  Collateral,  including
without limitation, any UCC financing statements.

     1.8 [ Intentionally Omitted. ]

     1.9 Insurance on the Collateral

         Borrower is  contemporaneously  with the execution hereof delivering to
Lender a  Certificate  or  Certificates  of  Insurance  (and shall  deliver  the
originals of the policies referred to herein upon request of Lender), respecting
hazard (including, but not limited to, fire and extended coverage including "all
risk"),  liability,  loss of rental and flood (if any of the Borrower's tangible
assets are located on premises in a special  flood hazard  area),  with coverage
for the fair  market  value at the  time of a loss of the  Collateral  and in an
amount  of at least  Two  Million  ($2,000,000)  Dollars  with no  co-insurance.
Borrower  shall  further be required  to provide  evidence to Lender of adequate
property insurance for all Collateral, which shall list the Lender as loss payee
as its interests may appear.

Section 2. Representations and Warranties
           ------------------------------

     Borrower hereby represents and warrants to Lender that:

     2.1 Incorporation and Qualification

         Borrower is a corporation  duly  organized and validly  existing and in
good standing  under the laws of Delaware,  has the  corporate  power to own its
assets and conduct its business as it is now being conducted and is qualified to
do business in each jurisdiction wherein the nature of the business conducted by
it or the  property  owned or held  under  lease by it make  such  qualification
necessary.

     2.2 Capitalization, Business and Subsidiaries

         Except as disclosed  on Schedule  "F"  attached  hereto and made a part
hereof,  as of the date of this  Agreement,  Borrower  does not own stock of any
other corporation, active or inactive. The information set forth on Schedule "G"
attached hereto with respect to Borrower and as to Borrower's authorized, issued
and outstanding  capital stock,  all of which stock has been duly authorized and
validly issued and is fully paid and non-assessable,  the holders of such stock,
the officers,  the  directors,  the principal and other places of business,  the
place where its  Inventory,  Equipment and Records of its Accounts are kept, and
Borrower's  present business  activities and status, is complete and accurate as
of the  date of this  Agreement.  As of the  date  of this  Agreement,  Borrower


                                      -6-
<PAGE>

neither has a place of business nor maintains or stores any of the Collateral at
any location other than those set forth in Schedule "G" attached hereto.

     2.3 Corporate Authorization

         Borrower has the corporate power to execute, deliver, and carry out the
terms and provisions of this Agreement and the other  Documents to which it is a
party and has taken all  necessary  corporate  and  legal  action  with  respect
thereto (including,  without  limitation,  obtaining any consent of stockholders
required  by law or its  Certificate  of  Incorporation  or  By-Laws),  and this
Agreement  and  such  other  Documents  to which it is a party  have  been  duly
authorized,  executed and delivered by it and  constitute  its valid,  legal and
binding agreement and obligation in accordance with the terms thereof and Lender
is entitled to the benefits thereof in accordance with such terms.

     2.4 Financial Statements

         There have been  furnished to Lender  financial  statements of Borrower
described or referred to in Schedule "H" attached hereto and made a part hereof.
Each such  financial  statement,  including  the  comments  and notes  contained
therein,  fairly  presents the  financial  position of the entity or business to
which  such  statement  applies  at the  date  thereof  and the  results  of its
operations for the period purported to be covered  thereby.  Each such financial
statement has been prepared in conformity  with  Generally  Accepted  Accounting
Principles  applied on a  consistent  basis  throughout  all  periods  involved,
subject,  in  the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments.

     2.5 Indebtedness

         As of the date of this Agreement,  Borrower has no material outstanding
indebtedness except for liabilities  reflected in said financial  statements and
liabilities  incurred since the date thereof to trade  creditors in the ordinary
course of business  and/or  except as  described  or set forth in  Schedule  "I"
attached and made apart hereof and has  performed  and complied  with all of the
terms of such  Indebtedness and all instruments and agreements  relating thereto
and no default  exists as of the date  hereof nor does there  exist any state of
facts which would after notice or lapse of time,  or both,  constitute a default
under or with respect to any such Indebtedness, instruments or agreements.

     2.6 Title to Properties and Assets; Liens, etc.

         Borrower has good and  marketable  title to its  properties and assets,
including,  but not limited to the  Collateral,  free and clear of any mortgage,
pledge,  lien,  lease,  encumbrance  or  charge  other  than  those set forth on
Schedule "J" attached hereto and made a part hereof,  with respect to assets (if
any)  other  than the  Collateral.  No  financing  statement  under the  Uniform
Commercial  Code which  names  Borrower as debtor has been filed in any state or
other  jurisdiction  which  covers the  Collateral  and has not been  terminated
except as set forth on Schedule "J". As of the date of this Agreement,  Borrower
has  not  signed  any  such  financing   statement  or  any  security  agreement
authorizing any mortgagee or secured party thereunder to file any such financing
statement on the  Collateral or its assets  except in connection  herewith or as
set forth on Schedule "J"  attached  hereto.  As of the date of this  Agreement,


                                      -7-
<PAGE>

Borrower is not a consignor or lessee under any  consignment  agreement or lease
agreement, except as described in Schedule "J" attached hereto.

     2.7 Patents, Trademarks, etc.

         Borrower owns or holds  licenses for the use of or has the right to use
all patents,  trademarks,  service  marks,  trade names,  copyrights  and rights
necessary for the conduct of its business as now conducted and as  contemplated,
including  those  identified  in Schedule  "K"  attached  hereto and made a part
hereof.

     2.8 Litigation, etc.

         Except as set forth in  Schedule  "L"  attached  hereto and made a part
hereof, as of the date of this Agreement,  there are no actions,  proceedings or
investigations  pending or to the knowledge of Borrower threatened (or any basis
therefor  known to it)  which,  either  in any case or in the  aggregate,  might
result  in any  material  adverse  change  in  Borrower's  business,  prospects,
profits,  properties,  liabilities,  operations,  or  conditions  (financial  or
otherwise),  or which might affect its ability to perform this  Agreement or any
other Documents executed by it.

     2.9 Changes in Condition

         Since the date of the financial  statements referred to in Schedule "H"
there has been no  material  adverse  change,  by reason of any  matter or cause
whatsoever, in Borrower's business, prospects, profits, properties, liabilities,
operations or condition (financial or otherwise).

     2.10 Tax Returns and Payments

         All tax  returns  and  reports  required by law to be filed by Borrower
have been duly  filed or the time for filing  has been  extended  and all taxes,
assessments,  fees and other governmental charges (U.S., foreign, state or local
or  other)  upon  Borrower  or upon any of its  properties,  assets,  income  or
franchises,  which are due and payable have been paid. To the best of Borrower's
knowledge the  provisions on Borrower's  books  respectively,  regarding  income
taxes  for all  fiscal  periods  to date are  adequate  according  to  Generally
Accepted Accounting Principles.

     2.11 Compliance With Instruments, Charter and Law

         Borrower is in full compliance with and is not  in-violation or default
of any term or provision of (a) its charter,  Certificate  of  Incorporation  or
by-laws, if a corporation, (b) any loan agreement, debt instrument,  mortgage or
indenture,  (c) any other material  contract,  agreement or instrument,  (d) any
judgment,  decree or order, nor has it, he or she been notified of any violation
of any statute, rule or regulation including but not limited to the Occupational
Safety and Health Act and the Employee Retirement Income Security Act ("ERISA"),
and the regulations issued by the Department of Environmental Protection and (e)
any licensing or governmental requirement. The execution,  delivery, performance
of, and compliance  with this  Agreement or any of the other  Documents will not
result in any such  violation or default or be in conflict with any such term or
provision or result in the creation of any mortgage, lien, encumbrance or charge


                                      -8-
<PAGE>

upon any of Borrower's  properties or assets except in favor of Lender and there
is no such term or provision which materially adversely affects or in the future
may materially adversely affect its business,  prospects,  profits,  properties,
liabilities,  operations or condition (financial or otherwise) or its ability to
perform this Agreement or any of the other Documents executed by Borrower. As of
the date of this  Agreement,  all  material  contracts,  agreements,  mortgages,
indentures,  instruments,  judgments,  decrees and orders to which Borrower is a
party or which are  effective  against it are listed in  Schedule  "M"  attached
except entered into in the normal course of business.

     2.12 Governmental Consents, etc.

         No consent,  approval or authorization for designation,  declaration or
filing with any governmental authority, federal, foreign or other is required in
connection with the execution and delivery of this Agreement or the Documents or
the consummation of any transaction  contemplated hereby or thereby by Borrower.
While no consent is required by the Securities and Exchange Commission, Borrower
will be required to file a form 8-K, and will comply with such requirements.

     2.13 Solvency

         Borrower is solvent,  having assets of a value which exceeds the amount
of its  liabilities  and is able to and will be able to meet  its  debts as they
mature and has  adequate  capital to conduct the business in which it is engaged
and is about to engage.

     2.14 Change of name, etc.

         As of the date of this  Agreement,  except as set forth on Schedule "N"
attached  hereto and made a part hereof,  Borrower has not within five (5) years
changed its name,  been a party to any  consolidation  or merger  other than the
Merger,  acquired  all or a  substantial  portion of the assets of any Person or
purchased any of its or his assets  included in the Collateral from a Person not
in the business of selling such assets.

     2.15 Full Disclosure

         The financial  statements referred to in Section 2.4 hereof do not, nor
does this Agreement or any Schedule hereto or any other Document, certificate or
statement  furnished to Lender by Borrower in  connection  with this  Agreement,
contain  any  untrue  statement  of a  material  fact or  omit  to  state a fact
necessary  in order to make the  statements  contained  therein  and  herein not
misleading. Borrower is not aware of any fact which materially adversely affects
or in the future may  materially and adversely  affect its business,  prospects,
profits,  properties,   liabilities,   operations  or  condition  (financial  or
otherwise),  or its  ability to perform  this  Agreement  or any other  Document
executed  by it,  which has not been set forth or  referred  to  herein,  in any
report or statement filed by Borrower or Parent with the Securities and Exchange
Commission or in a certificate or statement furnished by Borrower to Lender.


                                      -9-
<PAGE>

     2.16 No Event of Default

         No Event of Default or event or condition that with the passage of time
or giving of notice or both might  become an Event of Default  has  occurred  or
exists.

Section 3. Affirmative Covenants
           ---------------------

         Except with the prior written consent of Lender, Borrower covenants and
agrees that so long as there is outstanding  any portion of the First  Revolving
Loan or the Second  Revolving  Loan, or any agreement of Lender to make advances
to Borrower, it will comply or cause compliance with the following provisions:

3.1  Punctual Payment

         Borrower will duly and punctually pay all principal,  interest, charges
and other items  included in the First  Revolving  Loan or the Second  Revolving
Loan which is owing by it in accordance  with the  provisions  hereof and of the
other Documents.

     3.2 Prompt Payment of Taxes, Mortgages, Leases and Indebtedness

         Borrower  will  promptly  pay and  discharge,  or  cause to be paid and
discharged,  on the date due so as to prevent the accruing of interest  thereon,
all lawful taxes,  assessments,  and governmental charges or levies imposed upon
items of the Collateral  owned by it, or in which it has an interest or upon its
income,  profits,  property or business or of any of its Subsidiaries.  Borrower
will promptly pay or cause to be paid when due (or in conformity  with customary
trade terms) all of its other  Indebtedness  incident to its operations and will
promptly  pay and  perform  all of its  obligations  under  leases  of real  and
personal  property and under material  contracts and will promptly notify Lender
of any default or notice of alleged  default  received  with respect to any such
Indebtedness, lease or contract.

     3.3 Conduct of Business

         Borrower  will do all things  necessary to preserve,  renew and keep in
full force and effect and in good  standing,  its current  corporate  existence,
qualification  and any  franchises,  licenses,  patents,  trademarks  and  items
necessary to continue its business.  It will maintain its  properties and assets
in good order and repair, all in compliance with applicable federal,  state, and
local judgments, decrees, orders, statutes, rules and regulations, including but
not  limited to state and  federal  environmental  regulations  and those of the
Occupational Safety and Health Administration.

     3.4 Insurance

         Borrower will maintain insurance in amounts, coverage and with insurers
satisfactory  to Lender with respect to the Collateral  owned by it, or in which
they have an interest and their other  properties  and business  against loss or
damage to the extent that property of similar character is usually so insured by
other companies engaged in a similar  business.  Without limiting the foregoing,
such  insurance  shall  include  (a)  liability  insurance  in such  amounts and
covering  such  risks  as  Lender  may  reasonably  require,  (b)  all  worker's


                                      -10-
<PAGE>

compensation and other employees' liability insurance as may be required by law,
and  (c)  property  insurance  with  respect  to the  items  of  the  Collateral
constituting  tangible personal  property and fixtures,  and with respect to the
other  properties  both  real  and  personal,  including,  if  necessary,  flood
insurance,  to the full extent of the insurable value thereof, and covering such
risks as Lender may reasonably  require.  All of Borrower's  property  insurance
policies  with respect to the  Collateral  shall  contain  loss  payable  and/or
mortgagee  clauses  in form and  substance  reasonably  satisfactory  to Lender,
naming Lender as loss payee as  appropriate  and providing (i) that all proceeds
thereunder shall be payable to Lender as its interests may appear, and (ii) that
such  insurance  shall not be  affected  by any act or neglect of the insured or
owner of the property  described in said policy,  and (iii) that such policy and
loss payable clause may not be canceled, amended or terminated unless Lender has
received  written  notice  thereof  at  least  thirty  (30)  days'  prior to the
effective date of such  cancellation,  amendment or  termination.  Borrower will
furnish a  certificate  with  respect to the  insurance  at the time which is in
force  pursuant to this  Section  3.4,  specifying  the amount and  character of
coverage,  identifying  the  insurers  and  certifying  as to no  default in the
payment of current  premiums  thereon and will furnish  Lender with  original or
duplicate  original  copies of all  policies.  All  insurance  proceeds  for any
occurrence  or any  series of related  occurrences  which  exceed  Ten  Thousand
Dollars  ($10,000)  and which are  subject  to a  security  interest  under this
Agreement may, upon Lender's request, in Lender's sole and absolute  discretion,
be paid to Lender and shall be  applied  by Lender to the  payment of any of the
principal,  whether  or not  due,  or  interest  or  such  other  obligation  or
Indebtedness which constitutes a part of the Loan as Lender may determine in its
sole  discretion.  Proceeds of Ten Thousand  Dollars  ($10,000) or less shall be
payable to Borrower for general corporate  purposes.  Borrower does hereby grant
Lender  an   Irrevocable   Power  of  Attorney   and   appoint   Lender  as  its
attorney-in-fact (said power of Attorney being coupled with an interest) for the
sole  purpose  of  executing,   negotiating  and  signing  any  drafts,  checks,
instruments or documents to carry out the terms hereof.

     3.5 Accounting Financial Statements and Other Information

         Borrower   will   maintain  a  system  of  accounts   established   and
administered  in  accordance  with  Generally  Accepted  Accounting   Principles
consistently applied. Borrower will deliver or cause to be delivered to Lender:

     Financial Reports
     -----------------

          (i) as soon as available and in any event within  forty-five (45) days
     after the end of each of the first three (3) fiscal quarters of each fiscal
     year of Parent,  consolidated  and  consolidating  financial  statements of
     Parent  and its  Subsidiaries  (including,  after  the  Merger,  Borrower),
     including a balance sheet as of the end of period, and statements of income
     for the  period(s)  that have  been  included  as part of the  consolidated
     financial statement  disclosure of Parent's SEC Form 10-Q filing,  which in
     the case only of the consolidated financial statements of Parent, have been
     reviewed by Parent's  appointed  independent  accounting  firm,  along with
     statements of cash flows for that period.  In connection  with the delivery
     of such quarterly financial statements,  an officer, on behalf of Borrower,
     will provide written  representation that there is no knowledge of an Event
     of  Default  or an event  that with  notice or lapse of time or both  could
     constitute and Even of Default, has occurred and is continuing or if in the
     opinion  of said  individual  an Event  of  Default  or such an  event  has


                                      -11-
<PAGE>

     occurred and is  continuing  a statement  as to the nature  thereof and the
     action which Borrower  proposes to take with respect thereto (the provision
     for such a statement  herein  shall in no way be  construed as a consent to
     the  existence  of such an Event of Default and of the  granting of time to
     cure);

          (ii) as soon as available  and in any event within one hundred  twenty
     (120) days after the end of each  fiscal year of Parent,  consolidated  and
     consolidating financial statements of Parent (including,  after the Merger,
     Borrower),  including a balance sheet as of the end of such fiscal year and
     statements of income for the year(s) that have been included as part of the
     consolidated  financial  statement  disclosure  of  Parent's  SEC Form 10-K
     filing, which in the case only of the consolidated  financial statements of
     Parent,  have been  audited by Parent's  appointed  independent  accounting
     firm, and statements of cash flow for that period.  In connection  with the
     delivery  of such annual  financial  statements,  an officer,  on behalf of
     Borrower, will provide written representation that there is no knowledge of
     an Event of Default  or an event that with  notice or lapse of time or both
     could constitute an Event of Default,  has occurred and is continuing or if
     in the  opinion  of such  accounting  firm  such an  Event of  Default  has
     occurred  and is  continuing,  a statement  as to the nature  thereof  (the
     provisions  for such a statement  herein  shall in no way be construed as a
     consent to the  existence  of such an Event of Default or the  granting  of
     time to cure).

          (iii) within ten (10) days after filing  thereof copies of all federal
     and state income tax returns for Parent.

          (iv) such financial  information  from Borrower as shall reasonably be
     requested by Lender.

          (v) as soon as  reasonably  practicable,  upon  reasonable  request of
     Lender such other data and  information  (financial and otherwise)  bearing
     upon or related to Borrower's financial  condition,  results of operations,
     assets and/or Borrower's  projections of cash flow and profit and loss, all
     as Lender from time to time may reasonably request.

          (vi) within fifteen (15) days after the end of each calendar  month, a
     list of the  Borrower's  aged  accounts  receivable  and a complete list of
     Borrower's  inventory  duly  certified  by the chief  financial  officer of
     Borrower  and  such  other  information  relating  to  Borrower's  accounts
     receivable  as Lender shall  request at such times as Lender shall  request
     upon such  forms and  using  such  procedures  as Lender  shall  reasonably
     require.



     3.6 Inspection

         Borrower  will  permit  Lender and any  authorized  representatives  of
Lender,  at  Lender's  sole  cost and  expense  and upon  reasonable  notice  to
Borrower,  to  visit  and  inspect  any  of  its  offices  or  any of its or his
Affiliates,  including  all  items of  Collateral  and its and  their  books and


                                      -12-
<PAGE>

records,  including  books and records  relating to accounts  receivable (and to
make extracts  therefrom),  and to discuss its and their  affairs,  finances and
accounts,  with its and their  employees with  Borrower's  consent,  all at such
times  during  normal  business  hours and as often and  continuously  as may be
reasonably requested by Lender.

     3.7 Notice of Certain Events and Changes

         As  soon  as  reasonably   practicable  after  becoming  aware  of  any
condition,  event or state of facts which  constitutes an Event of Default under
this  Agreement  or  which,  after  notice  or  lapse of  time,  or both,  would
constitute  an Event of Default,  Borrower  will give  written  notice to Lender
specifying  the nature and period of existence  thereof.  Borrower will promptly
give  Lender  written  notice of any  condition,  event or state of facts  which
causes or may cause material loss or depreciation in the value of the Collateral
and of the commencement or threat of any action, proceeding or investigation, or
the  occurrence  or existence of any other  event,  matter or cause  whatsoever,
which  either in any case or in the  aggregate  results  or might  result in any
material  adverse  change  in  its  business,  prospects,  profits,  properties,
operations  or condition  (financial  or  otherwise).  Borrower will give Lender
written  notice of any change in its place or places of business,  any change of
location  of any item of the  Collateral  having a book value in excess of Fifty
Thousand  Dollars  ($50,000),  except as items of Collateral may be moved in the
ordinary course of business.

     3.8 Application of Proceeds

         Borrower agrees that it will apply the funds provided to it pursuant to
this Agreement in accordance with the terms of this Agreement.  Without limiting
the generality of the foregoing,  Borrower agrees that it will not,  directly or
indirectly, apply any part of such proceeds to the purchasing or carrying of any
"margin  stock"  within the meaning of Regulation U of the Board of Governors of
the Federal Reserve  System,  or for any use which will cause a violation of any
other  regulation of the Board of Governors of the Federal  Reserve System or of
any regulations, interpretations or rulings thereunder.

     3.9 Governmental Notices

         As soon as reasonably  practicable upon the issuance thereof,  Borrower
will  send to  Lender  a copy of all  orders  issued  by any  federal,  state or
municipal  regulatory  authority under any laws or regulations  adopted thereby,
which,  if enforced,  would have a material  adverse  effect upon its  condition
whether financial,  operating, or otherwise, and further,  Borrower will as soon
as  reasonably  practicable  send to  Lender  copies  of all  reports  or  other
materials  filed by it with or issued to it by the U.S.  Securities and Exchange
Commission,  and all  reports,  notices or  statements  sent by  Borrower to its
stockholders.

     3.10 Maintenance of Property and Collateral

         Borrower  shall  maintain its  properties  and the  Collateral  in good
repair,  working  order and  condition  and make all needed and proper  repairs,
renewals, replacements, additions or improvements thereto and immediately notify
Lender of any event causing loss or  depreciation in the value of the Collateral
and the  amount  of  such  loss  or  depreciation.  Borrower  shall  defend  the
Collateral  against all claims and  demands of all persons at any time  claiming
the same or any interest therein, and in the event Lender's security interest in


                                      -13-
<PAGE>

the Collateral or a part thereof would be impaired by an adverse decision, allow
Lender to  contest or defend any such  claim or demand in  Borrower's  name,  at
Borrower's  reasonable cost, charge and expenses,  and pay to Lender upon demand
all costs and expenses,  including without limitation,  attorney's fees incurred
by Lender in connection therewith.

     3.11 Payment of Lender Expenses

         Borrower shall pay to Lender on demand any and all reasonable  expenses
including  attorneys  fees  incurred or expended by Lender in the  collection or
attempted  collection of the  Obligations,  in protecting  and/or  enforcing the
rights of Lender  against  Borrower,  and in  sustaining  and/or  enforcing  the
security interest and other liens, if any, granted to Lender hereunder and under
all related agreements, instruments and documents.

Section 4. Negative Covenants

     Except with the prior express written consent of Lender, Borrower covenants
and agrees  that so long as there is  outstanding  any  portion of either of the
Loans,  or so long as this  Agreement  has not  been  terminated  if there is no
amount outstanding under either of the Loans, it will not:

     4.1 Liens

         Directly or indirectly,  create,  incur,  assume or permit to exist any
mortgage,  lien, charge or encumbrance on or pledge or deposit of or conditional
sale,  lease or other title retention  agreement with respect to any Collateral,
whether  now  owned or  hereafter  acquired,  or be bound by or  subject  to any
agreement or option to do so, provided that the foregoing restrictions shall not
apply to:

         (a) liens for taxes,  assessments or governmental charges or levies the
payment of which is not at the time required by Section 3.2;

         (b) liens incurred or deposits made in the ordinary  course of business
in connection with worker's compensation or unemployment  insurance or to secure
the  performance  of tenders,  statutory  obligations,  surety and appeal bonds,
performance and return-of-money  bonds and other similar obligations  (exclusive
of obligations for the payment of borrowed money);

         (c) liens,  charges  and  encumbrances  related  to the  conduct of its
business  or the  ownership  of its or his  properties  or assets  which are not
incurred in  connection  with the  borrowing of money and which in the aggregate
are not material;

         (d) statutory or common law  possessory  liens for charges  incurred in
the ordinary course of business the payment of which is not yet due;

         (e) the mortgages,  liens and encumbrances  referred to or described in
Schedules "D" and "J" attached hereto;


                                      -14-
<PAGE>

         (f) liens created hereunder;

     4.2 Restrictions on Indebtedness

         Directly or indirectly,  create,  incur,  assume,  guarantee,  agree to
purchase or repurchase,  pay or provide funds in respect of, or otherwise become
or be or remain liable,  contingently,  directly or indirectly,  with respect to
any Indebtedness other than:

         (a) Indebtedness hereunder;

         (b) Current liabilities for trade and other obligations incurred in the
ordinary course of its business not as a result of borrowing;

         (c) presently existing indebtedness  specifically described in Schedule
"I"  attached  hereto,  none of which shall be prepaid  without  Lender's  prior
written consent.

         (d) Indebtedness in respect of endorsements made in connection with the
deposit of items for credit or collection  in the normal and ordinary  course of
business.

     4.3 Restrictions on Investments, Loan, etc.

         Purchase or otherwise  acquire or own any stock or other  securities or
Indebtedness  of any other Person,  or make or permit to be outstanding any loan
or advance or capital contribution to any other Person, other than:

         (a) presently  outstanding loans, advances and investments described in
Schedules "H" and "I" attached hereto;

         (b) Indebtedness of customers for merchandise sold or services rendered
in the ordinary course of business;

         (c) Indebtedness  pursuant to Third Party Loans made in accordance with
the policies listed in Schedule B;

         (d)  investments  in bills or bonds  issued  by the  government  of the
United States of America and/or  Certificates of Deposit issued by a bank having
a net worth of at least Fifty Million Dollars  ($50,000,000)  and/or  securities
issued by and purchased from Lender; and

         (e) Permitted Inter-Company Transactions.

     4.4 Stock Issuance,  Dividends,  Distributions,  Redemptions and Directors'
Fees

         Issue any additional shares of stock, directly or indirectly,  declare,
order,  pay,  make  or  set  apart  any  sum or  property  for  the  redemption,
retirement,  purchase or other acquisition, direct or indirect, of any shares of
its stock of any class now or  hereafter  outstanding  or for the payment of any
dividends on any of such stock, except for Permitted Inter-Company  Transactions
and  quarterly  dividends  payable  concurrently  with  payments to Lender under
Section 9 hereof, or pay any directors' fees.


                                      -15-
<PAGE>

     4.5 Sale of Assets and Collateral,  Consolidation, Merger or Acquisition of
         Assets

         Directly  or  indirectly,  sell,  abandon or  otherwise  dispose of the
Collateral or any part thereof,  except for sales and  consignments of Inventory
in the ordinary course of Borrower's business, or replacement with Collateral of
like value and quality,  or directly or  indirectly  sell,  abandon or otherwise
dispose of all or any portion of its properties or assets or, except pursuant to
the Merger, consolidate with or merge into any other corporation,  or permit any
other  corporation  to  consolidate  with or merge into it or  acquire  all or a
substantial  portion  of the assets of  another  Person or form or  acquire  any
Subsidiary.

     4.6 Transactions With Affiliates

         Enter  into  any  transaction  with  any  Affiliate  other  than in the
ordinary  course of business  and on terms not less  favorable to it than are at
the  time  available  to  it  from  any  Non-Affiliate,   except  for  Permitted
Inter-Company Transactions and as otherwise authorized by this Agreement.

     4.7 Partnerships, Joint Ventures, Other Businesses

         Create  or  participate  in  the  creation  of any  partnership,  joint
venture,  corporation,  or  other  entity  (including  but  not  limited  to any
subsidiaries)  or engage  in any  business  other  than the  business  presently
conducted by it, except in the ordinary course of business.

     4.8 Subordinate Debt Payments

         Pay  principal  or interest  on  Subordinate  Debt  (present or future)
except as authorized in this Agreement.

     4.9 Expenditures for Capital Assets

         Make any expenditure for capital assets (other than for routine repairs
and  maintenance  which are not required to be capitalized  as  hereinafter  set
forth)  unless,  immediately  after giving effect  thereto the aggregate  amount
expended or to be expended on account of all such  expenditures  by the Borrower
in any fiscal year commencing with the current fiscal year of Borrower would not
exceed the amount of One Hundred  Thousand  Dollars  ($100,000).  The  following
shall be  deemed  to be  expenditures  for  capital  assets  as  subject  to the
limitations of this Section 4.10:

         (a) Expenditures for acquisition,  major repairs and maintenance which,
in accordance with generally accepted  accounting  principles,  are or should be
capitalized, and

         (b) All lease  rentals and other amounts  payable under leases  entered
into after the date hereof  whether "true  leases" or finance  leases other than
renewals and  extensions of leasing  existing on the date hereof and all amounts
payable under contracts or arrangements for the purchase of property for payment
of the purchase price for such property as deferred in whole or in part.


                                      -16-
<PAGE>

     4.10 Changes in Locations, Name, etc.

         Borrower  shall give written notice as soon as  practicable,  and shall
take such  steps as Lender may deem  necessary  or  advisable  to  continue  the
perfection and priority of the security interest granted pursuant hereto,  prior
to taking any of the following  actions:  (i) changing the location of its chief
executive  office;  (ii) permitting any Inventory to be kept at a location other
than that  specified  in Schedule G; (iii)  changing  its name,  existence  as a
corporation,  jurisdiction of incorporation or formation, or corporate structure
to such an extent that any  financing  statement  filed by Lender in  connection
with this Agreement would become seriously misleading.

Section 5. Events of Default
           -----------------

     If any one or more of the  following  events  ("Events of  Default")  shall
occur:

         (a) If Borrower  shall fail to make payment of any part or  installment
of principal or interest on any advance made under either of the Loans or on any
other Obligations when any such payment shall be due and payable, whether at any
stated maturity or by demand, acceleration or otherwise; or

         (b) If Borrower shall be in default in the performance of or compliance
with any other term,  covenant or condition  applicable  to it contained in this
Agreement  or contained  in any other  Documents,  and shall have failed to cure
such  default  for thirty  (30) days after  receipt of written  notice  from the
Lender.

         (c) If any  representation or warranty made by or on behalf of Borrower
in this Agreement or in the Schedules  hereto, or in any of the other Documents,
or in connection with the transactions  contemplated hereby and thereby shall be
false or incorrect in any material respect; or

         (d) If Borrower  shall default in the payment of any  Indebtedness  for
borrowed  money,  including,  but not  limited  to,  the  indebtedness  which is
referred to in Schedule "I" attached hereto or shall default with respect to any
of the terns of any evidence of such  Indebtedness  or of any indenture or other
agreement  relating thereto,  or if Borrower shall commit any material breach or
be in default under any contract set forth in Schedule "M" attached hereto; or

         (e) If Borrower  shall make an assignment for the benefit of creditors,
or shall admit in writing an inability to pay debts as they become due, or shall
file a voluntary  petition in bankruptcy,  or shall be adjudicated a bankrupt or
insolvent,  or shall  file  any  petition  or  answer  seeking  for  itself  any
reorganization,    arrangement,    composition,    readjustment,    liquidation,
dissolution,  or similar  relief  under any  present or future  statute,  law or
regulation,  or  shall  file any  answer  admitting  or  shall  fail to deny the
material  allegations  of a petition  filed  against it for any such relief,  or
shall  seek or  consent  to or  acquiesce  in the  appointment  of any  trustee,
receiver  or  liquidator  of  itself  or of all or any  substantial  part of its
properties,  or its  directors  or majority  stockholders  shall take any action
looking to its dissolution or liquidation, or it shall cease doing business as a
going concern; or


                                      -17-
<PAGE>

         (f)  If,  within  ninety  (90)  days  after  the  commencement  of  any
proceeding   against   Borrower   seeking   any   reorganization,   arrangement,
composition, readjustment,  liquidation, dissolution or similar relief under any
present or future statute,  law or regulation,  such  proceeding  shall not have
been dismissed,  or if, within ninety (90) days after the  appointment,  without
its consent or acquiescence of any trustee,  receiver or liquidator of itself or
himself or of all or any substantial  part of its properties,  such  appointment
shall not have been vacated;

         (g) If an event of default  shall occur under a Third Party Loan and is
continuing or an event which  pursuant to the provisions of the Third Party Loan
Documents  with the lapse of time and/or notice  specified  therein would become
such an event of default has occurred and is continuing;

then,  and in any such event,  in addition to its rights and remedies under this
Agreement,  the other  Documents  and any other  instruments,  Lender may at its
option  declare  the Notes and the  Obligations  or any  portion  thereof  to be
immediately due and payable,  whereupon the same shall forthwith mature together
with interest accrued thereon and together with any and all costs of collection,
including,  but not limited to,  reasonable  attorney's  fees without notice and
without presentment, demand or protest, all of which are hereby waived.

Section 6. Payment Terms.

     Payment of all sums due hereunder  shall become due and shall be payable on
__________, 2011. Borrower shall make each payment of principal of, and interest
on, the Loans and of fees and all other amounts  payable by Borrower  under this
Agreement, in good funds no later than 5:00 p.m. (Eastern time) on the date when
due and payable,  without condition or deduction for any counterclaim,  defense,
recoupment or setoff, in Federal or other funds immediately  available to Lender
at its address  referred  to herein and in the Note.  All  payments  received by
Lender after 5:00 p.m.  (Eastern  time) shall be deemed to have been received by
Lender on the next  succeeding  Business  Day.  If the date for any  payment  of
principal is extended by operation of law or otherwise,  interest thereon at the
then applicable rate,  shall be payable for such extended time.  Notwithstanding
the foregoing,  upon the occurrence and continuance of an Event of Default,  all
sums due hereunder  shall, at the option of the Lender,  become  immediately due
and payable upon written notice to Borrower.

Section 7. Remedies, Provisions re: Collateral, etc.

     In the event of an  occurrence  of an Event of  Default  which has not been
cured or waived  within thirty (30) days after notice from Lender to Borrower of
such occurrence, Lender:

         (a) may  proceed  to protect  and  enforce  its rights if Lender  deems
necessary  to do so by  suit  in  equity,  action  at law or  other  appropriate
proceedings,  whether for the specific  performance  of any agreement  contained
herein or in any other Document, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any right, power or
remedy granted thereby or by law, equity or otherwise.

         (b)  without  limitation  of any  rights  and  remedies  of Lender as a
secured party under the Uniform  Commercial  Code and any rights or remedies set


                                      -18-
<PAGE>

forth in any of the Documents, Lender shall have all of the following rights and
remedies with respect to the Collateral or any portion thereof:

                  (i)  Lender  may,  at any time and from time to time,  with or
         without   judicial  process  and  the  aid  or  assistance  of  others,
         reasonably  enter upon any premises in which any of the  Collateral may
         be located and,  without  resistance or interference by Borrower,  take
         possession of the  Collateral  and/or dispose of any part or all of the
         Collateral on any such premises;  and/or  require  Borrower to assemble
         and make available to Lender at the expense of Borrower any part or all
         of the  Collateral  at any place or time  designated by Lender which is
         reasonably convenient to Borrower and Lender; and/or remove any part or
         all of the  Collateral  from  any  premises  on  which  any part may be
         located for the purpose of effecting sale or other disposition  thereof
         and/or sell, resell,  lease,  assign and deliver,  grant options for or
         otherwise dispose of any or all of the Collateral in its then condition
         or following any commercially reasonable preparation or processing,  at
         public or private sale or proceedings, by one or more contracts, in one
         or more parcels, at the same or different times, with or without having
         the  Collateral  at the  place of sale or other  disposition,  for cash
         and/or  credit and upon any  reasonable  and customary  terms,  at such
         place(s) and time(s) and to such Persons as Lender shall deem best, all
         without  demand  for   performance  or  any  notice  or   advertisement
         whatsoever,  except  that the  owner of the  items to be sold  shall be
         given fifteen (15) business  days' written notice of the place and time
         of any public sale or of the time after which any private sale or other
         intended disposition is to be made, which notice Borrower hereby agrees
         shall be reasonable notice thereof. If any of the Collateral is sold by
         Lender upon credit or for future  delivery,  Lender shall not be liable
         for the  failure  of the  purchaser  to pay for same and in such  event
         Lender may resell  such  Collateral.  Lender may buy any part or all of
         the  Collateral  at any  public  sale  and if  any  part  or all of the
         Collateral is of a type customarily  sold in a recognized  market or is
         of the type which is the  subject  of widely  distributed  in  standard
         price  quotations  Lender may buy at private  sale and may make payment
         therefor by application of all or a part of either Loan.

                  (ii)  Lender  shall apply the cash  proceeds  from any sale or
         other disposition of the Collateral  first, to the reasonable  expenses
         of  retaking,   holding,  preparing  for  sale,  selling,  leasing  and
         otherwise  disposing of such Collateral,  and to reasonable  attorneys'
         fees and all legal expenses,  travel and other expenses which are to be
         paid or reimbursed to Lender  pursuant  hereto or pursuant to the other
         Documents,   second,  to  all  accrued   interest,   fees  and  charges
         outstanding with respect to the Loans,  third, to all other outstanding
         portions of the Loans,  fourth,  if there is any surplus,  to any other
         secured parties having an interest in the Collateral known to Lender in
         accordance with their interests, and fifth, if there is any surplus, to
         Borrower;  provided,  however,  that Borrower  shall remain liable with
         respect to unpaid portions of the Loans.

                  (iii)  Any  of the  proceeds  of the  Collateral  received  by
         Borrower after demand by Lender for repayment of all or any part of the
         Loans, shall not be commingled with any other of its property but shall
         be segregated,  held by Borrower in trust as the exclusive  property of
         Lender, and it will immediately deliver to Lender the identical checks,
         monies, or other proceeds of Collateral.


                                      -19-
<PAGE>

                  (iv)  At its  option,  Lender  may pay  for  insurance  on the
         Collateral and taxes, assessments or other charges which Borrower fails
         to pay in  accordance  with the  provisions  hereof  or of any  related
         agreement,  instrument  or  document  and may  discharge  any  security
         interest or lien upon the  Collateral.  No such payment or discharge of
         any such  security  interest  or lien shall be deemed to  constitute  a
         waiver by Lender of the  violation  of any  covenant  by  Borrower as a
         result of  Borrower's  failure to make any such  payment or  Borrower's
         suffering of any such  security  interest or lien.  Any payment made or
         expense  incurred by Lender pursuant to this or any other provisions of
         this Agreement  shall be added and become a part of the  Obligations of
         Borrower to Lender, shall bear interest at a rate per annum as provided
         for in the Notes, and shall be payable on demand.

Section 8. Cumulative Remedies; No Waivers, etc.

     No right,  power or remedy  granted to Lender in this  Agreement  or in the
other Documents is intended to be exclusive, but each shall be cumulative and in
addition to any other rights,  powers or remedies referred to in this Agreement,
in the other Documents or otherwise available to Lender at law or in equity, and
the  exercise  or  beginning  of  exercise  by Lender of any one or more of such
rights,  powers  or  remedies,  shall not  preclude  the  simultaneous  or later
exercise by Lender of any or all of such other  rights,  powers or remedies.  No
waiver  by,  nor any  failure  or delay on the part of Lender in any one or more
instances  to  insist  upon  strict  performance  or  observance  of one or more
covenants or conditions  hereof,  or of the other Documents shall in any way be,
or be construed to be, a waiver thereof or to prevent  Lender's  rights to later
require the strict performance or observance of such covenants or conditions, or
otherwise prejudice Lender's rights, powers or remedies.

Section 9. Partial Invalidity, Waivers

         (a) If any term or  provision  of this  Agreement  or any of the  other
Documents or the application thereof to any Person or circumstance shall, to any
extent,  be  invalid  or  unenforceable  by reason of any  applicable  law,  the
remainder of this Agreement and the other Documents, or application of such term
or provision to Persons or circumstances other than those as to which it is held
invalid  or  unenforceable,  shall not be  affected  thereby,  and each term and
provision  of this  Agreement  and the  other  Documents  shall be valid  and be
enforced to the fullest  extent  permitted by law. To the full extent,  however,
that the provisions of any such  applicable  law may be waived,  they are hereby
waived by Borrower to the end that this Agreement and the other  Documents shall
be deemed to be valid and binding  obligations  enforceable  in accordance  with
their terms.

         (b) To the extent  permitted by applicable law,  Borrower hereby waives
presentment,  demand, protest, notice of protest, notice of default or dishonor,
notice of payments and non-payments, or of any default.

         (c) BORROWER  HEREBY WAIVES ALL RIGHTS TO NOTICE,  JUDICIAL  HEARING OR
PRIOR COURT ORDER TO WHICH IT MIGHT  OTHERWISE  HAVE THE RIGHT UNDER ANY FEDERAL
OR STATE STATUTE OR REGULATION IN CONNECTION WITH THE OBTAINING BY LENDER OF ANY


                                      -20-
<PAGE>

PREJUDGMENT  REMEDY  BY  REASON OF THIS  AGREEMENT,  OR BY REASON OF  BORROWER'S
OBLIGATIONS OR ANY RENEWALS OR EXTENSIONS OF THE SAME.  BORROWER ALSO WAIVES ANY
AND ALL OBJECTION WHICH IT MIGHT OTHERWISE ASSERT,  NOW OR IN THE FUTURE, TO THE
EXERCISE OR USE BY LENDER OF ANY RIGHT OF SET-OFF,  REPOSSESSION OR SELF HELP AS
MAY PRESENTLY EXIST UNDER STATUTE OR COMMON LAW.

Section 10. Definitions

     As used herein, the following terms have the following meanings:

     Account Debtor: means a Person who is obligated on an account.

     Agreement: this Amended and Restated Loan and Security Agreement, as it may
be amended, amended and restated, renewed or supplemented from time to time.

     Affiliate: with reference to any Person, any director,  officer or employee
of such Person, any corporation, association, firm or other entity in which such
Person has a direct or indirect  substantial interest or by which such Person is
directly or  indirectly  controlled  or is under direct or indirect  substantial
common  control with such  Person.  For  purposes of this  Agreement,  Borrower,
Parent and the Parent Subsidiaries are Affiliates of one another.

     Bankruptcy Code: Title 11 of the United States Code (11 U.S.C.  Section 101
et seq.), as amended from time to time, or any successor statute.

     Borrower: the meaning specified on page 1.

     Borrowing  Base: as of any date, an amount equal to the sum of: (a) seventy
percent (70%) of Eligible  Accounts on such date, plus (b) seventy percent (70%)
of the value of Eligible Inventory,  based upon the lower of cost (computed on a
first-in-first-out  basis),  fair market value or orderly  liquidation  value as
determined by Lender.

     Borrowing  Base  Certificate:  a  certificate  in the form of Schedule  "O"
attached hereto.

     Collateral: the meaning specified in Section 1.6.

     Documents:  this Agreement,  the Notes,  all collateral  assignments of the
notes and liens described in Section 1.6(a)(iv), all UCC-1 Financing Statements,
and all other agreements, documents and instruments heretofore, now or hereafter
executed  and  delivered  pursuant to this  Agreement  or pursuant to any of the
aforesaid documents.

     Eligible  Accounts:  all accounts of Borrower  that are deemed by Lender in
the exercise of its sole and absolute discretion to be eligible for inclusion in
the  calculation  of the  Borrowing  Base net of any and all  interest,  finance
charges, sales tax, fees, returns,  discounts,  claims, credits, charges, contra
accounts, exchange contracts or other allowances,  offsets and rights of offset,
deductions, counterclaims, disputes, rejections, shortages or other defenses and
all credits  owed or allowed by Borrower  upon any of its  accounts  and further
reduced by the aggregate amount of all reserves,  limits and deductions provided


                                      -21-
<PAGE>

for in this definition and elsewhere in this Agreement.  Eligible Accounts shall
not include the following:

     (a)  accounts  which  remain  unpaid  more than ninety (90) days past their
invoice dates;

     (b)  accounts  which are not due and payable  within  sixty (60) days after
their invoice dates;

     (c) accounts  owing by a single  Account  Debtor if twenty percent (20%) or
more of the  aggregate  balance  owing  by said  Account  Debtor  is  ineligible
pursuant to clauses (a) or (b) above;

     (d) accounts with respect to which the obligation of payment by the Account
Debtor is or may be conditional  for any reason  whatsoever  including,  without
limitation,  accounts arising with respect to goods that were (i) not sold on an
absolute  basis,  (ii)  sold on a bill  and hold  sale  basis,  (iii)  sold on a
consignment sale basis, (iv) sold on a guaranteed sale basis, (v) sold on a sale
or return basis, or (vi) sold on the basis of any other similar understanding;

     (e) accounts with respect to which the Account  Debtor is not a resident or
citizen of, or otherwise  located in, the continental  United States of America,
or with respect to which the Account Debtor is not subject to service of process
in the continental United States of America,  unless such accounts are backed in
full by  irrevocable  letters  of  credit  or  insurance  in form and  substance
satisfactory  to Lender  issued  or  confirmed  by a  domestic  commercial  bank
acceptable to Lender;

     (f) accounts with respect to which the Account  Debtor is the United States
of America or any other federal  governmental body unless such accounts are duly
assigned to Lender in compliance with all applicable  governmental  requirements
(including, without limitation, the Federal Assignment of Claims Act of 1940, as
amended, if applicable);

     (g)  accounts  with  respect to which  Borrower  is or may be liable to the
Account Debtor for goods sold or services  rendered by such Account Debtor,  but
only to the extent of such liability to such Account Debtor;

     (h)  accounts  with respect to which the goods giving rise thereto have not
been shipped and  delivered to and accepted as  satisfactory  by the  applicable
Account  Debtor or with  respect to which the  services  performed  giving  rise
thereto  have not been  completed  and accepted as  satisfactory  by the Account
Debtor thereon;

     (i)  accounts  which are not  invoiced  within  thirty  (30) days after the
shipment and  delivery to and  acceptance  by said  Account  Debtor of the goods
giving rise thereto or the performance of the services giving rise thereto;

     (j) accounts which are not subject to a first priority  perfected  security
interest in favor of Lender;

     (k) that  portion of an account  balance  owed by a single  Account  Debtor
which exceeds fifteen percent (15%) of total accounts  otherwise deemed eligible
hereunder; and


                                      -22-
<PAGE>

     (l)  accounts  with  respect to which the Account  Debtor is located in any
state requiring the filing of a Notice of Business  Activities Report or similar
report in order to permit a Borrower to seek judicial  enforcement in such state
of payment of such account, unless such Borrower has qualified to do business in
such state or has filed a Notice of  Business  Activities  Report or  equivalent
report for the then current year.

     Eligible Inventory: as at any date of determination, all inventory owned by
and in the  possession  of Borrower and located in the United  States of America
that  Lender,  in its sole and  absolute  discretion,  deems to be eligible  for
borrowing  purposes.  Without  limiting the generality of the foregoing,  unless
otherwise agreed by Lender, the following is not Eligible Inventory:

     (a) work-in-process;

     (b)  finished  goods which do not meet the  specifications  of the purchase
order for such goods;

     (c)  inventory  with respect to which  Lender does not have a valid,  first
priority and fully perfected security interest;

     (d) inventory  with respect to which there exists any security  interest or
lien in favor of any Person other than Lender;

     (e) packaging and shipping materials, products and labels;

     (f) inventory that is obsolete;

     (g)  inventory  produced in violation of the Fair Labor  Standards  Act, in
particular provisions contained in Title 29 U.S.C. 215 (a)(i); and

     (h) inventory  located at a location for which Lender does not have a valid
landlord's or  warehouseman's  waiver or  subordination  on terms and conditions
acceptable  to  Lender  in its sole  discretion  and  inventory  located  at any
location other than those listed on Schedule "G".

     Financial Statements:  the reports,  statements and other information to be
delivered to Lender pursuant to Section 3.5.

     First Revolving Loan: the meaning specified in Section 1.1(a).

     First Revolving Loan Note: the meaning specified in Section 1.1(a).

     Generally Accepted  Accounting  Principles:  generally accepted  accounting
principles and practices in the United States of America, consistently applied.

     Indebtedness:  as  applied  to a Person,  (a) all  items,  except  items of
capital stock or of surplus or of unappropriated retained earnings or of amounts
accrued for deferred  income taxes if in compliance  with Section 3.2,  which in
accordance with Generally  Accepted  Accounting  Principles would be included in
determining  total liabilities as shown on the liability side of a balance sheet
of such person as at the date of which Indebtedness is to be determined, (b) all


                                      -23-
<PAGE>

indebtedness secured by any mortgage, pledge, lease, lien or conditional sale or
other title retention  agreement existing on any property or asset owned or held
by such person subject thereto, whether or not such indebtedness shall have been
assumed,  and (c) all  indebtedness  of others which such Person has directly or
indirectly guaranteed,  endorsed, discounted or agreed contingently or otherwise
to purchase or  repurchase  or  otherwise  acquire,  or in respect of which such
Person has  agreed to supply or advance  funds  (whether  by way of loan,  stock
purchase,  capital  contribution  or  otherwise)  or otherwise to become  liable
directly or indirectly with respect thereto.

     Lender: the meaning specified on page 1.

     Loans:  collectively,  the First  Revolving  Loan and the Second  Revolving
Loan.

     Merger:  the merger of DGSE Merger Corp., a Delaware  corporation  ("Merger
Corp.") and wholly-owned  subsidiary of Parent, with and into Borrower, by which
Borrower  shall become a  wholly-owned  Subsidiary  of Parent,  on the terms and
conditions set forth in that certain Amended and Restated  Agreement and Plan of
Merger and  Reorganization,  dated as of January 6, 2007,  by and among  Parent,
Merger Corp., Borrower and the stockholder agent named therein.

     Notes: collectively, the First Revolving Loan Note and the Second Revolving
Loan Note.

     Obligations: the meaning specified in Section 1.2.

     Parent:  DGSE  Companies,  Inc., a Nevada  corporation  and,  following the
consummation of the Merger, the sole stockholder of Borrower.

     Parent Subsidiary: a Subsidiary of Parent other than Borrower.

     Permitted Inter-Company  Transaction:  a cash dividend or distribution made
by Borrower to Parent in  accordance  with any  applicable  restrictions  of the
General Corporation Law of the State of Delaware or a loan by Borrower to Parent
or to a Parent  Subsidiary,  in each case with the proceeds of advances  made by
Lender to Borrower under the First Revolving Loan or the Second  Revolving Loan,
provided that:

         (a) Parent has  executed and  delivered to Lender a limited  continuing
guaranty of the Obligations,  in form and substance  reasonably  satisfactory to
Lender,  covering an amount of the  Obligations not to exceed the sum of (x) the
aggregate  amount of all such  dividends or  distributions  to Parent,  less all
amounts  contributed  by Parent  to  Borrower  as  capital  in  return  for such
dividends or distributions,  and (y) the aggregate outstanding principal balance
of all such inter-company loans to Parent or any Parent Subsidiary; and

         (b) Parent has executed and delivered to Lender a security agreement in
form and substance reasonably  satisfactory to Lender,  pursuant to which Parent
has  granted  Lender  a  second-priority   security  interest  in  all  Stanford
Collateral  (as defined in the  Intercreditor  Agreement,  dated as of July ___,
2006, entered into by and between Texas Capital Bank,  National  Association,  a


                                      -24-
<PAGE>

national banking association Lender ("TCB"), Lender and Parent), subject only to
the first-priority security interest of TCB.

     Person: a corporation,  an association, a partnership,  an organization,  a
business,  an individual or a government or political subdivision thereof or any
governmental agency.

     Second Revolving Loan: the meaning specified in Section 1.1(b).

     Second Revolving Loan Note: the meaning specified in Section 1.1(b).

     Subsidiary:  with  reference  to any  Person,  a  corporation,  or  similar
association  or  entity of which not less  than a  majority  of the  outstanding
shares of the class or  classes  of stock,  have by the terms  thereof  ordinary
voting power to elect a majority of the directors,  managers or trustees of such
corporation,  association  or  entity,  of  which  are  at  the  time  owned  or
controlled,  directly or  indirectly,  by such Person or by a Subsidiary of such
Person.

     Third Party Loan  Documents:  all  agreements,  documents  and  instruments
heretofore,  now or hereafter executed and delivered pursuant to any Third Party
Loans made by Borrower.

     Uniform Commercial Code: the Uniform Commercial Code as in effect from time
to time in the State of Texas,  including,  without  limitation,  any amendments
thereto which are effective after the date hereof.

Section 11. Expenses
            --------

     Borrower  agrees to indemnify and save Lender  harmless from, and to pay or
reimburse Lender for, all reasonable charges,  costs,  damages,  liabilities and
expenses,  including,  without limitation,  reasonable  attorneys' fees, if any,
incurred by Lender in defending or protecting  the security  interests and liens
granted  pursuant to this Agreement or the other  Documents,  or the priority of
any thereof,  or in the  performance of any obligation of Borrower in connection
with the  Collateral  or in the attempted  enforcement  or  enforcement  of this
Agreement or the other Documents,  or in the collection or attempted  collection
of any of the  obligations  owing under any thereof,  or in the  realization  or
attempted realization upon the Collateral.

Section 12. Further Assurances; Possession of Collateral; Custodians
            --------------------------------------------------------

     Borrower  will  deliver  to  Lender  such  financing  statements  and other
instruments  constituting  or  evidencing  items  of  the  Collateral  as may be
reasonably  requested by Lender to better assure it with respect to the security
interests  granted to it pursuant to this Agreement and the other Documents.  To
the extent  permitted by applicable law,  Borrower hereby  authorizes  Lender to
file,  in the name of Borrower,  financing  statements  which Lender in its sole
discretion  deems  necessary to further perfect the security  interests  granted
under this Agreement and the other Documents.

Section 13. Survival of Agreements, Representations and Warranties etc.
            -----------------------------------------------------------

     All agreements,  representations and warranties contained herein or made in
writing  by or on  behalf  of  Borrower,  in  connection  with the  transactions
contemplated  hereby shall survive the execution and delivery of this  Agreement


                                      -25-
<PAGE>

and the other  Documents  shall  survive any  investigation  at any time made by
Lender and any disposition of the Loans by Lender and, to the extent applicable,
shall be deemed to be made a new by each of them  each time an  advance  is made
pursuant hereto or pursuant to the other Documents.  All statements contained in
any  certificate  or other  instrument  delivered  by or on behalf  of  Borrower
pursuant hereto or in connection with the transactions contemplated hereby shall
be deemed representations and warranties made hereunder.

Section 14. Failure to Perform
            ------------------

     If Borrower  shall fail to observe or perform any of the covenants  hereof,
Lender may pay such reasonable amount or incur reasonable  liabilities to remedy
or  attempt  to  remedy  any  such  failure,  and all  such  payments  made  and
liabilities  incurred  shall be for the  account  of  Borrower  and  shall be in
Lender's  sole  discretion  or  shall  be  withdrawn  from  Borrower's  accounts
maintained with Lender.

Section 15. Notices, etc.
            -------------

     All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to be duly  delivered  upon actual  receipt if by
facsimile,  email or over night  courier,  and five (5) days after mailing if by
first class registered mail, return receipt requested

         (a) if to Lender:

             Lender:          Stanford International Bank Ltd.
                              No. 11 Pavilion Drive, St. John's,
                              Antigua, West Indies
                              Attn:  James M. Davis, Chief Financial Officer
                              Facsimile: (901) 680-5265
                              Email:  MDavis@StanfordEagle.com

             with a copy to:

                              Adorno & Yoss LLP
                              225 Ponce de Leon Boulevard, Suite 400
                              Coral Gables, FL 33134
                              Attn: Seth P. Joseph, Esq.
                              Facsimile: (305) 460-1422
                              Email: SPJ@Adorno.com

         or at such  other  address  as may have been  furnished  in  writing by
         Lender to Borrower; or

         (b) if to Borrower:

             Borrower:        Superior Galleries, Inc.
                              9478 W. Olympic Blvd.
                              Beverly Hills, California 90212
                              Attn:  Chief Executive Officer
                              Facsimile:  (310) 203-0496
                              Email:


                                      -26-
<PAGE>

             with a copy to:

                              DGSE Companies, Inc.
                              2817 Forest Lane
                              Dallas, TX  75234
                              Attn:  Dr. L.S. Smith
                              Facsimile:  (972) 772-3093
                              Email:  LSSmith1@ClassicNet.net

             with an additional copy to:

                              Sheppard, Mullin, Richter & Hampton, LLP
                              12275 El Camino Real, Suite 200
                              San Diego, California  92130-2006
                              Attn:  John J. Hentrich, Esq.
                              Facsimile:  (858) 509-3691
                              Email:  JHentrich@SheppardMullin.com

         or at such  other  address  as may have been  furnished  in  writing by
         Borrower to Lender.

Section 16. Amendments and Waivers
            ----------------------

         Neither this Agreement nor any other Document nor any term hereof or
thereof may be changed, waived, discharged or terminated except by a writing
signed by the party to be charged.

Section 17. Term
            ----

     The term of this Agreement and the other  Documents  shall be from the date
hereof and  continue  until all  amounts  due  hereunder  are paid in full.  Any
expiration  or  termination  of this  Agreement  shall not  affect any rights of
Lender  under  this  Agreement  or under the other  Documents  and upon any such
expiration or  termination  Borrower  shall be obligated to forthwith pay all of
the Loans and Borrower  shall  continue to be bound by all of the  provisions of
this Agreement until all of the Loans shall have been paid in full.

Section 18. Conditions Precedent
            --------------------

     18.1 The  obligation of Lender to make the Loans and advances to be made by
it hereunder is subject to the following conditions precedent;

         (a) Approval of Lender Counsel

         All legal  matters  incident to the  transactions  hereby  contemplated
shall be satisfactory to counsel for Lender.


                                      -27-
<PAGE>

         (b) Proof of Corporate Action

         Lender shall have received  certified  copies of all  corporate  action
taken by Borrower to authorize the execution and delivery of this  Agreement and
the Notes and Loans hereunder, and such other documents as Lender or its counsel
shall reasonably request.

         (c) Corporate Documents and Opinions

         Borrower is furnishing to Lender a certificate  of good standing of the
state of its  incorporation,  resolutions,  incumbency  certificates,  and other
documents which Borrower  acknowledges are being relied upon by Lender, and such
other  documents are to be in the form and of the content as may be satisfactory
to Lender and its counsel.

         (d) Loan Documents

         Receipt  by Lender of the  Notes  fully  executed  by  Borrower,  UCC-1
Financing Statements in form satisfactory for filing with the Delaware Secretary
of State and other material documents required by Lender.

         (e) Insurance

         Receipt by Lender of the  policies  of  insurance  in  compliance  with
Section 1.9.

         (f) Opinion of Counsel

         Lender shall have received from counsel to Borrower a written  opinion,
reasonably satisfactory to Lender.

         (g) Representations and Warranties

         The Representations and Warranties  contained in Section 2 herein shall
be true on and as of the date of closing.

         (h) Collateral

         Receipt by Lender of any of the Collateral  where  possession by Lender
is necessary to perfect its security interest therein.

         (i) Merger

         Lender shall have  received  satisfactory  evidence that the Merger has
been consummated.

         (j) Parent Approval

         Lender shall have received  satisfactory  written approval by Parent of
the terms and provisions of this Agreement and the other Documents.


                                      -28-
<PAGE>

     18.2 The  obligation  of the Lender to make each  subsequent  advance to be
made by it hereunder is subject to the conditions precedent that:

         (a) No Event of Default

         No Event of Default  specified in Section 5 hereof,  and no event which
pursuant to the  provisions  of Section 5 with the lapse of time  and/or  notice
specified  therein  would  become such an Event of Default,  has occurred and is
continuing; and

         (b) No Material Adverse Change

         There has been no material adverse change in the consolidated financial
condition of Borrower and its consolidated subsidiaries; and

         (c) Representations and Warranties

         The Representations and Warranties  contained in Section 2 are true and
correct.

Lender  shall  have  received  a  certificate  of the CEO  and  CFO of  Borrower
certifying  as of the date of the current  advance  that (i) no Event of Default
specified in Section 5 hereof exists or is continuing,  (ii) no material  change
has taken place with regard to its financial  condition as represented to Lender
and (iii) the  Representations  and Warranties  contained in Section 2 are still
true and correct.

     18.3 By  delivering  the  Notes  and each  other  Document  to  Lender  and
receiving the Loans and advances,  Borrower  represents that no Event of Default
specified in Section 5 hereof  exists or is continuing  and no material  adverse
change has taken place with regard to its financial  condition as represented to
Lender.

     18.4 Loan Administration.

         Advances made under the Loans shall be as follows:

         (a) A request for an advance  shall be made by Borrower  giving  Lender
notice of its intention to borrow,  in which notice  Borrower  shall specify the
amount of the proposed  borrowing,  whether such  proposed  borrowing  will be a
borrowing under this First Revolving Loan or the Second  Revolving Loan, and the
proposed  borrowing date, not later than 2:00 p.m. Eastern time one (1) business
day  prior to the  proposed  borrowing  date;  provided,  however,  that no such
request may be made at a time when there exists an Event of Default.

         (b) In the  case  of  each  request  for an  advance  under  the  First
Revolving Loan, Borrower shall deliver to Lender,  concurrently with delivery of
the notice of borrowing required by clause (a) of this Section 18.4, a Borrowing
Base  Certificate  executed by Borrower  and prepared as of a date not more than
thirty (30) business days prior to the date of such requested advance.

         (c) Borrower hereby  authorizes Lender to disburse the proceeds of each
revolving credit advance  requested by wire transfer to such bank account as may


                                      -29-
<PAGE>

be agreed upon by Borrower and Lender from time to time or elsewhere if pursuant
to written direction from Borrower.

         (d) All revolving  credit advances and other extensions of credit to or
for the benefit of Borrower shall constitute one general  Obligation of Borrower
and shall be secured by Lender's lien upon all of the Collateral.

         (e) Lender  shall enter all  revolving  credit  advances as debits to a
loan  account in the name of Borrower and shall also record in said loan account
all payments made by Borrower on any  Obligations and all proceeds of Collateral
which are  indefeasibly  paid to Lender,  and may record therein,  in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly  chargeable to Borrower.  All payments and
collections  shall be applied  first to fees,  costs and  expenses due and owing
under the  Documents,  then to interest due and owing under the  Documents,  and
then to principal outstanding under the Loan.

         (f) Lender will  account to Borrower  monthly  with a statement  of the
Loans, charges and payments made pursuant to this Agreement, and such accounting
rendered by Lender shall be deemed final,  binding and conclusive  upon Borrower
unless  Lender is notified by Borrower in writing to the contrary  within thirty
(30) days of the date each accounting is mailed to Borrower.  Such notices shall
be deemed an objection to those items specifically objected to therein.

         (g) Borrower shall  establish one or more bank accounts for deposits of
advances  made under the Loans and for  deposits  of  repayments  of Third Party
Loans,  and shall  assign such  accounts to Lender.  Borrower  shall not deposit
advances from Lender or repayments  from borrowers  under Third Party Loans into
any other accounts.

Section 19. Setoff.
            -------

     Borrower hereby gives Lender a security interest in, and a right of set-off
for the Loans  upon or  against,  all the  deposits,  credits,  Collateral,  and
property of Borrower, now or hereafter in the possession or control of Lender or
in transit to it.  Lender may at any time apply or set-off the same, or any part
thereof, to either of the Loans even though unmatured.

Section 20. Miscellaneous
            -------------

         (a) This Agreement and each other document  granting  Lender a security
interest in the  Collateral  is a security  agreement  within the meaning of the
Uniform  Commercial Code. Where any provision in this Agreement refers to action
to be taken by any Person, or which such Person is prohibited from taking,  such
provision  shall  be  applicable  whether  such  action  is  taken  directly  or
indirectly by such Person. To the extent there is any inconsistency  between the
terms of this Agreement and any of the other  Documents,  this  Agreement  shall
control.  All of the terms of this  Agreement and the other  Documents  shall be
binding upon and inure to the benefit of and be  enforceable  by the  respective
heirs, executors, administrators,  successors and assigns of the parties hereto,
whether so  expressed  or not, and by any other holder or holders at the time of
the  Loan or any  part  thereof.  The  headings  in this  Agreement  are for the
purposes of reference  only and shall not limit or  otherwise  affect any of the
terms hereof.  This  Agreement may be executed in two (2) or more  counterparts,


                                      -30-
<PAGE>

each of which shall be deemed an original,  and by the several parties hereto in
separate  counterparts,  but all of which together shall  constitute one and the
same instrument.

         (b) This  Agreement  is between  the Lender and the  Borrower  only and
shall not be relied upon by any third party.  Without  limiting  the  foregoing,
Lender shall have no liability to any third party  whatever  (including  without
limitation  Borrower or anyone conducting business with any of the foregoing) in
the event Lender for any reason and at any time  determines  not to advance sums
under the Notes  and/or for any reason or otherwise  exercises  its rights under
this Agreement and/or the other Documents.

         (c) Subject to Section  552(a) of the  Bankruptcy  Code,  the  security
interests  granted hereby extends to the Collateral,  whether acquired before or
after the commencement of a case under the Bankruptcy Code.

Section 21. CHOICE OF LAW; CONSENT TO JURISDICTION.
            ---------------------------------------

     THIS  AGREEMENT  AND THE NOTES  SHALL BE  GOVERNED  BY,  AND  CONSTRUED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,  WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE  PRINCIPLES OF CONFLICTS OF LAWS.  IF ANY ACTION  ARISING OUT OF THIS
AGREEMENT  OR THE NOTES IS  COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE
OF TEXAS OR IN THE U.S.  DISTRICT  COURT  FOR THE  NORTHERN  DISTRICT  OF TEXAS,
BORROWER  HEREBY  CONSENTS  TO THE  JURISDICTION  OF ANY SUCH  COURT IN ANY SUCH
ACTION AND TO THE LAYING OF VENUE IN THE STATE OF TEXAS. ANY PROCESS IN ANY SUCH
ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED MAIL,  POSTAGE  PREPAID,  TO
BORROWER AT THE ADDRESS  DESCRIBED IN SECTION 15 HEREOF.  ANY MATTERS  AFFECTING
THE  ENFORCEMENT  OR   INTERPRETATION  OF  LENDER'S  SECURITY  INTEREST  IN  THE
COLLATERAL  SHALL (TO THE  EXTENT  NOT  GOVERNED  BY TEXAS LAW  PURSUANT  TO THE
AGREEMENT SET FORTH HEREIN) BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE
LAWS OF THE STATE OF DELAWARE OR CALIFORNIA, AS APPLICABLE.

         [Rest of page intentionally left blank; signature page follows]









                                      -31-
<PAGE>

     IN WITNESS WHEREOF,  each of the parties hereto has executed this Agreement
on the day first above mentioned.

SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:

                                                BORROWER:
                                                Superior Galleries, Inc.


                                                BY:
- -----------------------------------                -----------------------------
                                                   Name:
                                                   Title:

                                                LENDER
                                                Stanford Financial Group Company


                                                BY: /s/ James M. Davis
- -----------------------------------                -----------------------------
                                                   James M. Davis
                                                   Its Chief Financial Officer















                                      -32-
<PAGE>

                COMMERCIAL LOAN AND SECURITY AGREEMENT SCHEDULES

[ TO COME ]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.4
<SEQUENCE>5
<FILENAME>dgse8kex24010907.txt
<DESCRIPTION>FORM OF WARRANT
<TEXT>

                                                                     Exhibit 2.4

NEITHER THIS WARRANT NOR THE WARRANT SHARES (AS  HEREINAFTER  DEFINED) HAVE BEEN
REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED (THE "ACT"),  OR THE
SECURITIES  LAWS OF ANY STATE.  THIS WARRANT AND THE WARRANT SHARES MAY BE SOLD,
OFFERED  FOR  SALE,  PLEDGED,  HYPOTHECATED  OR  OTHERWISE  TRANSFERRED  ONLY IN
COMPLIANCE  WITH THE ACT AND SUCH LAWS.  THIS LEGEND SHALL BE ENDORSED  UPON ANY
WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.



                                                                Warrant No. ____

                                     WARRANT
                       For the Purchase of Common Stock of
                              DGSE COMPANIES, INC.
                              a Nevada corporation

         VOID AFTER 5:00 P.M., EASTERN STANDARD TIME, ON ________, 2014.


_________ Shares                                                 _________, 2007


     FOR VALUE RECEIVED,  DGSE COMPANIES,  INC., a Nevada corporation  (together
with  its   successors,   the   "Company"),   hereby   certifies  that  STANFORD
INTERNATIONAL BANK LTD. (the "Holder") is entitled, subject to the provisions of
this Warrant,  to purchase from the Company up to  ___________  shares of common
stock (the "Common Shares"),  par value $0.01 per share ("Common Stock"), of the
Company,  at an initial  exercise  price equal to $______ per Common  Share (the
"Exercise  Price"),  during the period commencing  ________,  2007 (the "Date of
Issuance") and expiring at 5:00 P.M.,  Eastern Standard time, on ________,  2014
(the "Expiration Date").

     The  number  of Common  Shares to be  received  upon the  exercise  of this
Warrant may be adjusted from time to time as hereinafter  set forth.  The Common
Shares  deliverable  upon such exercise,  or the  entitlement  thereto upon such
exercise,  and as so  adjusted  from  time to time,  are  hereinafter  sometimes
referred to as "Warrant  Shares".  The  warrants  issued on the same date hereof
bearing the same terms and  conditions  as this  Warrant  shall be  collectively
referred to as the "Warrants".

     The Holder agrees with the Company that this Warrant is issued, and all the
rights  hereunder shall be held subject to, all of the  conditions,  limitations
and provisions set forth herein.

     1.   EXERCISE OF WARRANT

         (a)  By  Payment  of  Cash.  This  Warrant  may  be  exercised  by  its
presentation  and  surrender  to the  Company at its  principal  office (or such
office or agency of the  Company  as it may  designate  in writing to the Holder
hereof),  commencing on the Date of Issuance and expiring at 5:00 P.M.,  Eastern
Standard time, on the Expiration  Date, with the Warrant  Exercise Form attached
hereto duly completed and executed and accompanied by payment (either in cash or
by certified or official bank check or by wire transfer, payable to the order of
the  Company) of the Exercise  Price for the number of shares  specified in such
form.


                                      -1-
<PAGE>

     The Company  agrees that the Holder hereof shall be deemed the record owner
of such  Common  Shares as of the close of  business  on the date on which  this
Warrant  shall have been  presented  and payment made for such Common  Shares as
aforesaid whether or not the Company or its transfer agent is open for business.
Certificates for the Common Shares so purchased shall be delivered to the Holder
hereof  within a  reasonable  time,  not  exceeding  15 days,  after the  rights
represented by this Warrant shall have been so exercised. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation,  execute and deliver a new  Warrant of like tenor  evidencing  the
rights of the Holder  hereof to purchase  the balance of the shares  purchasable
hereunder as soon as reasonably practicable.

     Notwithstanding  anything to the contrary set forth above, each exercise of
this  Warrant  shall cover at least the lesser of (i) 10,000  Common  Shares (as
adjusted for stock splits, stock dividends, combinations and the like), and (ii)
the total number of Common Shares then subject to the Warrant.

         (b)  Cashless  Exercise.  In lieu of the  payment  method  set forth in
Section 1(a) above,  if the Common Stock is then traded or listed on a Principal
Market (as defined below),  the Holder may elect to exchange all or some of this
Warrant for the Common  Shares  equal to the value of the amount of this Warrant
being  exchanged on the date of exchange.  If the Holder elects to exchange this
Warrant as provided in this Section 1(b), the Holder shall tender to the Company
this Warrant for the amount  being  exchanged,  along with the Warrant  Exercise
Form  attached  hereto duly  completed  and  executed  indicating  the  Holder's
election to exchange some or all of this Warrant, and the Company shall issue to
the Holder the number of Common Shares computed using the following formula:


                                    X =    Y x (A - B)
                                         ----------------
                                                A

     Where:   X =    The number of Common Shares to be issued to the Holder.

                     Y =   The number of Common Shares for which this Warrant is
                           being exercised (as adjusted to
                           the date of such calculation).

                     A =   The Market Price (as defined below) of one Common
                           Share.

                     B =   The Exercise Price (as adjusted to the date of
                           such calculation).

     The Warrant  exchange shall take place on the date specified in the form of
notice or if the date the notice is  received  by the  Company is later than the
date specified in the notice, on the date the notice is received by the Company.

     As used herein, the term "Market Price" at any date shall be the arithmetic
mean of the last  reported  sale price or closing price for the most recent five
consecutive  Trading Days ending on such date (or, if such date is not a Trading
Day, the next preceding Trading Day) on which trading occurred on such Principal
Market in the Common  Stock;  the term  "Trading Day" means any day other than a
Saturday or a Sunday on which the Company's Principal Market is open for trading
in equity  securities;  and the term "Principal Market" means the Nasdaq Capital
Market,  the New York Stock  Exchange,  the Nasdaq Global  Market,  the American
Stock Exchange, the OTC Bulletin Board or any other national securities exchange
registered  under Section 6 of the  Securities  Exchange Act of 1934, as amended
(the "Exchange Act"),  whichever is at the time the principal  trading exchange,
market or inter-dealer or automated quotation system for the Common Stock.


                                      -2-
<PAGE>

         (c) "Easy Sale"  Exercise.  In lieu of the payment  method set forth in
Section 1(a) above, when permitted by law and applicable  regulations (including
rules of the Nasdaq and National  Association of Securities  Dealers  ("NASD")),
the Holder may pay the aggregate  Exercise Price (the "Exercise Amount") through
a "same day sale"  commitment from the Holder (and if applicable a broker-dealer
that is a member of the NASD (an "NASD Dealer")), whereby the Holder irrevocably
elects to exercise this Warrant and to sell a portion of the shares so purchased
to pay the Exercise  Amount and the Holder (or, if applicable,  the NASD Dealer)
commits  upon sale (or, in the case of the NASD  Dealer,  upon  receipt) of such
shares to forward the Exercise Amount directly to the Company.

     2. COVENANTS BY THE COMPANY

     The Company covenants and agrees as follows:

         (a)  Reservation  of Shares.  During the period within which the rights
represented by this Warrant may be exercised,  the Company shall,  at all times,
reserve and keep available out of its authorized  capital stock,  solely for the
purposes of issuance upon  exercise of this  Warrant,  such number of its Common
Shares as shall be issuable  upon the exercise of this  Warrant.  If at any time
the number of  authorized  Common  Shares shall not be  sufficient to effect the
exercise of this Warrant,  the Company will take such corporate action as may be
necessary to increase its authorized  but unissued  Common Shares to such number
of shares as shall be  sufficient  for such  purpose.  The  Company  shall  have
analogous  obligations with respect to any other securities or property issuable
upon exercise of this Warrant.

         (b) Valid  Issuance,  etc.  All Common  Shares which may be issued upon
exercise of the rights represented by this Warrant included herein will be, upon
payment in full thereof,  validly issued,  fully paid,  non-assessable  and free
from all liens of the Company.

         (c) Taxes.  All original issue taxes payable in respect of the issuance
of Common  Shares upon the  exercise of the rights  represented  by this Warrant
shall be borne by the Company,  but in no event shall the Company be responsible
or liable for income  taxes or transfer  taxes upon the  issuance or transfer of
this Warrant or the Warrant Shares. The Company shall not be required to pay any
tax or other charge  imposed in  connection  with any  transfer  involved in the
issuance of any certificate for Common Shares in any name other than that of the
Holder of this  Warrant,  and in such case the Company  shall not be required to
issue or  deliver  any stock  certificate  or  security  until such tax or other
charge has been paid, or it has been  established  to the  Company's  reasonable
satisfaction that no tax or other charge is due.

         (d)  Fractional  Shares.  The  Company  shall not be  required to issue
certificates  representing fractions of Common Shares. In lieu of any fractional
interests,  the Company  shall make a cash payment  equal to the Exercise  Price
multiplied by such fraction.

     3.   EXCHANGE OR ASSIGNMENT OF WARRANT

     This Warrant is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender hereof to the Company for other warrants of like
tenor but  different  denominations,  entitling  the Holder to  purchase  in the
aggregate the same number of Common Shares then purchasable  hereunder.  Subject
to the provisions of this Warrant and the receipt by the Company of any required
representations  and  agreements,  upon surrender of this Warrant to the Company
with the Warrant  Assignment Form annexed hereto duly completed and executed and
funds sufficient to pay any transfer tax or charge,  the Company shall,  without
additional charge, execute and deliver a new warrant in the name of the assignee
named in such  instrument  of  assignment  and this  Warrant  shall  promptly be
canceled. In the event of a partial assignment of this Warrant, the new warrants


                                      -3-
<PAGE>

issued to the assignee and the Holder shall in the aggregate be exercisable  for
the same  number of Common  Shares as the  number of Common  Shares  purchasable
under this Warrant at the time of the partial assignment.

     4.   RIGHTS OF THE HOLDER

     The Holder shall not, by virtue hereof,  be entitled to any voting or other
rights of a  stockholder  of the  Company,  either at law or in equity,  and the
rights of the Holder are limited to those expressed in this Warrant.

     5.   ADJUSTMENT OF EXERCISE PRICE

         (a) Common Stock Dividends; Common Stock Splits;  Reclassification.  If
the  Company,  at any time while this  Warrant is  outstanding,  shall (a) pay a
stock dividend on its Common Stock, (b) split or subdivide outstanding shares of
Common  Stock into a larger  number of shares (or  reverse  split or combine the
outstanding shares of Common Stock into a smaller number of shares) or (c) issue
by reclassification of shares of Common Stock any shares of capital stock of the
Company,  then (i) the Exercise  Price shall be  multiplied  by a fraction,  the
numerator  of which  shall be the number of shares of Common  Stock  outstanding
prior to such event and the  denominator  of which shall be the number of shares
of Common  Stock  outstanding  after such event and (ii) the number of shares of
the Warrant  Shares shall be  multiplied  by a fraction,  the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
outstanding  immediately  prior to such event.  Any adjustment  made pursuant to
this Section 5(a) shall become effective  immediately  after the record date for
the  determination  of  stockholders   entitled  to  receive  such  dividend  or
distribution or, in the case of a subdivision or re-classification, shall become
effective immediately after the effective date thereof.

         (b) Rights; Options;  Warrants or Other Securities.  If the Company, at
any time while  this  Warrant is  outstanding,  shall fix a record  date for the
issuance of rights, options,  warrants or other securities to all the holders of
its Common  Stock  entitling  them to  subscribe  for or  purchase,  convert to,
exchange for or otherwise acquire shares of Common Stock for no consideration or
at a price per share less than the Exercise  Price,  the Exercise Price shall be
multiplied  by a fraction,  the numerator of which shall be the number of shares
of Common Stock outstanding  immediately prior to such issuance or sale plus the
number of shares of Common Stock which the aggregate  consideration  received by
the Company (including the exercise price paid for Convertible Securities) would
purchase at the Exercise Price, and the denominator of which shall be the number
of shares of Common Stock  outstanding  immediately  prior to such issuance date
plus the number of additional  shares of Common Stock offered for  subscription,
purchase,  conversion,  exchange  or  acquisition,  as the  case  may  be.  Such
adjustment  shall be made  whenever  such  rights,  options,  warrants  or other
securities are issued,  and shall become effective  immediately after the record
date for the  determination  of  stockholders  entitled to receive  such rights,
options, warrants or other securities.

         (c) Subscription Rights. If the Company, at any time while this Warrant
is outstanding,  shall fix a record date for the  distribution to holders of its
Common  Stock,  evidence  of its  indebtedness  or  assets or  rights,  options,
warrants or other security (excluding those referred to in Sections 5(a) or 5(b)
above and  excluding  Excluded  Securities)  entitling  them to subscribe for or
purchase,  convert to, exchange for or otherwise  acquire any security,  then in
each such case the Exercise  Price at which this  Warrant  shall  thereafter  be
exercisable  shall be determined  by  multiplying  the Exercise  Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the  per-share  Market  Price on such  record  date  less the then fair
market  value at such  record  date of the portion of such assets or evidence of
indebtedness so distributed  applicable to one outstanding share of Common Stock


                                      -4-
<PAGE>

as determined by the Board of Directors in good faith,  and the  denominator  of
which shall be the per-share Market Price as of such record date.

         (d) Rounding.  All  calculations  under this Section 5 shall be made to
the nearest 1/10th of a cent or the nearest  l/100th of a share, as the case may
be.

         (e) Notice of  Adjustment.  Whenever  the  Exercise  Price is  adjusted
pursuant to this Section 5, the Company shall  promptly  deliver to the Holder a
notice setting forth the Exercise Price after such  adjustment and setting forth
a brief statement of the facts requiring such  adjustment.  Such notice shall be
signed by the chairman,  chief executive  officer,  chief  operating  officer or
chief financial officer of the Company.

         (f)  Treasury  Shares.  For  purposes of this  Section 5, the number of
shares of Common Stock  outstanding  at any given time shall not include  shares
owned or held by or for the account of the Company,  and the  disposition of any
shares so owned or held shall be  considered an issue or sale of Common Stock by
the Company.

         (g) Change of Control;  Compulsory  Share Exchange.  In case of (A) any
Change of Control  Transaction  (as defined below) or (B) any  compulsory  share
exchange  pursuant to which the Common Stock is converted into other securities,
cash or property (each, an "Event"),  lawful  provision shall be made (which may
be conditioned  upon the surrender and exchange of this Warrant for a warrant of
like  tenor,  subject to such  adjustments  as may be  reasonably  necessary  to
account for the applicable transaction,  including proportionate  adjustments to
the  Exercise  Price) so that the  Holder  shall  have the right  thereafter  to
exercise  this  Warrant  for  shares  of stock and  other  securities,  cash and
property  receivable  upon or  deemed  to be held by  holders  of  Common  Stock
following  such  Event,  and the  Holder  shall be  entitled  upon such Event to
receive  upon  exercise  hereof  such  amount  of  shares  of  stock  and  other
securities,  cash or property  as the shares of the Common  Stock of the Company
into which this  Warrant  could have been  exercised  immediately  prior to such
Event  (without  taking into  account any  limitations  or  restrictions  on the
exercisability of this Warrant) would have been entitled.  The terms of any such
Event shall include such terms so as to continue to give to the Holder the right
to receive the securities,  cash or property set forth in this Section 5(g) upon
any exercise or redemption  following  such Event,  and, in the case of an Event
specified in clause (A) above,  the  successor  corporation  or other entity (if
other  than  the  Company)  resulting  from  such   reorganization,   merger  or
consolidation,  or the person acquiring the properties and assets, or such other
controlling corporation or entity as may be appropriate,  shall expressly assume
the  obligation  to deliver the  securities  or other assets which the Holder is
entitled  to  receive  hereunder.  The  provisions  of this  Section  5(g) shall
similarly apply to successive Events.  "Change of Control Transaction" means the
occurrence  of any (i)  merger  or  consolidation  of the  Company  with or into
another entity, unless the holders of the Company's securities immediately prior
to such  transaction or series of transactions  continue to hold at least 50% of
such securities following such transaction or series of transactions,  or (ii) a
sale, conveyance,  lease, transfer or disposition of all or substantially all of
the assets of the Company in one or a series of related transactions.

         (h) Issuances  Below Exercise  Price.  Subject to the last paragraph of
this  Section  5(h),  if  the  Company,  at  any  time  while  this  Warrant  is
outstanding:

             (i)  issues or sells,  or is  deemed  to have  issued or sold,  any
Common Stock (other than any Excluded Securities (as defined below));

             (ii) in any manner  grants,  issues or sells any  rights,  options,
warrants,  options to subscribe for or to purchase  Common Stock or any stock or
other  securities  convertible into or exchangeable for Common Stock (other than
any Excluded  Securities) (such rights,  options or warrants being herein called


                                      -5-
<PAGE>

"Options" and such convertible or exchangeable  stock or securities being herein
called "Convertible  Securities") or reprices of any of the Company's issued and
outstanding Options or Convertible  Securities (other than reprices triggered by
the  issuance of this  Warrant or any other  warrants  being  issued on the date
hereof); or

             (iii) in any  manner  issues  or sells any  Convertible  Securities
(other than any Excluded Securities);

for (a) with  respect to  paragraph  (i) above,  a price per share,  or (b) with
respect to  paragraphs  (ii) or (iii) above,  a price per share for which Common
Stock is issuable upon the exercise of such Options (together with the price per
optioned  share,  if  any,  paid  for the  issuance  of  such  Options)  or upon
conversion or exchange of such Convertible Securities;  in either case, which is
less than the Exercise  Price in effect  immediately  prior to such  issuance or
sale, then,  immediately after such issuance,  sale or grant, the Exercise Price
shall be  adjusted  by  multiplying  the  Exercise  Price  then in  effect  by a
fraction,  (x) the  numerator  of which  shall be the sum of (1) the  number  of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(2) the  number  of shares of Common  Stock  which the  aggregate  consideration
received  by the  Company  for  such  Common  Stock or  Convertible  Securities,
together with any  consideration  receivable  upon the exercise or conversion of
such  Convertible  Securities,  then issued would purchase at the Exercise Price
then in effect;  and (y) the  denominator of which shall be the number of shares
of Common Stock outstanding immediately after such issue or sale plus the number
of shares of Common  Stock then  issued or  issuable  upon the  exercise  of any
Convertible  Securities then issued. No modification of the issuance terms shall
be made upon the  actual  issuance  of such  Common  Stock  upon  conversion  or
exchange of such Options or Convertible Securities.

     "Excluded  Securities"  means (i) options to be granted pursuant to a stock
option  plan  approved  by  the  stockholders  of  the  Company  or by  Stanford
International  Bank Ltd.  ("Stanford"),  (ii) shares of Common Stock issued upon
conversion or exercise of warrants, options or other securities convertible into
Common  Stock  which are or become  outstanding  on the date hereof or which are
described in clause (i) next above,  (iii) shares of Common Stock or  securities
convertible  into or exercisable  for shares of Common Stock issued or deemed to
be issued by the  Company in  connection  with a  strategic  acquisition  by the
Company of the assets or business,  or division thereof, of another entity which
acquisition  has been approved by Stanford in writing or by the  stockholders of
the  Company,  (iv)  issuances  of rights in  connection  with the adoption of a
stockholder rights plan, or (v) any other issuance of securities  referred to in
Sections 5(a), 5(b) or 5(c) above.

     Notwithstanding  anything  herein to the contrary,  no adjustment  shall be
made to the Exercise Price  hereunder as a result of the first 100,000 shares of
Common Stock issued or issuable  upon the exercise of Options or the  conversion
or  exchange  of  Convertible  Securities  issued  during any fiscal year of the
Company  while this  Warrant is  outstanding.  If this amount is exceeded in any
such fiscal year,  the Exercise  Price shall be adjusted in accordance  with the
provisions  hereof  based  solely  on the  shares of  Common  Stock  sold or the
exercise  price or conversion  price of the Options and  Convertible  Securities
issued,  as  applicable,  thereafter,  without any  adjustment in respect of the
initial 100,000 shares of Common Stock, Options or Convertible Securities issued
in such fiscal year.

         (i)  Effect on  Exercise  Price of  Certain  Events.  For  purposes  of
determining the adjusted  Exercise Price under Section 5(h), the following shall
be applicable:

             (i)  Calculation of  Consideration  Received.  If any Common Stock,
Options  or  Convertible  Securities  are  issued or sold or deemed to have been
issued or sold for cash, the  consideration  received therefor will be deemed to
be the gross amount  received by the Company  therefor,  without  deducting  any
expenses  paid or incurred by the Company or any  commissions  or  compensations


                                      -6-
<PAGE>

paid or  concessions  or discounts  allowed to  underwriters,  dealers or others
performing  similar  services in connection with such issue or sale. In case any
Common  Stock,  Options  or  Convertible  Securities  are  issued  or sold for a
consideration  other than cash, the amount of the consideration  other than cash
received by the  Company  will be the fair value of such  consideration,  except
where such  consideration  consists of securities listed or quoted on a national
securities  exchange or national  quotation  system, in which case the amount of
consideration  received by the  Company  will be the  arithmetic  average of the
closing sale price of such  security for the five (5)  consecutive  trading days
immediately  preceding  the date of receipt  thereof.  In case any Common Stock,
Options or Convertible  Securities are issued to the owners of the non-surviving
entity in  connection  with any  merger in which the  Company  is the  surviving
entity, the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable  to such Common Stock,  Options or Convertible  Securities,  as the
case may be. The fair value of any consideration  other than cash or such listed
or quoted  securities will be determined in good faith by the Board of Directors
of the Company.

             (ii)  Integrated  Transactions.  In case any  Option  is  issued in
connection with the issue or sale of other  securities of the Company,  together
comprising one  integrated  transaction  in which no specific  consideration  is
allocated to such Options by the parties thereto,  the Options will be deemed to
have been issued for an aggregate consideration of $.002.

             (iii) Record Date.  If the Company takes a record of the holders of
Common  Stock for the  purpose of  entitling  them (a) to receive a dividend  or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to  subscribe  for or  purchase  Common  Stock,  Options  or  Convertible
Securities,  then such record date will be deemed to be the date of the issue or
sale of the shares of Common  Stock  deemed to have been issued or sold upon the
declaration  of such  dividend or the making of such other  distribution  or the
date of the granting of such right of subscription or purchase,  as the case may
be.

             (iv) Other Events.  If any event occurs that would adversely affect
the rights of the Holder of this  Warrant but is not  expressly  provided for by
this  Section  5  (including,   without   limitation,   the  granting  of  stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Exercise  Price so as to protect  the rights of the Holder;  provided,  however,
that no such adjustment will increase the Exercise Price.

         (j) Notice of Certain Events. If:

             (i)  the   Company   shall   declare  a  dividend   (or  any  other
distribution) on its Common Stock;

             (ii) the Company shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock;

             (iii) the Company  shall  authorize  the granting to the holders of
all of its Common  Stock  rights or warrants to  subscribe  for or purchase  any
shares of capital stock of any class or of any rights  (other than  issuances of
rights in connection with the adoption of a stockholder rights plan);

             (iv) the  approval  of any  stockholders  of the  Company  shall be
required in connection with any capital reorganization,  reclassification of the
Company's  capital stock, any  consolidation or merger to which the Company is a
party,  any sale or  transfer of all or  substantially  all of the assets of the
Company,  or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; or


                                      -7-
<PAGE>

             (v) the  Company  shall  authorize  the  voluntary  or  involuntary
dissolution, liquidation or winding up of the affairs of the Company;

then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant,  and shall cause to be delivered to the
Holder,  at least 10 calendar days prior to the  applicable  record or effective
date  hereinafter  specified,  a notice  (provided  the  Company may exclude any
information which it deems to be material  non-public  information)  stating (a)
the date on which a record  is to be taken  for the  purpose  of such  dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the  holders of Common  Stock of record to be  entitled  to
such  dividend,  distributions,   redemption,  rights  or  warrants  are  to  be
determined,  or (b) the date on  which  such  reorganization,  reclassification,
consolidation,  merger,  sale,  transfer or share exchange is expected to become
effective  or close,  and the date as of which it is  expected  that  holders of
Common  Stock of record  shall be entitled to  exchange  their  shares of Common
Stock  for   securities,   cash  or  other   property   deliverable   upon  such
reorganization, reclassification, consolidation, merger, sale, transfer or share
exchange;  provided, however, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action  required to be specified in such notice.  Nothing  herein shall prohibit
the Holder from exercising  this Warrant during the 10-day period  commencing on
the date of such notice.

         (k) Increase in Exercise Price. In no event shall any provision in this
Section 5 cause the Exercise  Price to be greater than the Exercise Price on the
date  of  issuance  of  this  Warrant,  except  for a  reverse  split  or  other
combination of the  outstanding  shares of Common Stock into a smaller number of
shares as  referenced  in Section  5(a) above.  Notwithstanding  anything to the
contrary in this Section 5, in the event of any adjustment of the Exercise Price
or in the  securities  into which this  Warrant may be  exercised,  the Exercise
Price shall be increased as necessary  such that the Exercise Price shall be not
less than the par value of the  shares of capital  stock for which this  Warrant
may be exercised.

     6.   INVESTMENT INTENT

     Unless,  prior to the exercise of the Warrant,  the issuance of the Warrant
Shares has been registered with the Securities and Exchange  Commission pursuant
to the Securities Act of 1933, as amended (the  "Securities  Act"),  the Warrant
Exercise  Form shall be  accompanied  by a  representation  of the Holder to the
Company to the effect that such shares are being acquired for investment and not
with a view to the  distribution  thereof,  and such other  representations  and
documentation  as may be  required  by the  Company,  unless in the  opinion  of
counsel to the  Company  such  representations  or other  documentation  are not
necessary to comply with the Securities Act.

     7.   RESTRICTIONS ON TRANSFER

         (a)  Transfer to Comply with the  Securities  Act.  Holder  understands
that, unless a registration statement relating to the resale of this Warrant and
the Warrant  Shares  shall then be  effective  under the  Securities  Act,  this
Warrant and the Warrant Shares shall be "restricted securities" (as that term is
defined in Rule 144 promulgated under the Securities Act).  Neither this Warrant
nor any Warrant Shares or other securities  issuable upon exercise hereof may be
sold,  assigned,  pledged,  transferred  or  otherwise  disposed  of  except  in
compliance with applicable  state  securities or "blue sky" laws and as follows:
(1) to a person who, in the opinion of counsel satisfactory to the Company, is a
person to whom this  Warrant or the Warrant  Shares may  legally be  transferred
without  registration and without the delivery of a current prospectus under the
Securities  Act  with  respect  thereto  and then  only  against  receipt  of an
agreement  of such person to comply with the  provisions  of this Section 7 with
respect to any resale, assignment, pledge, transfer or other disposition of such


                                      -8-
<PAGE>

securities;  or (2) to any person upon delivery of a prospectus then meeting the
requirements  of the Securities Act relating to such securities and the offering
thereof for such sale, assignment, pledge, transfer or other disposition.

         (b) Legend.  Subject to the terms hereof, upon exercise of this Warrant
and the  issuance of the Warrant  Shares,  all  certificates  representing  such
Warrant Shares (or other securities  issuable  hereunder) shall bear on the face
or  reverse  thereof  substantially  the  following  legend (or  another  legend
substantially  in such form as the transfer  agent for the Company may from time
to time use generally on certificates  evidencing  restricted  securities of the
Company):

     THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT
     BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
     SOLD, TRANSFERRED,  HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
     REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE
     UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
     THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION  REQUIREMENTS
     OF SUCH ACT IS AVAILABLE.

     8.   REPRESENTATIONS AND WARRANTIES OF HOLDER

     In  connection  with the  issuance  of this  Warrant,  Holder  specifically
represents and warrants to the Company by acceptance of this Warrant as follows:

         (a) If an entity,  Holder is duly  organized,  validly  existing and in
good standing under the laws of its  jurisdiction of incorporation or formation,
and has the  requisite  entity  power and  authority to exercise the Warrant and
purchase the Warrant Shares.

         (b)  Holder is an  "accredited  investor"  as  defined  in Rule  501(a)
promulgated  under the  Securities  Act, and is not a  registered  broker-dealer
under Section 15 of the Exchange Act.

         (c) Holder, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the  prospective  investment
in this  Warrant and,  upon  exercise  hereof,  the Warrant  Shares,  and has so
evaluated the merits and risks of such  investment.  The  undersigned is able to
bear the economic risk of an  investment in this Warrant and the Warrant  Shares
and, at the present time, is able to afford a complete loss of such investment.

         (d) Holder is aware of the  Company's  business  affairs and  financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant.

         (e) Holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection  with, any
"distribution" thereof in violation of the Securities Act.

         (f) Holder is not  acquiring  this  Warrant or  purchasing  any Warrant
Shares as a result of any advertisement,  article, notice or other communication
regarding  this  Warrant  or the  Warrant  Shares  published  in any  newspaper,
magazine or similar media or broadcast over  television or radio or presented at
any seminar or any other general solicitation or general advertisement.

         (g) Holder understands that neither this Warrant nor the Warrant Shares
has been registered under the Securities Act and neither may be offered, resold,


                                      -9-
<PAGE>

pledged or  otherwise  transferred  except (i)  pursuant  to an  exemption  from
registration  under the Securities Act or pursuant to an effective  registration
statement  in  compliance  with Section 5 under the  Securities  Act, or (ii) in
accordance  with all applicable  securities and "blue sky" laws of the states of
the United States and other jurisdictions.  Holder is aware of the provisions of
Rule 144 promulgated under the Securities Act.

         (h) To the extent a registration  statement under the Securities Act is
not in effect, Holder understands and acknowledges that (i) this Warrant is, and
the Warrant Shares (if any) will be, issued and sold to it without  registration
under the Securities in a private placement that is exempt from the registration
provisions  of the  Securities  , and (ii) the  availability  of such  exemption
depends in part on, and that the Company and its  counsel is relying  upon,  the
accuracy and  truthfulness  of the foregoing  representations  and Holder hereby
consents to such reliance.

     9.   LOST, STOLEN OR DESTROYED WARRANTS

     In the event that the Holder certifies to the Company that this Warrant has
been lost,  stolen or destroyed  and provides (a) a letter,  in form  reasonably
satisfactory  to the Company,  to the effect that it will  indemnify the Company
from any loss  incurred by it in connection  therewith,  and/or (b) an indemnity
bond in such amount as is reasonably required by the Company, the Company having
the option of electing  either (a) or (b) or both,  the Company may, in its sole
discretion, accept such letter and/or indemnity bond in lieu of the surrender of
this Warrant as required by Section 1 hereof.

     10.  SUBSEQUENT HOLDERS

     Every Holder  hereof,  by accepting  the same,  agrees with any  subsequent
Holder  hereof and with the Company that this  Warrant and all rights  hereunder
are  issued  and  shall  be  held  subject  to  all of  the  terms,  conditions,
limitations  and provisions  set forth in this Warrant,  and further agrees that
the Company and its transfer  agent,  if any, may deem and treat the  registered
holder of this Warrant as the  absolute  owner hereof for all purposes and shall
not be affected by any notice to the contrary.

     11.  NOTICES

     Any  notice  required  or  permitted  hereunder  shall be given in  writing
(unless  otherwise  specified  herein)  and  shall be  effective  upon  personal
delivery,  via  facsimile or email (upon receipt of  confirmation  of error-free
transmission  and  mailing  a copy  of such  confirmation,  postage  prepaid  by
certified mail, return receipt requested) or two business days following deposit
of such notice with an internationally  recognized courier service, with postage
prepaid and addressed the other party at the following address, or at such other
addresses as a party may  designate by five days advance  written  notice to the
other party hereto.

     Company:                 DGSE Companies, Inc.
                              2817 Forest Lane
                              Dallas, Texas  75234
                              Attn: Dr. L.S. Smith
                              Facsimile:  (972) 772-3093
                              Email:  LSSmith1@ClassicNet.net

     with a copy to:          Sheppard, Mullin, Richter & Hampton LLP


                                      -10-
<PAGE>

                              12275 El Camino Real, Suite 200
                              San Diego, California  92130-2006
                              Attn:  John J. Hentrich, Esq.
                              Facsimile: (858) 509-3691
                              Email:  JHentrich@SheppardMullin.com

     Holder:                  Stanford International Bank Ltd.
                              c/o Stanford Financial Group
                              6075 Poplar Avenue
                              Memphis, Tennessee 38119
                              Attention: James M. Davis, Chief Financial Officer
                              Facsimile: (901) 680-5265
                              Email:  MDavis@StanfordEagle.com

     with a copy to:          Adorno & Yoss LLP
                              2525 Ponce de Leon Boulevard, 4th Floor
                              Coral Gables, Florida 33134
                              Attention: Seth P. Joseph
                              Facsimile: 305-460-1422
                              Email:  spg@adorno.com

     12.  GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL

     This Warrant shall be governed by and  interpreted  in accordance  with the
laws of the State of Texas,  without  regard to its  principles  of  conflict of
laws. Any action or proceeding  seeking to enforce any provision of, or based on
any right  arising out of, this Warrant may be brought  against any party in the
federal  courts of Texas or the state courts of the State of Texas,  and each of
the parties  consents to the  jurisdiction of such courts and hereby waives,  to
the maximum  extent  permitted by law, any  objection,  including any objections
based on forum non  conveniens,  to the bringing of any such  proceeding in such
jurisdictions.

     EACH PARTY  ACKNOWLEDGES  AND AGREES  THAT ANY  CONTROVERSY  THAT MAY ARISE
UNDER THIS WARRANT IS LIKELY TO INVOLVE  COMPLICATED AND DIFFICULT  ISSUES,  AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION  DIRECTLY OR INDIRECTLY  ARISING
OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO  REPRESENTATIVE,  AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS  REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  THAT SUCH OTHER
PARTY  WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE  EITHER OF SUCH
WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS,
(3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO
THIS WARRANT BY, AMONG OTHER THINGS,  THE MUTUAL WAIVERS AND  CERTIFICATIONS  IN
THIS SECTION 12.

     13.  WAIVER

     This Warrant and any provision hereof may be changed, waived, discharged or
terminated  only by an instrument  in writing  signed by the party against which
enforcement of the same is sought.



        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]


                                      -11-
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, all as of the day
and year first above written.

                                    DGSE COMPANIES, INC.


                                    By:
                                       -----------------------------------------
                                       Dr. L.S. Smith
                                       Chief Executive Officer











<PAGE>

                              DGSE COMPANIES, INC.

                              WARRANT EXERCISE FORM

     The undersigned  hereby irrevocably elects to exercise the attached Warrant
dated __________  _____,  200___ (the "Warrant"),  pursuant to the provisions of
(SELECT  ONE) [  Section  1(a)  of the  Warrant,  to the  extent  of  purchasing
_____________  shares (the  "Shares") of the common  stock,  par value $0.01 per
share (the "Common Stock"),  of DGSE Companies,  Inc., a Nevada corporation (the
"Company"), and encloses herewith in cash or by certified or official bank check
or by  wire  transfer,  payable  to the  order  of the  Company,  a  payment  of
$_________ in payment  therefor,  which sum  represents  the aggregate  Exercise
Price (as defined in the  Warrant)  for the Shares ] (OR) [ Section  1(b) of the
Warrant to the extent of _________  shares of the common stock,  par value $0.01
per share (the "Common Stock"),  of DGSE Companies,  Inc., a Nevada  corporation
(the  "Company"),  which based on an estimated  Market Price of $_____ per share
would result in the issuance to the Holder of _______  shares (the  "Shares") of
Common Stock ] .

     As of the date hereof, the undersigned represents and warrants to the
Company as follows:

         (a) If an entity,  the undersigned is duly organized,  validly existing
and in good standing  under the laws of its  jurisdiction  of  incorporation  or
formation,  and has the  requisite  entity  power and  authority to exercise the
Warrant and purchase the Shares.

         (b) The  undersigned  is an  "accredited  investor"  as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended (the "Act"), and
is not a registered  broker-dealer  under Section 15 of the Securities  Exchange
Act of 1934, as amended.

         (c) The undersigned, either alone or together with its representatives,
has such  knowledge,  sophistication  and  experience  in business and financial
matters  so  as to be  capable  of  evaluating  the  merits  and  risks  of  the
prospective  investment in the Shares, and has so evaluated the merits and risks
of such  investment.  The  undersigned  is able to bear the economic  risk of an
investment  in the Shares and, at the present time, is able to afford a complete
loss of such investment.

         (d) The  undersigned  is aware of the  Company's  business  affairs and
financial  condition,  and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant.

         (e) The  undersigned  is  acquiring  the Shares for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof in violation of the Act.

         (f) The  undersigned  is not  purchasing  the Shares as a result of any
advertisement, article, notice or other communication regarding the Common Stock
published  in any  newspaper,  magazine  or  similar  media  or  broadcast  over
television   or  radio  or  presented  at  any  seminar  or  any  other  general
solicitation or general advertisement.

         (g)  The  undersigned   understands  that  the  Shares  have  not  been
registered  under the Act and may not be offered,  resold,  pledged or otherwise
transferred  except (i) pursuant to an exemption from registration under the Act
or pursuant to an effective  registration statement in compliance with Section 5
under the Act, or (ii) in accordance  with all  applicable  securities and "blue
sky" laws of the  states of the  United  States  and  other  jurisdictions.  The
undersigned is aware of the provisions of Rule 144 promulgated under the Act.


                                      -1-
<PAGE>

         (h) To the  extent a  registration  statement  under  the Act is not in
effect,  the undersigned  understands and  acknowledges  that (i) the Shares are
being  issued  and sold to it  without  registration  under the Act in a private
placement that is exempt from the  registration  provisions of the Act, and (ii)
the availability of such exemption  depends in part on, and that the Company and
its counsel is relying  upon,  the accuracy and  truthfulness  of the  foregoing
representations and the undersigned hereby consents to such reliance.

     Please issue a certificate or certificates  representing  the Shares in the
name of the  undersigned  or in the  name  of the  undersigned's  nominee  as is
specified below. [ Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or the undersigned's  nominee as
is specified below. ]



                                               ---------------------------------
                                               Name of Holder


                                               ---------------------------------
                                               Signature of Holder
                                               or Authorized Representative


                                               ---------------------------------
                                               Social Security Number or
                                               Tax Identification Number


                                               ---------------------------------
                                               Signature, if jointly held


                                               ---------------------------------
                                               Name and Title of Authorized
                                               Representative


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

                                               ---------------------------------
                                               Address of Holder


                                               ---------------------------------
                                               Nominee of Holder (if applicable)


                                               ---------------------------------
                                               Date


                                      -2-
<PAGE>

                              DGSE COMPANIES, INC.

                             WARRANT ASSIGNMENT FORM

     FOR VALUE  RECEIVED,  the undersigned  hereby sells,  assigns and transfers
unto ________________________________ ("Assignee") the rights represented by the
within Warrant to purchase  ____________ shares of common stock, par value $0.01
per share (the "Common Stock"),  of DGSE Companies,  Inc., a Nevada  corporation
(the   "Company"),   to  which  the  within   Warrant   relates   and   appoints
________________  attorney  to  transfer  said right on the books of the Company
with full power of  substitution  in the premises.  The undersigned has informed
Assignee that Assignee must make the representations and warranties contained in
this form in connection with said transfer, and the undersigned has no reason to
belief that Assignee cannot make such representations.

     As of the date hereof, the Assignee  represents and warrants to the Company
as follows:

         (a) If an entity,  Assignee is duly organized,  validly existing and in
good standing under the laws of its  jurisdiction of incorporation or formation,
and has the  requisite  entity  power and  authority to exercise the Warrant and
purchase the shares of Common Stock deliverable upon such exercise (the "Warrant
Shares").

         (b)  Assignee  is an  "accredited  investor"  as defined in Rule 501(a)
promulgated under the Securities Act of 1933, as amended (the "Act"), and is not
a registered  broker-dealer  under Section 15 of the Securities  Exchange Act of
1934, as amended.

         (c) Assignee,  either alone or together with its  representatives,  has
such knowledge,  sophistication and experience in business and financial matters
so as to be  capable  of  evaluating  the  merits  and risks of the  prospective
investment in this Warrant and, upon exercise  hereof,  the Warrant Shares,  and
has so evaluated the merits and risks of such  investment.  The  undersigned  is
able to bear the economic  risk of an investment in this Warrant and the Warrant
Shares  and,  at the  present  time,  is able to afford a complete  loss of such
investment.

         (d) Assignee is aware of the Company's  business  affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant.

         (e)  Assignee  is  acquiring  this  Warrant  for  its own  account  for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof in violation of the Act.

         (f) Assignee is not acquiring  this Warrant or  purchasing  any Warrant
Shares as a result of any advertisement,  article, notice or other communication
regarding  this  Warrant  or the  Warrant  Shares  published  in any  newspaper,
magazine or similar media or broadcast over  television or radio or presented at
any seminar or any other general solicitation or general advertisement.

         (g)  Assignee  understands  that  neither  the  Warrant nor the Warrant
Shares has been  registered  under the Act and neither  may be offered,  resold,
pledged or  otherwise  transferred  except (i)  pursuant  to an  exemption  from
registration under the Act or pursuant to an effective registration statement in
compliance  with  Section  5 under  the  Act,  or (ii) in  accordance  with  all
applicable securities and "blue sky" laws of the states of the United States and
other  jurisdictions.  The  Assignee  is  aware  of the  provisions  of Rule 144
promulgated under the Act.


                                      -1-
<PAGE>

         (h) To the  extent a  registration  statement  under  the Act is not in
effect,  Assignee  understands and acknowledges that (i) the Warrant is, and the
Warrant  Shares (if any) will be,  issued  and sold to it  without  registration
under  the Act in a  private  placement  that is  exempt  from the  registration
provisions of the Act, and (ii) the  availability  of such exemption  depends in
part on, and that the Company and its counsel is relying upon,  the accuracy and
truthfulness of the foregoing  representations  and the Assignee hereby consents
to such reliance.

     Please  issue a new Warrant of like tenor for the  assigned  portion of the
attached  Warrant in the name of the  Assignee or the  Assignee's  nominee as is
specified  below.  [ Please issue a new Warrant of like tenor for the unassigned
portion  of  the  attached  Warrant  in  the  name  of  the  undersigned  or the
undersigned's nominee as is specified below. ]



                                           -------------------------------------
                                           Name of Holder


                                           -------------------------------------
                                           Signature of Holder
                                           or Authorized Representative


                                           -------------------------------------
                                           Social Security Number or
                                           Tax Identification Number of Holder


                                           -------------------------------------
                                           Signature, if jointly held


                                           -------------------------------------
                                           Name and Title of Authorized
                                           Representative


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

                                           -------------------------------------
                                           Address of Holder


                                           -------------------------------------
                                           Nominee of Holder (if applicable)


                                           -------------------------------------
                                           Date


                                      -2-
<PAGE>


                                           -------------------------------------
                                           Name of Assignee


                                           -------------------------------------
                                           Signature of Assignee
                                           or Authorized Representative


                                           -------------------------------------
                                           Social Security Number or
                                           Tax Identification Number of Assignee


                                           -------------------------------------
                                           Signature, if to be jointly held


                                           -------------------------------------
                                           Name and Title of Authorized
                                           Representative


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

                                           -------------------------------------
                                           Address of Assignee


                                           -------------------------------------
                                           Nominee of Assignee (if applicable)








                                      -3-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.5
<SEQUENCE>6
<FILENAME>dgse8kex25010907.txt
<DESCRIPTION>FORM OF NOTE EXCHANGE AGREEMENT
<TEXT>

                                                                     Exhibit 2.5

                             NOTE EXCHANGE AGREEMENT

     THIS NOTE  EXCHANGE  AGREEMENT  is made and entered into as of ________ __,
2007 (this  "Agreement"),  by and between Superior  Galleries,  Inc., a Delaware
corporation  (f/k/a Tangible Asset Galleries,  Inc., a Nevada  corporation) (the
"Company"),  and Stanford International Bank Ltd., a corporation organized under
the  laws of  Antigua  and  Barbuda  (together  with  its  successors,  "SIBL").
Capitalized terms used but not defined herein shall have the respective meanings
ascribed to such terms in that certain  Amended and Restated  Agreement and Plan
of Merger and  Reorganization,  made and entered into as of January 6, 2007 (the
"Merger Agreement"),  by and among the Company,  DGSE Companies,  Inc., a Nevada
corporation ("Parent"),  DGSE Merger Corp., a Nevada corporation ("Merger Sub"),
and SIBL, as stockholder agent.

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

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

     WHEREAS,  in the  Merger,  one  hundred  percent  (100%) of the  issued and
outstanding  shares of capital  stock of the Company will be converted  into the
right to receive  shares of Common  Stock of Parent (as set forth in Article III
of the Merger  Agreement),  on the terms and subject to the conditions set forth
in the Merger  Agreement and in accordance  with the General  Corporation Law of
the State of Delaware  (the  "DGCL")  and  Chapters 78 and 92A of Title 7 of the
Nevada Revised Statutes (the "NPCA");

     WHEREAS,  pursuant to that certain  Commercial Loan and Security  Agreement
originally dated October 1, 2003 (as amended as of March 29, 2005 and as further
amended  as of April 6, 2006 and on  January  6,  2007,  the "Loan  Agreement"),
Stanford Financial Group Company, a Florida  corporation  ("SFG"),  has provided
certain credit facilities to the Company;

     WHEREAS,  on November 30, 2004,  SIBL was indirectly  assigned all of SFG's
right, title and interest in the Loan Agreement, and the Note issued thereunder;

     WHEREAS,  the  obligation of Parent and Merger Sub to consummate the Merger
is  conditioned  on SIBL  exchanging  Eight  Million  Three  Hundred  Ninety-Two
Thousand  Three  Hundred Forty  Dollars  ($8,392,340)  of principal and interest
outstanding  under the Loan Agreement (such amount,  the "Exchanged  Debt") into
4,936,671  shares (the  "Exchanged  Shares") of the common  stock of the Company
(the "Common  Shares") in  accordance  with the terms and  conditions  set forth
herein, and SIBL is willing to agree to do so subject to the satisfaction of the
conditions  herein and all  conditions  to the  obligations  of the  Company and
Parent set forth in the Merger Agreement;

     WHEREAS,  in consideration of SIBL entering into this Agreement and certain
amendments  to the Loan  Agreement,  as  contemplated  in the Merger  Agreement,
Parent has agreed to issue to SIBL and its  designees,  at the  Effective  Time,
certain A Warrants and B Warrants; and

     WHEREAS,  SIBL desires to exchange  the  Exchanged  Debt for the  Exchanged
Shares to induce Parent and Merger Sub to enter into the Merger Agreement and to
consummate  the Merger and other  Transactions,  including  the  issuance of the
afore-referenced warrants.


                                      -1-
<PAGE>

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

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:

     1. Exchange of Debt. SIBL and the Company hereby agree,  subject to (i) the
issuance of the Exchanged Shares as provided in Section 2, (ii) the consummation
of the Merger pursuant to the Merger  Agreement  immediately  after the Exchange
Time,  (iii) the issuance of the A Warrants  and the B Warrants  pursuant to the
Merger Agreement  (subject to Section 3 of the Limited Joinder  Agreement),  and
(iv) the tendering by SIBL of the notes  evidencing  the  Exchanged  Debt to the
Company;  to exchange the Exchanged Debt for the Exchanged Shares, such exchange
to occur  immediately  prior to the  Effective  Time (the  "Exchange  Time") and
simultaneously with, and conditioned upon, the issuance of the Exchanged Shares.
Upon  the  issuance  of  such  Exchanged   Shares,   the  Exchanged  Debt  shall
automatically  be cancelled and retired and shall cease to exist, and the holder
of the  portion  of any  note  that,  immediately  prior to the  Exchange  Time,
represented issued and outstanding Exchanged Debt shall cease to have any rights
with respect  thereto,  including any claims for any default  occurring or other
liability arising prior to the Exchange Time, except the right to receive,  upon
the surrender of such portion of the note,  the  certificates  for the Exchanged
Shares contemplated by Section 2.

     2.  Issuance of Shares.  At the Exchange Time and  simultaneously  with the
exchanges  contemplated by Section 1, and subject to the conditions thereof, the
Company  shall  issue  to  SIBL  the  Exchanged   Shares  in  exchange  for  the
cancellation  of the  Exchanged  Debt.  All Common  Shares  issued and paid upon
exchange of the  Exchanged  Debt in  accordance  with the terms  hereof shall be
deemed  to  have  been  issued  and  paid  in full  satisfaction  of all  rights
pertaining to the Exchanged Debt.

     3. Capitalization Adjustments to Shares. In the event of any Capitalization
Adjustment  with respect to the Common Shares  occurring  after the date of this
Agreement and prior to the Exchange  Time,  all  references in this Agreement to
specified  numbers  of Common  Shares  affected  thereby,  and all  calculations
provided  for that are based upon numbers of Common  Shares,  shall be equitably
adjusted to the extent necessary to provide the Parties the same economic effect
as contemplated by this Agreement prior to such Capitalization Adjustment.

     4.  Representations  and  Warranties.  SIBL  represents and warrants to the
Company as follows:

         (a) Investment  Purpose.  SIBL is acquiring the Common Shares  issuable
upon the exchange of the Exchanged Debt (collectively, the "Securities") for its
own account for  investment  only and not with a view towards,  or for resale in
connection  with, the public sale or  distribution  thereof,  except pursuant to
sales registered or exempted under the Securities Act.

         (b) Accredited  Investor  Status.  SIBL is an "accredited  investor" as
that term is defined in Rule 501(a) of  Regulation D under the  Securities  Act,
and it has not been formed solely for the purpose of acquiring the Securities.

         (c) Reliance on Exemptions.  SIBL  understands  that the Securities are
being  offered  and  sold to it in  reliance  on  specific  exemptions  from the
registration  requirements  of the Securities Act and state  securities laws and
that the Company is relying in part upon the truth and  accuracy  of, and SIBL's
compliance with, the representations,  warranties,  agreements,  acknowledgments


                                      -2-
<PAGE>

and  understandings  of  SIBL  set  forth  herein  in  order  to  determine  the
availability  of such  exemptions  and the  eligibility  of SIBL to acquire  the
Securities.

         (d) Transfer or Resale.  SIBL  understands that the Securities have not
been registered  under the Securities Act or any state  securities laws, and may
not be offered for sale, sold,  assigned,  pledged,  hypothecated or transferred
unless (A) subsequently registered thereunder,  (B) SIBL shall have delivered to
the  Company an opinion of counsel,  in a form  reasonably  satisfactory  to the
Company, to the effect that such Securities may be sold, assigned or transferred
pursuant  to an  exemption  from such  registration,  or (C) SIBL  provides  the
Company  with such  documents  and  certificates  as the Company may  reasonably
request to demonstrate  to its  satisfaction  that such  Securities can be sold,
assigned or transferred  pursuant to Rule 144  promulgated  under the Securities
Act (or a successor rule thereto).

         (e) No General Solicitation.  SIBL is not acquiring the Securities as a
result of any advertisement,  article,  notice or other communication  regarding
any  Securities  published  in any  newspaper,  magazine  or  similar  media  or
broadcast over television or radio, or presented at any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

         (f)  Adequate  Information.  SIBL is  aware of the  Company's  business
affairs and financial condition,  and has acquired information about the Company
sufficient  to reach an  informed  and  knowledgeable  decision  to acquire  the
Securities.

         (g) Sophistication and Experience.  SIBL, either alone or together with
its  representatives,  has such  knowledge,  sophistication  and  experience  in
business and financial  matters so as to be capable of evaluating the merits and
risks of the  prospective  investment in the Securities and has so evaluated the
merits and risks of such investment.

         (h) Ability to Bear Risk.  SIBL is able to bear the economic risk of an
investment  in the  Securities  and,  at the present  time,  is able to afford a
complete loss of such investment.

         (i)  Relationship.  SIBL either has a preexisting  personal or business
relationship  with the Company or any of its officers,  directors or controlling
persons, or by reason of its business or financial experience or the business or
financial experience of its professional  advisers who are unaffiliated with and
who are not  compensated by the Company or any affiliate or selling agent of the
Company,  directly or indirectly,  has the capacity to protect its own interests
in connection with the exchange of the Exchanged Debt and the acquisition of the
Securities.

         (j) Legend.  SIBL understands that the stock certificates  representing
the Common Shares shall bear a restrictive legend in substantially the following
form (or another legend substantially in such form as the transfer agent for the
Company  may  from  time  to  time  use  generally  on  certificates  evidencing
restricted securities of the Company):

         THE  SECURITIES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
         REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE
         "ACT"), OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE
         BEEN  ACQUIRED  FOR  INVESTMENT  AND MAY NOT BE OFFERED FOR SALE,
         SOLD,  TRANSFERRED  OR ASSIGNED  IN THE  ABSENCE OF AN  EFFECTIVE
         REGISTRATION  STATEMENT  OR AN  OPINION  OF  COUNSEL,  IN A  FORM


                                      -3-
<PAGE>

         REASONABLY  SATISFACTORY TO THE ISSUER,  THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

     5. Governing  Law;  Jurisdiction.  This Agreement  shall be governed in all
respects by the laws of the State of Texas  applicable to contracts  negotiated,
executed and to be performed  entirely within such State. All suits,  actions or
proceedings  arising  out of,  or in  connection  with,  this  Agreement  or the
transactions  contemplated  by this Agreement shall be brought in any federal or
state court of competent subject matter  jurisdiction  sitting in Dallas County,
Texas.

     6.  Construction.  The  rules of  construction  specified  in  Section  1.3
(Construction)  of the Merger  Agreement  are hereby  incorporated  by reference
herein and shall apply to this Agreement mutatis  mutandis,  as if expressly set
forth herein.

     7.  Titles and  Headings.  The section and  paragraph  titles and  headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

     8.  Counterparts.   This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be enforceable  against the Parties  actually
executing such  counterparts,  and all of which  together  shall  constitute one
instrument.

     9. Facsimile Execution. A facsimile, telecopy or other reproduction of this
Agreement may be executed by one or more  Parties,  and an executed copy of this
Agreement may be delivered by one or more Parties by facsimile, email or similar
electronic  or digital  transmission  pursuant to which the  signature  of or on
behalf of such  Party can be seen,  and such  execution  and  delivery  shall be
considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

     10. Entire  Agreement.  This Agreement and the Merger Agreement  constitute
the entire  agreement  among the  Parties  with  respect to the  subject  matter
hereof.

     11. Notices. All notices,  requests,  instructions or other documents to be
given or delivered under this Agreement  shall be given in the manner,  with the
effect and to the address, email address or fax number to be used for such Party
as provided in Section 10.1 of the Merger Agreement.

     12.  Amendment;  Waiver.  This  Agreement and any  provision  hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the  Party  against  which  enforcement  of the same is sought  and by
Parent.  This Agreement may be amended only by a writing executed by all Parties
and by Parent.

     13.  Binding  Effect.  This Agreement  shall be binding upon,  inure to the
benefit of, and be enforceable by, the Parties and their  respective  successors
and permitted assigns.

     14.  Specific   Performance;   Injunctive  Relief.   Each  of  the  Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions  hereof would cause  substantial and irreparable
damage  to the  other  parties  hereto,  and  that  money  damages  would  be an
inadequate remedy therefor. Accordingly, each of the Parties agrees that each of
them shall be entitled to seek equitable relief,  including specific performance
and  injunctive  relief,  in the event of any such  breach,  non-performance  or
default in any Action  instituted in any court of the United States or any state


                                      -4-
<PAGE>

having  competent  jurisdiction,  or before any  arbitrator,  in addition to any
other remedy to which such Party may be entitled, at law or in equity.

     15.  Severability.  The  provisions  of  this  Agreement  shall  be  deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any Party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
Parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

     16.  Further  Assurances.  At any time,  and from  time to time,  after the
effective  date,  each Party will execute such  additional  instruments and take
such  action as may be  reasonably  requested  by any other  Party to confirm or
perfect title to any property  interests  transferred  hereunder or otherwise to
carry out the intent and purposes of this Agreement.

     17.  Third-Party  Beneficiaries.  This  Agreement  is made  solely  for the
benefit of the Parties and Parent, and their respective permitted successors and
assigns, and no other Person shall have or acquire any right or remedy by virtue
hereof except as otherwise expressly provided herein.

     18.   Voluntary   Execution  of  Agreement.   This  Agreement  is  executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties.  Each of the Parties hereby  acknowledges,  represents and warrants
that (i) it has read and fully  understood  this Agreement and the  implications
and  consequences  thereof;  (ii) it has been  represented  in the  preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,
or it has made a  voluntary  and  informed  decision  to  decline  to seek  such
counsel;  and (iii) it is fully  aware of the legal and  binding  effect of this
Agreement.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]









                                      -5-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their  respective  authorized  signatories as of the date first
indicated above.

                                                SUPERIOR GALLERIES, INC.


                                                By:
                                                   -----------------------------
                                                   Name:
                                                   Title:


                                                STANFORD INTERNATIONAL BANK LTD.


                                                By:
                                                   -----------------------------
                                                   James M. Davis
                                                   Chief Financial Officer

ACKNOWLEDGED AND ACCEPTED:


DGSE COMPANIES, INC.


By:
   ------------------------------------
   Dr. L.S. Smith
   Chairman and Chief Executive Officer












                                      -6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.6
<SEQUENCE>7
<FILENAME>dgse8kex26010907.txt
<DESCRIPTION>FORM OF TERMINATION AND RELEASE AGREEMENT
<TEXT>

                                                                     Exhibit 2.6

                        TERMINATION AND RELEASE AGREEMENT

     THIS  TERMINATION  AND RELEASE  AGREEMENT  is made and  entered  into as of
________,  2007 (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
predecessors  and  successors,  the  "Company"  or  "Superior"),  (iv)  Stanford
International  Bank Ltd.,  a company  organized  under the laws of  Antigua  and
Barbuda  (together with its successors,  "SIBL"),  (v) Stanford  Financial Group
Company,  a  corporation  organized  under  the  laws of the  State  of  Florida
(together  with its  successors,  "SFG"),  and  (vi)  Stanford  Venture  Capital
Holdings,  Inc., a corporation organized under the laws of the State of Delaware
(together  with its  successors,  "SVCH",  and,  together with SIBL and SFG, the
"Stanford  Parties").  Capitalized  terms used but not defined herein shall have
the respective  meanings  ascribed  thereto in that certain Amended and Restated
Agreement  and Plan of Merger and  Reorganization,  made and entered  into as of
January 6, 2007 (the  "Merger  Agreement"),  by and among  Parent,  Merger  Sub,
Superior, and the stockholder agent.

                                 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 the Merger Agreement and the merger
of Merger Sub with and into the Company (the  "Merger"),  with the Company being
the surviving corporation;

     WHEREAS,  SIBL is a key stockholder of Superior,  SFG is the primary lender
to Superior, and SVCH is a consultant to Superior;

     WHEREAS,   Parent  has  requested  various  Parties  to  terminate  various
Contracts  in place among  various of them and Superior as a condition to Parent
consummating the Merger; and

     WHEREAS,  each Stanford Party desires to execute and deliver this Agreement
to  induce  Parent  and  Merger  Sub to  consummate  the  Merger  and the  other
Transactions; and

     WHEREAS,  the  execution  and  delivery of this  Agreement  by the Stanford
Parties  and the  Company  is a  condition  precedent  to Parent  and Merger Sub
consummating the Merger and the other Transactions.

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

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  respective
covenants and  agreements  set forth in this  Agreement,  and for other good and
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged, the parties hereto (collectively,  the "Parties"), intending to be
legally bound, hereby agree as follows as of the Effective Time:

     Section 1. Release.

         (a) Release.  Each of the Stanford Parties, on behalf of itself and its
Affiliates (all of the foregoing, individually, a "Releasor", and, collectively,
the "Releasors"), hereby irrevocably and forever releases and discharges Parent,
the Company and Merger Sub, and each of their  respective  individual,  joint or
mutual, past, present and future stockholders,  Affiliates, controlling persons,
directors,  officers, managers,  employees,  consultants,  contractors,  agents,


                                      -1-
<PAGE>

financial,  banking  and  legal  advisors  and  other  representatives,  and the
respective  successors  and  assigns  of each of  them,  (all of the  foregoing,
individually, a "Releasee" and, collectively,  the "Releasees") from any and all
claims, demands, actions, orders, obligations, contracts, debts, and Liabilities
whatsoever,  whether 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, both at law
and in equity,  (collectively,  "Claims")  which any Stanford Party or any other
Releasor now has,  has ever had or may  hereafter  have  against the  respective
Releasees  arising  contemporaneously  with or prior to the Effective Time or on
account of or arising out of any matter,  cause or event  occurring,  whether in
any Stanford  Party's or any other  Releasor's  capacity as a direct or indirect
stockholder of the Company, as a beneficial owner or record holder of any Equity
Interests of the Company,  as an  consultant or adviser to the Company or in any
other  capacity  or due to  any  relationship  with  the  Company  or any of its
Subsidiaries,  contemporaneously  with or prior to the Effective Time, including
(a) any  dissenter's,  appraisal or similar rights under applicable Law, (b) any
rights to bring any lawsuit or claim action against any Person in the name or on
behalf of the Company or Merger Sub,  (c) any right  pursuant to any Contract or
any  Releasee's   Organizational  Documents,  (d)  any  claim  pursuant  to  the
Securities  Act,  Exchange Act, the SEC Rules or other  securities or "blue sky"
Laws,  (e) any rights to  indemnification  or  reimbursement  from any Releasee,
whether pursuant to their respective Organizational Documents or pursuant to any
Contracts,  applicable  Law or otherwise,  and whether or not relating to claims
pending on, or asserted after, the Closing Date; provided, however, that nothing
contained herein shall operate to release:  (i) any indebtedness,  together with
interest thereon, of the Company under the Stanford LOC; (ii) any obligations or
Liabilities of the Surviving Corporation under the Amended and Restated Stanford
LOC; (iii) any  obligations or Liabilities of Parent under the limited  guaranty
and security  agreement entered into in connection with the Amended and Restated
Stanford LOC; (iv) any contractual Liabilities of Parent or Merger Sub under the
Merger  Agreement or any Related  Agreement;  or (v) any statutory or regulatory
Liabilities  of Parent or Merger Sub under the Securities  Act,  Exchange Act or
the SEC Rules in connection with the Merger and other Transactions.

         (b) No Actions.  Upon the  Closing,  each  Stanford  Party  irrevocably
covenants to refrain, and to cause its Affiliates to refrain,  from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be  commenced,  any Action of any kind against any  Releasee,  based upon any
matter purported to be released by Section 1(a).

         (c)  Indemnity.  Without  in any way  limiting  any of the  rights  and
remedies otherwise available to any Releasee, the Stanford Parties shall jointly
and  severally  indemnify  and hold  harmless each Releasee from and against all
Losses,  Liabilities,  Claims,  damages (including  incidental and consequential
damages) or expense (including costs of investigation and defense and reasonable
attorney fees), whether or not involving third party claims, arising directly or
indirectly  from or in connection  with (i) the assertion by or on behalf of any
Stanford  Party  or any  Releasor  of any  claim or other  matter  sought  to be
released  pursuant to Section 1(a), (ii) the assertion by any third party of any
Claim or demand  against any Releasee  which Claim or demand arises  directly or
indirectly  from,  or in connection  with,  any assertion by or on behalf of any
Stanford Party or any other  Releasor  against such third party of any Claims or
other  matters  sought to be  released  pursuant to Section  1(a),  or (iii) the
breach by any Stanford Releasor of the terms of Section 1(b).

         (d) Unknown Claims. It is the intention of the Parties that the release
provisions  in Section 1(a) and Section 1(b) shall be effective as a bar to each
and every Claim,  demand and action  specified in Section 1(a) and Section 1(b).
In  furtherance  of this  intention,  each  Stanford  Party  hereby  waives  and
relinquishes all rights and benefits under Section 1542 of the Civil Code of the
State of California, and any and all statutes of other jurisdictions to the same
or similar  effect.  Section  1542 of the Civil Code of the State of  California
provides:


                                      -2-
<PAGE>

         A  GENERAL  RELEASE  DOES NOT  EXTEND  TO  CLAIMS  WHICH THE
         CREDITOR  DOES  NOT KNOW OR  SUSPECT  TO EXIST IN HIS OR HER
         FAVOR AT THE TIME OF EXECUTING  THE RELEASE,  WHICH IF KNOWN
         BY HIM OR HER  MIGHT  HAVE  MATERIALLY  AFFECTED  HIS OR HER
         SETTLEMENT WITH THE DEBTOR.

Each Stanford Party acknowledges that it may, after execution of this Agreement,
discover  facts  different from or in addition to those now known or believed to
be true with  respect to such  claims,  demands or action,  and agrees  that the
release  provisions in Section 1(a) and Section 1(b) shall be and remain in full
force and  effective in all respects  notwithstanding  any such  differences  or
additional facts.

     Section 2. Terminations. Without limitation of Section 1, the Parties agree
as follows:

         (a)  Consulting  Agreement.  SVCH and the Company  hereby  covenant and
agree (i) to terminate that certain Consulting Agreement, dated January 31, 2003
(as Amended from time to time, the "Consulting  Agreement"),  by and between the
Company and SVCH, in its entirety,  including,  notwithstanding  anything to the
contrary in the Consulting Agreement,  Sections 4 and 7 thereof,  except for the
confidentiality  obligations  set forth in Sections 5(b), 5(c) and 5(d) thereof,
which  shall  survive,  and  (ii)  that  neither  SVCH nor the  Company  has any
Liabilities  to the other of them under the  Consulting  Agreement.  SVCH hereby
warrants  that it has  complied  with its  obligations  under  Section  5 of the
Consulting Agreement.

     Section 3.  Representations.  Each Party hereby  represents and warrants to
each other Party that:

         (a) It has the full power, capacity, authority and right to execute and
deliver this Agreement and to perform its obligations  hereunder,  and under the
Merger Agreement as affected hereby.

         (b) This Agreement has been duly authorized by all necessary action and
constitutes such Party's valid and binding agreement,  enforceable  against such
Party in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
other similar laws of general applicability  relating to or affecting creditors'
rights and to general equity principles.

         (c) No  approval,  authorization,  consent  or filing  (other  than any
obligation to file certain  information  pursuant to the Securities Exchange Act
of 1934, as amended, and the regulations  promulgated thereunder) is required in
connection with its execution,  delivery and performance of this Agreement which
has not heretofore been obtained or made.

     Section  4.  Effectiveness.  Notwithstanding  any  provision  hereof to the
contrary,  it is the intention of the Parties that this  Agreement  shall become
effective at the Effective  Time,  and the terms and provisions of Section 1 and
Section 2 shall  apply as of the  Effective  Time.  If the Merger  Agreement  is
terminated  prior to the  consummation  of the Merger,  the covenants  contained
herein shall be deemed  abandoned and this Agreement shall forthwith become null
and void and without force or effect.

     Section 5.  Voluntary  Execution of Agreement.  This  Agreement is executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties.  Each of the Parties hereby  acknowledges,  represents and warrants
that (i) it has read and fully  understood  this Agreement and the  implications
and  consequences  thereof;  (ii) it has been  represented  in the  preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,


                                      -3-
<PAGE>

or it has made a  voluntary  and  informed  decision  to  decline  to seek  such
counsel;  and (iii) it is fully  aware of the legal and  binding  effect of this
Agreement.

     Section 6.  Miscellaneous.  The terms and  provisions  of  Section  1.3 and
Article X of the Merger  Agreement are hereby  incorporated by reference  herein
and shall apply to this Agreement  mutatis  mutandis,  as if expressly set forth
herein.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]












                                      -4-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                       DGSE COMPANIES, INC.


                                       By:
                                          --------------------------------------
                                          Dr. L.S. Smith
                                          Chairman and Chief Executive Officer


                                       DGSE MERGER CORP.


                                       By:  /s/ William H. Oyster
                                          --------------------------------------
                                          William H. Oyster
                                          Chief Executive Officer


                                       SUPERIOR GALLERIES, INC.


                                       By:
                                          --------------------------------------
                                          Silvano DiGenova
                                          Chief Executive Officer


                                       STANFORD INTERNATIONAL BANK LTD.


                                       By:
                                          --------------------------------------
                                          James M. Davis
                                          Chief Financial Officer


                                       STANFORD FINANCIAL GROUP COMPANY


                                       By:
                                          --------------------------------------
                                          James M. Davis
                                          Chief Financial Officer


                                       STANFORD VENTURE CAPITAL HOLDINGS, INC.


                                       By:
                                          --------------------------------------
                                          James M. Davis
                                          Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.7
<SEQUENCE>8
<FILENAME>dgse8kex27010907.txt
<DESCRIPTION>FORM OF REGISTRATION RIGHTS AGREEMENT
<TEXT>

                                                                     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;


                                      -1-
<PAGE>

     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


                                      -2-
<PAGE>

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.


                                      -3-
<PAGE>

     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.


                                      -4-
<PAGE>

         (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


                                      -5-
<PAGE>

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  Registrable  Securities"
means (i) with respect to an Incidental  Registration  Event specified in clause
(i)  of  the  definition  of  Incidental  Registration  Event,  the  Registrable
Securities  required  to be  included  in an  effective  Registration  Statement
hereunder  which are not so  covered,  and (ii) with  respect  to an  Incidental
Registration  Event  specified in clause (ii) of the  definition  of  Incidental
Registration  Event,  the  outstanding  Registrable  Securities or Merger Shares
which are not covered by any effective Registration Statement.

         (i) Notwithstanding  the foregoing  provisions of this Section 5, if in
the good  faith  judgment  of the  Company,  following  consultation  with legal
counsel,  the Company (i) delivers a Blackout  Notice (as defined  below) to the
Holders,  or  determines  that it would be  detrimental  to the  Company  or its
stockholders  for the  Registration  Statement  (or any  amendment or supplement
thereto)  to be  filed  or for  resales  of  Registrable  Securities  to be made
pursuant  to the  Registration  Statement  due to the  existence  of a  material
development  or potential  material  development  involving the Company that the
Company  would be obligated  to disclose in the  Registration  Statement,  which
disclosure (i) would be premature or otherwise  inadvisable  at such time,  (ii)
cannot then be made by the Company despites its commercially reasonable efforts,
or (iii) is reasonably  likely to have a material  adverse effect on the Company
or its stockholders; then in each such case, the Company shall have the right to
(A) immediately  defer such filing for a period of not more than sixty (60) days
beyond  the date by which the  Registration  Statement  was  otherwise  required
hereunder to be filed,  or (B) suspend use of the  Registration  Statement for a
period of not more than  thirty  (30)  consecutive  days (any such  deferral  or
suspension period, a "Blackout Period").  Each Holder acknowledges that it would
be  seriously   detrimental  to  the  Company  and  its   stockholders  for  the


                                      -6-
<PAGE>

Registration  Statement  to be filed (or  remain in  effect)  during a  Blackout
Period and therefore essential to defer such filing (or suspend the use thereof)
during  such  Blackout  Period  and  agrees  to  cease  any  disposition  of the
Registrable  Securities  during  such  Blackout  Period.  The  Company  may  not
designate more than two Blackout Periods in any twelve (12) month period.

     6.   COVENANTS OF HOLDERS

         (a) Each Holder  will  cooperate  with the  Company in all  respects in
connection  with this  Agreement,  including  timely  supplying all  information
(including a Registration Statement  Questionnaire)  reasonably requested by the
Company from time to time (which shall include all  information  regarding  such
Holder and proposed manner of sale of the Registrable  Securities required to be
disclosed  in any  Registration  Statement)  and  executing  and  returning  all
documents  reasonably  requested in connection with the registration and sale of
the  Registrable  Securities and entering into and  performing  its  obligations
under any underwriting  agreement,  if the offering is an underwritten offering,
in usual and customary  form,  with the managing  underwriter or underwriters of
such  underwritten  offering,  including any  confirmation  of, or additional or
supplemental,  information  or documents the Company may request for purposes of
filing amendments to such registration statement or amendments or supplements to
the prospectus  contained therein.  Nothing in this Agreement shall obligate any
Holder to consent to be named as an  underwriter in any  Registration  Statement
unless  required  by the  Commission  (in which case the  applicable  Holder may
withdraw  its   Registrable   Securities  from  the   Registration   Statement).
Notwithstanding  anything to the contrary herein, (i) any delay or delays caused
by a Holder by failure to cooperate as required hereunder shall not constitute a
breach of the terms hereof as to such Holder, and (ii) the Company shall have no
obligation  to register,  or to maintain the  registration,  of any  Registrable
Securities  of any Holder on any  registration  statement if such Holder has not
timely  provided any such  information or documents to the Company in connection
with such registration statement.

         (b) Each Holder shall comply with the prospectus delivery  requirements
of  the  Securities  Act  as  applicable  to  it in  connection  with  sales  of
Registrable Securities pursuant to any registration statement.

         (c) Upon receipt of a notice from the Company of the  occurrence of any
event or passage of time that (i) makes the financial  statements  included in a
registration   statement  ineligible  for  inclusion  therein,  (ii)  makes  any
statement  made in a  registration  statement or any  prospectus or any document
incorporated  or deemed to be  incorporated  therein by reference  untrue in any
material respect,  or (iii) requires any revisions to a registration  statement,
any prospectus  contained therein or any other documents so that, in the case of
such registration statement or such prospectus,  as the case may be, it will not
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,
in light of the  circumstances  under which they were made, not misleading (each
such notice, a "Blackout  Notice");  each Holder who has Registrable  Securities
registered  under  such  registration   statement  shall  forthwith  discontinue
disposition of such  Registrable  Securities under such  registration  statement
until such  Holder's  receipt of the copies of the  supplemented  prospectus  or
amended registration  statement or until it is advised in writing (the "Advice")
by the Company that the use of the applicable prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental  filings that
are incorporated or deemed to be incorporated by reference in such prospectus or
registration  statement.  The  Company may  provide  appropriate  stop orders to
enforce the provisions of this Section 6(c).

         (d) Each  Holder  agrees  not to take any  action  with  respect to any
distribution  deemed to be made  pursuant to any  registration  statement  which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.


                                      -7-
<PAGE>

     7.   REGISTRATION PROCEDURES

     If and  whenever the Company is required by any of the  provisions  of this
Agreement to effect the registration of any of the Registrable  Securities under
the  Securities  Act, the Company  shall  (except as otherwise  provided in this
Agreement),  use  commercially  reasonable  efforts to,  subject to the Holders'
assistance  and   cooperation  as  reasonably   required  with  respect  to  the
Registration Statement:

         (a) (i)  prepare  and file  with the  Commission  such  amendments  and
supplements to the Registration  Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration  Statement effective and
to comply with the provisions of the Securities Act during the applicable period
with  respect to the sale or other  disposition  of all  Registrable  Securities
covered by such  Registration  Statement in accordance with the intended methods
of distribution by the Holders thereof set forth in the  Registration  Statement
or prospectus  (including  prospectus  supplements  with respect to the sales of
Registrable  Securities  from  time to time in  connection  with a  registration
statement  pursuant to Rule 415  promulgated  under the Securities Act) and (ii)
take all lawful  action  such that each of the  Registration  Statement  and any
amendment  thereto does not, when it becomes  effective,  and any  prospectus or
prospectus  supplement  thereafter  filed,  contain  an  untrue  statement  of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading.

         (b) (i) prior to the filing  with the  Commission  of any  Registration
Statement (including any amendments thereto) and the distribution or delivery of
any prospectus (including any supplements thereto), provide draft copies thereof
to the Holders as required by Section 5(d) hereof and reflect in such  documents
all such  comments as the Holders  (and their  counsel)  reasonably  may propose
(provided  that the Company  shall not be liable under Section 5(f) or otherwise
for any delay in filing or effectiveness if such delay is fairly attributable to
such comments);  (ii) furnish to each of the Holders such numbers of copies of a
prospectus including a preliminary  prospectus or any amendment or supplement to
any  prospectus,  as  applicable,  in conformity  with the  requirements  of the
Securities Act, and such other  documents,  as any of the Holders may reasonably
request in order to  facilitate  the  public  sale or other  disposition  of the
Registrable  Securities  owned by such Holder;  and (iii) provide to the Holders
copies of any comments and  communications  from the Commission  relating to the
Registration  Statement,  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;

         (c)  register  and qualify the  Registrable  Securities  covered by the
Registration  Statement  under  such other  securities  or blue sky laws of such
jurisdictions  as any of the Holders shall  reasonably  request  (subject to the
limitations set forth in Section 5(d) hereof), and do any and all other acts and
things which may be  necessary or advisable to enable such Holder to  consummate
the public sale or other  disposition in such  jurisdiction  of the  Registrable
Securities owned by such Holder;

         (d) list such  Registrable  Securities  on the primary  trading  market
where the Common Stock of the Company is listed as of the effective  date of the
Registration  Statement,  if the listing of such Registrable  Securities is then
permitted under the rules of such market;

         (e) notify the Holders at any time when a prospectus  relating  thereto
covered by the  Registration  Statement  is required to be  delivered  under the
Securities  Act, of the  happening  of any event of which it has  knowledge as a
result of which the prospectus included in the Registration  Statement,  as then
in effect,  includes an untrue  statement of a material fact or omits to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing,  and the
Company  shall  prepare  and use is  commercially  reasonable  efforts to file a
curative  amendment under Section 7(a) hereof as soon as reasonably  practicable


                                      -8-
<PAGE>

and during  such  period,  the Holders  shall not make any sales of  Registrable
Securities pursuant to the Registration Statement;

         (f) after becoming aware of such event,  notify each of the Holders who
holds  Registrable  Securities  being sold (or, in the event of an  underwritten
offering,  the managing  underwriters)  of the issuance by the Commission of any
stop  order  or  other  suspension  of the  effectiveness  of  the  Registration
Statement as soon as reasonably  practicable  and take all reasonable  action to
effect  the  withdrawal,  rescission  or  removal  of such  stop  order or other
suspension;

         (g) cooperate with the Holders to facilitate the timely preparation and
delivery of certificates  for the Registrable  Securities to be offered pursuant
to the Registration  Statement and enable such  certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as any of
the Holders  reasonably  may request and  registered in such names as any of the
Holders  may  request;  and,  within  three  Trading  Days after a  Registration
Statement  which includes  Registrable  Securities is declared  effective by the
Commission,  deliver and cause legal counsel  selected by the Company to deliver
to the  transfer  agent  for the  Registrable  Securities  (with  copies  to the
Holders) an appropriate  instruction and, to the extent necessary, an opinion of
such counsel;

         (h) in the  event of an  underwritten  offering,  promptly  include  or
incorporate  in a  prospectus  supplement  or  post-effective  amendment  to the
Registration  Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such prospectus  supplement or post-effective  amendment
as soon as  reasonably  practicable  after it is  notified  of the matters to be
included  or  incorporated  in  such  prospectus  supplement  or  post-effective
amendment; and

         (i) maintain a transfer agent and registrar for the Common Stock.

     8.   INDEMNIFICATION

         (a) To the maximum  extent  permitted  by law,  the  Company  agrees to
indemnify  and hold  harmless  each of the  Holders,  each  person,  if any, who
controls any of the Holders within the meaning of the  Securities  Act, and each
director, officer, shareholder, employee or agent of the foregoing (each of such
indemnified  parties,  a "Distributing  Investor")  against any losses,  claims,
damages or liabilities,  joint or several (which shall, for all purposes of this
Agreement,  include,  but not be limited to, all reasonable costs of defense and
investigation  and all reasonable  attorneys'  fees and expenses),  to which the
Distributing Investor may become subject, under the Securities Act or otherwise,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based upon any untrue  statement or alleged untrue
statement of any material fact contained in any Registration  Statement,  or any
related final prospectus or amendment or supplement  thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading;  provided,  however, that the Company will not be liable in any such
case to the extent, and only to the extent, that any such loss, claim, damage or
liability  arises out of or is based upon an untrue  statement or alleged untrue
statement or omission or alleged omission made in such  Registration  Statement,
preliminary  prospectus,  final prospectus or amendment or supplement thereto in
reliance  upon, and in conformity  with,  written  information  furnished to the
Company  by any  Distributing  Investor,  its  counsel,  affiliates  or  agents,
specifically  for  use  in  the  preparation  thereof  or  by  any  Distributing
Investor's  failure  to  deliver  to a  purchaser  a  copy  of the  most  recent
prospectus  (including any amendments or  supplements  thereto).  This indemnity
agreement  will be in addition to any liability  which the Company may otherwise
have.


                                      -9-
<PAGE>

         (b) To the maximum extent permitted by law, each Distributing  Investor
agrees that it will  indemnify and hold harmless the Company,  and each officer,
director,  employee or agent of the Company or person,  if any, who controls the
Company within the meaning of the Securities  Act,  against any losses,  claims,
damages  or  liabilities  (which  shall,  for all  purposes  of this  Agreement,
include,   but  not  be  limited  to,  all  reasonable   costs  of  defense  and
investigation  and all  reasonable  attorneys'  fees and  expenses) to which the
Company or any such officer, director, employee, agent or controlling person may
become subject under the  Securities  Act or otherwise,  insofar as such losses,
claims,  damages or liabilities (or actions in respect  thereof) arise out of or
are based upon any untrue  statement or alleged untrue statement of any material
fact contained in any Registration Statement, or any related final prospectus or
amendment or supplement  thereto, or arise out of or are based upon the omission
or the alleged  omission to state  therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,  but in each
case only to the extent that such untrue  statement or alleged untrue  statement
or omission or alleged omission was made in such Registration  Statement,  final
prospectus  or  amendment  or  supplement  thereto  in  reliance  upon,  and  in
conformity  with,  written   information   furnished  to  the  Company  by  such
Distributing  Investor,  its counsel or affiliates,  specifically for use in the
preparation  thereof.  This  indemnity  agreement  will  be in  addition  to any
liability  which  the  Distributing  Investor  may  otherwise  have  under  this
Agreement.  Notwithstanding  anything to the contrary  herein,  the Distributing
Investor  shall be liable  under this  Section 8(b) for only that amount as does
not exceed the net  proceeds  to such  Distributing  Investor as a result of the
sale of Registrable Securities pursuant to a Registration Statement.

         (c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action against such indemnified party, such
indemnified  party will, if a claim in respect thereof is to be made against the
indemnifying  party  under this  Section 8,  notify  the  indemnifying  party in
writing  of  the  commencement  thereof;  but  the  omission  so to  notify  the
indemnifying  party will not relieve the  indemnifying  party from any liability
which it may have to any  indemnified  party except to the extent the failure of
the indemnified party to provide such written  notification  actually prejudices
the ability of the  indemnifying  party to defend such action.  In case any such
action  is  brought  against  any  indemnified   party,   and  it  notifies  the
indemnifying party of the commencement  thereof,  the indemnifying party will be
entitled to  participate  in, and, to the extent that it may wish,  jointly with
any other  indemnifying  party similarly  notified,  assume the defense thereof,
subject to the provisions  herein stated and after notice from the  indemnifying
party to such  indemnified  party  of its  election  so to  assume  the  defense
thereof,  the indemnifying  party will not be liable to such  indemnified  party
under this Section 8 for any legal or other  expenses  subsequently  incurred by
such  indemnified  party in  connection  with the  defense  thereof  other  than
reasonable  costs of  investigation,  unless the  indemnifying  party  shall not
pursue the action to its final  conclusion.  The indemnified  parties shall have
the right to employ  one or more  separate  counsel  in any such  action  and to
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall not be at the expense of the indemnifying  party if the indemnifying party
has assumed the defense of the action with counsel  reasonably  satisfactory  to
the  indemnified  party  unless  (i) the  employment  of such  counsel  has been
specifically  authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any interpleaded parties) include both the
indemnified  party and the  indemnifying  party and the indemnified  party shall
have been  advised by its counsel  that there may be one or more legal  defenses
available to the indemnifying party different from or in conflict with any legal
defenses  which  may  be  available  to  the  indemnified  party  or  any  other
indemnified party (in which case the indemnifying party shall not have the right
to assume the defense of such  action on behalf of such  indemnified  party,  it
being understood, however, that the indemnifying party shall, in connection with
any one such action or separate but substantially  similar or related actions in
the  same  jurisdiction   arising  out  of  the  same  general   allegations  or
circumstances,  be  liable  only for the  reasonable  fees and  expenses  of one
separate  firm of  attorneys  for the  indemnified  party,  which  firm shall be
designated  in writing by the  indemnified  party).  No settlement of any action
against an indemnified  party shall be made without the prior written consent of


                                      -10-
<PAGE>

the indemnified party, which consent shall not be unreasonably  withheld so long
as such  settlement  includes a full release of claims  against the  indemnified
party.

     All fees and expenses of the indemnified party (including  reasonable costs
of defense and  investigation in a manner not  inconsistent  with this Section 8
and  all  reasonable  attorneys'  fees  and  expenses)  shall  be  paid  to  the
indemnified party, as incurred, within 10 Trading Days of written notice thereof
to the indemnifying  party;  provided,  that the indemnifying  party may require
such  indemnified  party to undertake to reimburse all such fees and expenses to
the extent it is finally  judicially  determined that such indemnified  party is
not entitled to indemnification hereunder.

     9.   CONTRIBUTION

     In  order  to  provide  for  just  and  equitable  contribution  under  the
Securities Act in any case in which (i) the indemnified  party makes a claim for
indemnification  pursuant to Section 8 hereof but is judicially  determined  (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such  indemnification may not be enforced in such case  notwithstanding the fact
that the express  provisions of Section 8 hereof provide for  indemnification in
such case, or (ii) contribution  under the Securities Act may be required on the
part of any indemnified party, then the Company and the applicable  Distributing
Investor  shall  contribute  to  the  aggregate  losses,   claims,   damages  or
liabilities to which they may be subject (which shall,  for all purposes of this
Agreement,  include,  but not be limited to, all reasonable costs of defense and
investigation and all reasonable  attorneys' fees and expenses),  in either such
case (after  contribution from others) on the basis of relative fault as well as
any  other  relevant  equitable  considerations.  The  relative  fault  shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to  information  supplied by the Company on the one hand
or the  applicable  Distributing  Investor on the other hand,  and the  parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.  The Company and the  Distributing  Investor
agree that it would not be just and equitable if  contribution  pursuant to this
Section 9 were  determined  by pro rata  allocation  or by any  other  method of
allocation which does not take account of the equitable  considerations referred
to in this  Section 9. The amount paid or payable by an  indemnified  party as a
result of the  losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  referred  to above in this  Section 9 shall be deemed to  include  any
legal  or  other  expenses  reasonably  incurred  by such  indemnified  party in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities  Act) shall be entitled to  contribution  from any person who was
not guilty of such fraudulent misrepresentation.

     Notwithstanding  any other  provision  of this Section 9, in no event shall
(i) any of the Distributing  Investors be required to undertake liability to any
person  under this  Section 9 for any amounts in excess of the dollar  amount of
the  proceeds  received  by such  Distributing  Investor  from  the sale of such
Distributing  Investor's  Registrable  Securities  (after  deducting  any  fees,
discounts  and  commissions  applicable  thereto)  pursuant to any  Registration
Statement  under which such  Registrable  Securities  are  registered  under the
Securities Act and (ii) any  underwriter  be required to undertake  liability to
any  person  hereunder  for any  amounts  in excess of the  aggregate  discount,
commission or other compensation payable to such underwriter with respect to the
Registrable  Securities  underwritten  by it and  distributed  pursuant  to such
Registration Statement.

     10.  NOTICES

     Any  notice  required  or  permitted  hereunder  shall be given in  writing
(unless  otherwise  specified  herein)  and  shall be  effective  upon  personal
delivery,  via  facsimile or email (upon receipt of  confirmation  of error-free


                                      -11-
<PAGE>

transmission  or  mailing  a copy  of  such  confirmation,  postage  prepaid  by
certified mail, return receipt requested) or two business days following deposit
of such notice with an internationally  recognized courier service, with postage
prepaid and  addressed to each of the other  parties  thereunto  entitled at the
following addresses, or at such other addresses as a party may designate by five
days advance written notice to each of the other parties hereto.

     Company:                 DGSE Companies, Inc.
                              2817 Forest Lane
                              Dallas, Texas 75234
                              Attn: Dr. L. S. Smith
                              Facsimile: (972) 772-3093
                              Email:  LSSmith1@ClassicNet.net

     With a copy to:          Sheppard, Mullin, Richter & Hampton LLP
                              12275 El Camino Real, Suite 200
                              San Diego, California  92130-2006
                              Attn:  John J. Hentrich, Esq.
                              Facsimile:  (858) 509-3691
                              Email:  JHentrich@sheppardmullin.com

     SIBL:                    Stanford International Bank Ltd.
                              6075 Poplar Avenue
                              Memphis, TN 38119
                              Attention: James M. Davis, Chief Financial Officer
                              Facsimile: (901) 680-5265
                              Email:  MDavis@StanfordEagle.com

     With a copy to:          Adorno & Yoss, P.A.
                              2525 Ponce de Leon Blvd., Suite 400
                              Miami, Florida  33134
                              Attention: Seth P. Joseph, Esquire
                              Facsimile: (305) 460-1422
                              Email:  spj@adorno.com

     If to the Assignees:     William R. Fusselmann
                              141 Crandon Blvd., #437
                              Key Biscayne, Florida 33149
                              Facsimile:  (305) 960-8535
                              Email:  wfusselmann@stanfordeagle.com

                              Daniel T. Bogar
                              1016 Sanibel Drive
                              Hollywood, Florida 33021
                              Facsimile:  (305) 960-8535
                              Email:  dbogar@stanfordeagle.com

                              Ronald M. Stein
                              6520 Allison Road
                              Miami Beach, Florida 33141
                              Facsimile:  (305) 960-8535
                              Email:  rstein@stanfordeagle.com


                                      -12-
<PAGE>

                              Osvaldo Pi
                              6405 SW 104th Street
                              Pinecrest, Florida 33156
                              Facsimile:  (305) 960-8535
                              Email:  OPi@StanfordEagle.com

                              Charles M. Weiser
                              3521 N. 55th Avenue
                              Hollywood, Florida 33021
                              Facsimile:  (305) 960-8535
                              Email:  cweiser@stanfordeagle.com

     11.  ASSIGNMENT

     Neither this  Agreement  nor any of the rights,  interests  or  obligations
hereunder  shall be  assigned  without  the  prior  written  consent  of (i) the
Company,  in the case of an  assignment  by a Holder,  or (ii) Holders  owning a
majority of the shares of Company  common  stock  constituting  the  outstanding
Registrable Securities from time to time (a "Majority of Holders"),  in the case
of an  assignment by the Company.  Any  assignment in violation of the preceding
sentence shall be null and void and of no force or effect.

     12.  GOVERNING LAW; JURISDICTION

     This Agreement  shall be governed by and interpreted in accordance with the
laws of the State of Texas,  without  regard to its  principles  of  conflict of
laws. Any action or proceeding  seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any party in the
federal  courts of Texas or the state courts of the State of Texas,  and each of
the parties  consents to the  jurisdiction of such courts and hereby waives,  to
the maximum  extent  permitted by law, any  objection,  including any objections
based on forum non  conveniens,  to the bringing of any such  proceeding in such
jurisdictions.

     13.  NO DELAY OF REGISTRATION

     No Holder shall have any right, and each Holder covenants and agrees not to
commence any action or proceeding,  to obtain or seek an injunction  restraining
or  otherwise  delaying  any  registration  by the  Company as the result of any
controversy   that  might   arise  with   respect  to  the   interpretation   or
implementation of this Agreement.

     14.  TERMINATION OF REGISTRATION RIGHTS

     A Holder shall not be entitled to exercise any rights provided herein after
the first date on which all Registrable  Securities then held by such Holder may
immediately  be sold  under  Rule 144  during  any  90-day  period  taking  into
consideration the volume restrictions specified in Rule 144.

     15. MISCELLANEOUS

         (a)  Entire  Agreement.  This  Agreement,  including  any  certificate,
schedule,   exhibit  or  other  document  delivered  pursuant  to  their  terms,
constitutes  the entire  agreement  among the parties hereto with respect to the
subject  matters hereof and thereof,  and  supersedes  all prior  agreements and
understandings,  whether written or oral, among the parties with respect to such
subject matters.


                                      -13-
<PAGE>

         (b)  Amendments.  This  Agreement  may  not  be  amended  except  by an
instrument  in  writing  signed  by  the  Company  and a  Majority  of  Holders.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof  with  respect  to a matter  that  relates  exclusively  to the rights of
certain  Holders and that does not directly or  indirectly  affect the rights of
other  Holders  must be given by  Holders of all of the  Registrable  Securities
which such waiver or consent affects.

         (c)  Waiver.  No waiver of any  provision  of this  Agreement  shall be
deemed a waiver of any other  provisions or shall a waiver of the performance of
a provision in one or more  instances  be deemed a waiver of future  performance
thereof.  No  waiver by any party of any  default,  misrepresentation  or breach
hereunder,  whether intentional or not, shall be effective unless in writing and
signed by (i) the Company, if the waiver is sought to be enforced by any Holder,
or (ii) a Majority  of  Holders,  if the waiver is sought to be  enforced by the
Company.

         (d)  Construction.  This Agreement has been entered into freely by each
of the parties,  following consultation with their respective counsel, and shall
be  interpreted  fairly in accordance  with its  respective  terms,  without any
construction in favor of or against either party.

         (e) Binding  Effect of  Agreement.  This  Agreement  shall inure to the
benefit of, and be binding upon the successors and permitted  assigns of each of
the parties hereto.

         (f)  Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement or
the validity or unenforceability of this Agreement in any other jurisdiction.

         (g)  Attorneys'  Fees.  If any action  should arise between the parties
hereto to enforce or interpret the provisions of this Agreement,  the prevailing
party in such action shall be reimbursed for all reasonable expenses incurred in
connection with such action, including reasonable attorneys' fees.

         (h)  Third-Party  Beneficiaries.  This Agreement is made solely for the
benefit of the parties to this  Agreement and their  respective  successors  and
permitted assigns, and no other person or entity shall have or acquire any right
or remedy by virtue hereof except as otherwise expressly provided herein.

         (i) Headings.  The headings of this  Agreement are for  convenience  of
reference only and shall not form part of, or affect the  interpretation of this
Agreement.

         (j)  Counterparts.  This  Agreement  may  be  signed  in  one  or  more
counterparts,  each of which shall be deemed an original and all of which,  when
taken together, will be deemed to constitute one and the same agreement.

         (k) Facsimile Execution. A facsimile, telecopy or other reproduction of
this  Agreement may be executed by one or more parties  hereto,  and an executed
copy of this  Agreement  may be delivered  by one or more parties by  facsimile,
email or  similar  electronic  or  digital  transmission  pursuant  to which the
signature  of or on behalf of such  party can be seen,  and such  execution  and
delivery shall be considered valid,  binding and effective for all purposes.  At
the request of any party  hereto,  all  parties  agree to execute an original of
this Agreement as well as any facsimile, telecopy or other reproduction hereof.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]


                                      -14-
<PAGE>

         IN WITNESS  WHEREOF,  the parties hereto have caused this  Registration
Rights Agreement to be duly executed, as of the date first written above.

                                                DGSE COMPANIES, INC


                                                By:
                                                   -----------------------------
                                                   Dr. L.S. Smith
                                                   Chief Executive Officer


                                                STANFORD INTERNATIONAL BANK LTD.


                                                By:
                                                   -----------------------------
                                                   James M. Davis
                                                   Chief Financial Officer















                                      -15-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.8
<SEQUENCE>9
<FILENAME>dgse8kex28010907.txt
<DESCRIPTION>FORM OF CORPORATE GOVERNANCE AGREEMENT
<TEXT>

                                                                     Exhibit 2.8

                         CORPORATE GOVERNANCE AGREEMENT

     THIS  CORPORATE  GOVERNANCE  AGREEMENT  is  made  and  entered  into  as of
__________,  2007 (this "Agreement"),  by and among (i) DGSE Companies,  Inc., a
Nevada corporation (together with its successors and permitted assigns, "DGSE"),
(ii) Stanford  International  Bank, Ltd., a company  organized under the laws of
Antigua  and  Barbuda  (together  with its  successors  and  permitted  assigns,
"SIBL"),  and (iii) Dr. L.S. Smith, an individual resident of the State of Texas
(together  with his heirs and assigns,  "Smith"  and,  together  with SIBL,  the
"Stockholders").

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

     WHEREAS, DGSE, its wholly-owned  subsidiary,  DGSE Merger Corp., a Delaware
corporation  ("Merger Sub"),  Superior Galleries,  Inc., a Delaware  corporation
(f/k/a Tangible Asset Galleries, Inc., a Nevada corporation)  ("Superior"),  and
SIBL,  as  stockholder  agent,  made and entered into that  certain  Amended and
Restated  Agreement and Plan of Merger and  Reorganization as of January 6, 2007
(as  amended,   modified  or  supplemented   from  time  to  time,  the  "Merger
Agreement");

     WHEREAS,  the Merger Agreement provides for the merger of Superior with and
into  Merger Sub,  with  Superior as the  surviving  company and a  wholly-owned
subsidiary of DGSE (the "Merger");

     WHEREAS,  pursuant to the Merger, all outstanding capital stock of Superior
may be exchanged for shares of common stock,  par value $0.01 per share, of DGSE
(the "DGSE Common Stock"),  subject to the terms and conditions set forth in the
Merger Agreement;

     WHEREAS, SIBL is currently the largest stockholder of Superior and Smith is
currently the largest stockholder of DGSE;

     WHEREAS,  the  stockholders of Superior and DGSE need to approve the Merger
Agreement in order for the Merger to be consummated and Smith and SIBL desire to
induce each other to support and approve the Merger  Agreement and to enter into
support agreements in relation thereto; and

     WHEREAS, Smith and SIBL desire to establish in this Agreement certain terms
and conditions  concerning the post-Merger board of directors of DGSE (the "DGSE
Board").

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

     NOW, THEREFORE,  in consideration of the premises, the mutual covenants and
agreements  herein  contained  and other good and  valuable  consideration,  the
receipt and sufficiency of which are hereby expressly acknowledged,  the parties
hereto  (collectively,  the  "Parties"),  intending to be legally bound,  hereby
agree as follows:

     1. Certain  Definitions.  Unless otherwise  expressly  provided herein, the
following  terms,  whenever  used in this  Agreement,  shall  have the  meanings
ascribed to them below:

     "Affiliate"  means,  with respect to any  specified  Person,  (1) any other
Person who, directly or indirectly,  owns or controls, is under common ownership
or control with, or is owned or controlled  by, such specified  Person,  (2) any
other Person who is a director,  officer,  managing member or general partner or
is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of
any class of equity securities, of the specified Person or a Person described in
clause (1) next above,  (3)  another  Person of whom the  specified  Person is a
director, officer or partner or is, directly or indirectly, the Beneficial Owner
of ten  percent  (10%) or more of any class of equity  securities,  (4)  another


                                      -1-
<PAGE>

Person in whom the specified Person has a substantial  beneficial interest or as
to whom the specified Person serves as trustee or in a similar capacity,  or (5)
if applicable,  any member of the Immediate Family of the specified  Person.  As
used in this  definition,  the term "control" means the possession,  directly or
indirectly,  of the power to direct the  management  and  policies  of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     "Associate"  shall  have the  meaning  ascribed  to such term in Rule 12b-2
promulgated under the Exchange Act (or any successor regulation thereto).

     "Beneficially Own" means, with respect to any Person, any securities:

             (a)  which  such  Person  or any of  such  Person's  Affiliates  or
Associates, directly or indirectly, has the right to acquire (whether such right
is  exercisable  immediately  or only after the passage of time) pursuant to any
agreement,  arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights,  exchange rights,  rights,  warrants,  options or
otherwise;

             (b)  which  such  Person  or  any  such   Person's   Affiliates  or
Associates,  directly or indirectly,  has the right to vote or dispose of or has
"beneficial  ownership"  of (as  determined  pursuant to Rule 13d-3  promulgated
under the Exchange Act as such rule is in effect on the date of this Agreement),
including  pursuant to any agreement,  arrangement or understanding,  whether or
not in  writing;  provided,  however,  that a  Person  shall  not be  deemed  to
"Beneficially  Own" any security under this  subparagraph  (b) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement  or  understanding  arises  solely from a  revocable  proxy given in
response to a public proxy or consent solicitation made by DGSE pursuant to, and
in  accordance  with,  the  applicable  provisions  of  the  General  Rules  and
Regulations promulgated under the Exchange Act; or

             (c) which are beneficially  owned,  directly or indirectly,  by any
other Person (or any Affiliate or Associate  thereof) with which such Person (or
any of such Person's Affiliates or Associates) has an agreement,  arrangement or
understanding  (whether  or not in  writing),  for  the  purpose  of  acquiring,
holding,  voting  (except  pursuant to a  revocable  proxy as  described  in the
proviso to subparagraph (b) next above) or disposing of any voting securities of
DGSE;  provided,  however,  that nothing in this  subparagraph (c) shall cause a
person engaged in business as an underwriter of securities to "Beneficially Own"
any securities  acquired through such Person's  participation in good faith in a
firm  commitment  underwriting  under the Securities Act until the expiration of
forty days after the date of such acquisition.

The related term "Beneficial Owner" shall have the correlative meaning.

     "Common Stock" means the common stock,  par value $0.01 per share, of DGSE,
or any capital stock into which such common stock may be converted or exchanged.

     "DGSE Shares" means,  with respect to any  Stockholder,  all shares of DGSE
capital  stock (or any  capital  stock  into  which  such  capital  stock may be
converted or exchanged) Beneficially Owned by such Stockholder.

     "Director" means any director on the DGSE Board.

     "Effective  Time"  means  the  effective  time of the  consummation  of the
Merger.

     "Entity" means any  corporation  (including  any  non-profit  corporation),
general partnership,  limited partnership,  limited liability partnership, joint


                                      -2-
<PAGE>

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.

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

     "Executive  Officer"  means an  "officer"  (as such term is defined in Rule
16a-1(f) promulgated under the Exchange Act on the date hereof) of DGSE.

     "Immediate Family" means, with respect to any individual, such individual's
(i) children, stepchildren,  grandchildren, parents, stepparents,  grandparents,
spouse,  former  spouses,  siblings,  nieces,  nephews,  or  current  or  former
mothers-in-law,  fathers-in-law, sons-in-law, daughters-in-law,  brothers-in-law
or  sisters-in-law,  including  in each  case by  adoption,  and (ii) any  other
individual  sharing  such  individual's   household  (other  than  a  tenant  or
employee).

     "Independent  Director"  means a Director or Nominee (i) who is not and has
never been an officer or employee of DGSE,  Superior or SIBL or their respective
Affiliates  or  Associates,  or of any  Entity  that  derived  5% or more of its
revenues  or  earnings  in  any of its  three  most  recent  fiscal  years  from
transactions involving DGSE, Superior, SIBL or any Affiliate or Associate of any
of them,  (ii) who has no affiliation,  compensation,  consulting or contracting
arrangement  with  DGSE,  Superior  or SIBL or their  respective  Affiliates  or
Associates  or any other Entity such that a reasonable  person would regard such
individual as likely to be unduly influenced by management of DGSE,  Superior or
SIBL, respectively,  or their respective Affiliates or Associates, and (iii) who
is a Director  the DGSE  Board has  determined,  or a Nominee  the DGSE Board is
reasonably  likely to determine,  to be "independent"  within the meaning of the
applicable  listing rules of DGSE's  principal  trading market from time to time
and Section  10A(m)(3)  of the  Exchange  Act and Rule  10A-3(b)(1)  promulgated
thereunder.

     "Person"  means any (i)  individual,  (ii)  group  (within  the  meaning of
Section 13 of the Exchange Act), (iii) supranational,  national, federal, state,
local, municipal,  foreign or other governmental or quasi-governmental authority
of any nature (including any legislature,  agency, board, body, bureau,  branch,
department, division, commission,  instrumentality, court, tribunal, magistrate,
justice or other entity exercising governmental or quasi-governmental powers, or
(iv) any Entity.

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

     "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.

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

     2. Board of Directors.

         2.1 Nominations.  From and after the Effective Time, (i) for so long as
SIBL shall  Beneficially  Own at least 15% of the  outstanding  shares of Common
Stock as of the record date for the applicable meeting at which directors are to
be elected to the DGSE  Board,  SIBL shall have the right to  nominate up to two
Independent  Directors for election to the DGSE Board, (ii) for so long as Smith
shall Beneficially Own at least 10% of the outstanding shares of Common Stock as


                                      -3-
<PAGE>

of the  record  date for the  applicable  meeting at which  directors  are to be
elected to the DGSE  Board,  Smith  shall have the right to  nominate  up to two
Independent Directors for election to the DGSE Board, (iii) for so long as Smith
is an executive  officer of DGSE, Smith shall have the right to be nominated for
election to the DGSE Board, and (iv) as long as William H. Oyster  ("Oyster") is
an executive  officer of DGSE,  Oyster shall have the right to be nominated  for
election to the DGSE Board (all of the foregoing six nominees, collectively, the
"Nominees"). All Nominees shall be individuals at least 18 years of age.

         2.2 Audit Committee  Financial Expert. The Stockholders shall use their
reasonable  efforts  to  nominate  at  least  one  Independent  Director  who is
qualified as an "audit committee  financial expert", as such term is defined for
purposes of Item  401(h)(2) of Regulation S-K of the SEC Rules (or satisfies the
applicable requirements of any successor rule or regulation thereto).

         2.3 Notice of Elections,  Etc.  DGSE shall provide to each  Stockholder
entitled to nominate  Nominees  hereunder and to each executive officer entitled
to be  nominated  as a Nominee  hereunder  15 days prior  written  notice of any
intended  mailing of notice to its stockholders for a meeting at which directors
are to be elected,  and any such Stockholder or executive  officer,  as the case
may be, shall  notify DGSE in writing,  prior to such  mailing,  of each Nominee
nominated by such  Stockholder or whether such executive  officer requests to be
nominated,  as the case may be. If any such  Stockholder  or  executive  officer
fails to give  notice  to DGSE as set  forth in this  Section  2.3,  it shall be
deemed that the Nominee of such  Stockholder then serving as a Director shall be
its  Nominees  for  reelection  or that such  executive  officer  requests to be
nominated, as the case may be.

         2.4 DGSE  Solicitation and Voting of Shares.  Subject to the applicable
fiduciary  duties of the DGSE Board, or any applicable  committee  thereof,  and
compliance  by DGSE and the DGSE Board,  or such  committee,  in good faith with
applicable  law,  including  the SEC  Rules  and the  listing  rules  of  DGSE's
principal trading market,  DGSE and the DGSE Board shall, in connection with any
vote or meeting of DGSE stockholders at which directors to the DGSE Board are to
be  elected,  (i) cause each  Nominee to be  included  in the slate of  nominees
recommended by the DGSE Board to DGSE's  stockholders for election as directors,
and (ii) use its  reasonable  efforts  to cause the  election  of each  Nominee,
including (A) including  each Nominee in DGSE's proxy  statement  (provided such
Nominee promptly provides any information DGSE reasonably requests in connection
with  the  preparation  of its  proxy  statement,  including  a  duly  completed
director's  questionnaire  in such form as DGSE may  reasonably  provide to such
Nominee),  (B) recommending a vote for each Nominee,  and (C) soliciting proxies
in favor of each Nominee's election to the DGSE Board.

         2.5 SIBL Voting.  As long as SIBL Beneficially Owns any Common Stock of
DGSE,  SIBL shall, in its capacity as a stockholder of DGSE, take all reasonable
actions,  including voting all DGSE Shares which are Beneficially  Owned by SIBL
in person or by proxy at any  annual or  special  meeting  of DGSE  stockholders
called for the purpose of voting on the  election of  directors,  or executing a
written  consent in lieu  thereof in respect of such DGSE  Shares,  to elect (i)
Smith as a Director if nominated and then an Executive Officer,  and (ii) Oyster
as a Director if nominated  and then an Executive  Officer.  SIBL shall take all
such other actions,  including providing instructions to its nominated Directors
and causing its Affiliates  and Associates to vote all DGSE Shares  respectively
owned or controlled  by them,  as may be required to effectuate  the intents and
purposes of the foregoing.

         2.6 Non-Qualified  Nominees. If the DGSE Board determines in good faith
that a Nominee  elected  as a  Director  who is  required  to be an  Independent
Director  does not  qualify  as an  Independent  Director  or is  otherwise  not
qualified  to serve as a  Director  pursuant  to  Section  2.1,  the  nominating
Stockholder  shall take all action  necessary  to cause such  Director to resign
from  office and the DGSE Board may,  in  compliance  with  DGSE's  Bylaws as in
effect from time to time, remove such Director from office.


                                      -4-
<PAGE>

         2.7  Replacement  of  Directors.  If (i) any  Nominee  shall fail to be
elected as a Director,  or (ii) any Nominee elected as a Director shall cease to
serve as a Director,  whether by virtue of death, resignation (including because
such  Nominee is  required to resign  pursuant  to the last  sentence of Section
2.1),  removal or  otherwise,  before his or her successor has been duly elected
and  qualified at a meeting of DGSE  stockholders  at which  Directors are to be
elected;  and in  either  case a  vacancy  exists  on the DGSE  Board,  then the
Stockholder who had nominated such Nominee or former  Director,  as the case may
be, shall have the right to nominate a  replacement  Nominee who  satisfies  the
applicable  qualifications of such unelected Nominee or former Director,  as the
case may be, to fill such vacancy within 30 days of the date of such vacancy. In
any such case, subject to the applicable  fiduciary duties of the DGSE Board, or
any applicable  committee thereof, and compliance by DGSE and the DGSE Board, or
such committee,  in good faith with applicable law,  including the SEC Rules and
the listing rules of DGSE's principal  trading market,  the remaining  Directors
shall act to elect such replacement Nominee to fill such vacancy.

     3. Miscellaneous.

         3.1  Construction.  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) the  words  "include,"  "includes,"  and  "including"  shall be
deemed to be followed by "without limitation";

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

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

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

             (g) 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.

         3.2 Titles and Headings.  The section and paragraph titles and headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

         3.3  Voluntary  Execution  of  Agreement.  This  Agreement  is executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties. Each of the Parties acknowledges,  represents and warrants that (i)


                                      -5-
<PAGE>

it has read  and  fully  understood  this  Agreement  and the  implications  and
consequences   thereof;  (ii)  it  has  been  represented  in  the  preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,
or it has made a  voluntary  and  informed  decision  to  decline  to seek  such
counsel;  and (iii) it is fully  aware of the legal and  binding  effect of this
Agreement.

         3.4  Assignment.  None of the  Parties  may assign any of its rights or
interests  or delegate  any of its duties or  obligations  under this  Agreement
without the prior  written  consent of the other  Parties,  which consent may be
withheld in each Party's sole discretion.  Any purported  assignment not in full
compliance  with  this  Section  3.4  shall  be null and void and of no force or
effect ab initio.  Subject to the sentence next preceding,  this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the Parties and
express   beneficiaries   hereof   and  their   respective   heirs,   executors,
administrators, successors and permitted assigns

         3.5  Amendments and  Modification.  This Agreement may not be modified,
amended,  altered or  supplemented  except upon the  execution and delivery of a
written agreement executed by each of the Parties.

         3.6  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any Party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
Parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

         3.7 No Waiver. The failure of any Party to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in  equity,  or to insist  upon  compliance  by any other  Party with its
obligations hereunder, or any custom or practice of the Parties at variance with
the terms  hereof  shall not  constitute  a waiver by such Party of its right to
exercise any such or other right,  power or remedy or to demand such compliance.
No waiver by any Party of any default,  misrepresentation  or breach  hereunder,
whether  intentional or not, shall be effective  unless in writing and signed by
the Party against whom such waiver is sought to be enforced,  and no such waiver
shall be deemed to extend to any prior or subsequent default,  misrepresentation
or breach hereunder or affect in any way any rights arising because of any prior
or subsequent such occurrence.

         3.8 Arbitration.  Any dispute,  claim or controversy  arising out of or
relating   to  this   Agreement   or  the  breach,   termination,   enforcement,
interpretation or validity thereof,  including the determination of the scope or
applicability of this agreement to arbitrate, shall be determined by arbitration
in Dallas, Texas before one arbitrator. The arbitration shall be administered by
the  Judicial  Arbitration  and  Mediation  Services  ("JAMS")  pursuant  to its
Streamlined  Arbitration  Rules  and  Procedures.  Judgment  on any award may be
entered in any court having jurisdiction. This clause shall not preclude Parties
from  seeking  provisional  remedies  in aid of  arbitration  from  a  court  of
appropriate jurisdiction. The arbitrator may, in the award, allocate all or part
of the costs of the  arbitration,  including the fees of the  arbitrator and the
reasonable attorneys' fees of the prevailing party.

         3.9 Specific Performance.  The Parties declare that it is impossible to
measure in money the damages  that would  accrue to a Party by reason of another
Party's  failure  to  perform  any  of the  obligations  hereunder.  Each  Party
therefore  consents to an order of specific  performance  with respect to any of
its  obligations  hereunder.  Any  Party  against  whom an  order  for  specific
performance is sought hereby waives any claim or defense therein that the moving


                                      -6-
<PAGE>

party has an  adequate  remedy at law or that  money  damages  would  provide an
adequate remedy.  It shall,  however,  be the election of the moving party as to
whether or not to seek specific  performance.  An order for specific performance
shall be among the  remedies  that can be  granted  pursuant  to an  arbitration
instituted   under   Section  3.8  and   enforced  by  any  court  of  competent
jurisdiction.  Additionally,  solely for the purpose of provisional relief prior
to the  commencement of the arbitration  process  provided for in Section 3.8 or
pending a determination on the merits pursuant to such arbitration  process, any
Party may seek from an appropriate  court  injunctive  relief,  trustee process,
attachments, equitable attachments or similar relief.

         3.10 Notices. All notices, requests, instructions or other documents to
be given under this Agreement shall be in writing and shall be deemed given, (i)
upon receipt if sent via registered or certified mail, return receipt requested,
in the U.S.  mails,  postage  prepaid,  (ii) when sent if sent by  facsimile  or
email;  provided,  however, that the facsimile or email is promptly confirmed by
telephone confirmation thereof, (iii) when delivered, if delivered personally to
the  intended  recipient,  and (iv) one  business  day  following  delivery to a
reputable  national  courier service for overnight  delivery;  and in each case,
addressed to a Party at the following address for such Party:

         (a) If to DGSE, addressed to it at:

             DGSE Companies, Inc.
             2817 Forest Lane
             Dallas, Texas  75234
             Attn:  Dr. L.S. Smith
             Facsimile:  (972) 772-3093
             Email:  LSSmith1@ClassicNet.net



             with a copy (which shall not constitute  notice and which shall not
be required for delivery to be effective) to:

             Sheppard, Mullin, Richter & Hampton LLP
             12275 El Camino Real, Suite 200
             San Diego, California  92130-2006
             Attn:  John J. Hentrich, Esq.
             Facsimile:  (858) 509-3691
             Email:  JHentrich@sheppardmullin.com

         (b) If to Smith, addressed to him at:

             Dr. L.S. Smith 519 Interstate 30, #243
             Rockwall, Texas 75087 Facsimile: Email:
             LSSmith1@ClassicNet.net

         (c) If to SIBL, addressed to it at:

             Stanford International Bank Ltd.
             c/o Stanford Financial Group
             6075 Poplar Avenue
             Memphis, Tennessee  38119
             Attn: James M. Davis, Chief Financial Officer
             Facsimile: (901) 680-5265
             Email:  MDavis@StanfordEagle.com


                                      -7-
<PAGE>

             with a copy (which shall not constitute  notice and which shall not
be required for delivery to be effective) to:

             Adorno & Yoss LLP
             2525 Ponce de Leon Blvd., Suite 400
             Miami, Florida  33134-6012
             Attn: Seth P. Joseph, Esq.
             Facsimile:  (305) 460-1422
             Email:  spj@adorno.com

Or in each case to such other address,  email address or fax number as the Party
to whom the notice,  request,  instruction  or other  document is given may have
previously  furnished to the other Parties in writing in the manner set forth in
this Section 3.10.

         3.11  Governing  Law.  This  Agreement  and  the   performance  of  the
transactions  and obligations of the Parties  hereunder shall be governed by and
construed  in  accordance  with the laws of the  State  of Texas  applicable  to
contracts negotiated, executed and to be performed entirely within such State by
residents thereof.

         3.12 Entire Agreement.  This Agreement constitutes the entire agreement
and  understanding  of the Parties in respect of the subject  matter  hereof and
supersedes all prior  understandings,  agreements or representations by or among
the  Parties,  written  or oral,  to the  extent  they  relate in any way to the
subject matter hereof or the transactions contemplated by this Agreement.

         3.13 Third-Party  Beneficiaries.  This Agreement is made solely for the
benefit of the Parties and their  respective  permitted  successors and assigns,
and,  except to the extent  provided  in Section 2  regarding  Oyster,  no other
Person  shall have or  acquire  any right or remedy by virtue  hereof  except as
otherwise expressly provided herein.

         3.14 Submission to  Jurisdiction;  No Jury Trial.  Any suit,  action or
proceeding  with respect to this Agreement  shall be brought  exclusively in any
court of  competent  jurisdiction  in the County of Dallas,  Texas.  ALL PARTIES
HERETO HEREBY  IRREVOCABLY  WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE PERSONAL  JURISDICTION  OR VENUE OF ANY SUIT,  ACTION OR  PROCEEDING
ARISING  OUT OF OR  RELATING  TO THIS  AGREEMENT  BROUGHT  IN ANY SUCH COURT AND
HEREBY FURTHER  IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH  COURT HAS BEEN  BROUGHT IN AN  INCONVENIENT  FORUM.  TO THE
MAXIMUM EXTENT  PERMITTED BY LAW, THE PARTIES HERETO HEREBY FURTHER  IRREVOCABLY
WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION  ARISING  OUT OF OR IN  CONNECTION
WITH THIS AGREEMENT.

         3.15  Counterparts.  This  Agreement  may be  executed  in two or  more
original or  facsimile  counterparts,  each of which shall be deemed an original
but all of which together shall constitute but one and the same instrument.

         3.16 Facsimile Execution.  A facsimile,  telecopy or other reproduction
of this  Agreement may be executed by one or more Parties,  and an executed copy
of this  Agreement  may be  delivered  by one or more  Parties by  facsimile  or
similar electronic  transmission device pursuant to which the signature of or on
behalf of such  Party can be seen,  and such  execution  and  delivery  shall be


                                      -8-
<PAGE>

considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]










                                      -9-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed on the day and year first above written.

                                       DGSE COMPANIES, INC.


                                       By:
                                          --------------------------------------
                                          Dr. L.S. Smith
                                          Chief Executive Officer


                                       STANFORD INTERNATIONAL BANK, LTD.


                                       By:
                                          --------------------------------------
                                          James M. Davis
                                          Chief Financial Officer


                                       DR. L.S. SMITH

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






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.9
<SEQUENCE>10
<FILENAME>dgse8kex29010907.txt
<DESCRIPTION>LIMITED JOINDER AGREEMENT DATED JANUARY 6, 2007
<TEXT>

                                                                     Exhibit 2.9

                            LIMITED JOINDER AGREEMENT

     THIS  LIMITED  JOINDER  AGREEMENT is made and entered into as of January 6,
2007  (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,
"SIBL"). Capitalized terms used but not defined herein shall have the respective
meanings  ascribed  thereto in that certain  Amended and Restated  Agreement and
Plan of Merger and  Reorganization,  made and entered into as of the date hereof
(the "Merger Agreement"), by and among Parent, Merger Sub and Superior.

                                 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 the Merger Agreement and the merger
of Merger Sub with and into the Company (the  "Merger"),  with the Company being
the surviving corporation;

     WHEREAS, SIBL is a key stockholder of and the primary lender to Superior;

     WHEREAS,  SIBL  desires to execute and  deliver  this  Agreement  to induce
Parent,  Merger Sub and the  Company to enter into the Merger  Agreement  and to
consummate the Merger and the other Transactions; and

     WHEREAS,  the  execution  and  delivery of this  Agreement  by SIBL and the
Company is a condition precedent to the obligation of Parent and Merger Sub, and
the execution and delivery of this Agreement by SIBL, Parent and Merger Sub is a
condition precedent to the obligation of the Company, to consummate the Merger.

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

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

         Section 1. Merger Agreement.

         (a)  SIBL  hereby  acknowledges,  agrees  and  confirms  that,  by  its
execution and delivery of this Agreement,  SIBL shall be bound by and subject to
the terms and provisions of Article I, Section 6.1(a),  Section 6.1(g),  Section
6.4(c), Section 6.6, Section 9.5 and Article X of the Merger Agreement,  in each
case as if it were a party to the Merger Agreement,  and hence shall have all of
the rights, duties,  obligations and liabilities under such terms and provisions
as if it had been a signatory party to the Merger Agreement.

         (b)  SIBL  hereby  acknowledges,  agrees  and  confirms  that,  by  its
execution  and  delivery  of this  Agreement,  SIBL shall  serve as the  initial
Stockholder  Agent under the Merger  Agreement  and the Escrow  Agreement and in
such  capacity  shall  additionally  be bound by and  subject  to the  terms and
provisions  of  Section  3.3,  Section  3.14  and  Article  VIII  of the  Merger
Agreement, in each case as if it were a party to the Merger Agreement, and hence


                                      -1-
<PAGE>

shall have all of the rights, duties, powers,  obligations and liabilities under
such terms and  provisions as if it had been a signatory  party,  as Stockholder
Agent, to the Merger Agreement.

         (c)  SIBL  confirms  that  SIBL has  received  copies  of the  forms of
Employment  Agreements for Dr. L.S. Smith and William H. Oyster, copies of which
were attached as Exhibit A and Exhibit B,  respectively,  to that certain letter
dated July 17,  2006 from SIBL to Dr. L.S.  Smith,  Chief  Executive  Officer of
Parent,  each of which  Employment  Agreements  is to  become  effective  at the
Closing. SIBL confirms that SIBL has no objections to the form or content of the
Employment  Agreements and that,  for purposes of approving the Merger,  SIBL is
satisfied with the form and substance thereof.

         (d) In addition,  SIBL confirms that SIBL has  negotiated  and approved
the form of the Amended  and  Restated  Stanford  LOC,  Termination  and Release
Agreement, Escrow Agreement and Corporate Governance Agreement, and confirms its
agreement to execute and deliver  each such  agreement  in  connection  with the
Closing, as contemplated by Section 7.2 of the Merger Agreement.

         Section 2. Management Agreement.

         (a) SIBL hereby  authorizes  the  Independent  Committee (as defined in
that certain Management  Agreement,  made and entered into as of the date hereof
(the  "Management  Agreement"),  by and between  Merger Sub and the  Company) to
cooperate with Merger Sub in implementing Merger Sub's turnaround  strategy,  as
contemplated by the Management Agreement.

         (b)  SIBL  hereby  acknowledges  that  it has  received  a copy  of the
Management  Agreement  and  that it has no  objections  to the  form or  content
thereof. SIBL agrees, on behalf of itself and its Affiliates, that in performing
any duties under the Management  Agreement,  to the maximum extent  permitted by
applicable  law,  Merger  Sub and its  Representatives,  including  the  Interim
Executives  (as  defined  in the  Management  Agreement),  shall not (i) owe any
fiduciary duties to SIBL or any of its Affiliates whether in their capacity as a
creditor or stockholder of the Company or otherwise,  and SIBL hereby waives any
such fiduciary duties,  and (ii) be directly or indirectly liable to SIBL or any
of its Affiliates,  for damages, losses, expenses or other Liabilities,  whether
sounding in tort,  contract or otherwise,  arising from their acts or omissions,
including for their active negligence, violations of federal or state securities
laws,  breaches  of  fiduciary  duties,  or other act of Merger  Sub or any such
Representative, except for the acts of gross negligence or willful misconduct of
such Person.  Merger Sub or its  Representatives  may consult with legal counsel
(whether such counsel will be regularly  retained or  specifically  employed and
whether such counsel is engaged by Merger Sub or the Company) in connection with
providing  the  services  under  the  Management  Agreement  and  shall be fully
protected  in any act  taken,  suffered,  or  permitted  by it in good  faith in
accordance with the advice of counsel.  With respect to the Management Agreement
and the services,  acts and  omissions of Merger Sub and the Interim  Executives
thereunder,  IN NO EVENT SHALL  MERGER SUB OR ANY INTERIM  EXECUTIVE  BE LIABLE,
DIRECTLY OR INDIRECTLY,  TO SIBL OR ANY OF ITS AFFILIATES FOR ANY (x) DAMAGES OR
EXPENSES  ARISING OUT OF THE SERVICES  PROVIDED UNDER THE  MANAGEMENT  AGREEMENT
(OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL  MISCONDUCT BY
MERGER SUB OR AN INTERIM EXECUTIVE),  (y) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN
IF ADVISED OF THE  POSSIBILITY  OF SUCH  DAMAGES,  OR (z)  DAMAGES  WHICH IN THE
AGGREGATE  WOULD  EXCEED  THE  AMOUNT  OF FEES  PAID TO  MERGER  SUB  UNDER  THE
MANAGEMENT  AGREEMENT  (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL  MISCONDUCT  BY MERGER SUB OR AN INTERIM  EXECUTIVE).  During the period
commencing  on the date hereof and at all times  thereafter,  except as provided
below, SIBL covenants to refrain, and to cause its Affiliates to refrain,  from,
directly  or  indirectly,   asserting  any  claim  or  demand,   or  commencing,


                                      -2-
<PAGE>

instituting,  causing to be commenced,  or participating  in, any Action against
Merger  Sub  (or  any  Affiliate  thereof,  including  Parent)  or any of  their
respective  Representatives,  including any Interim Executive, based on any acts
or omissions for which Merger Sub and such  Representatives are not to be liable
pursuant to, or seeking any damages exceeding the limitations  thereon specified
in, the foregoing  provisions of this Section 2(b). Nothing in this Section 2(b)
shall abrogate  SIBL's (or its  Affiliates')  rights under any Contract with the
Company,  including its rights as a secured party to exercise any and all of its
remedies under the Stanford LOC (and the promissory  note executed in connection
therewith) or the  Forbearance  Agreement,  made and entered into as of the date
hereof, between SIBL and the Company.

         (c) SIBL  hereby  acknowledges  the  provisions  of Section  3.1 of the
Management  Agreement,  and hereby  consents  under the Stanford LOC,  including
Section 4.6  thereof,  to the Company  entering  into any  transaction  with any
"Affiliate" (as defined in the Stanford LOC) subject to the terms and conditions
of such Section 3.1,  including (i) intercompany  transaction with Parent or any
of Parent's  Affiliates on the terms described in Schedule 3.1 thereto  (without
giving  effect to any  amendment to such  Schedule  after the date hereof unless
SIBL shall have acknowledged and approved such amendment in writing), or (ii) on
terms approved by Special Interim  Committee of the Company Board (provided that
a majority of the members of the Special Interim Committee  approving such terms
shall be Mitchell Stolz,  David Rector or any director nominated to serve on the
Company Board by SIBL).

         Section 3.  Representations.  Each party hereto hereby  represents  and
warrants to each other party hereto that:

         (a) It has the full power, capacity, authority and right to execute and
deliver this Agreement and to perform its obligations  hereunder,  and under the
Merger Agreement as affected hereby.

         (b) This Agreement has been duly authorized by all necessary action and
constitutes such party's valid and binding agreement,  enforceable  against such
party in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
other similar laws of general applicability  relating to or affecting creditors'
rights and to general equity principles.

         (c) No  approval,  authorization,  consent  or filing  (other  than any
obligation to file certain  information  pursuant to the Securities Exchange Act
of 1934, as amended, and the regulations  promulgated thereunder) is required in
connection with its execution,  delivery and performance of this Agreement which
has not heretofore been obtained or made.

         (d) It has reviewed  this  Agreement,  the  Management  Agreement,  the
Merger Agreement and the form of Escrow Agreement in its entirety,  has obtained
the advice of counsel prior to executing  this  Agreement and fully  understands
all provisions of this  Agreement,  the Merger  Agreement and the form of Escrow
Agreement.

         Section 4.  Miscellaneous.  The terms and provisions of Section 1.3 and
Article X of the Merger  Agreement are hereby  incorporated by reference  herein
and shall apply to this Agreement  mutatis  mutandis,  as if expressly set forth
herein.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]




                                      -3-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                       DGSE COMPANIES, INC.


                                       By:  /s/ Dr. L.S. Smith
                                          --------------------------------------
                                          Dr. L.S. Smith
                                          Chairman and Chief Executive Officer


                                       DGSE MERGER CORP.


                                       By:  /s/ William H. Oyster
                                          --------------------------------------
                                          William H. Oyster
                                          Chief Executive Officer


                                       SUPERIOR GALLERIES, INC.


                                       By:  /s/ Silvano DiGenova
                                          --------------------------------------
                                          Silvano DiGenova
                                          Chief Executive Officer


                                       STANFORD INTERNATIONAL BANK, LTD.


                                       By:  /s/ James M. Davis
                                          --------------------------------------
                                          James M. Davis
                                          Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>11
<FILENAME>dgse8kex991010907.txt
<DESCRIPTION>SUPPORT AGREEMENT-DGSE STOCKHOLDERS DTD 01/06/07
<TEXT>

                                                                    Exhibit 99.1

                              DGSE COMPANIES, INC.
                                SUPPORT AGREEMENT

     THIS SUPPORT AGREEMENT is made and entered into as of January 6, 2007 (this
"Agreement"),  by and  among  (i) DGSE  Companies,  Inc.,  a Nevada  corporation
(together with its successors and permitted  assigns,  "Parent"),  (ii) Superior
Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a
Nevada corporation) (together with its successors, the "Company"), and (iii) the
undersigned  stockholders  of Parent  (each,  solely in its  capacity  as such a
stockholder, a "Stockholder").

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

     WHEREAS,  Parent,  DGSE Merger Corp., a Nevada corporation  ("Merger Sub"),
the Company, and Stanford International Bank Ltd., a corporation organized under
the laws of Antigua and  Barbuda  (together  with its  successors,  "SIBL"),  as
stockholder agent, have entered into that certain Amended and Restated Agreement
and Plan of Merger  and  Reorganization,  made and  entered  into as of the date
hereof (the "Merger Agreement");

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

     WHEREAS,  in the  Merger,  one  hundred  percent  (100%) of the  issued and
outstanding  shares of common stock of the Company (the "Company  Common Stock")
will be converted  into the right to receive  shares of common stock,  par value
$0.01 per share,  of Parent (the "Parent Common Stock") (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,  each Stockholder is the beneficial owner of such number of shares
of Parent Common Stock as is indicated on such  Stockholder's  signature page to
this Agreement;

     WHEREAS,  approval  of  the  Merger  by the  stockholders  of  Parent  is a
condition  precedent  to the  obligation  of each of Parent  and the  Company to
consummate the Merger or other Transactions;

     WHEREAS, the Company has incurred,  and may continue to incur,  substantial
expenses  related  to  the  evaluation,  negotiation  and  consummation  of  the
Transactions, the Merger Agreement and the Related Agreements;

     WHEREAS, the execution and deliver of this Agreement by the Stockholders is
a condition precedent to the execution and delivery by the Company of the Merger
Agreement and constitutes a material inducement for the Company therefor; and

     WHEREAS,  in  consideration  of and as a condition to the  execution of the
Merger  Agreement by the Company,  each  Stockholder  (solely in its capacity as
such)  agrees to vote all Shares (as such term is defined  below) of Parent over
which such Stockholder has voting power so as to facilitate  consummation of the
transactions contemplated by the Merger Agreement.


                                      -1-
<PAGE>

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

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:

     1. Certain Definitions. Capitalized terms used but not defined herein shall
have the respective  meanings ascribed thereto in the Merger  Agreement.  Unless
otherwise expressly provided herein, the following terms,  whenever used in this
Agreement, shall have the meanings ascribed to them below:

         (a) "Expiration  Date" means the earliest to occur of (i) such date and
time as the Merger  Agreement shall have been terminated  pursuant to Article IX
thereof, (ii) the Effective Time, and (iii) the written agreement of the parties
hereto.

         (b) "Merger Votes" means each of the following:

             (1) in favor of  approval  and  adoption of the Merger or any other
Transaction,  the Merger Agreement  (including any Amendment thereto approved by
the Board of Directors of the Company),  the Related  Agreements,  or any matter
that could reasonably be expected to facilitate the Merger;

             (2)  against  any  proposal  or action  that  could  reasonably  be
expected to delay,  impede or  interfere  with the approval of the Merger or any
other Transaction;

             (3)  against  any  action or  agreement  that could  reasonably  be
expected to result in a Breach of any  covenant,  representation  or warranty or
any  other  obligation  of Parent  under the  Merger  Agreement  or any  Related
Agreement to which Parent is a party or signatory;

             (4)  in  favor  of  the   amendment  to  the  Parent   Articles  of
Incorporation to increase the number of authorized shares of Parent Common Stock
to 30,000,000 shares; and

             (5) in favor of any other  matter  relating  to the  execution  and
delivery of the Related Agreements and the proper and prompt consummation of the
Transactions.

         (c) "New Shares"  means,  with respect to any  Stockholder,  all Equity
Interests  in Parent that such  Stockholder  purchases  or with respect to which
such Stockholder  otherwise acquires beneficial ownership after the date hereof,
including  (i) any Equity  Interests  acquired by gift or succession or means of
dividend or distribution,  and (ii) any Equity Interests issued or issuable upon
the conversion,  exercise or exchange,  as the case may be, of any Securities or
Commitments of Parent which are convertible into, or exercisable or exchangeable
for, Equity Interests of Parent.

         (d)  "Original  Shares"  means,  with respect to any  Stockholder,  all
Equity Interests of Parent beneficially owned by such Stockholder as of the date
of this Agreement.

         (e) "Shares" means, with respect to any Stockholder all Original Shares
and New Shares beneficially owned from time to time by such Stockholder.

     2. Restrictions on Transfer of Shares.


                                      -2-
<PAGE>

         (a)   Restrictions   on  Transfer  of  Shares.   Except  as   otherwise
contemplated by the Merger  Agreement,  each Stockholder  agrees not to cause or
permit,  or to attempt to effect,  directly or  indirectly,  any  Transfer of or
Encumbrance on its Shares,  and any such purported Transfer or Encumbrance shall
be null and void ab initio.

         (b) Transfer of Voting Rights. Except as otherwise  contemplated by the
Merger Agreement or the Related  Agreements,  each Stockholder agrees not to (i)
deposit (or permit the deposit of) any Shares in a voting  trust,  or (ii) grant
any proxy or power of  attorney  or enter into any voting  agreement  or similar
agreement  or  authorization  in  contravention  of its  obligations  under this
Agreement with respect to any Shares.

         (c) No Conflicts. Each Stockholder shall not take any other action that
would in any way restrict,  limit or interfere or conflict with the  performance
of  its  obligations   under  this  Agreement,   the  Merger  Agreement  or  the
Transactions.

     3.  Agreement  to Vote  Shares.  At every  meeting of the  stockholders  of
Parent,  however called, and at every adjournment or postponement  thereof,  and
for every action or approval by consent of the  stockholders of Parent,  in each
case  related  or  potentially  related to the Merger  Votes,  each  Stockholder
(solely in its  capacity  as such) shall (A) sign and  deliver  such  consent to
Parent  if  consistent  with the  Merger  Votes,  (B) not sign such  consent  if
inconsistent  with the Merger  Votes,  (C) appear at such  meeting or  otherwise
cause its Shares to be counted as present thereat for purposes of establishing a
quorum,  and (D) vote, or cause to be voted,  its Shares  strictly in accordance
with the Merger Votes.

     4.  Irrevocable and Exclusive  Proxy.  Concurrently  with the execution and
delivery of this Agreement,  each Stockholder agrees to deliver to the Company a
duly executed Irrevocable Proxy and Power Of Attorney  substantially in the form
attached  hereto as Exhibit A (the "Proxy"),  which shall be irrevocable  during
the term of this  Agreement  to the  fullest  extent  permissible  by law,  with
respect to the Shares. Each Stockholder expressly acknowledges that the Proxy is
coupled  with an interest.  Each  Stockholder  hereby  revokes any and all prior
proxies,  powers of attorney or similar  authorizations in respect of any Shares
to the extent related to the Merger Votes.

     5.  Representations and Warranties of Stockholder.  Each Stockholder hereby
represents and warrants to the Company as follows:

         (a) Title to Securities.  Such Stockholder is the beneficial owner and,
to the extent indicated, record holder of the Equity Interests of Parent and the
options,  warrants,  convertible notes and other Commitments of Parent indicated
on the signature page hereof,  free and clear of any  Encumbrance  that, in each
case,  would  deprive  the  Company  of the  benefits  of this  Agreement.  Such
Stockholder  has  identified on the signature page of this Agreement any nominee
or agent or other  Person in whose  name any Shares  beneficially  owned by such
Stockholder are held, and contact information relating to such Person.

         (b) No Other Securities. Such Stockholder does not beneficially own any
Securities of Parent other than the Equity  Interests in Parent and the options,
warrants,  convertible  notes and other  Commitments of Parent  indicated on the
signature page hereof.

         (c)  Authorization.  Such  Stockholder has the full power and authority
(if an Entity),  or the full legal capacity (if an individual),  to make,  enter
into and carry out the terms of this Agreement and the Proxy. This Agreement and
the  Proxy  have  been duly  executed  and  delivered  by such  Stockholder  and
constitute its legal, valid and binding  obligations,  enforceable against it in
accordance with their respective terms.


                                      -3-
<PAGE>

         (d) No  Conflicts  or  Consents.  The  execution  and  delivery of this
Agreement and the Proxy by such  Stockholder do not, and the performance of this
Agreement  and the Proxy by such  Stockholder  will not,  (i)  conflict  with or
violate any Law or Order applicable to such Stockholder or to which it or any of
its Properties is or may be subject or affected, or (ii) result in or constitute
a Breach of, or result (with or without notice or lapse of time) in the creation
of any  Encumbrance on any of the Shares pursuant to, any Contract to which such
Stockholder is a party or by which such  Stockholder or any of its affiliates or
Property is or may be bound or  affected.  The  execution  and  delivery of this
Agreement and the Proxy by such  Stockholder do not, and the performance of this
Agreement and the Proxy by such Stockholder will not, require any Consent of any
Person.

     6. Covenants of Parent.

         (a) No  Registration  of  Transfers.  Parent  shall  not  register  the
Transfer of any Shares,  or any Commitments for Equity  Interests of Parent,  of
any  Stockholder on the stock record books,  records or ledgers of Parent at any
time prior to the Expiration Date. Parent shall issue stop-transfer instructions
to each transfer agent (if any) for any class or series of its Equity Interests,
instructing  each such transfer agent not to register any Transfer of any Shares
during the term hereof except in compliance with the terms of this Agreement.

         (b) Filing of Proxies.  Parent shall  promptly file each Proxy with the
corporate secretary of Parent.

         (c) Notice of  Conflict.  Parent  shall  notify the  Company as soon as
practicable,  but in any event within one  business  day, if it receives (i) any
proxy,  power of  attorney  or similar  authorization  or any  revocation  which
purports to revoke or otherwise conflicts with any Proxy, or (ii) any request or
notice of Transfer of any Shares of any Stockholder.

     7. New Shares.  Parent and each Stockholder  agree that New Shares shall be
subject to the terms and  conditions of this  Agreement to the same extent as if
they constituted  Original Shares.  Each Stockholder shall promptly,  and in any
event within two business  days,  notify the Company of the number of New Shares
it acquires from time to time.

     8. Permitted  Activities.  Nothing in this Agreement  shall be construed to
(i) require any Stockholder to exercise any option,  warrant or other Commitment
to acquire Equity  Interests in Parent,  or (ii) prohibit any  Stockholder  from
engaging in a net exercise of any option, warrant or other Commitment to acquire
Equity Interests of Parent in accordance with the terms thereof.

     9. Stock Certificates  Legends. If so requested by the Company,  Parent and
each Stockholder agrees that the certificates representing any Shares shall bear
a legend  stating that they are subject to this  Agreement and to an irrevocable
proxy.

     10.  Further  Assurances.  From time to time, at the Company's  request and
without  consideration,  each  Stockholder  and Parent shall execute and deliver
such  additional  documents and take all such further action as may be necessary
or desirable to consummate and make effective,  in the most  expeditious  manner
practicable,  the transactions and appointments  contemplated by this Agreement.
Without limiting the generality of the foregoing,  each  Stockholder  (solely in
its capacity as such) shall  execute and deliver any  additional  documents  and
instruments as necessary or desirable, in the reasonable opinion of the Company,
to carry out the  intent  of this  Agreement,  including  executing  another  or
different appointment of proxy.


                                      -4-
<PAGE>

     11. Expenses. All fees, costs and expenses incurred in connection with this
Agreement by the Stockholders and Parent shall be paid by Parent.

     12. Miscellaneous.

         (a) Term. This Agreement shall be effective as of the date hereof. This
Agreement  shall  terminate,  and have no  further  force or  effect,  as of the
Expiration Date;  provided that such termination of this Agreement shall relieve
any party hereto from any  liability for any breach of this  Agreement  prior to
termination.

         (b)  Construction.  The rules of construction  specified in Section 1.3
(Construction)  of the Merger  Agreement  are hereby  incorporated  by reference
herein and shall apply to this Agreement mutatis  mutandis,  as if expressly set
forth herein.

         (c) Titles and Headings.  The section and paragraph titles and headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

         (d)  Voluntary  Execution  of  Agreement.  This  Agreement  is executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties.  Each of the Parties hereby  acknowledges,  represents and warrants
that (i) it has read and fully  understood  this Agreement and the  implications
and  consequences  thereof;  (ii) it has been  represented  in the  preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,
or it has made a  voluntary  and  informed  decision  to  decline  to seek  such
counsel;  and (iii) it is fully  aware of the legal and  binding  effect of this
Agreement.

         (e)  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any Party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
Parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

         (f) Binding Effect.  This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Parties and their  respective  successors
and permitted assigns.

         (g)  Amendments and  Modification.  This Agreement may not be modified,
amended,  altered or  supplemented  except upon the  execution and delivery of a
written agreement  executed by Parent,  the Company each of the Stockholders (if
any) adversely affected thereby.

         (h) No Waiver. The failure of any Party to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in  equity,  or to insist  upon  compliance  by any other  Party with its
obligations hereunder, or any custom or practice of the Parties at variance with
the terms  hereof  shall not  constitute  a waiver by such Party of its right to
exercise any such or other right,  power or remedy or to demand such compliance.
No waiver by any Party of any default,  misrepresentation  or breach  hereunder,
whether  intentional or not, shall be effective  unless in writing and signed by
the Party against whom such waiver is sought to be enforced,  and no such waiver
shall be deemed to extend to any prior or subsequent default,  misrepresentation


                                      -5-
<PAGE>

or breach hereunder or affect in any way any rights arising because of any prior
or subsequent such  occurrence.  Notwithstanding  the foregoing,  Parent and the
Company shall have the right to waive compliance with Section 2.

         (i)  Specific  Performance;  Injunctive  Relief.  Each  of the  Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions  hereof would cause  substantial and irreparable
damage to the other  Parties,  and that  money  damages  would be an  inadequate
remedy therefor. Accordingly, each of the Parties agrees that each of them shall
be  entitled  to seek  equitable  relief,  including  specific  performance  and
injunctive  relief, in the event of any such breach,  non-performance or default
in any Action  instituted  in any court of the United States or any state having
competent  jurisdiction,  or before any  arbitrator,  in  addition  to any other
remedy to which such Party may be entitled, at law or in equity.

         (j) Notices. All notices, requests,  instructions or other documents to
be given under this Agreement shall be in writing and shall be deemed given, (i)
five business days following  sending by registered or certified  mail,  postage
prepaid, (ii) when sent if sent by facsimile or email;  provided,  however, that
the facsimile or email is promptly confirmed by telephone  confirmation thereof,
(iii) when delivered,  if delivered  personally to the intended  recipient,  and
(iv) one business  day  following  sending by overnight  delivery via a national
courier  service,  and in each case,  addressed  to a Party (1) with  respect to
Parent or the  Company,  at the address set forth for such Party in Section 10.1
(Notices) of the Merger Agreement,  and (2) with respect to any Stockholder,  at
the address set forth on such  Stockholder's  signature page hereto,  or in each
case to such other address, fax number or email address as the Party to whom the
notice,  request,  instruction  or other  document is given may have  previously
furnished  to the other  Parties  in  writing  in the  manner  set forth in this
Section 12(j).

         (k)  Governing  Law.  This   Agreement  and  the   performance  of  the
transactions  and obligations of the Parties  hereunder shall be governed by and
construed  in  accordance  with the laws of the  State  of Texas  applicable  to
contracts negotiated, executed and to be performed entirely within such State.

         (l) Entire Agreement.  The Parties hereby acknowledge and re-affirm the
terms and provisions of Section 10.4 of the Merger Agreement.

         (m)  Third-Party  Beneficiaries.  This Agreement is made solely for the
benefit of
the Parties and their respective permitted successors and assigns, and no other
Person shall have or acquire any right or remedy by virtue hereof except as
otherwise expressly provided herein.

         (n) Consent to  Jurisdiction;  No Jury Trial;  Service of Process.  The
terms and provisions of Section 10.7(b)-(d) (Consent to Jurisdiction; Service of
Process;  No Jury  Trial) of the Merger  Agreement  are hereby  incorporated  by
reference  herein and shall  apply to this  Agreement  mutatis  mutandis,  as if
expressly set forth herein.

         (o)  Counterparts.  This  Agreement  may be  executed  in  two or  more
original or  facsimile  counterparts,  each of which shall be deemed an original
but all of which together shall constitute but one and the same instrument.

         (p) Facsimile Execution. A facsimile, telecopy or other reproduction of
this  Agreement may be executed by one or more Parties,  and an executed copy of
this  Agreement may be delivered by one or more Parties by  facsimile,  email or
similar electronic or digital transmission pursuant to which the signature of or
on behalf of such Party can be seen,  and such  execution and delivery  shall be
considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.


         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]


                                      -6-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed on the day and year first above written.

                           DGSE COMPANIES, INC.


                           By:  /s/ Dr. L.S. Smith
                              --------------------------------------------------
                              Dr. L.S. Smith
                              Chief Executive Officer


                           SUPERIOR GALLERIES, INC.


                           By:  /s/ Silvano DiGenova
                              --------------------------------------------------
                              Silvano DiGenova
                              Chief Executive Officer


                   [ THE STOCKHOLDER SIGNATURE PAGES FOLLOW ]







<PAGE>

                           STOCKHOLDER:


                           DR. L.S. SMITH

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



                           Address, etc. for notices:

                                    2817 Forest Lane
                                    Dallas, Texas 75234
                                    Facsimile:  [omitted]
                                    Email:  [omitted]

                           Parent Equity Interests held:

                                    2,279,864 shares of Parent Common Stock

                           Commitments to acquire Parent Equity Interests:

                                    Options to acquired 845,634 shares of Parent
                                    Common Stock








<PAGE>

                                                                       EXHIBIT A

                     IRREVOCABLE PROXY AND POWER OF ATTORNEY
                            SUPERIOR GALLERIES, INC.

     The undersigned holder of shares ("Stockholder") of DGSE COMPANIES, INC., a
Nevada  corporation  (together  with  its  successors,  the  "Company"),  hereby
irrevocably  (to the fullest extent  permitted by law)  constitutes and appoints
MITCHELL  STOLZ,  an  individual  resident of the State of  ________,  and DAVID
RECTOR, an individual resident of the State of _________,  and either of them or
each of their respective nominees,  as the true and lawful attorneys and proxies
of the undersigned, with full power of substitution and resubstitution,  for and
in its name,  place and stead,  solely and  exclusively to vote and exercise all
voting and related  rights (to the full extent that the  undersigned is entitled
to do so) with  respect to the  matters  referred to in Section 4 of this Proxy,
including  the right to sign its name (solely in its capacity as a  stockholder)
to any consent,  certificate or other document  relating to the Company that the
Chapters 78 and 92A of Title 7 of the Nevada  Revised  Statutes (the "NPCA") may
permit or require as  provided  in Section 4 of this  Proxy,  for all Shares (as
defined below), all in accordance with the terms of this Proxy.

     1. The following capitalized terms, whenever used in this Proxy, shall have
the meanings ascribed to them below:

         (a)  "Expiration  Date" means the earlier to occur of (i) such date and
time as the Merger  Agreement  shall have been  validly  terminated  pursuant to
Article X thereof,  (ii) such date and time as the Merger shall become effective
in accordance with the terms and provisions of the Merger  Agreement,  and (iii)
the termination of the Support Agreement.

         (b)  "Merger   Agreement"  means  that  certain  Amended  and  Restated
Agreement and Plan of Merger and Reorganization, made and entered into as of the
date hereof, by and among the Company,  DGSE Merger Corp., a Nevada  corporation
("Merger Sub"),  Superior,  and Stanford  International Bank Ltd., a corporation
organized  under the laws of Antigua and Barbuda  (together with its successors,
"SIBL"),  as  stockholder  agent,  as the  same  may  be  amended,  modified  or
supplemented from time to time.

         (c) "New Shares"  means all shares of capital stock of the Company that
the undersigned  Stockholder  purchases or with respect to which the undersigned
Stockholder  otherwise  acquires  beneficial  ownership  after the date  hereof,
including,  without  limitation,  (i)  any  such  shares  acquired  by  gift  or
succession or means of dividend or distribution,  and (ii) any shares of capital
stock of the  Company  issued  or  issuable  upon the  conversion,  exercise  or
exchange, as the case may be, of any options,  warrants,  convertible securities
or other  commitments of the Company which are convertible  into, or exercisable
or exchangeable for, shares of capital stock of the Company.

         (d)  "Original  Shares"  means  shares of capital  stock of the Company
(including  all shares  issuable  upon the  exercise or  conversion  of options,
warrants,   convertible   notes  and  other   rights  to  acquire  such  shares)
beneficially owned by the undersigned  Stockholder as of the date of the Support
Agreement.

         (e) "Shares" means all Original Shares and New Shares from time to time
beneficially owned by the undersigned Stockholder.


                                      -1-
<PAGE>

         (f) "Superior" means Superior Galleries,  Inc., a Delaware  corporation
(f/k/a Tangible Asset Galleries, Inc., a Nevada corporation),  together with its
successors and permitted assigns under the Support Agreement.

         (g) "Support Agreement" means that certain Support Agreement,  made and
entered into as of even date  herewith,  by and among the Company,  Superior and
the  stockholders  of the  Company  party  thereto,  as the same may be amended,
modified or supplemented from time to time.

     2. This Proxy is granted  pursuant to the Support  Agreement and is granted
in  consideration  of Superior  entering into the Merger  Agreement.  The Merger
Agreement  provides  for the merger of Superior  with and into Merger Sub,  with
Superior as the  surviving  corporation  and a  wholly-owned  subsidiary  of the
Company (the "Merger").

     3. Upon the undersigned's execution of this Proxy, any and all prior powers
of attorney and proxies given by the undersigned with respect to any Shares,  to
the extent  related to the  matters  set forth in Section 4 of this  Proxy,  are
hereby revoked, and the undersigned agrees not to grant any subsequent powers of
attorney or proxies  with  respect to the Shares or any New Shares to the extent
related thereto until after the Expiration Date.

     4. The attorneys and appointees  named above,  and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's  attorney and nominee to vote the Shares,  and
to exercise  all voting,  consent and  similar  rights of the  undersigned  with
respect to the Shares (including,  without limitation,  the power to execute and
deliver  written  consents)  at every  annual,  special,  postponed or adjourned
meeting of the  stockholders of the Company and in every written consent in lieu
of any such meeting, and the right to sign its name (solely in its capacity as a
stockholder)  to any  consent,  certificate  or other  document  relating to the
Company that the DGCL may permit or require:

         (a) in  favor  of  approval  and  adoption  of the  Merger,  the  other
transactions   and  agreements   contemplated  by  the  Merger   Agreement  (the
"Transactions"),  the Merger Agreement (including any amendment, modification or
supplement thereto approved by the Board of Directors of the Company), the other
agreements  expressly   contemplated  by  the  Merger  Agreement  (the  "Related
Agreements"), and any matter that could reasonably be expected to facilitate the
Merger;

         (b) against any proposal or action that could reasonably be expected to
delay,  impede  or  interfere  with the  approval  of the  Merger  or any  other
Transaction;

         (c) against any action or agreement  that could  reasonably be expected
to result in a breach  of or  default  under  any  covenant,  representation  or
warranty or any other  obligation of the Company  under the Merger  Agreement or
any Related Agreement to which the Company is a party or signatory;

         (d) in favor of the amendment to the Parent  Articles of  Incorporation
to increase the number of authorized shares of common stock, par value $0.01 per
share, of the Company to 30,000,000 shares; and

         (e) in favor of any other matter relating to the execution and delivery
of the Related  Agreements and the proper and prompt  consummation of the Merger
and the other Transactions.


                                      -2-
<PAGE>

     5. THIS PROXY AND POWER OF ATTORNEY ARE  IRREVOCABLE (TO THE FULLEST EXTENT
PERMITTED BY LAW) AND ARE COUPLED  WITH AN INTEREST.  This Proxy shall expire on
the Expiration Date.

     6. For sake of  clarification,  nothing in this Proxy shall confer upon the
attorneys named above the right to exercise control or direction over the voting
rights  attached  to the  Shares  in any  circumstance  other  than the  limited
circumstances expressly referred to herein. The undersigned Stockholder may vote
the Shares on all other matters.

     7. Any obligation of the undersigned Stockholder hereunder shall be binding
upon the successors and assigns of the undersigned Stockholder.

     8. If any term or  provision  of this Proxy or any part of any such term or
provision is held under any  circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such term or provision or part thereof will, with respect
to such circumstances and in such jurisdiction,  be deemed amended to conform to
applicable  laws so as to be valid  and  enforceable  to the  fullest  permitted
extent,  (ii) the  invalidity or  unenforceability  of such term or provision or
part thereof under such  circumstances and in such jurisdiction shall not affect
the validity or  enforceability  of such term or provision or part thereof under
any other circumstances or in any other  jurisdiction,  and (iii) the invalidity
or  unenforceability  of such term or provision or part thereof shall not affect
the validity or enforceability of the remainder of such term or provision or the
validity or  enforceability  of any other term or provision of this Proxy.  Each
term and provision of this Proxy is separable from every other term or provision
of this  Proxy,  and  each  part of each  term or  provision  of this  Proxy  is
separable from every other part of such term or provision.

     9. The Shares  beneficially owned by the undersigned  Stockholder as of the
date of this Proxy are listed on the final page of this Proxy.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]









                                      -3-
<PAGE>

     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated:  January ___, 2007



                DR. L.S. SMITH

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





                Shares Beneficially Owned:
                         2,279,864 shares of common stock of the Company

                         845,634  shares of common stock of the Company issuable
                         upon exercise of outstanding options, warrants or other
                         rights or upon conversion of outstanding notes or other
                         convertible securities
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>12
<FILENAME>dgse8kex992010907.txt
<DESCRIPTION>SECURITIES EXCHANGE AGREEMENT DATED 01/06/07
<TEXT>

                                                                    Exhibit 99.2

                          SECURITIES EXCHANGE AGREEMENT

     THIS SECURITIES  EXCHANGE  AGREEMENT is made and entered into as of January
6, 2007 (this  "Agreement"),  by and  between  DGSE  Companies,  Inc.,  a Nevada
corporation (the "Company"), and Silvano DiGenova, an individual resident of the
State of California ("DiGenova").  Capitalized terms used but not defined herein
shall  have the  respective  meanings  ascribed  to such  terms in that  certain
Amended and Restated Agreement and Plan of Merger and  Reorganization,  made and
entered  into as of the date  hereof  (the  "Merger  Agreement"),  by and  among
Superior  Galleries,   Inc.,  a  Delaware   corporation  (f/k/a  Tangible  Asset
Galleries,   Inc.,  a  Nevada   corporation)   (together  with  its  successors,
"Superior"),  the Company,  DGSE Merger  Corp.,  a Nevada  corporation  ("Merger
Sub"), and Stanford  International Bank Ltd., a corporation  organized under the
laws  of  Antigua  and  Barbuda  (together  with  its  successors,  "SIBL"),  as
stockholder agent.

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

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

     WHEREAS,  in the  Merger,  one  hundred  percent  (100%) of the  issued and
outstanding  shares of capital  stock of the Company will be converted  into the
right to receive  shares of Common  Stock of Parent (as set forth in Article III
of the Merger  Agreement),  on the terms and subject to the conditions set forth
in the Merger  Agreement and in accordance  with the General  Corporation Law of
the State of Delaware  (the  "DGCL")  and  Chapters 78 and 92A of Title 7 of the
Nevada Revised Statutes (the "NPCA");

     WHEREAS,  DiGenova  is the holder of record of  1,905,064  shares of common
stock of Superior (the "Superior  Common  Shares"),  and the Beneficial Owner of
(1) an  additional  2,200  Superior  Common  Shares  held in his IRA,  (2) 1,000
Superior  Common Shares held of record by his children,  and (3) 30,000 Superior
Common Shares subject to outstanding Company Options; and

     WHEREAS, DiGenova desires to induce Parent and Merger Sub to consummate the
Merger by  exchanging  355,000 of his  Superior  Common  Shares (the  "Exchanged
Shares")  for a  warrant,  substantially  in the form of  Exhibit A hereto  (the
"Warrant"),  to purchase  shares of common stock,  par value $0.01 per share, of
the Company ("DGSE Common Shares"), all in accordance with the terms and subject
to the conditions set forth herein.

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

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:

     1. Exchange of  Securities.  On the terms and subject to the conditions set
forth in this Agreement, DiGenova shall sell, convey, transfer and assign to the
Company,  and the Company shall  purchase and accept from  DiGenova,  all right,
title and interest in and to the Exchanged  Shares, in exchange (the "Exchange")
for the Warrant on the date hereof (the "Exchange  Time").  Not later than three
business days after the Exchange Time, (i) DiGenova shall deliver to the Company
a certificate  for the Exchanged  Shares duly endorsed or  accompanied  by stock


                                      -1-
<PAGE>

powers duly  endorsed in blank,  with any required  transfer tax stamps  affixed
thereto,  and (ii) upon receipt  thereof,  the Company shall deliver to DiGenova
the Warrant duly issued in the name of DiGenova.  Upon the  effectiveness of the
Exchange at the Exchange  Time,  all right,  title and interest to the Exchanged
Shares shall vest in the Company.

     2.  Representations  and Warranties.  Each Party represents and warrants to
the other Party as follows:

         (a) Investment Purpose. Such Party is acquiring the Exchanged Shares or
Warrant issuable upon the exchange of the Exchanged  Shares, as the case may be,
(collectively, the "Securities") for its own account for investment only and not
with a view  towards,  or for resale in  connection  with,  the  public  sale or
distribution thereof,  except pursuant to sales registered or exempted under the
Securities Act.

         (b) No  Conflicts  or  Consents.  The  execution  and  delivery of this
Agreement by such Party do not, and the  performance  of this  Agreement by such
Party will not, (i) conflict with or violate any Law or Order applicable to such
Party or to which it or any of its  Properties is or may be subject or affected,
or (ii) result in or  constitute a Breach of, or result (with or without  notice
or lapse of time) in the creation of any  Encumbrance  on any of the  Securities
pursuant  to, any Contract to which such Party is a party or by which such Party
or any of its  affiliates  or  Property  is or may be  bound  or  affected.  The
execution  and  delivery  of this  Agreement  by  such  Party  do  not,  and the
performance of this Agreement by such Party will not, require any Consent of any
Person.

         (c) Accredited Investor Status. Such Party is an "accredited  investor"
as that term is defined in Rule 501(a) of Regulation D under the Securities Act.

         (d) Reliance on Exemptions.  Such Party understands that the Securities
are being  offered and sold to it in reliance  on specific  exemptions  from the
registration  requirements  of the Securities Act and state  securities laws and
that the other Party is relying in part upon the truth and accuracy of, and such
Party's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of such Party set forth herein in order to
determine the  availability of such exemptions and the eligibility of such Party
to acquire the Securities.

         (e) Transfer or Resale. Such Party understands that the Securities have
not been registered  under the Securities Act or any state  securities laws, and
may  not  be  offered  for  sale,  sold,  assigned,  pledged,   hypothecated  or
transferred unless (A) subsequently registered thereunder,  (B) such Party shall
have delivered to the issuers of the Securities an opinion of counsel, in a form
reasonably  satisfactory to such issuer,  to the effect that such Securities may
be  sold,   assigned  or   transferred   pursuant  to  an  exemption  from  such
registration,  or (C) such Party provides the issuer of the Securities with such
documents and certificates as such issuer may reasonably  request to demonstrate
to its  satisfaction  that such Securities can be sold,  assigned or transferred
pursuant to Rule 144  promulgated  under the Securities Act (or a successor rule
thereto).

         (f) No General Solicitation. Such Party is not acquiring the Securities
as a  result  of any  advertisement,  article,  notice  or  other  communication
regarding any Securities  published in any newspaper,  magazine or similar media
or broadcast  over  television or radio,  or presented at any seminar or meeting
whose  attendees  have been  invited  by any  general  solicitation  or  general
advertising.

         (g) Disclosure of Information.  Such Party believes it has received all
the information it considers  necessary or appropriate  for deciding  whether to
acquire the  Securities  being  acquired by it hereunder.  Such Party has had an


                                      -2-
<PAGE>

opportunity  to ask  questions  and  receive  answers  from the  issuer  of such
Securities regarding the business, properties, prospects and financial condition
of such issuer.

         (h) Adequate  Information.  Such Party is aware of business affairs and
financial  condition  of  the  issuer  of  the  Securities,   and  has  acquired
information  about such issuer sufficient to reach an informed and knowledgeable
decision to acquire the Securities.

         (i) Sophistication and Experience. Such Party, either alone or together
with its representatives,  has such knowledge,  sophistication and experience in
business and financial  matters so as to be capable of evaluating the merits and
risks of the  prospective  investment in the Securities and has so evaluated the
merits and risks of such investment.

         (j) Ability to Bear Risk.  Such Party is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

         (k)  Relationship.  Such Party  either has a  preexisting  personal  or
business  relationship with the issuer of the Securities or any of its officers,
directors  or  controlling  persons,  or by reason of its  business or financial
experience or the business or financial experience of its professional  advisers
who are  unaffiliated  with and who are not  compensated  by such  issuer or any
affiliate  or selling  agent of such  issuer,  directly or  indirectly,  has the
capacity to protect its own interests in connection  with the acquisition of the
Securities.

         (l) Legend.  Such Party  understands  that the Securities  shall bear a
restrictive legend in substantially the following form:

         NEITHER THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE NOR THE
         SECURITIES  FOR  WHICH  THESE   SECURITIES  MAY  BE  EXERCISED
         (COLLECTIVELY,  THE  "SECURITIES")  HAVE BEEN REGISTERED UNDER
         THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR UNDER
         THE   SECURITIES   OR  "BLUE  SKY"  LAWS  OF  ANY  STATE  (THE
         "SECURITIES  LAWS").  THE SECURITIES MAY NOT BE SOLD,  OFFERED
         FOR SALE,  PLEDGED,  HYPOTHECATED OR OTHERWISE  TRANSFERRED IN
         THE ABSENCE OF (1)  REGISTRATION AND  QUALIFICATION  UNDER THE
         ACT AND  APPLICABLE  SECURITIES  LAWS,  OR (2) AN  OPINION  OF
         COUNSEL AND/OR OTHER EVIDENCE  REASONABLY  SATISFACTORY TO THE
         ISSUER  THAT  SUCH  REGISTRATION  AND  QUALIFICATION  ARE  NOT
         REQUIRED.

     3. Company Representations.  The Company agrees, represents and warrants to
DiGenova as follows:

         (a) Valid  Issuance.  The  Warrant,  and the  shares of share of common
stock,  par value $0.01 per share, of the Company (the "Common Stock")  issuable
upon exercise of the Warrant, (the "Shares") have been duly authorized and, when
issued  and paid for in  accordance  with this  Agreement  and the  Warrant,  as
applicable, will be duly and validly issued, fully paid and nonassessable,  free
and clear of all  liens.  The  Company  has  reserved  from its duly  authorized
capital stock the maximum number of shares of Common Stock issuable  pursuant to
the Warrant in order to issue the full  number of shares of Common  Stock as may
become issuable in accordance with the Warrant.

     4. DiGenova  Representations.  DiGenova agrees,  represents and warrants to
the Company as follows:


                                      -3-
<PAGE>

         (a) Warrant Representations. DiGenova has read and fully understood the
Warrant, including the representations and warranties being made by the "Holder"
(as defined in the  Warrant) in Section  10.3 of the  Warrant,  and hereby makes
such  representations  and  warranties  to the  Company.  Without  limiting  the
generality of the  foregoing,  DiGenova  represents and warrants that he (i) has
read  and  fully  understood  the  Warrant  and the  Merger  Agreement,  and the
implications  and consequences  thereof;  (ii) understands that in the event the
Merger is not  consummated by the  Expiration  Date (as defined in the Warrant),
the Warrant shall expire without having ever become  exercisable,  and (iii) has
been represented in the preparation,  negotiation,  and execution of the Warrant
by legal counsel and tax advisers of his own choice, or has made a voluntary and
informed decision to decline to seek such counsel or advice.

         (b) Certain Warrant  Provisions.  DiGenova  acknowledges  the terms and
provisions of Section 6 of the Warrant, pursuant to which the DGSE Common Shares
to be issued upon the  exercise  of the  Warrant are made  subject to the escrow
provisions of the Merger  Agreement,  and Section 9 of the Warrant,  pursuant to
which the Warrant may not be Transferred  except pursuant to the laws of descent
and distribution.

         (c) Title to Shares. DiGenova is the beneficial owner and record holder
of the Exchanged  Shares,  free and clear of any  Encumbrance,  and has the full
right,  power and  authority  to transfer  the  Exchanged  Shares to the Company
pursuant to this Agreement.

         (d) Securities  Held. After giving effect to the repayment of "DiGenova
Note" (as defined in that certain  Termination and Release  Agreement,  made and
entered  into as of the date  hereof,  by and among  the  Company,  Merger  Sub,
Superior,  DiGenova, Sanford, SFG and Stanford Venture Capital Holdings) and the
conversion  of  DiGenova's  400,000  shares  of the  Company's  Series  B  $1.00
Convertible Preferred Stock pursuant to that certain Conversion Agreement,  made
and entered into as of the date hereof,  by and between  Superior and  DiGenova,
DiGenova  (1) will be the  Beneficial  Owner or record  holder of (A)  1,905,064
Superior  Common Shares held of record in his name,  (B) 2,200  Superior  Common
Shares held in his IRA, (C) 1,000  Superior  Common Shares held of record by his
children, and (D) Company Options to acquire, in the aggregate,  30,000 Superior
Common Shares, and (2) will not Beneficially Own or own of record any Securities
of the Company  other than the Superior  Common  Shares and the Company  Options
specifically set forth in Section 4(d)(1).

         (e) California Qualification. DIGENOVA UNDERSTANDS THAT THE SALE OF THE
SECURITIES HAS NOT BEEN QUALIFIED WITH THE  COMMISSIONER  OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT
OF ANY PART OF THE CONSIDERATION FOR THE SECURITIES PRIOR TO SUCH  QUALIFICATION
IS UNLAWFUL,  UNLESS THE SALE OF THE SECURITIES IS EXEMPT FROM  QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF
ALL PARTIES TO THIS AGREEMENT  EXPRESSLY ARE CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

         (f) Residence of Transferee. The Person identified in Schedule 6 is not
a resident of, and does not have a residence in, the State of California.

     5. Escrow  Provisions.  DiGenova  acknowledges that the Shares to be issued
upon the exercise of the Warrant  shall be subject to the escrow  provisions  of
the Merger Agreement and the Escrow Agreement.  DiGenova acknowledges and agrees
that, upon any exercise of the Warrant,  DGSE will deliver 15% of the Shares for
which the Warrant is exercised (collectively, the "Escrow Shares") to the Escrow
Agent for deposit  into the Escrow  Account  established  with the Escrow  Agent


                                      -4-
<PAGE>

under the Escrow  Agreement  for the  purpose of  securing  the  indemnification
obligations  (including  DiGenova's  indemnification  obligations)  set forth in
Article VIII of the Merger Agreement, all as contemplated by, and subject to the
terms and conditions  of, Section 3.14 and Article VIII of the Merger  Agreement
and the Escrow  Agreement.  DiGenova  further  acknowledges  and agrees that the
Escrow Shares shall be subject to all of the applicable  terms and provisions of
the Merger  Agreement and Escrow  Agreement,  including the terms and conditions
relating to the  release  thereof and the use thereof as security to satisfy the
claims  of the  Indemnified  Parties.  DiGenova  (i)  irrevocably  appoints  and
constitutes  the  Stockholder  Agent from time to time as his  exclusive  agent,
attorney-in-fact  and  representative  in relation to or in connection  with the
afore-referenced provisions of the Merger Agreement and the Escrow Agreement and
the  transactions  contemplated  thereby,  (ii) consents to and  authorizes  the
Stockholder  Agent  to take or omit to take any and all  actions  and to make or
omit to make any and all decisions required or permitted to be taken by it under
the Merger Agreement or the Escrow Agreement, and (iii) consents to and approves
the terms and provisions of the Escrow Agreement.

     6. Transfer of Exchanged Shares.

         (a) The  Company  hereby  covenants  and  agrees  not to,  directly  or
indirectly, sell, offer, contract to sell, pledge, transfer the economic risk of
ownership,  enter into any  Commitment  for, or make any short  sale,  pledge or
otherwise  transfer,  any Exchanged  Shares prior to the earlier to occur of the
termination or exercise of the Warrant, except (i) a transfer to an Affiliate of
the Company  which agrees to be bound by the  provisions of this Section 6 as if
it were the Company hereunder, or (ii) in connection with the acquisition by one
or more Persons,  directly or indirectly,  pursuant to a tender offer,  exchange
offer, merger, reorganization, consolidation or other business combination, sale
of assets,  bulk transfer or other  transaction,  of all or substantially all of
the assets or Common Stock of the Company.

         (b) If the Warrant expires or otherwise  terminates without having been
exercised,  in whole or in part, the Company shall  promptly  assign and deliver
(without  recourse,  representation  or warranty)  the  Exchanged  Shares to the
Person  identified  in  Schedule  6.  Upon  such  delivery,  the  Warrant  shall
immediately be cancelled and be of no further force or effect.

     7. Governing  Law;  Jurisdiction.  This Agreement  shall be governed in all
respects by the laws of the State of Texas  applicable to contracts  negotiated,
executed and to be performed  entirely within such State. All suits,  actions or
proceedings  arising  out of,  or in  connection  with,  this  Agreement  or the
transactions  contemplated  by this Agreement shall be brought in any federal or
state court of competent subject matter  jurisdiction  sitting in Dallas County,
Texas.

     8.  Construction.  The  rules of  construction  specified  in  Section  1.3
(Construction)  of the Merger  Agreement  are hereby  incorporated  by reference
herein and shall apply to this Agreement mutatis  mutandis,  as if expressly set
forth herein.

     9.  Titles and  Headings.  The section and  paragraph  titles and  headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

     10.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be enforceable  against the Parties  actually
executing such  counterparts,  and all of which  together  shall  constitute one
instrument.

     11. Facsimile  Execution.  A facsimile,  telecopy or other  reproduction of
this  Agreement may be executed by one or more Parties,  and an executed copy of


                                      -5-
<PAGE>

this  Agreement may be delivered by one or more Parties by  facsimile,  email or
similar electronic or digital transmission pursuant to which the signature of or
on behalf of such Party can be seen,  and such  execution and delivery  shall be
considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

     12. Notices. All notices,  requests,  instructions or other documents to be
given or delivered under this Agreement  shall be given in the manner,  with the
effect and to the address, email address or fax number to be used for such Party
as provided in Section 10.1 of the Merger  Agreement;  provided that the initial
address, email address and fax number for DiGenova shall be as follows:

         Silvano DiGenova
         32001 S. Coast Highway
         Laguna Beach, California  92651
         Facsimile:
         Email:  [omitted]

     13. Entire  Agreement.  This Agreement and the Merger Agreement  constitute
the entire  agreement  among the  Parties  with  respect to the  subject  matter
hereof.

     14.  Amendment;  Waiver.  This  Agreement and any  provision  hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the  Party  against  which  enforcement  of the same is sought  and by
Parent.  This Agreement may be amended only by a writing executed by all Parties
and by Parent.

     15.  Binding  Effect.  This Agreement  shall be binding upon,  inure to the
benefit of, and be enforceable by, the Parties and their  respective  successors
and permitted assigns.

     16.  Specific   Performance;   Injunctive  Relief.   Each  of  the  Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions  hereof would cause  substantial and irreparable
damage  to the  other  parties  hereto,  and  that  money  damages  would  be an
inadequate remedy therefor. Accordingly, each of the Parties agrees that each of
them shall be entitled to seek equitable relief,  including specific performance
and  injunctive  relief,  in the event of any such  breach,  non-performance  or
default in any Action  instituted in any court of the United States or any state
having  competent  jurisdiction,  or before any  arbitrator,  in addition to any
other remedy to which such Party may be entitled, at law or in equity.

     17.  Severability.  The  provisions  of  this  Agreement  shall  be  deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any Party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
Parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

     18.  Further  Assurances.  At any time,  and from  time to time,  after the
effective  date,  each Party will execute such  additional  instruments and take
such  action as may be  reasonably  requested  by any other  Party to confirm or
perfect title to any property  interests  transferred  hereunder or otherwise to
carry out the intent and purposes of this Agreement.


                                      -6-
<PAGE>

     19.  Third-Party  Beneficiaries.  This  Agreement  is made  solely  for the
benefit of the Parties and Parent, and their respective permitted successors and
assigns, and no other Person shall have or acquire any right or remedy by virtue
hereof except as otherwise expressly provided herein.

     20.   Voluntary   Execution  of  Agreement.   This  Agreement  is  executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties.  Each of the Parties hereby  acknowledges,  represents and warrants
that (i) it has read and fully  understood this Agreement,  the Merger Agreement
and the Escrow Agreement, and the implications and consequences thereof; (ii) it
has been  represented  in the  preparation,  negotiation,  and execution of this
Agreement  by legal  counsel of its own choice,  or it has made a voluntary  and
informed  decision to decline to seek such counsel;  and (iii) it is fully aware
of the legal and binding effect of this Agreement.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]








                                      -7-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their  respective  authorized  signatories as of the date first
indicated above.

                                       DGSE COMPANIES, INC.


                                       By:  /s/ Dr. L.S. Smith
                                          --------------------------------------
                                          Dr. L.S. Smith
                                          Chairman and Chief Executive Officer


                                       SILVANO DIGENOVA

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









<PAGE>

                                                                       EXHIBIT A

                                 FORM OF WARRANT

                                   (Attached)














<PAGE>

                                                                      SCHEDULE 6

                         TRANSFEREE OF EXCHANGED SHARES

[ OMITTED ]



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>13
<FILENAME>dgse8kex993010907.txt
<DESCRIPTION>WARRANT TO DIGENOVA ISSUED JANUARY 6, 2007
<TEXT>

                                                                    Exhibit 99.3


NEITHER THE  SECURITIES  EVIDENCED BY THIS  CERTIFICATE  NOR THE  SECURITIES FOR
WHICH THESE SECURITIES MAY BE EXERCISED  (COLLECTIVELY,  THE "SECURITIES")  HAVE
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR
UNDER THE  SECURITIES OR "BLUE SKY" LAWS OF ANY STATE (THE  "SECURITIES  LAWS").
THE  SECURITIES  MAY NOT BE SOLD,  OFFERED FOR SALE,  PLEDGED,  HYPOTHECATED  OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF (1) REGISTRATION AND QUALIFICATION UNDER
THE ACT AND  APPLICABLE  SECURITIES  LAWS,  OR (2) AN OPINION OF COUNSEL  AND/OR
OTHER EVIDENCE REASONABLY  SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.

THIS WARRANT IS NOT TRANSFERABLE.



                              DGSE COMPANIES, INC.

                        WARRANT TO PURCHASE 96,951 SHARES
                                 OF COMMON STOCK

Warrant No. 1                        Date of Original Issuance:  January 6, 2007

     This certifies that Silvano DiGenova,  an individual  resident of the State
of California,  or his heirs,  legatees or executors (the  "Holder"),  for value
received,  shall have the right and obligation to purchase from DGSE  Companies,
Inc., a Nevada  corporation (the "Company"),  having a place of business at 2817
Forest Lane,  Dallas,  Texas 75234,  Ninety-Six  Thousand Nine Hundred Fifty-One
(96,951)  fully  paid and  nonassessable  shares,  as such  number  and class of
security may be adjusted as provided herein (as so adjusted,  the "Shares"),  of
the Company's common stock, par value $0.01 per share ("Common Stock"), for cash
at a price of $0.01 per share,  as such price may be adjusted as provided herein
(as so adjusted,  the "Exercise  Price"),  at the effective time (if any) of the
acquisition  (the  "Acquisition")  of  Superior  Galleries,   Inc.,  a  Delaware
corporation  ("Superior"),  by the Company (such time,  the  "Effective  Time");
provided that Holder's  obligation to purchase the Shares from the Company,  and
the  Company's  obligations  to sell the Shares to the  Holder,  shall cease and
expire  (whether or not the Effective  Time has occurred) at 5:00 p.m.  (Pacific
time) on the earlier to occur of (i) eighteen months after the date hereof,  and
(ii) the termination of that certain Amended and Restated  Agreement and Plan of
Merger and  Reorganization,  made and  entered  into as of the date of  original
issuance  hereof,  by and among the  Company,  DGSE  Merger  Corp.,  a  Delaware
corporation,   Superior  Galleries,  Inc.,  a  Delaware  corporation,   and  the
stockholder  agent (such  earliest date, the  "Expiration  Date").  The Exercise
Price and the number of shares  purchasable  hereunder are subject to adjustment
as provided in Section 4 of this Warrant.

     This  warrant to purchase  Common  Stock (this  "Warrant")  is being issued
pursuant to that certain Securities Exchange Agreement, made and entered into as
of the date of original issuance hereof (the "Securities  Exchange  Agreement"),
by and between the Company and the Holder,  in consideration for the exchange of
355,000 shares of common stock of Superior (the "Exchanged Shares").

     This Warrant is subject to the following terms and conditions:

     1. Term. This Warrant shall be deemed to be automatically exercised for all
of the Shares at the Effective Time (for avoidance of doubt,  without the giving


                                      -1-
<PAGE>

of any  notice or the  taking  of any other  action on the part of Holder or the
Company).  Holder  acknowledges  and agrees that the exercise of this Warrant is
conditioned  upon the  consummation of the  Acquisition  prior to the Expiration
Date, and that if the Acquisition  does not occur prior to the Expiration  Date,
this  Warrant  shall  expire and be of no force or effect  without  having  been
exercised.

     2.  Exercise;  Issuance  Of  Certificates;  Payment  For  Shares.  Upon the
exercise hereof, Holder shall promptly surrender to the Company at its principal
office  (or at such  other  location  as the  Company  may  advise the Holder in
writing) this Warrant and, if applicable, shall deliver to the Company therewith
payment  in cash or by  check of the  aggregate  Exercise  Price  for all of the
Shares determined in accordance with the provisions  hereof.  The Company agrees
that the  Shares  purchased  under  this  Warrant  shall be and are deemed to be
issued to the Holder  hereof as the record  owner of such Shares as of the close
of business on the date on which this Warrant shall have been surrendered to the
Company together with any required payment made for such Shares.  Subject to the
escrow  provisions  of Section  6,  certificates  for the  Shares so  purchased,
together  with any other  securities  or property to which the Holder  hereof is
entitled upon such exercise,  shall be delivered to the Holder by the Company at
the Company's expense within five (5) business days after the rights represented
by this  Warrant have been so  exercised.  Each stock  certificate  so delivered
shall be in such denominations of Common Stock as may be reasonably requested by
the Holder  and shall be  registered  in the name of the Holder or his  nominee.
Notwithstanding anything to the contrary set forth herein, this Warrant may only
be exercised  in its  entirety  for the total  number of Shares  subject to this
Warrant.

     3. Shares To Be Fully Paid;  Reservation Of Shares.  The Company  covenants
and agrees that all Shares  which may be issued upon the  exercise of the rights
represented by this Warrant will,  upon issuance,  be duly  authorized,  validly
issued,  fully paid and nonassessable and free from all preemptive rights of any
stockholder  and free of all taxes,  liens and charges with respect to the issue
thereof  (subject to the escrow  provisions  of Section 6). The Company  further
covenants and agrees that,  until the expiration or earlier  termination of this
Warrant,  the Company shall at all times have  authorized and reserved,  for the
purpose of issue or transfer upon exercise of the subscription  rights evidenced
by this Warrant, a sufficient number of Shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights  evidenced by this  Warrant.  The Company  shall take all
such  action as may be  necessary  to assure  that such  Shares may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed; provided, however, that the Company shall not be required to effect a
registration or  qualification  under federal or State  securities or "blue sky"
laws with respect to such exercise.

     4. Adjustment to the Shares.

         4.1 Stock Dividends, Splits, etc. If the Company (i) declares or pays a
dividend on its Shares  payable in shares of Common  Stock or other  securities,
(ii) subdivides  (including by means of a split) the  outstanding  Shares into a
greater  amount of shares of Common Stock or other  securities,  (iii)  combines
(including by means of a reverse split) or consolidates  the outstanding  Shares
into a lesser  amount of shares of Common Stock or other  securities;  then,  in
each such case,  the number of Shares for which this  Warrant  may be  exercised
shall be adjusted so that upon exercise the Holder shall  receive,  without cost
to Holder,  the total number and kind of  securities  to which Holder would have
been  entitled  had  Holder  owned  the  Shares  of  record  as of the date such
dividend, subdivision, split, combination or consolidation occurred.

         4.2    Reclassification,    Exchange   or   Substitution.    Upon   any
reclassification, exchange, substitution or other event that results in a change


                                      -2-
<PAGE>

to all of the outstanding  shares of Common Stock or other  securities for which
this Warrant is then  exercisable,  the number and class of securities  issuable
upon exercise of this Warrant shall be adjusted so that Holder shall be entitled
to  receive,  upon  exercise  of this  Warrant,  the  total  number  and kind of
securities  and  property to which  Holder  would have been  entitled had Holder
owned the  Shares of record as of the date of such  reclassification,  exchange,
substitution or other event. Upon surrender of this Warrant,  the Company or its
successor  shall promptly issue to Holder a new warrant  evidencing the right to
acquire such new securities or other property. The new warrant shall provide for
adjustments  which shall be as nearly  equivalent as may be  practicable  to the
adjustments  provided  for in this  Section  4  including,  without  limitation,
adjustments  to the Exercise  Price and to the number of  securities or property
issuable upon exercise of the new warrant.

         4.3  Subdivision or Combination of Shares.  If the Company shall at any
time combine or consolidate the Shares, by reclassification or otherwise, into a
lesser number of shares, the Exercise Price shall be proportionately  increased.
If the Company shall at any time subdivide the Shares,  by  reclassification  or
otherwise,  into a  greater  number  of  shares,  the  Exercise  Price  shall be
proportionately decreased.

         4.4  Successive  Adjustments.  The  provisions  of this Section 4 shall
similarly apply to successive dividends, splits,  reclassifications,  exchanges,
substitutions, combinations or other events.

         4.5 Notices of Change.  Within 10 business days after any adjustment in
the number or class of the Shares  subject to this  Warrant and of the  Exercise
Price, the Company shall give written notice thereof to Holder, setting forth in
reasonable detail the calculation of such adjustment.

     5. Issue Tax.  The  issuance  of  certificates  evidencing  Shares upon the
exercise of this Warrant  shall be made  without  charge to Holder for any issue
tax (other  than any  applicable  income  taxes) in respect  thereof;  provided,
however,  that the  Company  shall not be  required  to pay any tax which may be
payable in respect of any transfer  involved in the issuance and delivery of any
certificate in a name other than that of the then Holder of this Warrant.

     6. Escrow  Provisions.  Notwithstanding  anything  to the  contrary in this
Warrant,  the Shares to be issued  upon the  exercise of this  Warrant  shall be
subject to the escrow  provisions  of that  certain  (i)  Amended  and  Restated
Agreement and Plan of Merger and Reorganization, made and entered into as of the
date hereof (the  "Merger  Agreement"),  by and among the  Company,  DGSE Merger
Corp., a Delaware corporation, Superior Galleries, Inc., a Delaware corporation,
and  the  stockholder   agent  thereunder   (together  with  any  successors  as
stockholder  agent  under  the  Merger  Agreement  and  Escrow  Agreement,   the
"Stockholder  Agent"),  and (ii) Escrow Agreement (the "Escrow Agreement") to be
entered  into by and between the Company and an escrow  agent to be appointed by
the Company  pursuant  to the Merger  Agreement  (the  "Escrow  Agent").  Holder
acknowledges  and agrees that,  upon any exercise of this  Warrant,  the Company
shall   deliver  15%  of  the  Shares  for  which  this   Warrant  is  exercised
(collectively,  the "Escrow  Shares") to the Escrow  Agent for deposit  into the
escrow account established with the Escrow Agent under the Escrow Agreement (the
"Escrow  Account") for the purpose of securing the  indemnification  obligations
(including the Holder's  indemnification  obligations) set forth in Article VIII
of the Merger  Agreement,  all as contemplated  by, and subject to the terms and
conditions  of,  Section 3.14 and Article VIII of the Merger  Agreement  and the
Escrow Agreement. Holder acknowledges that the Escrow Shares shall be subject to
all of the applicable  terms and  provisions of the Merger  Agreement and Escrow
Agreement,  including the terms and conditions  relating to the release  thereof
and the use thereof as security to satisfy the claims of the Indemnified Parties
(as defined in the Merger Agreement). Holder, by acceptance of this Warrant, (i)
irrevocably  appoints and constitutes the Stockholder Agent from time to time as
his exclusive agent,  attorney-in-fact  and  representative in relation to or in
connection with the afore-referenced  provisions of the Merger Agreement and the


                                      -3-
<PAGE>

Escrow Agreement and the transactions contemplated thereby, (ii) consents to and
authorizes the Stockholder Agent to take or omit to take any and all actions and
to make or omit to make any and all decisions  required or permitted to be taken
by it under the Merger Agreement or the Escrow Agreement,  and (iii) consents to
and  approves the terms and  provisions  of the Escrow  Agreement;  in each case
without any further action on the part of the Holder.

     7. Closing Of Books.  The Company will at no time close its transfer  books
against the  transfer of this Warrant or of any Shares  issued or issuable  upon
the  exercise of this  Warrant in any manner  which  interferes  with the timely
exercise of this Warrant.

     8. No Voting Or Dividend Rights; Limitation Of Liability. Other than as set
forth herein, nothing contained in this Warrant shall be construed as conferring
upon  Holder  the  right  to  vote  or to  consent  or to  receive  notice  as a
shareholder  of the Company or any other  matters or any rights  whatsoever as a
shareholder of the Company. No dividends or interest shall be payable or accrued
in respect  of this  Warrant or the  interest  represented  hereby or the Shares
purchasable  hereunder  until,  and only to the extent that,  this Warrant shall
have been exercised.  No provisions hereof, in the absence of affirmative action
by the Holder,  and no mere  enumeration  herein of the rights or  privileges of
Holder,  shall give rise to any liability of Holder for the Exercise Price or as
a shareholder of the Company,  whether such liability is asserted by the Company
or by its creditors.

     9. Warrant Not Transferable.  Neither this Warrant nor any right,  title or
interest herein or hereunder is transferable, in whole or in part; provided that
this  Warrant may be  transferred  to the heirs,  legatees or  executors  of the
Holder,  pursuant to the applicable  laws of descent and  distribution,  without
charge to the Holder (except for transfer taxes), upon surrender of this Warrant
properly endorsed. Any purported sale, transfer, pledge,  hypothecation or other
disposition of this Warrant or any right, title or interest herein shall be null
and void ab initio and of no force or effect.

     10. Securities Laws.

         10.1 Compliance with Securities  Laws.  Holder,  by acceptance  hereof,
agrees that this Warrant,  and the Shares or other  securities to be issued upon
exercise  hereof,  are being and will be acquired for investment and that Holder
will not offer,  sell, pledge or otherwise  transfer or dispose of this Warrant,
or any Shares or other  securities  to be issued upon  exercise  hereof,  except
under  circumstances  which will not result in a violation of the Securities Act
of 1933, as amended (the  "Securities  Act"), or any applicable state securities
or "blue sky" laws.  Upon  exercise  of this  Warrant,  unless the Shares  being
acquired  are  registered  and  qualified  under  the  Securities  Act  and  any
applicable  state  securities  or "blue  sky"  laws or an  exemption  from  such
registration  and  qualification  is available,  Holder shall confirm in writing
that the  Shares (or other  securities)  so  purchased  are being  acquired  for
investment and not with a view toward distribution or resale in violation of the
Securities  Act and shall confirm such other matters  related  thereto as may be
reasonably requested by the Company.

         10.2 Restricted Securities;  Legend. Holder understands that the Shares
issuable upon the exercise of this Warrant shall be "restricted  securities" (as
that term is defined in Rule 144  promulgated  under the  Securities  Act),  and
unless a registration  statement relating to the resale of the Shares shall then
be  effective  under  the  Securities  Act,  may  bear  a  legend  in  the  form
substantially  as follows or otherwise  indicating  such Shares are  "restricted
securities":

   THE SECURITIES EVIDENCED BY THIS CERTIFICATE (THESE "SECURITIES") HAVE
   NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
   "ACT"),  OR UNDER THE  SECURITIES OR "BLUE SKY" LAWS OF ANY STATE (THE


                                      -4-
<PAGE>

   "SECURITIES  LAWS").  THESE  SECURITIES  MAY NOT BE SOLD,  OFFERED FOR
   SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
   (1)  REGISTRATION  AND  QUALIFICATION  UNDER  THE ACT  AND  APPLICABLE
   SECURITIES  LAWS, OR (2) AN OPINION OF COUNSEL  AND/OR OTHER  EVIDENCE
   REASONABLY  SATISFACTORY  TO THE  ISSUER  THAT SUCH  REGISTRATION  AND
   QUALIFICATION ARE NOT REQUIRED.

         10.3 Representations and Warranties. In connection with the issuance of
this  Warrant,   Holder  (or  upon  any  permitted  assignment,   the  assignee)
specifically represents to the Company by acceptance of this Warrant as follows:

          (a) If an entity,  Holder is duly organized,  validly  existing and in
     good  standing  under  the laws of its  jurisdiction  of  incorporation  or
     formation,  and has the  requisite  right,  entity  power and  authority to
     exercise the Warrant and purchase the Shares; if an individual,  Holder has
     the requisite  right,  power and legal capacity to exercise the Warrant and
     purchase the Shares.

          (b) Holder is an  "accredited  investor"  as  defined  in Rule  501(a)
     promulgated under the Securities Act, and is not a registered broker-dealer
     under Section 15 of the Securities Exchange Act of 1934, as amended.

          (c) Holder,  either alone or together  with its  representatives,  has
     such  knowledge,  sophistication  and  experience in business and financial
     matters  so as to be  capable  of  evaluating  the  merits and risks of the
     prospective  investment  in this Warrant and,  upon  exercise  hereof,  the
     Shares,  and has so evaluated the merits and risks of such investment.  The
     undersigned  is able to bear the  economic  risk of an  investment  in this
     Warrant  and the  Shares  and,  at the  present  time,  is able to afford a
     complete loss of such investment.

          (d) Holder is aware of the  Company's  business  affairs and financial
     condition,  and has acquired  information  about the Company  sufficient to
     reach an informed and knowledgeable decision to acquire this Warrant.

          (e)  Holder  is  acquiring  this  Warrant  for  its  own  account  for
     investment  purposes  only  and not with a view to,  or for the  resale  in
     connection with, any "distribution"  thereof in violation of the Securities
     Act or applicable state securities laws.

          (f) Holder is not acquiring this Warrant or purchasing any Shares as a
     result  of  any  advertisement,  article,  notice  or  other  communication
     regarding this Warrant or the Shares  published in any newspaper,  magazine
     or similar media or broadcast over television or radio, or presented at any
     seminar  or  meeting  whose  attendees  have been  invited  by any  general
     solicitation or general advertising.

          (g) Holder  understands that the Shares have not been registered under
     the  Securities  Act and may not be offered,  resold,  pledged or otherwise
     transferred except (i) pursuant to an exemption from registration under the
     Securities  Act or  pursuant  to an  effective  registration  statement  in
     compliance  with Section 5 under the Securities  Act, or (ii) in accordance
     with all  applicable  securities  and "blue  sky" laws of the states of the
     United States and other jurisdictions.


                                      -5-
<PAGE>

          (h) To the extent a registration statement under the Securities Act is
     not in effect,  Holder understands and acknowledges that (i) the Shares are
     being issued and sold to it without  registration  under the Securities Act
     in a private  placement that is exempt from the registration  provisions of
     the Securities Act, and (ii) the availability of such exemption  depends in
     part on, and that the Company and its counsel is relying upon, the accuracy
     and  truthfulness  of the  foregoing  representations  and the  undersigned
     hereby consents to such reliance.

          (i) Holder  further  understands  that this  Warrant and any Shares or
     other  securities  purchased  hereunder  must be held  indefinitely  unless
     subsequently  registered  under the Securities Act and qualified  under any
     applicable state  securities or "blue sky" laws, or unless  exemptions from
     registration and qualification are otherwise available. The holder is aware
     of the provisions of Rule 144 promulgated under the Securities Act.

          (j) Holder either has a preexisting personal or business  relationship
     with the Company or any of its officers,  directors or controlling persons,
     or by reason of its  business or  financial  experience  or the business or
     financial experience of its professional advisers who are unaffiliated with
     and who are not  compensated  by the  Company or any  affiliate  or selling
     agent of the Company,  directly or indirectly,  has the capacity to protect
     its own interests in  connection  with the exercise of this Warrant and the
     purchase of the Shares.

          (k) Holder (i) has read and fully understood this Warrant,  the Merger
     Agreement and the Escrow  Agreement,  and the implications and consequences
     hereof and thereof;  (ii)  understands that in the event the Acquisition is
     not  consummated by the Expiration  Date,  this Warrant will expire without
     having  ever  become  exercisable,  and (iii) has been  represented  in the
     preparation,  negotiation,  and  execution of this Warrant by legal counsel
     and tax advisers of its own choice, or it has made a voluntary and informed
     decision to decline to seek such counsel or advice.

     11.  Modification And Waiver.  This Warrant and any provision hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the party against which enforcement of the same is sought.

     12. Notices. Any notice, request or other document required or permitted to
be given or  delivered  to Holder or the Company  shall be delivered or shall be
sent by certified mail,  postage prepaid,  to the Holder at its address as shown
on the books of the Company or to the Company at the address indicated  therefor
in the first  paragraph of this Warrant or such other address as either may from
time to time provide to the other.

     13. Binding  Effect On  Successors.  All of the covenants and agreements of
the Company shall inure to the benefit of the permitted  successors  and assigns
of Holder.

     14. Descriptive Headings.  The description headings of the several sections
and  paragraphs  of this Warrant are inserted  for  convenience  only and do not
constitute a part of this Warrant.

     15.  Governing  Law.  This  Warrant  shall be  construed  and  enforced  in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Texas  applicable  to  instruments  negotiated,  executed and to be
performed entirely within such State.

     16. Lost Warrants.  Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft,  destruction,  or mutilation of this Warrant and, in


                                      -6-
<PAGE>

the case of any such loss,  theft or  destruction,  upon receipt of an indemnity
reasonably  satisfactory  to the Company,  or in the case of any such mutilation
upon surrender and  cancellation of this Warrant,  the Company,  at its expense,
shall  make and  deliver  a new  warrant,  of like  tenor,  in lieu of the lost,
stolen, destroyed or mutilated Warrant.

     17.  Fractional  Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the  holder  entitled  to such  fraction  a sum in cash  equal to such  fraction
multiplied by the then effective Exercise Price.

     18.  Specific  Performance.  The parties  hereto hereby  declare that it is
impossible  to measure in money the damages  which will accrue to a party hereto
or to their heirs, personal  representatives,  or assigns by reason of a failure
to perform any of the obligations under this Warrant and agree that the terms of
this  Warrant  shall be  specifically  enforceable.  If any party  hereto or his
heirs, personal representatives,  or assigns institutes any action or proceeding
to  specifically  enforce the  provisions  hereof,  any person against whom such
action or proceeding is brought hereby waives the claim or defense  therein that
such party or such personal  representative  has an adequate  remedy at law, and
such  person  shall not  offer in any such  action  or  proceeding  the claim or
defense that such remedy at law exists.

        [ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]









                                      -7-
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized, this ____ day of January, 2007.

                                       DGSE COMPANIES, INC.


                                       By:  /s/ Dr. L.S. Smith
                                          --------------------------------------
                                          Dr. L.S. Smith
                                          Chairman and Chief Executive Officer



ACKNOWLEDGED AND AGREED TO:


SILVANO DIGENOVA

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






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>14
<FILENAME>dgse8kex994010907.txt
<DESCRIPTION>MANAGEMENT AGREEMENT DATED JANUARY 6, 2007
<TEXT>

                                                                    Exhibit 99.4

                              MANAGEMENT AGREEMENT

     THIS  MANAGEMENT  AGREEMENT  is made and entered into as of January 6, 2007
(this  "Agreement"),  by and between DGSE Merger Corp.,  a Delaware  corporation
("DGSE"),  and Superior Galleries,  Inc., a Delaware corporation (f/k/a Tangible
Asset Galleries,  Inc., a Nevada  corporation)  ("Superior").  Capitalized terms
used but not defined herein shall have the respective  meanings ascribed thereto
in  that  certain  Amended  and  Restated  Agreement  and  Plan  of  Merger  and
Reorganization,  made  and  entered  into as of the  date  hereof  (the  "Merger
Agreement"),  by and among DGSE Companies Inc., a Nevada corporation ("Parent"),
DGSE, Superior and Stanford  International Bank, Ltd., a company organized under
the laws of Antigua and Barbuda (together with its successors, "Stanford").

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

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

     WHEREAS,  Superior is engaged in the  business,  inter alia, of the sale of
rare coins on a retail, wholesale, and auction basis; and

     WHEREAS, key personnel of DGSE have substantial expertise that is useful to
Superior,  and Superior and DGSE desire that, during the Term hereof, DGSE shall
supply the  services  of certain of its  corporate  officers  to serve as senior
management of Superior.

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

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:

     1.  Appointment.  Superior  hereby  appoints  DGSE to render  the  Services
described in Section 2 for the term of this Agreement.

     2. Services.

         2.1 DGSE shall  provide two or three senior  executives  (the  "Interim
Executives"), on a part-time basis, for the term of this Agreement (the "Term"),
to serve as the senior  management of Superior.  These individuals are initially
anticipated to be William H. Oyster as interim Chief  Executive  Officer,  Scott
Williamson as interim Chief Operating Officer,  and John Benson as interim Chief
Financial  Officer and  interim  Vice  President,  Finance.  The  interim  Chief
Executive  Officer  shall  report to the Company  Board,  and the other  Interim
Executives shall report to the interim Chief Executive Officer.

         2.2 During the term of this  Agreement,  DGSE shall render to Superior,
by and through the Interim  Executives  and such of DGSE's  Representatives  and
Affiliates  and  Representatives  of  such  Affiliates  as  DGSE,  in  its  sole
discretion, shall from time to time designate,  management, advisory, consulting
and other services in relation to operations, inventory management,  litigation,
strategic planning,  sales,  restructuring,  marketing and financial  oversight,
including the selection,  retention and supervision of independent  auditors and
outside  legal  counsel and the  authority to approve  hiring,  discipline,  and
termination  of  all  Superior  employees,   consultants  and  contractors  (the
"Services"), in consultation with the Company Board.

<PAGE>

     3. Limitations.

         3.1 The Interim  Executives shall not effectuate any material  business
transaction  between DGSE (or any of its Affiliates) and Superior (or any of its
Affiliates),  except (i) as expressly contemplated by the Merger Agreement, (ii)
in the  Ordinary  Course of  Business  of each of DGSE and  Superior,  (iii) for
permitted  intercompany  transactions  on the terms  described  in Schedule  3.1
hereto,  or (iv) after consulting with and obtaining the approval of the Special
Interim Committee of the Company Board,  comprised of the Superior directors who
are not affiliated  with DGSE,  initially to consist of Mitchell Stolz and David
Rector (the "Independent Committee").

         3.2 The Interim  Executives  shall not materially  change the strategic
direction of Superior's business, except (i) for changes to Superior's strategic
direction  described in Schedule 3.2 hereto,  or (ii) after  consulting with and
obtaining the approval of the Independent Committee. The Parties acknowledge and
agree that Superior has been operating with heavy losses for an extended  period
of time and that DGSE shall have broad  authority  to  implement  a  turnaround,
including changing the focus,  strategy and direction of Superior as DGSE in its
business judgment and discretion deems appropriate,  and Superior authorizes and
directs the Independent  Committee to cooperate with DGSE in implementing DGSE's
turnaround strategy.

     4. Payment.

         4.1 In  consideration  for DGSE providing the Services,  Superior shall
pay DGSE fees in the amount of (i)  $50,000  per month for the  services  of the
Interim Executives,  and (ii) the hourly compensation rate, without mark-up, for
the services of all other DGSE Representatives. Fees shall accrue and be payable
on a daily basis. Fee payments shall be non-refundable.

         4.2  Superior  shall  reimburse  DGSE,  as  accrued,  for  all  of  its
reasonable  out-of-pocket expenses,  including travel, lodging and related costs
for the  Interim  Executives  and other DGSE  Representatives  for travel to the
offices of Superior or otherwise incurred to perform the Services.

         4.3 Superior shall pay to DGSE $60,000  concurrently with the execution
of this  Agreement as an advance  payment and retainer for all amounts  becoming
due under the Agreement, and DGSE may charge its fees and out-of-pocket expenses
directly  against the retainer as the same accrue.  On the first business day of
each  succeeding  calendar month during the term hereof,  Superior shall restore
the  balance of such  retainer  to  $60,000.  If at any time the  balance of the
retainer  shall fall below  $5,000,  Superior  shall  advance  additional  funds
reasonably  requested by DGSE as a retainer.  DGSE shall have no  obligation  to
provide any of its Services to Superior, or to incur any out-of-pocket  expenses
on behalf  of  Superior,  if it shall not be  reasonably  assured  of  obtaining
indefeasible  payment for its  Services.  DGSE shall be  obligated to return any
unearned retainer upon the termination of this Agreement.

     5. Term of Agreement. The Term shall commence on the date hereof, and shall
continue  until the first to occur of the  following (or such later time as DGSE
and Superior may agree in writing): (i) the consummation of the Merger; (ii) the
termination  of the Merger  Agreement;  and (iii) the Outside Date.  The Parties
acknowledge that nothing  contained in this Agreement shall obligate either DGSE
or Superior to consummate the Merger,  and that all  commitments  related to the
consummation of the Merger are set forth in the Merger Agreement.

     6. Other Business.

         6.1 DGSE and its Affiliates may engage in or possess an interest in any
other business venture of any kind, nature or description, independently or with
others,   whether  or  not  such  ventures  are   competitive   with   Superior,


                                      -2-
<PAGE>

notwithstanding  that  representatives  of  DGSE  or any of its  Affiliates  are
serving on the Company  Board or as senior  management  of the Company.  None of
DGSE  nor any of its  Affiliates,  as a  stockholder,  officer  or  director  of
Superior,  shall have any  obligation  to offer first to Superior  any  business
opportunity or venture of any kind,  nature or description that DGSE or any such
Affiliate  may wish to pursue from time to time,  independently  or with others.
Nothing  in this  Agreement  shall  be  deemed  to  prohibit  DGSE or any of its
Affiliates  from  dealing,  or  otherwise  engaging in  business,  with  Persons
transacting  business  with  Superior.  Superior  shall  not have any  rights or
obligations by virtue of this Agreement or the transactions contemplated hereby,
in or to any  independent  venture of DGSE or its  Affiliates,  or the income or
profits or losses or distributions  derived  therefrom,  and such ventures shall
not be deemed  wrongful or improper  even if  competitive  with the  business of
Superior.

         6.2 During the Term the  Interim  Executives  are  expected to continue
their current services to DGSE on a part-time basis. Nothing herein shall in any
way preclude DGSE or its officers, employees, agents,  representatives,  members
or affiliates,  including the Interim Executives,  from engaging in any business
activities or from  performing  services for its or their own account or for the
account of others,  including for companies that may be in competition  with the
business conducted by Superior.

     7. Confidentiality.

         7.1 The Parties  acknowledge  that DGSE,  Superior  and  Stanford  have
previously  executed that certain Mutual  Confidentiality  Agreement,  effective
April 1, 2006 (as amended from time to time, the  "Confidentiality  Agreement"),
which shall continue in full force and effect in accordance with its terms.

         7.2  Notwithstanding  anything to the  contrary in the  Confidentiality
Agreement,  the Parties acknowledge that each may use Residuals for any purpose.
"Residuals"   means  any   "Confidential   Information"   (as   defined  in  the
Confidentiality  Agreement)  and any ideas,  concepts,  know-how and  techniques
contained therein retained in the unaided memories of any employee or agent of a
Party who has had access to Confidential  Information.  Memory is deemed unaided
if an individual has not  intentionally  memorized the relevant  information for
the purpose of retaining  and  subsequently  using or disclosing it for purposes
unrelated to the purpose of disclosure.

         7.3  Notwithstanding  anything to the  contrary in the  Confidentiality
Agreement,  the  Parties  acknowledge  that the Interim  Executives  may use the
Confidential  Information in connection  with providing the Services,  including
(i) delivering Confidential Information to counterparties to Superior Contracts,
(ii) complying with  investigations  by Governmental  Entities,  (iii) providing
financial and other information to Superior's  independent public auditing firm,
and  (iv)  publicly  disclosing  the  Confidential  Information  as the  Interim
Executives  in good faith deem  necessary  to comply with  Superior's  reporting
obligations under the Securities Act, the Exchange Act, SOX or the SEC Rules.

         7.4 DGSE and Superior  acknowledge  and agree that they are competitors
operating in the same line of business and that  certain  customers,  suppliers,
vendors and  employees in this  business are known to both DGSE and Superior and
that each Party has access to information  regarding such customers,  suppliers,
vendors and employees that is not Confidential Information. The Party disclosing
Confidential Information ("Discloser") acknowledges that use of such information
will not be  restricted  by, or, in and of  itself,  be deemed to  violate,  any
provision of this  Agreement.  If a customer or employee of one Party  becomes a
customer or employee,  respectively, of the other Party, each Party acknowledges
and agrees that such other Party will have no  liability  with  respect  thereto
unless such Party can affirmatively prove that the Party receiving  Confidential
Information ("Recipient") used Confidential Information to solicit a customer or


                                      -3-
<PAGE>

employee  of  Discloser  to become a  customer  or  employee,  respectively,  of
Recipient.  Furthermore,  each  Party  understands  that  the  other  Party  may
currently or in the future be developing  information  internally,  or receiving
information  from other  Party that may be similar to  Discloser's  information.
Accordingly,  nothing in this Agreement or the Confidentiality Agreement will be
construed as a representation  or inference that Recipient will not enter into a
line of business, that, without violation of this Agreement,  would compete with
the business of the other  Party,  assuming  there is no misuse of  Confidential
Information.

     8. D&O Insurance. Upon the execution of this Agreement,  Superior shall use
its  commercially  reasonably  efforts  to add the  Interim  Executives  and new
members of the Company Board as named  beneficiaries  under its insurance policy
for directors and officers.

     9.  Exculpation;  Limitation of Liability.  Each Party agrees, on behalf of
itself and its  Affiliates,  that in  performing  any duties  hereunder,  to the
maximum  extent  permitted  by  applicable  law,  DGSE and its  Representatives,
including the Interim Executives,  shall not be directly or indirectly liable to
any Party,  or any  Affiliates of any Party,  for damages,  losses,  expenses or
other Liabilities, whether sounding in tort, contract or otherwise, arising from
their acts or omissions,  including for their active  negligence,  violations of
federal  or state  securities  laws,  breaches  of  fiduciary  duties,  or other
wrongful  act of DGSE or any such  Representative,  except for the acts of gross
negligence or willful misconduct of such Person. DGSE or its Representatives may
consult with legal counsel  (whether such counsel will be regularly  retained or
specifically  employed  and whether such counsel is engaged by DGSE or Superior)
in connection  with  providing the Services and shall be fully  protected in any
act taken,  suffered,  or permitted by it in good faith in  accordance  with the
advice of counsel.  IN NO EVENT SHALL DGSE OR ANY INTERIM  EXECUTIVE  BE LIABLE,
DIRECTLY  OR  INDIRECTLY,  FOR ANY (i)  DAMAGES OR  EXPENSES  ARISING OUT OF THE
SERVICES  PROVIDED  HEREUNDER  (OTHER  THAN  FOR  DAMAGES  CAUSED  BY THE  GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT BY DGSE OR THE INTERIM EXECUTIVE), (ii) SPECIAL
OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR
(iii)  DAMAGES  WHICH IN THE  AGGREGATE  WOULD EXCEED THE AMOUNT OF FEES PAID TO
DGSE UNDER THIS AGREEMENT (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL  MISCONDUCT  BY DGSE OR THE  INTERIM  EXECUTIVE).  Each Party  hereby
agrees to defend,  indemnify and hold harmless DGSE and its  Representatives for
any  Liabilities  to any Affiliate of such Party to the extent the provisions of
this Section 9 would limit such  Liabilities  if such Affiliate were a party and
signatory hereto.

     10. Indemnification.

         10.1  Superior  shall  defend,  indemnify  and hold DGSE,  the  Interim
Executives and their respective  Representatives  and Affiliates  (collectively,
the  "Indemnified  Parties")  harmless  from and  against all  damages,  losses,
expenses or other  Liabilities  incurred by the Indemnified  Parties directly or
indirectly as a result of providing the Services during the Term, including,  to
the maximum  extent  permitted by  applicable  law,  for the active  negligence,
violations of federal or state securities laws, breaches of fiduciary duties, or
other wrongful act of an Indemnified  Party;  provided,  however,  that Superior
shall not be liable  for any loss  caused by the  gross  negligence  or  willful
misconduct of an Indemnified Party.

         10.2  All  claims  for  indemnification  under  this  section  shall be
asserted and resolved as follows:

             (a) Third party claims.


                                      -4-
<PAGE>

                  (1) If an  Indemnified  Party  becomes  aware of a third-party
         claim that such Indemnified Party believes may result in a loss to such
         Indemnified  Party, such Indemnified Party (or DGSE on such Indemnified
         Party's behalf) shall promptly notify Superior of such claim;  provided
         that the failure to so notify  Superior  shall not relieve  Superior of
         any liability that it may have to any Indemnified Party,  except to the
         extent that Superior  demonstrates that the defense of such third-party
         claim is materially prejudiced by the failure to give such notice.

                  (2) If an Indemnified  Party (or DGSE on its behalf)  provides
         notice to Superior of the  assertion of a third-party  claim,  Superior
         shall be  entitled  to assume  the  defense of such  third-party  claim
         unless (i) Superior is also a Person against whom the third-party claim
         is made and the Indemnified  Party  determines in good faith that joint
         representation  would  be  inappropriate,  or (ii)  Superior  fails  to
         provide  reasonable  assurance to the Indemnified Party of both (x) the
         financial  capacity of Superior to defend such  third-party  claim, and
         (y) the ability of Superior to provide indemnification or to assume the
         defense of such  third-party  claim with  counsel  satisfactory  to the
         Indemnified  Party. After notice from Superior to the Indemnified Party
         of its  election  to assume  the  defense  of such  third-party  claim,
         Superior shall not, so long as it diligently  conducts such defense, be
         liable to the  Indemnified  Party for any fees of other  counsel or any
         other expenses with respect to the defense of such  third-party  claim,
         in  each  case  subsequently  incurred  by  the  Indemnified  Party  in
         connection  with the  defense  of such  third-party  claim,  other than
         reasonable costs of investigation. If Superior assumes the defense of a
         third-party claim, (A) such assumption shall establish conclusively for
         purposes of this  Agreement  that the claims  made in that  third-party
         claim are within the scope of and subject to  indemnification,  and (B)
         no compromise or settlement of such third-party  claims may be effected
         by Superior  without the  Indemnified  Party's  prior  written  consent
         unless (1) there is no finding or admission of any  violation of Law or
         any violation of the rights of any Person, (2) the sole relief provided
         is  monetary  damages  that are paid in full by  Superior,  and (3) the
         Indemnified   Party  shall  have  no  liability  with  respect  to  any
         compromise or settlement of such  third-party  claims effected  without
         its written consent. If notice is given to Superior of the assertion of
         any third-party  claim and Superior does not, within ten days after the
         Indemnified   Party's  notice  is  provided,   provide  notice  to  the
         Indemnified  Party of the election of Superior to assume the defense of
         such  third-party  claim,  then the  Indemnified  Party may  assume the
         defense of such third-party claim at the expense of Superior.  Superior
         shall be bound by any  determination  made in such third-party claim or
         any compromise or settlement effected by the Indemnified Party.

                  (3)  Notwithstanding  the foregoing,  if an Indemnified  Party
         determines in good faith that there is a reasonable  probability that a
         third-party  claim may adversely affect it or its Related Persons other
         than as a result of monetary  damages for which it would be entitled to
         indemnification  under this Agreement,  the  Indemnified  Party may, by
         notice to Superior, assume the exclusive right to defend, compromise or
         settle such  third-party  claim, but Superior shall not be bound by any
         determination  of any third-party  claim (including the losses incurred
         in connection therewith) so defended for the purposes of this Agreement
         or any compromise or settlement effected, without its written consent.

                  (4) Any dispute  between any  Indemnified  Party and  Superior
         under this section shall be resolved pursuant to the dispute resolution
         procedures described in Section 10.2(b) and Section 12.


                                      -5-
<PAGE>

                  (5) If Superior has  conducted any defense or consented to any
         settlement under this section, Superior shall not have the right, power
         or  authority  to object to the amount of any claim by any  Indemnified
         Party with respect to and in accordance with such settlement.

             (b) Non-third party claims.

                  (1) If an  Indemnified  Party has a claim  hereunder that does
         not involve a claim being asserted against or sought to be collected by
         a third party, such Indemnified Party shall with reasonable  promptness
         deliver a notice with  respect to such claim to  Superior.  Such notice
         shall set forth (i) a brief description of the circumstances supporting
         such   Indemnified   Party's  claim  against   Superior;   and  (ii)  a
         non-binding, preliminary estimate of the aggregate dollar amount of the
         actual and  potential  losses that have arisen and may arise related to
         such claim. If Superior does not notify such  Indemnified  Party within
         30 calendar  days from the date of receipt of such notice that Superior
         disputes  such claim,  the amount of such claim  shall be  conclusively
         deemed a liability of Superior hereunder. In case Superior shall object
         in writing  to any claim  made in  accordance  with this  section,  the
         Indemnified  Party shall have 15 calendar  days to respond in a written
         statement to the  objection of Superior.  If after such 15 calendar day
         period there remains a dispute as to any claim,  the Indemnified  Party
         and Superior  shall attempt in good faith for 60 calendar days to agree
         upon the rights of the respective  parties with respect to each of such
         claims.  If the  Indemnified  Party and  Superior  should  so agree,  a
         memorandum setting forth such agreement shall be prepared and signed by
         both parties.  If such parties do not so agree,  the Indemnified  Party
         and Superior  shall  resolve  such  dispute  pursuant to Section 12 and
         Section 15.6.

         10.3 An Indemnified Party's failure to give reasonably prompt notice to
Superior of any actual,  threatened  or possible  claim or demand which may give
rise to a right of  indemnification  hereunder shall not relieve Superior of any
liability which Superior may have to such Indemnified Party,  unless the failure
to give such notice materially and adversely prejudiced Superior.

         10.4 Each Party,  on its own behalf,  and on behalf of its  Affiliates,
agrees  that  DGSE  shall  not owe any  fiduciary  duties  to such  Party or its
Affiliates, in any capacity (including as a stockholder or creditor of Superior)
in the performance of any of the Services.

     11. Right of Setoff.  Superior hereby grants to DGSE a right of setoff upon
any and all monies,  securities or other property of Superior,  and the proceeds
therefrom,  now or  hereafter  held or received by or in transit to DGSE from or
for  the  account  of  Superior  (including  any  amounts  held  as  a  retainer
hereunder), whether for safekeeping,  custody, pledge, transmission,  collection
or  otherwise,  and also upon and against any and all claims or other Actions of
Superior  against  DGSE,  or any sums owing from DGSE to  Superior,  at any time
arising or  existing.  The right of setoff  granted  pursuant to this Section 11
shall be cumulative of and in addition to DGSE's common law right of setoff.

     12. Arbitration.

         12.1 If a dispute arises  concerning the matters  contemplated  by this
Agreement,  the Party  defending  the claim (the  "Defending  Party"),  may,  by
written  notice to the Party  asserting  the claim  (the  "Prosecuting  Party"),
demand  arbitration  of the matter,  which  arbitration  shall be conducted by a
single arbitrator. The Prosecuting Party and the Defending Party shall use their
respective best efforts to agree on the arbitrator, provided that if they cannot
so agree  within ten  business  days (or such longer  period as they may agree),
either the  Prosecuting  Party or the Defending  Party can request that Judicial


                                      -6-
<PAGE>

Arbitration  and  Mediation   Services  ("JAMS")  select  the  arbitrator.   The
arbitrator shall set a limited time period and establish  procedures designed to
reduce the cost and time for discovery  while  allowing the Defending  Party and
Prosecuting  Party  an  opportunity,  adequate  in  the  sole  judgment  of  the
arbitrator,  to discover  relevant  information from the other of them about the
subject matter of the dispute.  The arbitrator shall rule upon motions to compel
or limit discovery and shall have the authority to impose  sanctions,  including
attorneys'  fees and costs,  to the same extent as a court of  competent  Law or
equity,  should the  arbitrator  determine  that  discovery  was sought  without
substantial  justification  or that discovery was refused or objected to without
substantial  justification.  The  decision of the  arbitrator  shall be written,
shall be in accordance with applicable Law and with this Agreement, and shall be
supported by written  findings of fact and  conclusions  of Law, which shall set
forth  the  basis  for the  decision  of the  arbitrator.  The  decision  of the
arbitrator  as to the  validity  and amount of any claim  shall be  binding  and
conclusive.

         12.2 Judgment upon any award  rendered by the arbitrator may be entered
in any court having jurisdiction.  Any such arbitration shall be held in Dallas,
Texas under the  commercial  rules then in effect for JAMS.  The  non-prevailing
party to an arbitration shall pay its own expenses,  the fees of the arbitrator,
any administrative fee of JAMS, and the expenses,  including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.

     13. Notices. All notices,  requests,  instructions or other documents to be
given or delivered  under this Agreement shall be in writing and shall be deemed
given:  (i) five Business Days  following the deposit of registered or certified
mail in the  United  States  mails,  postage  prepaid,  (ii) when  confirmed  by
telephone confirmation,  if sent by facsimile or email, (iii) when delivered, if
delivered  personally  to the  intended  recipient,  and (iv) one  Business  Day
following  delivery  to a  reputable  national  courier  service  for  overnight
delivery,  postage  prepaid;  and in each  case,  addressed  to a  Party  at the
following address for such Party:

     If to DGSE, addressed to it at:

              DGSE Merger Corp.
              2817 Forest Lane
              Dallas, Texas  75234
              Attn:  Dr. L.S. Smith
              Facsimile:  [omitted]
              Email:  [omitted]

     with a copy  (which  shall not  constitute  notice  and which  shall not be
     required for delivery to be effective) to:

              Sheppard, Mullin, Richter & Hampton LLP
              12275 El Camino Real, Suite 200
              San Diego, California  92130-2006
              Attn:  John J. Hentrich, Esq.
              Facsimile:  [omitted]
              Email:  [omitted]

     If to Superior, addressed to it at:

              Superior Galleries, Inc.
              9478 W. Olympic Boulevard
              Beverly Hills, California  90212
              Attn:  Chair, Special Independent Committee
              Facsimile:  [omitted]
              Email:  [omitted]


                                      -7-
<PAGE>

     with  copies  (which  shall not  constitute  notice and which  shall not be
     required for delivery to be effective) to:

              Rutan & Tucker LLP
              611 Anton Boulevard Suite 1400
              Costa Mesa, California  92626-1931
              Attn: Thomas Brockington, Esq.
              Facsimile:  [omitted]
              Email:  [omitted]

     and:

              Stanford International Bank Ltd.
              c/o Stanford Financial Group
              6075 Poplar Avenue
              Memphis, Tennessee  38119
              Attn: James M. Davis, Chief Financial Officer
              Facsimile: [omitted]
              Email:  [omitted]

     and:

              Adorno & Yoss LLP
              2525 Ponce de Leon Blvd., Suite 400
              Miami, Florida  33134-6012
              Attn: Seth P. Joseph, Esq.
              Facsimile:  [omitted]
              Email:  [omitted]

Any Party may  change its  address,  email  address  or fax number for  purposes
hereof to such other address, email address or fax number as such Party may have
previously  furnished to the other  Parties in writing in  accordance  with this
Section 13.

     14. Status. The Parties intend that DGSE shall be an independent contractor
pursuant to this  Agreement,  and that this Agreement  shall not be construed to
create or give rise to any partnership, agency or joint venture.

     15. Miscellaneous.

         15.1  Headings.  The  headings  contained  in  this  Agreement  are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         15.2 Severability.  If any term or other provision of this Agreement is
invalid,  illegal or  incapable  of being  enforced by any rule of Law or public
policy,  all other terms and  provisions of this  Agreement  shall  nevertheless
remain in full force and effect so long as the  economic or legal  substance  of
the transactions  contemplated  hereby is not affected in any manner  materially
adverse to any Party. Upon such  determination  that any term or other provision
is invalid,  illegal or incapable of being enforced, the Parties shall negotiate


                                      -8-
<PAGE>

in good faith to modify this  Agreement so as to effect the  original  intent of
the  Parties as  closely as  possible  in an  acceptable  manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.

         15.3  Entire  Agreement.  This  Agreement,  together  with  the  Merger
Agreement and the Confidentiality Agreement, constitute the entire agreement and
understanding  of the Parties in respect of the subject matter of this Agreement
and supersede all prior  agreements  and  undertakings  by or among the Parties,
both written and oral,  among the Parties,  or any of them,  with respect to the
subject matter of this Agreement.

         15.4  Assignment.  Neither  this  Agreement  nor  any  of  the  rights,
interests,  Liabilities or obligations hereunder shall be assigned by any of the
Parties,  in whole or in part,  by  operation of Law or  otherwise,  without the
prior  written  consent of the other  Parties,  and any attempt to make any such
assignment  without  such  consent  shall  be null  and  void and of no force or
effect;  provided that DGSE may assign its rights and  obligations  hereunder to
any of its Affiliates.

         15.5  Parties in  Interest.  This  Agreement  shall be binding upon and
inure solely to the benefit of each Party and their  respective  successors  and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever  under or by reason of this  Agreement,  except  as  provided  in (i)
Section 10 with respect to  Indemnified  Parties and (ii) Section 8 with respect
to Interim Executives and new members of the Superior board of directors.

         15.6 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.

                  (a) This Agreement and the  performance of the  obligations of
         the Parties hereunder shall be governed by, and construed in accordance
         with,  the  laws  of  the  State  of  Texas   applicable  to  contracts
         negotiated, executed and to be performed entirely within such State.

                  (b) Each of the Parties hereby irrevocably and unconditionally
         submits, for itself and its property, to the exclusive jurisdiction and
         venue  of any  Texas  district  court  and any  state  appellate  court
         therefrom within the County of Dallas in the State of Texas (or, if the
         Texas district court declines to accept  jurisdiction over a particular
         matter, any state or federal court within said County) in any action or
         proceeding  arising  out  of or  relating  to  this  Agreement  or  for
         recognition or enforcement of any judgment relating hereto, and each of
         the Parties hereby  irrevocably and  unconditionally  (i) agrees not to
         commence  any such action or  proceeding  except in such  courts,  (ii)
         agrees that any claim in respect of any such action or  proceeding  may
         be heard and  determined  in such Texas  state  court or, to the extent
         permitted by law, in such federal court,  (iii) waives,  to the fullest
         extent it may legally and  effectively do so, any objection that it may
         now or  hereafter  have to the  laying  of venue of any such  action or
         proceeding in any such Texas state or federal  court,  and (iv) waives,
         to the fullest extent  permitted by law, the defense of an inconvenient
         forum to the maintenance of such action or proceeding in any such Texas
         state  or  federal  court.  Each  of the  Parties  agrees  that a final
         judgment in any such action or proceeding  shall be conclusive  and may
         be enforced in other  jurisdictions  by suit on the  judgment or in any
         other manner provided by law.

                  (c) Each Party  irrevocably  consents to service of process in
         the manner provided for notices under this  Agreement.  Nothing in this
         Agreement  shall  affect  the right of any Party to this  Agreement  to
         serve process in any other manner permitted by law.


                                      -9-
<PAGE>

                  (d) EACH PARTY  ACKNOWLEDGES  AND AGREES THAT ANY  CONTROVERSY
         THAT MAY ARISE UNDER THIS  AGREEMENT  IS LIKELY TO INVOLVE  COMPLICATED
         AND  DIFFICULT  ISSUES,   AND  THEREFORE  IT  HEREBY   IRREVOCABLY  AND
         UNCONDITIONALLY  WAIVES  ANY  RIGHT  IT MAY  HAVE TO A TRIAL BY JURY IN
         RESPECT OF ANY  LITIGATION  DIRECTLY  OR  INDIRECTLY  ARISING OUT OF OR
         RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY.
         EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT
         OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
         THAT SUCH OTHER PARTY WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO
         ENFORCE EITHER OF SUCH WAIVERS,  (2) IT UNDERSTANDS  AND HAS CONSIDERED
         THE   IMPLICATIONS   OF  SUCH  WAIVERS,   (3)  IT  MAKES  SUCH  WAIVERS
         VOLUNTARILY,  AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS  AGREEMENT
         BY, AMONG OTHER THINGS,  THE MUTUAL WAIVERS AND  CERTIFICATIONS IN THIS
         SECTION.

         15.7  Counterparts.  This  Agreement  may be  executed  in two or  more
original or facsimile  counterparts,  and by the  different  Parties in separate
counterparts,  each of which when executed shall be deemed to be an original but
all of which taken together shall constitute but one and the same agreement.

         15.8 Facsimile Execution.  A facsimile,  telecopy or other reproduction
of this  Agreement may be executed by one or more Parties,  and an executed copy
of this Agreement may be delivered by one or more Parties by facsimile, email or
similar electronic or digital transmission pursuant to which the signature of or
on behalf of such Party can be seen,  and such  execution and delivery  shall be
considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

15.9 Remedies Cumulative. Except as otherwise provided in this Agreement, any
and all remedies in this Agreement that are expressly conferred upon a Party
shall be deemed cumulative with and not exclusive of any other remedy conferred
by this Agreement, or by law or equity upon such Party, and the exercise by a
Party of any one remedy shall not preclude the exercise of any other remedy and
nothing in this Agreement shall be deemed a waiver by any Party of any right to
specific performance or injunctive relief.

         15.10  Time.  Time  is of  the  essence  in  the  performance  of  this
Agreement.

         15.11  Interpretation.  The terms and  provisions of Section 1.3 of the
Merger Agreement are hereby  incorporated by reference herein and shall apply to
this Agreement mutatis mutandis, as if expressly set forth herein.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]









                                      -10-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.

                                                      DGSE MERGER CORP.


                                                      By: /s/ William H. Oyster
                                                         -----------------------
                                                         William H. Oyster
                                                         Chief Executive Officer


                                                      SUPERIOR GALLERIES, INC.


                                                      By: /s/ Silvano DiGenova
                                                         -----------------------
                                                         Silvano DiGenova
                                                         Chief Executive Officer















                                      -11-
<PAGE>

                                                                    SCHEDULE 3.1
                                                                    ------------

                       PERMITTED INTERCOMPANY TRANSACTIONS

The following  transactions  may be effected  between DGSE Merger Corp.  and its
Affiliates   (collectively,   "DGSE")  and  Superior  Galleries,  Inc.  and  its
Affiliates (collectively, "Superior"):

     1.  DGSE  and   Superior  may  each  consign   jewelry,   watches,   coins,
collectibles,  and any other inventory to the other for sale to customers at the
standard DGSE dealer rates.

     2. DGSE may pay Superior standard dealer rates for scrap gold,  silver, and
other metals.

     3. DGSE may repair jewelry, watches, and other inventory items for Superior
or Superior's customers at standard dealer rates.

     4.  Each may sell the other  inventory  as needed  based on  standard  DGSE
dealer rates.

     5. DGSE may  consign  rare coins to Superior  for auction at the  preferred
standard auction consignment rates charged by Superior.

     6. DGSE may write  appraisals  for Superior  jewelry  inventory or Superior
customer jewelry and charge the standard customer rates.

     7.  Either  company  may  consign to the other  items to be sold on eBay or
other  Internet  sites;  such items may be  consigned  to Superior to  establish
DGSE's interest in such items.











<PAGE>

                                                                    SCHEDULE 3.2
                                                                    ------------

                           APPROVED STRATEGIC CHANGES

DGSE  Merger  Corp.,  acting  through  the  Interim  Executives  and  its  other
Representatives  (collectively,  "DGSE"),  is authorized to change the strategic
direction  of  Superior  Galleries,   Inc.  and  its  Affiliates  (collectively,
"Superior") in, inter alia, the following manner:

     1. DGSE may reassign Superior  personnel between operating  activities,  or
substantially increase or decrease staffing levels.

     2. DGSE may increase or decrease  Superior's  emphasis on any or all of the
following operating activities:

          2.1  auction;

          2.2  wholesale;

          2.3  retail;

          2.4  over the counter buying and selling (second-hand transactions);

          2.5  scrap processing;

          2.6  trading;

          2.7  dealer wholesale; and

          2.8  any other activity in which Superior is currently engaged.

     3. DGSE may change Superior's accounting hardware and software.

     4. DGSE may modify Superior's corporate policies regarding compensation and
fringe benefits.

     5. DGSE may change Superior's advertising form and policy.

     6. DGSE may introduce new business related to jewelry, watches, diamonds.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>15
<FILENAME>dgse8kex995010907.txt
<DESCRIPTION>SUPPORT AGREEMENT-SUPERIOR STOCKHOLDERS 01/06/07
<TEXT>

                                                                    Exhibit 99.5

                            SUPERIOR GALLERIES, INC.
                                SUPPORT AGREEMENT

     THIS SUPPORT AGREEMENT is made and entered into as of January 6, 2007 (this
"Agreement"),  by and  among  (i) DGSE  Companies,  Inc.,  a Nevada  corporation
(together with its successors and permitted  assigns,  "Parent"),  (ii) Superior
Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a
Nevada corporation) (together with its successors, the "Company"), and (iii) the
undersigned  stockholders of the Company (each, solely in its capacity as such a
stockholder, a "Stockholder").

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

     WHEREAS,  Parent,  DGSE Merger Corp., a Nevada corporation  ("Merger Sub"),
the Company, and Stanford International Bank Ltd., a corporation organized under
the laws of Antigua and  Barbuda  (together  with its  successors,  "SIBL"),  as
stockholder agent, have entered into that certain Amended and Restated Agreement
and Plan of Merger  and  Reorganization,  made and  entered  into as of the date
hereof (the "Merger Agreement");

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

     WHEREAS,  in the  Merger,  one  hundred  percent  (100%) of the  issued and
outstanding  shares of common stock of the Company (the "Company  Common Stock")
will be converted  into the right to receive  shares of common stock,  par value
$0.01 per share,  of Parent (the "Parent Common Stock") (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,  each Stockholder is the beneficial owner of such number of shares
of Company Common Stock as is indicated on such Stockholder's  signature page to
this Agreement;

     WHEREAS,  approval  of the Merger by the  stockholders  of the Company is a
condition  precedent to the ability and  obligation of Parent to consummate  the
Merger or other Transactions;

     WHEREAS,  Parent  has  incurred,  and may  continue  to incur,  substantial
expenses  related  to  the  evaluation,  negotiation  and  consummation  of  the
Transactions, the Merger Agreement and the Related Agreements;

     WHEREAS, the execution and deliver of this Agreement by the Stockholders is
a condition  precedent  to the  execution  and  delivery by Parent of the Merger
Agreement and constitutes a material inducement for Parent therefor; and

     WHEREAS,  in  consideration  of and as a condition to the  execution of the
Merger Agreement by Parent,  each  Stockholder  (solely in its capacity as such)
agrees to vote all Shares (as such term is defined  below) of the  Company  over
which such Stockholder has voting power so as to facilitate  consummation of the
transactions contemplated by the Merger Agreement.


                                      -1-
<PAGE>

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

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto (collectively, the
"Parties"), intending to be legally bound, hereby agree as follows:

     1. Certain Definitions. Capitalized terms used but not defined herein shall
have the respective  meanings ascribed thereto in the Merger  Agreement.  Unless
otherwise expressly provided herein, the following terms,  whenever used in this
Agreement, shall have the meanings ascribed to them below:

         (a) "Expiration  Date" means the earliest to occur of (i) such date and
time as the Merger  Agreement shall have been terminated  pursuant to Article IX
thereof, (ii) the Effective Time, and (iii) the written agreement of the parties
hereto.

         (b) "Merger Votes" means each of the following:

             (1) in favor of  approval  and  adoption of the Merger or any other
Transaction,  the Merger Agreement  (including any Amendment thereto approved by
the Board of Directors of the Company),  the Related  Agreements,  or any matter
that could reasonably be expected to facilitate the Merger;

             (2)  against  any  proposal  or action  that  could  reasonably  be
expected to delay,  impede or  interfere  with the approval of the Merger or any
other  Transaction,  including  (i) any merger,  consolidation,  sale of assets,
reorganization or  recapitalization  with any party other than Parent and Merger
Sub and their Affiliates, and (ii) any liquidation or winding up of the Company;
in each case except as provided in the Merger Agreement;

             (3)  against  any  action or  agreement  that could  reasonably  be
expected to result in a Breach of any  covenant,  representation  or warranty or
any other  obligation of the Company  under the Merger  Agreement or any Related
Agreement to which the Company is a party or signatory;

             (4) in  favor  of the  appointment  of SIBL  (or any  other  Person
approved by the Independent Committee) as Stockholder Agent; and

             (5) in favor of any other  matter  relating  to the  execution  and
delivery of the Related Agreements and the proper and prompt consummation of the
Transactions.

         (c) "New Shares"  means,  with respect to any  Stockholder,  all Equity
Interests  in the Company  that such  Stockholder  purchases  or with respect to
which such Stockholder  otherwise acquires  beneficial  ownership after the date
hereof,  including  (i) any Equity  Interests  acquired by gift or succession or
means of  dividend  or  distribution,  and (ii) any Equity  Interests  issued or
issuable upon the conversion,  exercise or exchange,  as the case may be, of any
Securities  or  Commitments  of the  Company  which  are  convertible  into,  or
exercisable or exchangeable for, Equity Interests of the Company.

         (d)  "Original  Shares"  means,  with respect to any  Stockholder,  all
Equity Interests of the Company beneficially owned by such Stockholder as of the
date of this Agreement.

         (e) "Shares" means, with respect to any Stockholder all Original Shares
and New Shares beneficially owned from time to time by such Stockholder.


                                      -2-
<PAGE>

     2. Restrictions on Transfer of Shares.

         (a)   Restrictions   on  Transfer  of  Shares.   Except  as   otherwise
contemplated by the Merger  Agreement,  each Stockholder  agrees not to cause or
permit,  or to attempt to effect,  directly or  indirectly,  any  Transfer of or
Encumbrance on its Shares,  and any such purported Transfer or Encumbrance shall
be null and void ab initio.

         (b) Transfer of Voting Rights. Except as otherwise  contemplated by the
Merger Agreement or the Related  Agreements,  each Stockholder agrees not to (i)
deposit (or permit the deposit of) any Shares in a voting  trust,  or (ii) grant
any proxy or power of  attorney  or enter into any voting  agreement  or similar
agreement  or  authorization  in  contravention  of its  obligations  under this
Agreement with respect to any Shares.

         (c) No Conflicts. Each Stockholder shall not take any other action that
would in any way restrict,  limit or interfere or conflict with the  performance
of  its  obligations   under  this  Agreement,   the  Merger  Agreement  or  the
Transactions.

     3. Agreement to Vote Shares.  At every meeting of the  stockholders  of the
Company,  however called, and at every adjournment or postponement  thereof, and
for every action or approval by consent of the  stockholders of the Company,  in
each case related or potentially  related to the Merger Votes,  each Stockholder
(solely in its  capacity as such) shall (A) sign and deliver such consent to the
Company  if  consistent  with the  Merger  Votes,  (B) not sign such  consent if
inconsistent  with the Merger  Votes,  (C) appear at such  meeting or  otherwise
cause its Shares to be counted as present thereat for purposes of establishing a
quorum,  and (D) vote, or cause to be voted,  its Shares  strictly in accordance
with the Merger Votes.

     4.  Irrevocable and Exclusive  Proxy.  Concurrently  with the execution and
delivery of this Agreement,  each Stockholder agrees to deliver to Parent a duly
executed  Irrevocable  Proxy and  Power Of  Attorney  substantially  in the form
attached  hereto as Exhibit A (the "Proxy"),  which shall be irrevocable  during
the term of this  Agreement  to the  fullest  extent  permissible  by law,  with
respect to the Shares. Each Stockholder expressly acknowledges that the Proxy is
coupled  with an interest.  Each  Stockholder  hereby  revokes any and all prior
proxies,  powers of attorney or similar  authorizations in respect of any Shares
to the extent related to the Merger Votes.

     5.  Representations and Warranties of Stockholder.  Each Stockholder hereby
represents and warrants to Parent as follows:

         (a) Title to Securities.  Such Stockholder is the beneficial owner and,
to the extent  indicated,  record holder of the Equity  Interests of the Company
and the  options,  warrants,  convertible  notes  and other  Commitments  of the
Company  indicated  on  the  signature  page  hereof,  free  and  clear  of  any
Encumbrance  that, in each case,  would  deprive  Parent of the benefits of this
Agreement.  Such  Stockholder  has  identified  on the  signature  page  of this
Agreement  any  nominee  or agent  or other  Person  in  whose  name any  Shares
beneficially  owned  by such  Stockholder  are  held,  and  contact  information
relating to such Person.

         (b) No Other Securities. Such Stockholder does not beneficially own any
Securities of the Company other than the Equity Interests in the Company and the
options,  warrants,  convertible  notes and  other  Commitments  of the  Company
indicated on the signature page hereof.

         (c)  Authorization.  Such  Stockholder has the full power and authority
(if an Entity),  or the full legal capacity (if an individual),  to make,  enter
into and carry out the terms of this Agreement and the Proxy. This Agreement and


                                      -3-
<PAGE>

the  Proxy  have  been duly  executed  and  delivered  by such  Stockholder  and
constitute its legal, valid and binding  obligations,  enforceable against it in
accordance with their respective terms.

         (d) No  Conflicts  or  Consents.  The  execution  and  delivery of this
Agreement and the Proxy by such  Stockholder do not, and the performance of this
Agreement  and the Proxy by such  Stockholder  will not,  (i)  conflict  with or
violate any Law or Order applicable to such Stockholder or to which it or any of
its Properties is or may be subject or affected, or (ii) result in or constitute
a Breach of, or result (with or without notice or lapse of time) in the creation
of any  Encumbrance on any of the Shares pursuant to, any Contract to which such
Stockholder is a party or by which such  Stockholder or any of its affiliates or
Property is or may be bound or  affected.  The  execution  and  delivery of this
Agreement and the Proxy by such  Stockholder do not, and the performance of this
Agreement and the Proxy by such Stockholder will not, require any Consent of any
Person.

     6. Covenants of the Company.

         (a) No  Registration  of Transfers.  The Company shall not register the
Transfer of any Shares,  or any Commitments for Equity Interests of the Company,
of any Stockholder on the stock record books,  records or ledgers of the Company
at any time prior to the Expiration Date. The Company shall issue  stop-transfer
instructions  to each  transfer  agent  (if any) for any  class or series of its
Equity  Interests,  instructing  each such  transfer  agent not to register  any
Transfer of any Shares  during the term  hereof  except in  compliance  with the
terms of this Agreement.

         (b) Filing of Proxies.  The Company shall promptly file each Proxy with
the corporate secretary of the Company.

         (c) Notice of  Conflict.  The Company  shall  notify  Parent as soon as
practicable,  but in any event within one  business  day, if it receives (i) any
proxy,  power of  attorney  or similar  authorization  or any  revocation  which
purports to revoke or otherwise conflicts with any Proxy, or (ii) any request or
notice of Transfer of any Shares of any Stockholder.

     7. New Shares. The Company and each Stockholder agree that New Shares shall
be subject to the terms and  conditions of this  Agreement to the same extent as
if they constituted Original Shares. Each Stockholder shall promptly, and in any
event within two  business  days,  notify  Parent of the number of New Shares it
acquires from time to time.

     8. Permitted  Activities.  Nothing in this Agreement  shall be construed to
(i) require any Stockholder to exercise any option,  warrant or other Commitment
to acquire  Equity  Interests in the Company,  or (ii) prohibit any  Stockholder
from  engaging in a net exercise of any option,  warrant or other  Commitment to
acquire Equity Interests of the Company in accordance with the terms thereof.

     9. Stock Certificates  Legends.  If so requested by Parent, the Company and
each Stockholder agrees that the certificates representing any Shares shall bear
a legend  stating that they are subject to this  Agreement and to an irrevocable
proxy.

     10. Further Assurances.  From time to time, at Parent's request and without
consideration,  each  Stockholder and the Company shall execute and deliver such
additional  documents  and take all such  further  action as may be necessary or
desirable to  consummate  and make  effective,  in the most  expeditious  manner
practicable,  the transactions and appointments  contemplated by this Agreement.
Without limiting the generality of the foregoing,  each  Stockholder  (solely in
its capacity as such) shall  execute and deliver any  additional  documents  and
instruments as necessary or desirable,  in the reasonable  opinion of Parent, to


                                      -4-
<PAGE>

carry out the intent of this Agreement, including executing another or different
appointment of proxy.

     11. Expenses. All fees, costs and expenses incurred in connection with this
Agreement by the Stockholders and the Company shall be paid by the Company.

     12. Miscellaneous.

         (a) Term. This Agreement shall be effective as of the date hereof. This
Agreement  shall  terminate,  and have no  further  force or  effect,  as of the
Expiration Date;  provided that such termination of this Agreement shall relieve
any party hereto from any  liability for any breach of this  Agreement  prior to
termination.

         (b)  Construction.  The rules of construction  specified in Section 1.3
(Construction)  of the Merger  Agreement  are hereby  incorporated  by reference
herein and shall apply to this Agreement mutatis  mutandis,  as if expressly set
forth herein.

         (c) Titles and Headings.  The section and paragraph titles and headings
contained  herein are inserted purely as a matter of convenience and for ease of
reference  and  shall be  disregarded  for all  other  purposes,  including  the
construction,  interpretation  or  enforcement  of this  Agreement or any of its
terms or provisions.

         (d)  Voluntary  Execution  of  Agreement.  This  Agreement  is executed
voluntarily  and without any duress or undue  influence on the part or behalf of
the Parties.  Each of the Parties hereby  acknowledges,  represents and warrants
that (i) it has read and fully  understood  this Agreement and the  implications
and  consequences  thereof;  (ii) it has been  represented  in the  preparation,
negotiation, and execution of this Agreement by legal counsel of its own choice,
or it has made a  voluntary  and  informed  decision  to  decline  to seek  such
counsel;  and (iii) it is fully  aware of the legal and  binding  effect of this
Agreement.

         (e)  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions  hereof;  provided
that if any  provision  of this  Agreement,  as  applied  to any Party or to any
circumstance,  is adjudged  by a court,  tribunal  or other  governmental  body,
arbitrator or mediator not to be enforceable in accordance  with its terms,  the
Parties agree that such  governmental  body,  arbitrator or mediator making such
determination  shall  have  the  power  to  modify  the  provision  in a  manner
consistent  with its  objectives  such  that it is  enforceable,  and to  delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.

         (f) Binding Effect.  This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Parties and their  respective  successors
and permitted assigns.

         (g)  Amendments and  Modification.  This Agreement may not be modified,
amended,  altered or  supplemented  except upon the  execution and delivery of a
written agreement  executed by Parent,  the Company each of the Stockholders (if
any) adversely affected thereby.

         (h) No Waiver. The failure of any Party to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in  equity,  or to insist  upon  compliance  by any other  Party with its
obligations hereunder, or any custom or practice of the Parties at variance with
the terms  hereof  shall not  constitute  a waiver by such Party of its right to
exercise any such or other right,  power or remedy or to demand such compliance.
No waiver by any Party of any default,  misrepresentation  or breach  hereunder,


                                      -5-
<PAGE>

whether  intentional or not, shall be effective  unless in writing and signed by
the Party against whom such waiver is sought to be enforced,  and no such waiver
shall be deemed to extend to any prior or subsequent default,  misrepresentation
or breach hereunder or affect in any way any rights arising because of any prior
or subsequent such  occurrence.  Notwithstanding  the foregoing,  Parent and the
Company shall have the right to waive compliance with Section 2.

         (i)  Specific  Performance;  Injunctive  Relief.  Each  of the  Parties
acknowledges and agrees that any breach or non-performance of, or default under,
any of the terms and provisions  hereof would cause  substantial and irreparable
damage to the other  Parties,  and that  money  damages  would be an  inadequate
remedy therefor. Accordingly, each of the Parties agrees that each of them shall
be  entitled  to seek  equitable  relief,  including  specific  performance  and
injunctive  relief, in the event of any such breach,  non-performance or default
in any Action  instituted  in any court of the United States or any state having
competent  jurisdiction,  or before any  arbitrator,  in  addition  to any other
remedy to which such Party may be entitled, at law or in equity.

         (j) Notices. All notices, requests,  instructions or other documents to
be given under this Agreement shall be in writing and shall be deemed given, (i)
five business days following  sending by registered or certified  mail,  postage
prepaid, (ii) when sent if sent by facsimile or email;  provided,  however, that
the facsimile or email is promptly confirmed by telephone  confirmation thereof,
(iii) when delivered,  if delivered  personally to the intended  recipient,  and
(iv) one business  day  following  sending by overnight  delivery via a national
courier  service,  and in each case,  addressed  to a Party (1) with  respect to
Parent or the  Company,  at the address set forth for such Party in Section 10.1
(Notices) of the Merger Agreement,  and (2) with respect to any Stockholder,  at
the address set forth on such  Stockholder's  signature page hereto,  or in each
case to such other address, fax number or email address as the Party to whom the
notice,  request,  instruction  or other  document is given may have  previously
furnished  to the other  Parties  in  writing  in the  manner  set forth in this
Section 12(j).

         (k)  Governing  Law.  This   Agreement  and  the   performance  of  the
transactions  and obligations of the Parties  hereunder shall be governed by and
construed  in  accordance  with the laws of the  State  of Texas  applicable  to
contracts negotiated, executed and to be performed entirely within such State.

         (l) Entire Agreement.  The Parties hereby acknowledge and re-affirm the
terms and provisions of Section 10.4 of the Merger Agreement.

         (m)  Third-Party  Beneficiaries.  This Agreement is made solely for the
benefit of the Parties and their  respective  permitted  successors and assigns,
and no other Person  shall have or acquire any right or remedy by virtue  hereof
except as otherwise expressly provided herein.

         (n) Consent to  Jurisdiction;  No Jury Trial;  Service of Process.  The
terms and provisions of Section 10.7(b)-(d) (Consent to Jurisdiction; Service of
Process;  No Jury  Trial) of the Merger  Agreement  are hereby  incorporated  by
reference  herein and shall  apply to this  Agreement  mutatis  mutandis,  as if
expressly set forth herein.

(o) Counterparts. This Agreement may be executed in two or more original or
facsimile counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.

         (p) Facsimile Execution. A facsimile, telecopy or other reproduction of
this  Agreement may be executed by one or more Parties,  and an executed copy of
this  Agreement may be delivered by one or more Parties by  facsimile,  email or
similar electronic or digital transmission pursuant to which the signature of or
on behalf of such Party can be seen,  and such  execution and delivery  shall be


                                      -6-
<PAGE>

considered valid, binding and effective for all purposes.  At the request of any
Party, all Parties agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]




















                                      -7-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed on the day and year first above written.

                                                      DGSE COMPANIES, INC.


                                                      By:
                                                      --------------------------
                                                         Dr. L.S. Smith
                                                         Chief Executive Officer


                                                      SUPERIOR GALLERIES, INC.


                                                      By:
                                                         -----------------------
                                                         Silvano DiGenova
                                                         Chief Executive Officer


                   [ THE STOCKHOLDER SIGNATURE PAGES FOLLOW ]












                                      -8-
<PAGE>

                                STOCKHOLDER:


                                SILVANO DIGENOVA


                                /s/ SILVANO DIGENOVA
                                ------------------------------------------------


                                Address, etc. for notices:

                                    32001 S. Coast Highway
                                    Laguna Beach, California  92651
                                    Facsimile:
                                    Email:  [omitted]

                                Company Equity Interests held:

                                    1,552,264  shares of  Company  Common  Stock
                                    (after  giving  effect to the  conversion of
                                    all  shares  of  Series B $1.00  Convertible
                                    Preferred  Stock and the exchange of 355,000
                                    shares  of  Company  Common  Stock  for  the
                                    DiGenova  Warrant),  plus  1,000  shares  of
                                    Company  Common  Stock held of record by the
                                    Stockholder's children

                                Commitments to acquire Company Equity Interests:

                                    Options to acquire  30,000 shares of Company
                                    Common Stock









<PAGE>

                                STOCKHOLDER:


                                STANFORD INTERNATIONAL BANK LTD.


                                By: /s/ James M. Davis
                                   ---------------------------------------------
                                   James M. Davis
                                   Chief Financial Officer


                                Address, etc. for notices:

                                   c/o Stanford Financial Group
                                   6075 Poplar Avenue
                                   Memphis, Tennessee  38119
                                   Attn: James M. Davis, Chief Financial Officer
                                   Facsimile: (901) 680-5265
                                   Email:  MDavis@StanfordEagle.com

                                Company Equity Interests held:

                                   4,350,806  shares  of  Company  Common  Stock
                                   (after  giving  effect to  the  conversion of
                                   all Preferred  Shares  being converted on the
                                   date hereof)

                                Commitments to acquire Company Equity Interests:

                                   None











<PAGE>

                                STOCKHOLDER:


                                WILLIAM R. FUSSELMANN


                                /s/ WILLIAM R. FUSSELMANN
                                ------------------------------------------------


                                Address, etc. for notices:

                                    141 Crandon Blvd., #437
                                    Key Biscayne, Florida 33149
                                    Facsimile:  (305) 960-8535
                                    Email:  wfusselmann@stanfordeagle.com

                                Company Equity Interests held:

                                    150,000  shares of Company Common Stock

                                Commitments to acquire Company Equity Interests:

                                    None














<PAGE>

                                STOCKHOLDER:


                                DANIEL T. BOGAR


                                /s/ DANIEL T. BOGAR
                                ------------------------------------------------


                                Address, etc. for notices:

                                    1016 Sanibel Drive
                                    Hollywood, Florida 33021
                                    Facsimile:  (305) 960-8535
                                    Email:  dbogar@stanfordeagle.com

                                Company Equity Interests held:

                                    150,000  shares of Company Common Stock

                                Commitments to acquire Company Equity Interests:

                                    None














<PAGE>

                                STOCKHOLDER:


                                RONALD M. STEIN


                                /s/ RONALD M. STEIN
                                ------------------------------------------------


                                Address, etc. for notices:

                                    6520 Allison Road
                                    Miami Beach, Florida 33141
                                    Facsimile:  (305) 960-8535
                                    Email:  rstein@stanfordeagle.com

                                Company Equity Interests held:

                                    150,000  shares of Company Common Stock

                                Commitments to acquire Company Equity Interests:

                                    None














<PAGE>

                                STOCKHOLDER:


                                OSVALDO PI


                                /s/ OSVALDO PI
                                ------------------------------------------------


                                Address, etc. for notices:

                                    6405 SW 104th Street
                                    Pinecrest, Florida 33156
                                    Facsimile:  (305) 960-8535
                                    Email:  OPi@StanfordEagle.com

                                Company Equity Interests held:

                                    150,000  shares of Company Common Stock

                                Commitments to acquire Company Equity Interests:

                                    None














<PAGE>

                                                                       EXHIBIT A

                     IRREVOCABLE PROXY AND POWER OF ATTORNEY
                            SUPERIOR GALLERIES, INC.

     The undersigned  holder of shares  ("Stockholder")  of SUPERIOR  GALLERIES,
INC., a Delaware  corporation  (f/k/a Tangible Asset  Galleries,  Inc., a Nevada
corporation) (together with its successors,  the "Company"),  hereby irrevocably
(to the fullest extent  permitted by law)  constitutes  and appoints  WILLIAM H.
OYSTER, an individual  resident of the State of Texas, and SCOTT WILLIAMSON,  an
individual  resident of the State of Texas,  and either of them or each of their
respective  nominees,  as the true  and  lawful  attorneys  and  proxies  of the
undersigned, with full power of substitution and resubstitution,  for and in its
name,  place and stead,  solely and  exclusively to vote and exercise all voting
and related  rights (to the full extent that the  undersigned  is entitled to do
so)  with  respect  to the  matters  referred  to in  Section  4 of this  Proxy,
including  the right to sign its name (solely in its capacity as a  stockholder)
to any  consent,  certificate  or other  document  relating to the Company  that
Section 212 of the General Corporation Law of the State of Delaware (the "DGCL")
may permit or require as provided in Section 4 of this Proxy, for all Shares (as
defined below), all in accordance with the terms of this Proxy.

     1. The following capitalized terms, whenever used in this Proxy, shall have
the meanings ascribed to them below:

         (a)  "Expiration  Date" means the earlier to occur of (i) such date and
time as the Merger  Agreement  shall have been  validly  terminated  pursuant to
Article X thereof,  (ii) such date and time as the Merger shall become effective
in accordance with the terms and provisions of the Merger  Agreement,  and (iii)
the termination of the Support Agreement.

         (b)  "Merger   Agreement"  means  that  certain  Amended  and  Restated
Agreement and Plan of Merger and Reorganization, made and entered into as of the
date  hereof,  by and among  Parent,  DGSE Merger  Corp.,  a Nevada  corporation
("Merger Sub"), the Company, and Stanford International Bank Ltd., a corporation
organized  under the laws of Antigua and Barbuda  (together with its successors,
"SIBL"),  as  stockholder  agent,  as the  same  may  be  amended,  modified  or
supplemented from time to time.

         (c) "New Shares"  means all shares of capital stock of the Company that
the undersigned  Stockholder  purchases or with respect to which the undersigned
Stockholder  otherwise  acquires  beneficial  ownership  after the date  hereof,
including,  without  limitation,  (i)  any  such  shares  acquired  by  gift  or
succession or means of dividend or distribution,  and (ii) any shares of capital
stock of the  Company  issued  or  issuable  upon the  conversion,  exercise  or
exchange, as the case may be, of any options,  warrants,  convertible securities
or other  commitments of the Company which are convertible  into, or exercisable
or exchangeable for, shares of capital stock of the Company.

         (d)  "Original  Shares"  means  shares of capital  stock of the Company
(including  all shares  issuable  upon the  exercise or  conversion  of options,
warrants,   convertible   notes  and  other   rights  to  acquire  such  shares)
beneficially owned by the undersigned  Stockholder as of the date of the Support
Agreement.

         (e) "Parent" means DGSE Companies, Inc., a Nevada corporation, together
with its successors and permitted assigns under the Support Agreement.


                                      -1-
<PAGE>

         (f) "Shares" means all Original Shares and New Shares from time to time
beneficially owned by the undersigned Stockholder.

         (g) "Support Agreement" means that certain Support Agreement,  made and
entered into as of even date herewith,  by and among Parent, the Company and the
stockholders of the Company party thereto, as the same may be amended,  modified
or supplemented from time to time.

     2. This Proxy is granted  pursuant to the Support  Agreement and is granted
in  consideration  of Parent  entering  into the  Merger  Agreement.  The Merger
Agreement  provides for the merger of the Company with and into Merger Sub, with
the Company as the surviving corporation and a wholly-owned subsidiary of Parent
(the "Merger").

     3. Upon the undersigned's execution of this Proxy, any and all prior powers
of attorney and proxies given by the undersigned with respect to any Shares,  to
the extent  related to the  matters  set forth in Section 4 of this  Proxy,  are
hereby revoked, and the undersigned agrees not to grant any subsequent powers of
attorney or proxies  with  respect to the Shares or any New Shares to the extent
related thereto until after the Expiration Date.

     4. The attorneys and appointees  named above,  and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's  attorney and nominee to vote the Shares,  and
to exercise  all voting,  consent and  similar  rights of the  undersigned  with
respect to the Shares (including,  without limitation,  the power to execute and
deliver  written  consents)  at every  annual,  special,  postponed or adjourned
meeting of the  stockholders of the Company and in every written consent in lieu
of any such meeting, and the right to sign its name (solely in its capacity as a
stockholder)  to any  consent,  certificate  or other  document  relating to the
Company that the NPCA may permit or require:

         (a) in  favor  of  approval  and  adoption  of the  Merger,  the  other
transactions   and  agreements   contemplated  by  the  Merger   Agreement  (the
"Transactions"),  the Merger Agreement (including any amendment, modification or
supplement thereto approved by the Board of Directors of the Company), the other
agreements  expressly   contemplated  by  the  Merger  Agreement  (the  "Related
Agreements"), and any matter that could reasonably be expected to facilitate the
Merger;

         (b) against any proposal or action that could reasonably be expected to
delay,  impede  or  interfere  with the  approval  of the  Merger  or any  other
Transaction, including without limitation (i) any merger, consolidation, sale of
assets,  reorganization or recapitalization with any party other than Parent and
Merger Sub and their  affiliates,  and (ii) any liquidation or winding up of the
Company; in each case except as provided in the Merger Agreement;

         (c) against any action or agreement  that could  reasonably be expected
to result in a breach  of or  default  under  any  covenant,  representation  or
warranty or any other  obligation of the Company  under the Merger  Agreement or
any Related Agreement to which the Company is a party or signatory;

         (d) in favor of the  appointment of SIBL (or any other person or entity
approved by the special  independent  committee of the Board of Directors of the
Company) as Stockholder Agent; and

         (e) in favor of any other matter relating to the execution and delivery
of the Related  Agreements and the proper and prompt  consummation of the Merger
and the other Transactions.


                                      -2-
<PAGE>

     5. THIS PROXY AND POWER OF ATTORNEY ARE  IRREVOCABLE (TO THE FULLEST EXTENT
PERMITTED BY LAW) AND ARE COUPLED  WITH AN INTEREST.  This Proxy shall expire on
the Expiration Date.

     6. For sake of  clarification,  nothing in this Proxy shall confer upon the
attorneys named above the right to exercise control or direction over the voting
rights  attached  to the  Shares  in any  circumstance  other  than the  limited
circumstances expressly referred to herein. The undersigned Stockholder may vote
the Shares on all other matters.

     7. Any obligation of the undersigned Stockholder hereunder shall be binding
upon the successors and assigns of the undersigned Stockholder.

     8. If any term or  provision  of this Proxy or any part of any such term or
provision is held under any  circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such term or provision or part thereof will, with respect
to such circumstances and in such jurisdiction,  be deemed amended to conform to
applicable  laws so as to be valid  and  enforceable  to the  fullest  permitted
extent,  (ii) the  invalidity or  unenforceability  of such term or provision or
part thereof under such  circumstances and in such jurisdiction shall not affect
the validity or  enforceability  of such term or provision or part thereof under
any other circumstances or in any other  jurisdiction,  and (iii) the invalidity
or  unenforceability  of such term or provision or part thereof shall not affect
the validity or enforceability of the remainder of such term or provision or the
validity or  enforceability  of any other term or provision of this Proxy.  Each
term and provision of this Proxy is separable from every other term or provision
of this  Proxy,  and  each  part of each  term or  provision  of this  Proxy  is
separable from every other part of such term or provision.

     9. The Shares  beneficially owned by the undersigned  Stockholder as of the
date of this Proxy are listed on the final page of this Proxy.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]












                                      -3-
<PAGE>

     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated: January __, 2007



                  SILVANO DIGENOVA



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

                  Shares Beneficially Owned:

                           1,552,264  shares of  capital  stock of the  Company,
                           plus  1,000  shares of capital  stock of the  Company
                           held of record by the Stockholder's children

                           30,000   shares  of  capital  stock  of  the  Company
                           issuable  upon  exercise  of   outstanding   options,
                           warrants  or  other  rights  or  upon  conversion  of
                           outstanding notes or other convertible securities














<PAGE>

     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated: January __, 2007



                  STANFORD INTERNATIONAL BANK LTD.


                  By:
                     -----------------------------
                     James M. Davis
                     Chief Financial Officer


                  Shares Beneficially Owned:

                           4,350,806 shares of capital stock of the Company

                           No shares of capital  stock of the  Company  issuable
                           upon  exercise of  outstanding  options,  warrants or
                           other rights or upon conversion of outstanding  notes
                           or other convertible securities














<PAGE>

     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated: January __, 2007



                  WILLIAM R. FUSSELMANN


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


                  Shares Beneficially Owned:

                           150,000 shares of capital stock of the Company

                           No shares of capital  stock of the  Company  issuable
                           upon  exercise of  outstanding  options,  warrants or
                           other rights or upon conversion of outstanding  notes
                           or other convertible securities














<PAGE>

     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated: January __, 2007



                  DANIEL T. BOGAR


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


                  Shares Beneficially Owned:

                           150,000 shares of capital stock of the Company

                           No shares of capital  stock of the  Company  issuable
                           upon  exercise of  outstanding  options,  warrants or
                           other rights or upon conversion of outstanding  notes
                           or other convertible securities




<PAGE>


     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated: January __, 2007



                  RONALD M. STEIN


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


                  Shares Beneficially Owned:

                           150,000 shares of capital stock of the Company

                           No shares of capital  stock of the  Company  issuable
                           upon  exercise of  outstanding  options,  warrants or
                           other rights or upon conversion of outstanding  notes
                           or other convertible securities




<PAGE>


     IN WITNESS WHEREOF, the undersigned Stockholder has caused this Proxy to be
duly executed on the day and year written next below.

Dated:  January __, 2007



                  OSVALDO PI


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


                  Shares Beneficially Owned:

                           150,000 shares of capital stock of the Company

                           No shares of capital  stock of the  Company  issuable
                           upon  exercise of  outstanding  options,  warrants or
                           other rights or upon conversion of outstanding  notes
                           or other convertible securities
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.6
<SEQUENCE>16
<FILENAME>dgse8kex996010907.txt
<DESCRIPTION>DGSE PRESS RELEASE DATED JANUARY 9,2007
<TEXT>

                                                                    Exhibit 99.6

For Immediate Release
- ---------------------



               DGSE COMPANIES, INC. ANNOUNCES MATERIAL CHANGES TO
              DEFINITIVE AGREEMENT TO ACQUIRE SUPERIOR GALLERIES,
              INC.; IMMEDIATE INTERIM AGREEMENT TO MANAGE SUPERIOR

DALLAS,  Texas (January 9, 2007) - DGSE Companies,  Inc. (Nasdaq:  DGSE),  which
wholesales,  retails and auctions fine watches,  jewelry,  diamonds and precious
metal and rare coin  products  via  traditional  and  Internet  channels,  today
announced that it has agreed to significant changes in its previously  announced
agreement to acquire Superior Galleries, Inc. (OTCBB: SPGR). The changes include
the following:

     1.   The total number of DGSE shares to be issued to Superior  stockholders
          has been reduced to an estimated 3,700,000, using an exchange ratio of
          0.2731 DGSE shares for each outstanding  Superior share, subject to an
          escrow equal to 15 percent of the total shares to be issued.

     2.   The DGSE  acquisition  subsidiary  and  Superior  have  entered into a
          management  agreement  under  which  DGSE  senior  management  assumed
          day-to-day  operational control of the business of Superior on January
          6,  2006.  William  Oyster  (COO of DGSE) has been  appointed  the new
          interim  Chief  Executive   Officer  of  Superior,   Scott  Williamson
          (Executive  Vice-President of DGSE) has been appointed the new interim
          Chief Operating  Officer of Superior and John Benson (Chief  Financial
          Officer of DGSE) has been  appointed the new  Vice-President,  Finance
          and interim Chief Financial Officer of Superior. All three individuals
          have also been elected to fill the  vacancies on  Superior's  Board of
          Directors  created upon the  resignations  of Silvano  DiGenova,  Paul
          Biberkraut,  Lee Itner and Anthony  Friscia.  Mitchell Stolz and David
          Rector  remain on the Board of Superior  and will serve as a Committee
          of Independent  Directors.  Dr. L.S. Smith,  Chairman and CEO of DGSE,
          will be a non-voting observer to the Superior Board.

     3.   Stanford  International  Bank Ltd.  (SIBL) has  increased its existing
          line  of  credit  to  Superior  by  $11.5  million  to   approximately
          $20,00,000,  and  executed a  forbearance  agreement  with  respect to
          existing  defaults.  As a  condition  to the  closing  of the  merger,
          Stanford  will have to  exchange  approximately  $8.4  million  of its
          current  debt for  Superior  common  stock at $1.70 per share,  and to
          replace the existing  credit  facilities with a new $11.5 million term
          facility that will be available to the combined operations.

     4.   Both SIBL and Silvano  DiGenova have converted  their  preferred stock
          into common shares of Superior, and Superior has repaid Mr. DiGenova's
          $400,000 note in full.

     5.   Silvano DiGenova,  the former Chief Executive  Officer,  President and
          director of Superior,  has exchanged 355,000 common shares in Superior
          for a  non-transferable  warrant to acquire  96,951 DGSE shares at the
          closing of the merger,  which  reflects the same exchange  ratio being
          used in the  definitive  merger  agreement.  Should  the merger not be
          consummated,  the warrant will  terminate  and DGSE will  transfer the
          Superior  shares  to  DiGenova's  designee.  Any  shares  acquired  by

<PAGE>

          DiGenova upon exercise of the warrant, in the merger or otherwise will
          be subject to a one-year lock-up agreement.

Upon successful completion of the acquisition,  Superior stockholders as a group
will own  approximately  42.9 percent of the outstanding  shares of the combined
entity, and SIBL will own approximately 30 percent of DGSE.

DGSE expects  substantial  continuity in the Superior staff.  Superior's  former
CEO,  Silvano  DiGenova,  has agreed to remain  with the new  enterprise  as the
Managing  Director-Numismatics,  and  Larry  Abbott  will  remain  as  Executive
Vice-President of Auctions and Sales at Superior.

The  acquisition  will enhance the size of DGSE and  diversify  its  activities,
making it one of the nation's  largest rare coin firms.  Upon the  completion of
the acquisition, the inventory at the current showroom facility of Superior will
be significantly  expanded to include a full inventory of jewelry,  diamonds and
fine watches. In addition, with Superior's national and international activities
and through a preferred provider agreement with Stanford Coin and Bullion,  DGSE
expects to increase  substantially  its  wholesale  and retail  precious  metals
business.  Superior plans to expand its dynamic internet website  (www.SGBH.com)
significantly  and to integrate the website with DGSE's websites - www.DGSE.com,
www.USBullionExchange.com,  www.FairchildWatches.com  (Fairchild International),
and www.CGDEInc.com (Charleston Gold & Diamond Exchange).

"The  revised  terms of this  transaction  represent  a  substantially  enhanced
opportunity for DGSE and its stockholders,"  noted William H. Oyster,  President
and Chief Operating Officer of DGSE Companies,  Inc. and interim Chief Executive
Officer of Superior. Mr. Oyster continued, "The interim period leading up to the
merger will give us the knowledge and opportunity to effect a more efficient and
accelerated integration of the operations of the two companies post-acquisition.
In addition,  SIBL's  commitment to the combined  entity's  success  through the
exchange of debt and the new credit  facility  provides robust tools for the new
combined enterprise.  With expected revenues for the combined entities more than
double our current level,  substantial financing in place and a history that can
be traced to 1930, we believe that the infrastructure will be in place to have a
major impact on our revenues and earnings."

DGSE and Superior expect the acquisition to close late in March 2007, subject to
the  satisfaction  or waiver of the  various  closing  conditions  in the merger
agreement,  including the approval of the stockholders of both companies and the
effectiveness of a registration statement on a Form S-4.

Additional Information and Where to Find It

In connection  with the proposed  acquisition,  DGSE and Superior intend to file
relevant  materials  with the SEC.  DGSE and Superior  each have filed a current
report on Form 8-K related to the proposed  acquisition on or before the date of
this release. In the near future, DGSE intends to file a registration  statement
on Form S-4, which will contain a prospectus  and related  materials to register
the DGSE  common  stock to be issued in the  proposed  acquisition,  and a joint
proxy  statement,  which  DGSE and  Superior  plan to mail to  their  respective
stockholders  in  connection  with the approval of the proposed  acquisition  by
their respective stockholders.

<PAGE>

The current report contains,  and the registration statement and the joint proxy
statement/prospectus  included therein will contain, important information about
DGSE,  Superior,  the proposed  acquisition and related  matters.  INVESTORS AND
SECURITY  HOLDERS  ARE  URGED  TO READ  THE  FILINGS  CAREFULLY  WHEN  THEY  ARE
AVAILABLE.  Investors and security holders will be able to obtain free copies of
these documents (when they become  available) and other documents filed with the
SEC  at  the  SEC's  web  site  at   www.sec.gov   or  by  calling  the  SEC  at
1-800-SEC-0330.  In addition,  investors  and  security  holders may obtain free
copies of the documents  filed by DGSE with the SEC by contacting  DGSE Investor
Relations at (972) 484-3662.

Participation in Solicitations

DGSE  and  its  directors  and  executive  officers  also  may be  deemed  to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection with the proposed transaction described herein. Information regarding
the  special  interests  of  these  directors  and  executive  officers  in  the
transaction   described   herein   will  be   included   in  the   joint   proxy
statement/prospectus  described above.  Additional  information  regarding these
directors and executive  officers is also included in DGSE's proxy statement for
its 2006  Annual  Meeting  of  Stockholders,  which was filed with the SEC on or
about June 23, 2006.  This document is available free of charge at the SEC's web
site at www.sec.gov and from DGSE by contacting DGSE Investor Relations at (972)
484-3662.

Superior  and its  directors  and  executive  officers  also may be deemed to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection with the proposed transaction described herein. Information regarding
the  special  interests  of  these  directors  and  executive  officers  in  the
transaction   described   herein   will  be   included   in  the   joint   proxy
statement/prospectus  described above.  Additional  information  regarding these
directors and executive  officers is also included in Superior's proxy statement
for its 2005 Annual Meeting of Stockholders,  which was filed with the SEC on or
about October 6, 2005.  This  document is available  free of charge at the SEC's
web site at  www.sec.gov  and from  Superior  by  contacting  Superior  Investor
Relations at (800) 421-0754.

About DGSE Companies, Inc.

DGSE Companies, Inc. wholesales and retails jewelry,  diamonds, fine watches and
precious  metal  bullion  products and rare coins to domestic and  international
customers  through its Dallas Gold and Silver  Exchange and Charleston  Gold and
Diamond  Exchange  subsidiaries  and well as through the Internet and World Wide
Web. DGSE also owns Fairchild  International,  Inc., one of the largest  vintage
watch  wholesalers  in the country.  In addition to its retail  facilities,  the
Company has online  stores and  conducts  live  Internet  auctions  which can be
accessed at www.dgse.com  and  www.CGDEInc.com.  Real-time price  quotations and
real-time  order  execution in precious  metals are provided on another DGSE web
site at  www.USBullionExchange.com.  Wholesale  customers  can  access  our full
vintage watch inventory through the restricted site at www.FairchildWatches.com.

The Company is headquartered in Dallas, Texas and its common stock trades on The
Nasdaq Stock Market(R) under the symbol "DGSE".

<PAGE>

About Superior Galleries, Inc.

Superior  Galleries,  Inc. is a publicly traded company,  acting as a dealer and
auctioneer of rare coins and other fine  collectibles.  Headquartered in Beverly
Hills,  California,  the firm markets its products  through  auctions (both live
events and on the World Wide Web),  its nationwide  sales force,  its gallery in
Beverly Hills and via the company's web site at www.SGBH.com.

Stanford  Coins &  Bullion  is a member  of the  Stanford  Financial  Group,  an
international  network of  affiliated  companies  that  together form a powerful
resource of financial services.  Located in Houston,  Texas, the company markets
its products through its retail sales force and the company's web site.

Safe  Harbor  for  Forward-Looking   Statements.  This  press  release  contains
statements  regarding the proposed  transaction  between DGSE and Superior,  the
expected  timetable  for  completing  the  transaction,   future  financial  and
operating  results,  benefits and  synergies of the  proposed  transaction,  the
ability of DGSE to integrate the business,  operations and personnel of Superior
following  the  acquisition,  and other  statements  about  DGSE and  Superior's
managements' future  expectations,  beliefs,  goals, plans or prospects that are
based on current expectations,  estimates,  forecasts and projections about DGSE
and Superior and the combined company,  as well as DGSE's and Superior's and the
combined  company's  future  performance  and the  industries  in which DGSE and
Superior  operate  and  the  combined  company  will  operate,  in  addition  to
managements' assumptions. These statements constitute forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Words  such  as  "expects,"   "anticipates,"   "targets,"  "goals,"  "projects,"
"intends," "plans," "believes,"  "seeks,"  "estimates," "will" and variations of
such words and similar expressions are intended to identify such forward-looking
statements which are not statements of historical facts.  These  forward-looking
statements are not guarantees of future  performance  and involve certain risks,
uncertainties  and assumptions that are difficult to assess.  Therefore,  actual
outcomes and results may differ  materially from what is expressed or forecasted
in such forward-looking statements. These risks and uncertainties are based upon
a number of important factors including, among others: the ability to consummate
the proposed  acquisition;  potential  difficulties in otherwise meeting closing
conditions set forth in the definitive merger agreement entered into by DGSE and
Superior;  difficulties  and delays in obtaining  regulatory  approvals  for the
proposed  acquisition;  difficulties  and  delays in  integration  or  achieving
synergies and cost savings; difficulties regarding the execution of the business
plan for the combined companies; continued acceptance of the DGSE's products and
services in the marketplace; competitive factors; the cooperation and support of
the  companies'  lenders  for  the  proposed  acquisition;  fluctuations  in the
secondhand market;  existing and future litigation;  and other risks detailed in
the companies'  respective  periodic report filings with the SEC. For a list and
description of risks and  uncertainties  relating to DGSE and Superior and their
respective businesses, refer to DGSE's Form 10-K for the year ended December 31,
2005 and Superior's Form 10-K for the year ended June 30, 2005, as well as other
filings by DGSE and  Superior  with the SEC.  These  forward-looking  statements
speak only as of the date of this release and, except as required under the U.S.
federal securities laws and the rules and regulations of the SEC, DGSE disclaims
any intention or obligation to update any  forward-looking  statements after the
distribution  of this press  release,  whether  as a result of new  information,
future events, developments, changes in assumptions or otherwise.



                    For further information, please contact:
         William H. Oyster, President and COO of DGSE at (800) 527-5307



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.7
<SEQUENCE>17
<FILENAME>dgse8kex997010907.txt
<DESCRIPTION>SUPERIOR PRESS RELEASE DATED JANUARY 9, 2007
<TEXT>

                                                                    Exhibit 99.7

FOR IMMEDIATE RELEASE

         SUPERIOR GALLERIES, INC. ANNOUNCES AMENDMENT OF AGREEMENT TO BE
                ACQUIRED BY DGSE COMPANIES, INC., NEW MANAGEMENT

BEVERLY HILLS, CA (January 9, 2007) - Superior  Galleries,  Inc. (OTCBB:  SPGR),
which  wholesales,  retails and auctions rare coin products via  traditional and
Internet channels,  today announced that it has executed an amended and restated
agreement to be acquired by DGSE COMPANIES, INC. (Nasdaq: DGSE) and a management
agreement with DGSE's acquisition subsidiary to manage the day-to-day operations
of Superior.

Pursuant to the revised merger  agreement,  Superior will still be merged into a
wholly-owned  subsidiary  of DGSE in an all-stock  transaction.  However,  among
other things, the following terms of the acquisition have been modified.  First,
the purchase  price has been reduced such that all of the  outstanding  Superior
common shares will be exchanged for 3,700,000  DGSE common shares.  Thus,  after
the acquisition,  Superior shareholders will own approximately 43 percent of the
outstanding  shares of the combined  entity.  Second,  the exchange rate for the
exchange of the  Stanford  International  Bank Ltd.  (SIBL) debt into equity was
reduced from $2.00 to $1.70 per share. The amount of debt to be exchanged at the
time of the merger is $8.4 million.

Third, the acquisition has been  re-structured into a two-step  transaction.  In
the first  step of the  transaction,  which was  completed  on  January 6, 2007,
Silvano DiGenova resigned as Chief Executive Officer,  President,  interim Chief
Financial  Officer and Chairman of Superior.  In accordance  with the management
agreement, William Oyster (COO of DGSE) has been appointed the new interim Chief
Executive  Officer of Superior,  Scott Williamson  (Executive  Vice-President of
DGSE) has been appointed the new interim Chief Operating Officer of Superior and
John  Benson  (Chief  Financial  Officer  of DGSE)  has been  appointed  the new
Vice-President,  Finance and interim  Chief  Financial  Officer of Superior.  In
accordance with the revised merger agreement,  all members of the Superior board
other than Mitch Stolz and David  Rector have  resigned,  and Scott  Williamson,
John Benson and William  Oyster of DGSE were  appointed to fill the vacancies on
the Superior board.  SIBL has increased the line of credit available to Superior
under the existing Loan and Security Agreement to approximately $20 million.

In the  second  step  of the  transaction,  Stanford  is  expected  to  exchange
approximately  $8.4 million of its loans for  approximately  5 million  Superior
common shares,  and the parties will  consummate the merger of Superior with and
into a wholly owned  subsidiary of DGSE. The  acquisition  remains  subject to a
number of closing conditions, including the approval of the stockholders of both
companies and the effectiveness of a registration statement on a Form S-4.

DGSE and Superior expect the acquisition to close late in March 2007, subject to
the satisfaction or waiver of the various closing  conditions in the acquisition
agreement.

<PAGE>

ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection  with the proposed  acquisition,  DGSE and Superior intend to file
relevant  materials  with the SEC.  DGSE and Superior  each have filed a current
report  on Form 8-K  related  to the  proposed  acquisition  on the date of this
release.  In the near future,  DGSE intends to file a registration  statement on
Form S-4, which will contain a prospectus and related  materials to register the
DGSE common  stock to be issued in the proposed  acquisition,  and a joint proxy
statement, which DGSE and Superior plan to mail to their respective stockholders
in connection with the approval of the proposed  acquisition by their respective
stockholders.

The current report contains,  and the registration statement and the joint proxy
statement/prospectus  included therein will contain, important information about
DGSE,  Superior,  the proposed  acquisition and related  matters.  INVESTORS AND
SECURITY  HOLDERS  ARE  URGED  TO READ  THE  FILINGS  CAREFULLY  WHEN  THEY  ARE
AVAILABLE.  Investors and security holders will be able to obtain free copies of
these documents (when they become  available) and other documents filed with the
SEC  at  the  SEC's  web  site  at   www.sec.gov   or  by  calling  the  SEC  at
1-800-SEC-0330.  In addition,  investors  and  security  holders may obtain free
copies of the documents  filed by Superior  with the SEC by contacting  Superior
Investor Relations at (800) 421-0754.

PARTICIPATION IN SOLICITATIONS

DGSE  and  its  directors  and  executive  officers  also  may be  deemed  to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection with the proposed transaction described herein. Information regarding
the  special  interests  of  these  directors  and  executive  officers  in  the
transaction   described   herein   will  be   included   in  the   joint   proxy
statement/prospectus  described above.  Additional  information  regarding these
directors and executive  officers is also included in DGSE's proxy statement for
its 2006  Annual  Meeting  of  Stockholders,  which was filed with the SEC on or
about June 23, 2006.  This document is available free of charge at the SEC's web
site at www.sec.gov and from DGSE by contacting DGSE Investor Relations at (972)
484-3662.

Superior  and its  directors  and  executive  officers  also may be deemed to be
participants  in the  solicitation  of proxies from the  stockholders of DGSE in
connection with the proposed transaction described herein. Information regarding
the  special  interests  of  these  directors  and  executive  officers  in  the
transaction   described   herein   will  be   included   in  the   joint   proxy
statement/prospectus  described above.  Additional  information  regarding these
directors and executive  officers is also included in Superior's proxy statement
for its 2005 Annual Meeting of Stockholders,  which was filed with the SEC on or
about October 6, 2005.  This  document is available  free of charge at the SEC's
web site at  www.sec.gov  and from  Superior  by  contacting  Superior  Investor
Relations at (800) 421-0754.

ABOUT SUPERIOR GALLERIES, INC.

Superior  Galleries,  Inc. is a publicly traded company,  acting as a dealer and
auctioneer of rare coins and other fine  collectibles.  Headquartered in Beverly
Hills,  California,  the firm markets its products  through  auctions (both live
events and on the World Wide Web),  its nationwide  sales force,  its gallery in
Beverly Hills and via the company's web site at www.SGBH.com.

Stanford  Coins &  Bullion  is a member  of the  Stanford  Financial  Group,  an
international  network of  affiliated  companies  that  together form a powerful
resource of financial services.  Located in Houston,  Texas, the company markets
its products through its retail sales force and the company's web site.

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ABOUT DGSE COMPANIES, INC.

DGSE Companies, Inc. wholesales and retails jewelry,  diamonds, fine watches and
precious  metal  bullion  products and rare coins to domestic and  international
customers  through its Dallas Gold and Silver  Exchange and Charleston  Gold and
Diamond  Exchange  subsidiaries  and well as through the Internet and World Wide
Web. DGSE also owns Fairchild  International,  Inc., one of the largest  vintage
watch wholesalers in the country. In addition to its retail facilities, DGSE has
online  stores and  conducts  live  Internet  auctions  which can be accessed at
www.dgse.com and www.CGDEInc.com. Real-time price quotations and real-time order
execution  in  precious  metals  are  provided  on  another  DGSE  web  site  at
www.USBullionExchange.com. Wholesale customers can access our full vintage watch
inventory through the restricted site at www.FairchildWatches.com.

DGSE is headquartered in Dallas, Texas and its common stock trades on The Nasdaq
Stock Market(R) under the symbol "DGSE".

SAFE  HARBOR  FOR  FORWARD-LOOKING   STATEMENTS.  THIS  PRESS  RELEASE  CONTAINS
STATEMENTS  REGARDING THE PROPOSED  TRANSACTION  BETWEEN DGSE AND SUPERIOR,  THE
EXPECTED  TIMETABLE  FOR  COMPLETING  THE  TRANSACTION,   FUTURE  FINANCIAL  AND
OPERATING  RESULTS,  BENEFITS AND  SYNERGIES OF THE  PROPOSED  TRANSACTION,  THE
ABILITY OF DGSE TO INTEGRATE THE BUSINESS,  OPERATIONS AND PERSONNEL OF SUPERIOR
FOLLOWING  THE  ACQUISITION,  AND OTHER  STATEMENTS  ABOUT  DGSE AND  SUPERIOR'S
MANAGEMENTS' FUTURE  EXPECTATIONS,  BELIEFS,  GOALS, PLANS OR PROSPECTS THAT ARE
BASED ON CURRENT EXPECTATIONS,  ESTIMATES,  FORECASTS AND PROJECTIONS ABOUT DGSE
AND SUPERIOR AND THE COMBINED COMPANY,  AS WELL AS DGSE'S AND SUPERIOR'S AND THE
COMBINED  COMPANY'S  FUTURE  PERFORMANCE  AND THE  INDUSTRIES  IN WHICH DGSE AND
SUPERIOR  OPERATE  AND  THE  COMBINED  COMPANY  WILL  OPERATE,  IN  ADDITION  TO
MANAGEMENTS' ASSUMPTIONS. THESE STATEMENTS CONSTITUTE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE U.S. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
WORDS  SUCH  AS  "EXPECTS,"   "ANTICIPATES,"   "TARGETS,"  "GOALS,"  "PROJECTS,"
"INTENDS," "PLANS," "BELIEVES,"  "SEEKS,"  "ESTIMATES," "WILL" AND VARIATIONS OF
SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS WHICH ARE NOT STATEMENTS OF HISTORICAL FACTS.  THESE  FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE  PERFORMANCE  AND INVOLVE CERTAIN RISKS,
UNCERTAINTIES  AND ASSUMPTIONS THAT ARE DIFFICULT TO ASSESS.  THEREFORE,  ACTUAL
OUTCOMES AND RESULTS MAY DIFFER  MATERIALLY FROM WHAT IS EXPRESSED OR FORECASTED
IN SUCH FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES ARE BASED UPON
A NUMBER OF IMPORTANT FACTORS INCLUDING, AMONG OTHERS: THE ABILITY TO CONSUMMATE
THE PROPOSED  ACQUISITION;  POTENTIAL  DIFFICULTIES IN OTHERWISE MEETING CLOSING
CONDITIONS SET FORTH IN THE DEFINITIVE MERGER AGREEMENT ENTERED INTO BY DGSE AND
SUPERIOR;  DIFFICULTIES  AND DELAYS IN OBTAINING  REGULATORY  APPROVALS  FOR THE
PROPOSED  ACQUISITION;  DIFFICULTIES  AND  DELAYS IN  INTEGRATION  OR  ACHIEVING
SYNERGIES AND COST SAVINGS; DIFFICULTIES REGARDING THE EXECUTION OF THE BUSINESS
PLAN FOR THE COMBINED COMPANIES; CONTINUED ACCEPTANCE OF THE SUPERIOR'S PRODUCTS
AND  SERVICES IN THE  MARKETPLACE;  COMPETITIVE  FACTORS;  THE  COOPERATION  AND
SUPPORT OF THE COMPANIES' LENDERS FOR THE PROPOSED ACQUISITION;  FLUCTUATIONS IN
THE SECONDHAND MARKET; EXISTING AND FUTURE LITIGATION;  AND OTHER RISKS DETAILED
IN THE COMPANIES'  RESPECTIVE  PERIODIC  REPORT FILINGS WITH THE SEC. FOR A LIST
AND  DESCRIPTION  OF RISKS AND  UNCERTAINTIES  RELATING TO DGSE AND SUPERIOR AND
THEIR  RESPECTIVE  BUSINESSES,  REFER TO  DGSE'S  FORM  10-K FOR THE YEAR  ENDED
DECEMBER 31, 2005 AND SUPERIOR'S  FORM 10-K FOR THE YEAR ENDED JUNE 30, 2005, AS
WELL AS OTHER FILINGS BY DGSE AND SUPERIOR WITH THE SEC.  THESE  FORWARD-LOOKING
STATEMENTS  SPEAK ONLY AS OF THE DATE OF THIS  RELEASE  AND,  EXCEPT AS REQUIRED
UNDER THE U.S. FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS OF THE SEC,
DGSE  DISCLAIMS  ANY  INTENTION  OR  OBLIGATION  TO UPDATE  ANY  FORWARD-LOOKING
STATEMENTS AFTER THE DISTRIBUTION OF THIS PRESS RELEASE,  WHETHER AS A RESULT OF
NEW  INFORMATION,  FUTURE  EVENTS,  DEVELOPMENTS,   CHANGES  IN  ASSUMPTIONS  OR
OTHERWISE.


                    For further information, please contact:
William H. Oyster, Interim Chief Executive Officer of Superior at (800) 421-0754
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