<SEC-DOCUMENT>0001144204-11-060300.txt : 20111031
<SEC-HEADER>0001144204-11-060300.hdr.sgml : 20111031
<ACCEPTANCE-DATETIME>20111031161712
ACCESSION NUMBER:		0001144204-11-060300
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20111031
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20111031
DATE AS OF CHANGE:		20111031

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:		111168465

	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>
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<TYPE>8-K
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT REPORT</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">October 31, 2011 (October 31, 2011)</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">DGSE COMPANIES, INC.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 (<font style="DISPLAY: inline; FONT-STYLE: italic">see </font>General Instruction A.2. below):</font></div>

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<div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</font></div>
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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 1.01</font></div>
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<div align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Entry into a Material Definitive Agreement</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>DGSE Companies, Inc., a Nevada corporation (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Registrant</font>&#8221;), has entered into an Executive Employment Agreement, dated November 1, 2011 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">2011 Smith Employment Agreement</font>&#8221;), in substantially the form attached hereto as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit 10.1</font>, by and between the Registrant and Dr. L.S. Smith (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Dr. Smith</font>&#8221;), who will, as of November 1, 2011, be the former Chairman of the Board and Chief Executive Officer of the Registrant as a result of his voluntary resignation from those positions prompted his need to attend to matters related to his health.&#160;&#160;Prior to November 1, 2011, Dr. Smith&#8217;s employment with the Registrant has been governed by an Executive Employment Agreement, dated September 1, 2010 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">2010 Smith Employment Agreement&#8221;</font>), by and between the Registrant and Dr. Smith, as described in the section entitled &#8220;Compensation of Directors and Executive Officers&#8221;<font style="DISPLAY: inline; FONT-STYLE: italic">&#160;</font>of the Definitive Proxy Statement of the Registrant on Schedule 14A, as filed with the Securities Exchange Commission on May 24, 2011 (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Proxy Statement</font>&#8221;).&#160;&#160;Effective November 1, 2011, the 2010 Smith Employment Agreement will be replaced and superseded by the 2011 Smith Employment Agreement, pursuant to which Dr. Smith will provide consulting and advisory services to the Registrant.&#160;&#160;The 2011 Smith Employment Agreement will provide Dr. Smith with an annual base salary of $225,000 per year.&#160;&#160;The other terms of the 2011 Smith Employment Agreement remain unchanged from those of the 2010 Smith Employment Agreement, as described in the section entitled &#8220;Compensation of Directors and Executive Officers&#8221;<font style="DISPLAY: inline; FONT-STYLE: italic">&#160;</font>of the Proxy Statement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 3.02&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Unregistered Sales of Equity Securities</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>On October 31, 2011, the Registrant completed the sale of 845,634 shares (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Option Shares</font>&#8221;) of the common stock of the Registrant, par value $0.01 per share (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Common Stock</font>&#8221;), to Dr. Smith in connection with his exercise of options to purchase Common Stock (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Options</font>&#8221;).&#160;&#160;In consideration for the aggregate exercise price of the Options, Dr. Smith tendered 219,924 previously-issued shares of Common Stock to the Registrant.&#160;&#160;The sale and delivery of the Option Shares to Dr. Smith was exempt from the registration requirements of the Securities Act of 1933, as amended (the &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Securities Act</font>&#8221;), in accordance with the exemption from the registration requirements of the Securities Act contained in Rule 506 of Regulation D, promulgated under the Securities Act (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Regulation D</font>&#8221;).&#160;&#160;Dr. Smith has represented to the Registrant in writing that Dr. Smith is an &#8220;accredited investor,&#8221; as that term is defined in Rule 501(a) of Regulation D.</font></div>

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<div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective November 1, 2011, Dr. Smith will resign as Chairman of the Board and Chief Executive Officer of the Registrant.&#160;&#160;Dr. Smith&#8217;s resignation was prompted by his need to attend to matters related to his health.&#160;&#160;Dr. Smith&#8217;s employment with the Registrant was governed by the 2010 Smith Employment Agreement.&#160;&#160;Effective November 1, 2011, the 2010 Smith Employment Agreement will be replaced and superseded by the 2011 Smith Employment Agreement, pursuant to which Dr. Smith will provide consulting and advisory services to the Registrant.&#160;&#160;Dr. Smith has no disagreements with the Registrant on any matter related to the Registrant&#8217;s operations, policies or practices.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective November 1, 2011, William H. Oyster, age 58 (&#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Mr. Oyster</font>&#8221;), who has served as a member of the Registrant&#8217;s Board of Directors and as the Registrant's President and Chief Operating Officer since January of 1990, will be appointed to serve as the Registrant&#8217;s Chairman of the Board and Chief Executive Officer immediately upon Dr. Smith&#8217;s resignation.&#160;&#160;Since his election as a director of the Registrant and appointment as President and Chief Operating Officer in January 1990, Mr. Oyster has overseen the day-to-day operations of the Registrant.&#160;&#160;Mr. Oyster obtained an A.A.S. in nursing from Grayson County College in 1976.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In accordance with Mr. Oyster&#8217;s appointment as Chairman of the Board and Chief Executive Officer of the Registrant, the Board of Directors of the Registrant has unanimously voted to increase Mr. Oyster&#8217;s starting salary to $425,000 per year.&#160;&#160;The other terms of Mr. Oyster&#8217;s employment remain unchanged from those set forth in the section entitled &#8220;Compensation of Directors and Executive Officers&#8221;<font style="DISPLAY: inline; FONT-STYLE: italic">&#160;</font>of the Proxy Statement.</font></div>
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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font></div>
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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 9.01.</font></div>
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<div align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Financial Statements and Exhibits</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Not applicable<font style="DISPLAY: inline; FONT-STYLE: italic">.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Not applicable<font style="DISPLAY: inline; FONT-STYLE: italic">.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Not applicable<font style="DISPLAY: inline; FONT-STYLE: italic">.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Exhibits</font><font style="DISPLAY: inline; FONT-STYLE: italic">.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Description</font></font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10.1</font></div>
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<td align="left" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Form of Executive Employment Agreement, dated November 1, 2011, by and between Dr. L.S. Smith and DGSE Companies, Inc.</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBITS</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10.1</font></div>
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<td align="left" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="top" width="80%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Form of Executive Employment Agreement, dated November 1, 2011, by and between Dr. L.S. Smith and DGSE Companies, Inc.</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SIGNATURES</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</font></div>

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<td colspan="2" valign="top" width="38%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">DGSE COMPANIES, INC.</font></div>
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<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td align="left" valign="top" width="50%" style="BORDER-BOTTOM: #ffffff solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Date:&#160;&#160;October 31, 2011</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By: </font></div>
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<td align="left" nowrap valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">John Benson</font></font></td>
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<td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" nowrap valign="bottom" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> </font>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">John Benson</font></font></div>
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<td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"> </font>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Chief Financial Officer</font></font></div>
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<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v238610_ex10-1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EMPLOYMENT AGREEMENT</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-VARIANT: small-caps">This Employment Agreement</font> (&#8220;Agreement&#8221;) is entered into and made to be effective as of November __, 2011 (the &#8220;Effective Date&#8221;) by and between <font style="DISPLAY: inline; FONT-VARIANT: small-caps">DGSE Companies, Inc</font>. (formerly Dallas Gold &amp; Silver Exchange, Inc.), a Nevada corporation (the &#8220;Company&#8221;) and <font style="DISPLAY: inline; FONT-VARIANT: small-caps">Dr. L.S. Smith</font>, an executive employee of the Company (&#8220;Executive&#8221;) (collectively, the &#8220;Parties&#8221;).</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-VARIANT: small-caps">Whereas</font>, prior to the Effective Date hereof, Executive was employed by the Company as its Chief Executive Officer and Chairman of the Board pursuant to an Employment Agreement entered into between DGSE Companies, Inc. and Executive on September 1, 2010 (the &#8220;2010 Employment Agreement&#8221;);</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Whereas, Executive desires to resign from the Board and step down as the Chief Executive Officer of the Company;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-VARIANT: small-caps">Whereas,</font> Executive is willing to continue such employment with the Company in accordance with the terms and conditions set forth in this Agreement provided that all accrued, but previously unpaid, Annual Bonus payments have been made to Executive prior to the Effective Date; and</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-VARIANT: small-caps">Whereas</font>, the Company and Executive agree that this Agreement amends, restates and supersedes the 2010 Employment Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">1.1</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8220;Board&#8221;</font> shall mean the board of directors of the Company.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1.2</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8220;Cause&#8221; </font>shall mean any of the following:&#160;&#160;(i) conviction of a felony involving dishonest acts during the term of this Agreement; (ii) any willful and material misapplication by Executive of the Company&#8217;s funds, or any other material act of dishonesty committed by Executive; or (iii) Executive&#8217;s willful and material breach of this Agreement or willful and material failure to substantially perform his duties hereunder (other than any such failure resulting from mental or physical illness) after written demand for substantial performance is delivered by the Board which specifically identifies the manner in which the Board believes Executive has not substantially performed his duties and Executive fails to cure his nonperformance.&#160;&#160;Executive shall not be deemed to have been terminated for Cause without first having been (i) provided written notice of not less than thirty (30) days setting forth the specific reasons for the Company&#8217;s intention to terminate for Cause, (ii) an opportunity for Executive, together with his counsel, to be heard before the Board, and (iii) delivery to Executive of a notice of termination from the Board stating that a majority of the Board of Directors found, in good faith, that Executive had engaged in the willful and material conduct&#160;&#160;referred to in such notice.&#160;&#160;For purposes of this Agreement, no act, or failure to act, on Executive&#8217;s part shall be considered &#8220;willful&#8221; unless done, or omitted to be done, by Executive in bad faith and without reasonable belief that Executive&#8217;s action or omission was in the best interest of the Company.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">3.1</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Executive agrees to perform the duties of Senior Adviser.&#160;&#160;Executive shall be available to consult with the Board on an as needed basis and provide the Company advice on strategy, business development and growth plans.&#160;&#160;During the Term Executive shall not have any day-to-day responsibilities or be required to physically be present at the Company except as may otherwise be required from time to time to meet or confer with the Board in person.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">3.2</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;While employed pursuant to this Agreement, Executive shall obey the lawful directions of the Board, or any duly authorized committee thereof, and shall endeavor to promote the interests of the Company and to maintain and promote the reputation thereof.&#160;&#160;During the Employment Term, Executive may from time to time engage in any businesses or activities that do not compete directly and materially with Company and any of its subsidiaries, provided that such businesses or activities do not materially interfere with his performance of the duties assigned to him in compliance with this Agreement by the Board or any duly authorized committee thereof.&#160;&#160;Executive is specifically permitted to (i) invest his personal assets as a passive investor in such form or manner as will not contravene the best interests of the Company, and (ii) serve as an officer, director, trustee or otherwise participate in educational, welfare, social, charitable, religious and civic organizations.&#160;&#160;In addition, Executive may, at his sole discretion, represent unrelated entities involved in insolvency proceedings notwithstanding any provisions of this Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Salary</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;As compensation for the performance of services to the Company, the Company shall pay Executive an annual salary of at least Two Hundred Twenty Five Thousand Dollars ($225,000.00) (said amount, together with any periodic increases, referred to as &#8220;Salary&#8221;). The Salary shall be payable in equal bi-weekly installments, subject only to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of the Company for employee benefits.&#160;&#160;The Board shall review Executive&#8217;s overall annual compensation at least annually, and Executive&#8217;s Salary may be increased by the Board from time to time by an amount that in the opinion of the Board is justified by Executive&#8217;s performance.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Annual Bonus</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.&#160;&#160;</font>Executive shall be entitled to receive an annual bonus from the Company upon the conclusion of each calendar year occurring during the Term (each an &#8220;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Annual Bonus</font>&#8221;) in an amount calculated and paid as follows:&#160;&#160;(i) an amount equal to 25% of his then existing Salary shall be paid in a lump-sum on January 31<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">st</font> of the next calendar year; and (ii) an amount equal to 25% of his then existing Salary shall be paid in a lump-sum on January 31<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">st</font> of the next calendar year <font style="DISPLAY: inline; TEXT-DECORATION: underline">provided</font> that the closing price per share of the Company&#8217;s common stock (as recorded by Reuters or reported by NASDAQ) on the last business day of the calendar year is at least 10% higher than the closing price per share of the Company&#8217;s common stock (as recorded by Reuters or reported by NASDAQ) on the last business day of the prior calendar year.&#160;&#160;By way of example, if Executive is employed with the Company on December 31, 2011, then he shall be paid one-half of his 2011 Annual Bonus on January 31, 2012.&#160;&#160;By way of further example, if the closing price per share of the Company&#8217;s common stock on the last business day of December 2011 is $4.708 or greater per share, then Executive would also be paid the other one-half of his Annual Bonus for calendar year 2011 on or before January 31, 2012 because the closing price per share of the Company&#8217;s stock on December 31, 2010 was $4.28 per share and would have therefore increased by 10% ($4.28 x 10% = .428 + $4.28 = $4.708) on the last business day of 2011.&#160;&#160;Executive shall be entitled to receive a pro rata Annual Bonus at the expiration of the Term in 2013.&#160;&#160;The Annual Bonus for 2013 will be calculated on a pro rata basis in which Executive shall be entitled to receive a partial Annual Bonus calculated as follows: 5/12 x then existing Salary x 25%.&#160;&#160;Executive shall also be entitled to receive an amount equal to 5/12 x then existing Salary x 25% if the closing share price per share of the Company&#8217;s stock on May 30, 2013 is at least 10% higher that the closing price per share of the Company&#8217;s stock on December 31, 2012.&#160;&#160;Payment of the 2013 pro rata Annual Bonus shall be paid in a lump-sum on July 1, 2013.&#160;&#160;In addition to the Annual Bonus, the Board may, in its discretion, award and pay Executive such additional bonus amounts as it deems necessary or appropriate.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.5</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Life and Disability Insurance.&#160;&#160;</font>During the Employment Term, the Company will obtain or provide for the benefit of Executive (i) term life insurance coverage providing death benefits to beneficiaries designated by Executive equal to $2,000,000.00, and (ii)&#160;long-term disability insurance coverage providing Executive with long-term disability benefits equal to 50% of his Salary payable on and after the 181<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">st</font> day of Executive&#8217;s qualifying disability.&#160;&#160;The Company and Executive agree that Executive&#8217;s existing life and disability insurance policies may, if permitted to be carried over to the Company, wholly or partially satisfy the Company&#8217;s obligations under this section.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.6</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Other Employee Benefit Plans.&#160;&#160;</font>Executive shall be eligible to participate at a level commensurate with his position in any employee equity purchase plans or programs that may be adopted for the benefit of the Company&#8217;s officers or employees generally and in any employee fringe or other employee benefits and pension and/or profit sharing plans that may be provided by the Company for its senior executive employees in accordance with the provisions of any such plans, as the same may be in effect from time to time.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: times new roman">4.7</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman">Vacation and Leave of Absence.&#160;&#160;</font>Executive shall be entitled to take a minimum of four (4) weeks paid vacation per calendar year.&#160;&#160;Executive shall also be entitled to all paid holidays and personal days given by the Company to its senior executives.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">4.8</font>&#160;<font style="FONT-WEIGHT: bold">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">Sick Leave and Disability.</font></font>Executive shall be entitled to sick leave, sick pay and disability benefits in accordance with any Company policy that may be applicable to senior executive employees from time to time.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.9</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Expense Reimbursement.&#160;&#160;</font>Upon Executive&#8217;s furnishing to the Company customary and reasonable documentary support evidencing costs and expenses incurred by him in the performance of his services and duties hereunder (including, without limitation, travel and entertainment expenses), the Company shall reimburse Executive for such costs and expenses in accordance with its normal expense reimbursement policy.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.10</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Legal and/or Accounting Expenses.&#160;&#160;</font>During the Employment Term, the Company agrees that in addition to any costs, fees or expenses it may cover or pay for Executive pursuant Section 10, it shall also provide an allowance to Executive of $5,000 per year for costs and expenses incurred by Executive for professional legal and/or accounting services rendered personally to Executive, which amount shall be paid to Executive on December 1 of each year (or such earlier time that Executive and the Company may otherwise agree).&#160;&#160;If at any time during the term of this Agreement or afterwards there should arise any dispute as to the validity, interpretation or application of any term or condition of this Agreement, the Company agrees, upon written demand by Executive (and Executive shall be entitled upon application to any court of competent jurisdiction, to the entry of a mandatory injunction, without the necessity of posting any bond with respect thereto, compelling the Company) to promptly provide sums sufficient to pay on a current basis (either directly or by reimbursing Executive) Executive&#8217;s attorneys&#8217; fees (including expenses of investigation and disbursements for the fees and expenses of experts, etc.) incurred by Executive in connection with any such dispute or any litigation.&#160;&#160;The provisions of this Section 4.10 shall survive the expiration or termination of this Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.11</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Additional Expense Allowance.&#160;&#160;</font>During the Employment Term, Executive shall be entitled to a reimbursement for reasonable and documented automobile expenses (the &#8220;Additional Expense Amounts&#8221;) up to $750.00 per month.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.12</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Other Executive Employee Benefits</font><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;During the Employment Term, Executive shall be eligible to participate in any additional incentive compensation benefit, insurance benefit or other plan or arrangement of the Company now or hereafter created for the benefit of executive employees of the Company.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">Company Stock Options</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;As of the Effective Date, Executive has previously been granted the following options to purchase common stock in the Company:</font></div>

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<td valign="bottom" width="15%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Date</font></font></font></td>
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<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">#/Options</font></font></div>
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<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: center">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Strike Price</font></font></div>
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<td valign="bottom" width="5%" style="TEXT-ALIGN: left">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(a)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">October 8, 2001</font></div>
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<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">577,777</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2.25</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="bottom" width="5%" style="TEXT-ALIGN: left">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(b)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">November 20, 2002</font></div>
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<td valign="bottom" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">267,857</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1.12</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="bottom" width="5%" style="TEXT-ALIGN: left">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(c)</font></div>
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<td valign="bottom" width="15%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">August 13, 2009</font></div>
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<td valign="bottom" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">100,000</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
<td valign="bottom" width="12%" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">.78</font></td>
<td nowrap valign="bottom" width="1%" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Parties agree and acknowledge that all options referred to above fully vested prior to the Effective Date.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Confidential Information</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;Executive hereby covenants, agrees and acknowledges as follows:</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Access to Confidential Information</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;During the Term of this Agreement Executive will have access to Confidential Information of the Company.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Non-Disclosure and Non-Use</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;During the Employment Term Executive shall not use or disclose, or make known for another&#8217;s benefit other than for the benefit of the Company, any Confidential Information of the Company.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Return of Confidential Information</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;Executive agrees that upon termination of his employment with the Company for any reason, Executive shall forthwith return to the Company all Confidential Information in whatever form maintained (including, without limitation, computer discs and other electronic media).</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Survival</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font> The obligations of Executive under this Section 6 shall, except as otherwise provided herein, survive the termination of the Employment Term and the expiration or termination of this Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman">7.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-VARIANT: small-caps">Termination</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-VARIANT: small-caps">.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Termination of Employment</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;Executive&#8217;s employment hereunder shall be terminated upon the occurrence of any of the following:</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Incapacity or death of Executive;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the Company giving written notice to Executive that Executive&#8217;s employment is being terminated for Cause as defined in Section 1.2 above;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the Company giving written notice to Executive that his employment is being terminated without Cause or the Agreement is not being renewed following expiration of the Term;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Executive terminating his employment hereunder for Good Reason (as defined in Section 7.3 below);</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Executive terminating his employment hereunder for any reason whatsoever (whether by reason of retirement, resignation, or otherwise), other than for Good Reason, upon sixty (60) days&#8217; written notice to the Company; or</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Upon expiration of the Term.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">7.2</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Compensation following Termination</font></font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Termination By Reason of Incapacity or Death.&#160;&#160;</font>If Executive&#8217;s employment relationship is terminated pursuant to Section 7.1(a) above due to Executive&#8217;s Incapacity or death, then Executive (or in the event of Executive&#8217;s death, Executive&#8217;s legal representative) will be entitled to those benefits that are provided by retirement and benefits plans and programs specifically adopted and approved by the Company for Executive that are earned and vested at the date of termination due to death or Incapacity.&#160;&#160;In the event of Executive&#8217;s Incapacity or death, Executive (or in the event of Executive&#8217;s death, Executive&#8217;s legal representative), even though no longer employed by the Company, shall continue to receive the Salary in effect at the time of Executive&#8217;s Incapacity or death for one (1) year following the date of termination.&#160;&#160;Executive (or in the event of Executive&#8217;s death, Executive&#8217;s legal representative) shall further be entitled to receive payment of an amount equal to a pro-rata share of the Annual Bonus paid to Executive for the calendar year immediately preceding his termination, which amount shall be paid within thirty (30) days from the date of termination.&#160;&#160;Executive&#8217;s rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Termination by Company for Cause</font><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;The Company may terminate Executive for Cause only if he engages in any of the acts or omissions listed in the definition of Cause set forth in Section 1.2 above. If the Company terminates Executive&#8217;s employment for Cause pursuant to Sections 1.2 and 7.1(b) above, then all compensation and benefits shall cease as of the date of termination other than:&#160;&#160;(i) such amounts, if any, of Executive&#8217;s Salary as shall have accrued and remain unpaid as of the date of such termination for Cause, (ii) payment of an amount equal to a pro-rata share of the Annual Bonus paid to Executive for the calendar year immediately preceding his termination; and (iii) such other amounts, if any, which may be payable to Executive pursuant to the terms of the Company&#8217;s benefits plans or pursuant to Section 4.7 above.&#160;&#160;Any amounts payable pursuant to this Section 7.2(b) shall be tendered to Executive within thirty (30) days from the date of termination.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Termination by Company Without Cause, by Executive for Good Reason, or upon Expiration of the Term.&#160;&#160;</font>If the Company terminates Executive&#8217;s employment without Cause pursuant to Section 7.1(c) above, or if Executive terminates his employment for Good Reason pursuant to Section 7.1(d) above, or if Executive&#8217;s employment terminates upon expiration of the Term pursuant to Section 7.1(f), then Executive, even though no longer employed by the Company, shall be entitled to receive:&#160;&#160;(i) a lump sum payment within thirty (30) days after the Termination Date equal to the remainder of Executive&#8217;s then existing Salary; (ii) a lump sum payment within thirty (30) days after the Termination Date in an amount equal to the maximum amount of Annual Bonus to which Executive would have been eligible to receive for the calendar year in which he was terminated; (iii) a lump sum payment within sixty (60) days following termination in an amount equal to three (3) years&#8217; Salary based on the Executive&#8217;s Salary then in effect immediately prior to termination of this Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Termination by Executive Without Good Reason.&#160;&#160;&#160;</font>In the event that Executive terminates this Agreement pursuant to Section 7.1(e) above, then Executive shall be entitled to receive (i) a lump sum payment within thirty (30) days after the Termination Date equal to the remainder of Executive&#8217;s current year&#8217;s Salary; (ii) a lump sum payment within thirty (30) days after the Termination Date equal to a pro-rata share of the maximum amount of Annual Bonus to which Executive would have been eligible to receive for the calendar year in which he voluntarily terminates this Agreement; (iii) payment of an amount equal to one year&#8217;s Salary based on his Salary in effect immediately prior to the termination of this Agreement payable in a lump sum within sixty (60) days following termination.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7.3</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Good Reason.&#160;&#160;</font>For purposes of this Agreement, Executive shall have a Good Reason for terminating employment with the Company if any one or more of the following occur:</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a) a material diminution in Executive&#8217;s authority, duties or responsibilities with the Company;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)&#160;&#160;the assignment to Executive of any duties or responsibilities that, in Executive&#8217;s reasonable judgment, are materially inconsistent with Executive&#8217;s existing duties or responsibilities as Senior Adviser;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)&#160;&#160;&#160;layoff or involuntary termination of Executive&#8217;s employment by the Company, except in connection with the termination of Executive&#8217;s employment for Cause or as a result of Executive&#8217;s retirement, Incapacity or death;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;any reduction by the Company in Executive&#8217;s Salary or Annual Bonus;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;any Change in Control occurring on or after the Effective Date of this Agreement;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the failure by the Company to continue in effect any employee benefit plan in which Executive is participating at the Effective Date other than as a result of the normal expiration of any such plan in accordance with its terms, except to the extent that the Company provides Executive with substantially equivalent benefits;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(h)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the Company&#8217;s failure to obtain the express assumption of this Agreement by any successor to the Company as provided by Section 8.2 hereof; or</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;any violation by the Company of any agreement (including this Agreement) between it and Executive.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any Good Reason shall not be deemed to be waived by Executive&#8217;s continued employment following an act or omission giving rise to such Good Reason.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7.4</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Insurance Benefits following Termination.</font>&#160;&#160;Following the expiration of the Employment Term due to termination or non-renewal of this Agreement for any reason or no reason at all by either Executive or the Company, the Company shall continue to provide medical health benefits and coverage to Executive and his wife, Sue Ellen Smith, which is at least equal to or better than the medical health benefits and coverage provided to Executive and his wife immediately prior to the expiration of the Employment Term (under either the Company&#8217;s health and insurance plans or such other health and insurance plans as may be necessary) at no cost to Executive or his wife; <font style="DISPLAY: inline; TEXT-DECORATION: underline">provided</font>, that with respect to taxable coverage provided to the Executive or his dependents, the entire applicable premium cost shall be charged to the Executive for such coverage and the Company shall reimburse the Executive for the cost of the premium in excess of the applicable employee-paid portion; <font style="DISPLAY: inline; TEXT-DECORATION: underline">provided</font><font style="DISPLAY: inline; FONT-STYLE: italic">, </font><font style="DISPLAY: inline; TEXT-DECORATION: underline">further</font>, such reimbursement shall be available only to the extent that (A) such premium expense is actually incurred for any particular calendar year and reasonably substantiated; (B) such reimbursement shall be made no later than the end of the calendar year following the year in which such expense is incurred by the Executive or his applicable dependents; (C) no reimbursement provided for any expense incurred in one taxable year shall affect the amount available in another taxable year; and (D) the right to this reimbursement is not subject to liquidation or exchange for another benefit. Notwithstanding the foregoing, the Company&#8217;s obligation to provide such benefits and coverage will end upon the earlier of (i) the death of both Executive and his wife; or (ii) the date both Executive and his wife become covered by a comparable health insurance plan provided by a subsequent employer.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">7.5</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Section 280G Treatment.&#160;&#160;</font>Notwithstanding anything in this Agreement to the contrary, in the event it is determined by an accounting firm chosen by mutual agreement of the Parties that any economic benefit, payment or distribution by the Company to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to the terms of this Agreement or otherwise (a &#8220;Payment&#8221;), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the &#8220;Code&#8221;), (such excise tax referred to in this Agreement as the &#8220;Excise Tax&#8221;), then the value of any such Payments payable under this Agreement which constitute &#8220;parachute payments&#8221; under Section 280G(b)(2) of the Code, as determined by the accounting firm, will be reduced so that the present value of all Payments (calculated in accordance with Section 280G of the Code and the regulations thereunder), in the aggregate, equals the Safe Harbor Amount.&#160;&#160;The &#8220;Safe Harbor Amount&#8221; is equal to 2.99 times the Executive&#8217;s &#8220;base amount,&#8221; within the meaning of Section 280G(b)(3) of the Code.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Assignment and Succession.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No Assignment by Executive</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.&#160;&#160;This Agreement is personal to Executive and shall not be assignable by Executive otherwise than by will or the laws of descent and distribution.&#160;&#160;This Agreement shall inure to the benefit of and be enforceable by Executive&#8217;s legal representatives.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman">8.2</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman">Succession.&#160;&#160;</font>This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">&#160;</font>The Company may assign this Agreement only to an assignee that agrees to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.&#160;&#160;The failure of any assignee of the Company to expressly assume to perform this Agreement in writing, which is not remedied within ten (10) business days after receipt of written notice from Executive notifying the Company or the Company&#8217;s assignee of such failure, shall, at the election of Executive, constitute Good Reason for Executive to terminate pursuant to Section 7.1(d).</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Restrictive Covenants</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.1&#160;&#160;Competition</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;During the Employment Term and in the event Executive&#8217;s employment is terminated for any reason other than pursuant to Section 7.1(d) for Good Reason, for a period of two (2) years from the date of termination, Executive, in consideration of compensation to be paid to Executive hereunder, will not directly or indirectly (as a director, officer, executive employee, manager, consultant, independent contractor, advisor or otherwise) engage in competition with, or own any interest in, manage, control, perform any services for, participate in or be connected with any business or organization which engages in competition with the Company within the geographic borders of each State in which the Company conducts business during the Employment Term; <font style="DISPLAY: inline; TEXT-DECORATION: underline">provided</font>, <font style="DISPLAY: inline; TEXT-DECORATION: underline">however</font>, that the provisions of this Section&#160;9.1 shall not be deemed to prohibit (i) Executive&#8217;s ownership of not more than 4.9% of the total shares of all classes of stock outstanding of any publicly held company, whether through direct or indirect stock holdings so long as Executive has no active participation in such company or (ii) any of the current activities permitted by Section 3.2 above.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">9.2</font>&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Activities Excluded.&#160;&#160;</font>The Parties acknowledge and agree that if Executive shall enter into any license or franchise agreement or comparable arrangement with the Company or any subsidiary or affiliate of the Company for the operation of a business also conducted by the Company or such subsidiary or affiliate, Executive shall not be deemed to be &#8220;engaged&#8221; in any business in competition with the business conducted by the Company for purposes of Section 9.1, provided Executive has first obtained the approval of the Board.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">10.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-VARIANT: small-caps">Indemnification.</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>The Company hereby agrees to indemnify Executive and hold him harmless to the fullest extent permitted by law against any and all actions, claims, demands, proceedings, damages, losses or suits, including all costs and/or expenses of defense (including but not limited to attorneys fees) resulting from Executive&#8217;s good faith performance of his duties and obligations with the Company.&#160;&#160;The Company agrees to pay for any and all such costs, fees and expenses within thirty (30) days of it receiving an invoice or bill for such costs, fees or expenses.&#160;&#160;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DGSE Companies, Inc.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11311 Reeder Road</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dallas, Texas&#160;&#160;75229</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:&#160;&#160;President</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dr. L.S. Smith</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or to such other address or addresses as either party shall have designated in writing to the other party hereto, provided, however, that any notice sent by certified or registered mail shall be deemed delivered on the date of delivery as evidenced by the return receipt.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Governing Law and Venue</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to any principle of conflict of laws that would require the application of the law of any other jurisdiction.&#160;&#160;The venue for any dispute arising out of this Agreement or Executive&#8217;s employment with the Company shall be exclusively in the State District Court of Dallas County, Texas.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Severability</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;The Parties agree that in the event that any court of competent jurisdiction shall hold any provision of this Agreement to be unenforceable, then such provision shall be deemed to be severed from the remainder of this Agreement for the purpose only of the particular legal proceedings in question and all other covenants and provisions of this Agreement shall in every other respect continue in full force and effect and no covenant or provision shall be deemed dependent upon any other covenant or provision.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Waiver</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Entire Agreement; Modifications</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;Unless otherwise specified, this Agreement, together with any previous Stock Grant Agreements or Stock Option Agreements entered into between Executive and the Company, constitute the entire and final expression of the agreement of the Parties with respect to the subject matters hereof and supersede all prior agreements, oral and written, between the Parties with respect to the subject matter hereof.&#160;&#160;This Agreement may be modified or amended only by an instrument in writing signed by the Company and Executive.&#160;&#160;The Parties agree that if the terms of this Agreement conflict with any future merger agreements, asset purchase agreements or other agreements relating to a Change of Control of the Company, then the terms of this Agreement shall govern with respect to Executive notwithstanding any provision to the contrary in any other agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">16.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-VARIANT: small-caps">Construction</font><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;This Agreement shall be construed as a whole according to its fair meaning.&#160;&#160;The headings of paragraphs and sections are for convenience of reference and are not part of this Agreement and shall not affect the interpretation of any of its terms.&#160;&#160;The Parties acknowledge that each of them has reviewed this Agreement and has had the opportunity to have it reviewed by their respective attorneys and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">17.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Counterparts</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">18.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-FAMILY: Times New Roman; FONT-VARIANT: small-caps">Compliance with Section 409A</font><font style="FONT-WEIGHT: bold">.</font>&#160;&#160;The Parties intend that this Agreement complies with Section 409A of the Code, where applicable, and this Agreement will be interpreted in a manner consistent with that intention.&#160;&#160;Notwithstanding any other provisions of this Agreement to the contrary, and solely to the extent necessary for compliance with Section 409A of the Code and not otherwise eligible for exclusion from the requirements of Section 409A, if as of the date of Executive&#8217;s &#8220;separation from service&#8221; (within the meaning of Section 409A of the Code and the applicable regulations) from the Company, (a) Executive is deemed to be a &#8220;Specified Employee&#8221; and (b) the Company or any member of a controlled group including the Company is publicly traded on an established securities market or otherwise, no payment or other distribution required to be made to Executive hereunder (including any payment of cash, any transfer of property and any provision of taxable benefits) solely as a result of Executive&#8217;s separation from service shall be made earlier than the first day of the seventh month following the date on which the Executive separates from service with the Company.</font></div>

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