Schedule 13D/A

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LcOtdZTPsurHQzK/LwrwK8EZBxW6oQNhP17bWEjaqebAyMMKA59wmBnSsQrZQBAk EIjN2wqs8XcNmF3i6CxocA== 0001193125-05-070420.txt : 20050405 0001193125-05-070420.hdr.sgml : 20050405 20050405170834 ACCESSION NUMBER: 0001193125-05-070420 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050405 DATE AS OF CHANGE: 20050405 GROUP MEMBERS: R. ALLEN STANFORD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR GALLERIES INC CENTRAL INDEX KEY: 0001091539 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] IRS NUMBER: 352208007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57071 FILM NUMBER: 05734818 BUSINESS ADDRESS: STREET 1: 9478 WEST OLYMPIC BLVD STREET 2: # CITY: BEVERLY HILLS STATE: CA ZIP: 90212 BUSINESS PHONE: 310-203-9855 MAIL ADDRESS: STREET 1: 9478 WEST OLYMPIC BLVD STREET 2: N/A CITY: BEVERLY HILLS STATE: CA ZIP: 90212 FORMER COMPANY: FORMER CONFORMED NAME: TANGIBLE ASSET GALLERIES INC DATE OF NAME CHANGE: 19991229 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STANFORD VENTURE CAPITAL HOLDINGS INC CENTRAL INDEX KEY: 0001160414 IRS NUMBER: 760619955 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 201 S BISCAYNE BLVD SUITE 1200 CITY: MIAMI STATE: FL ZIP: 33131 BUSINESS PHONE: 3053479102 SC 13D/A 1 dsc13da.htm SCHEDULE 13D/A Schedule 13D/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 2)*

Superior Galleries, Inc.

(Name of Issuer)

Common Stock, $.001 par value

(Title of Class of Securities)

868165 10 1

(CUSIP Number)

Robert A. Kramer

Legal Department

5050 Westheimer

Houston, Texas 77056

(713) 964-5143

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

March 31, 2005

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

(continued on following pages)


CUSIP No. 868165 10 1		SCHEDULE 13D		Page 2 of 7


1	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) Stanford Venture Capital Holdings, Inc.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)	¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

7 SOLE VOTING POWER

3,916,667(1)

8 SHARED VOTING POWER

3,916,667(1)

9 SOLE DISPOSITIVE POWER

3,916,667 (1)

10 SHARED DISPOSITIVE POWER

3,916,667(1)


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,916,667 (1)
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 47.3%
14	TYPE OF REPORTING PERSON CO

(1)	Includes 1,500,000 shares of common stock issuable upon the conversion of Series B Preferred Stock, 1,666,667 shares of common stock issuable upon the conversion of Series D Preferred Stock, all of which are currently convertible within the next 60 days.

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CUSIP No. 868165 10 1		SCHEDULE 13D		Page 3 of 7


1	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY) R. Allen Stanford
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)	¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States and Antigua

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

7 SOLE VOTING POWER

4,333,334 (1)

8 SHARED VOTING POWER

4,333,334 (1)

9 SOLE DISPOSITIVE POWER

4,333,334 (1)

10 SHARED DISPOSITIVE POWER

4,333,334 (1)


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,333,334 (1)
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 52.3%
14	TYPE OF REPORTING PERSON IN

(1)

Includes 1,500,000 shares of common stock issuable upon the conversion of Series B Preferred Stock, 1,666,667 shares of common stock issuable upon the conversion of Series D Preferred Stock, and 416,667 shares of common stock issuable upon the conversion of Series E Preferred Stock, all of which are currently convertible within the next 60 days.

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CUSIP No. 868165 10 1		SCHEDULE 13D		Page 4 of 7

This Amendment No. 2 to Schedule 13D (“Amendment”) amends the Schedule 13D (“Original Schedule 13D”) filed by Stanford Venture Capital Holdings, Inc., a Delaware corporation (“SVC”), and R. Allen Stanford, a citizen of the United States and Antigua (“Stanford”; collectively with SVC, the “Reporting Persons”), on May 22, 2002.

Item 1. Security and Issuer

Series E $1.00 Convertible Preferred Stock (“Series E Preferred Stock”) of Superior Galleries, Inc. (“Issuer”), 9478 West Olympic Boulevard, Beverly Hills, CA 90212.

Item 2. Identity and Background.

This statement is filed on behalf of Stanford Venture Capital Holdings, Inc., a Delaware corporation, or SVC, and R. Allen Stanford a citizen of the United States and Antigua, or Stanford. SVC and Stanford are sometimes collectively referred to as Reporting Persons. The business address of Reporting Persons is 5050 Westheimer, Houston, Texas 77056. Stanford is a director and sole stockholder of SVC. SVC provides investment capital and other funding to companies across various industries.

During the past five years, neither Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the past five years, neither Reporting Person has been a party to a civil proceeding that has resulted in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 is amended to reflect the information contained in Item 4 below regarding the source and amount of funds or other consideration involved in the transactions described in this Amendment.

Item 4. Purpose of Transaction.

Item 4 is supplemented to reflect the occurrence of the following:

As of March 29, 2005, Stanford International Bank Limited (“SIBL”), which is an affiliate of SVC that is 100% owned by Stanford International Bank Holdings Limited (“SIB Holdings”) and which, in turn, is 100% owned by Stanford, purchased 2,500,000 shares of newly created Series E Preferred Stock for an aggregate purchase price of $2,500,000, pursuant to a Series E Stock Purchase Agreement (“Purchase Agreement”) among the Issuer, SIBL and Stanford Financial Group Company (“Stanford Financial”), also an affiliate of SVC and SIBL which is 100% owned by Stanford. Each share of the Series E Preferred Stock has a stated value of one dollar ($1.00) (the “Stated Value”). At the option of the holder any time after issuance, each share of Series E Preferred Stock is convertible into a certain number of shares of Common Stock of the Issuer, to be calculated by dividing the Stated Value by $6.00, subject to certain anti-dilution adjustments. Each share of the Series E Preferred Stock is entitled to vote on all matters requiring a vote of the stockholders and shall be entitled to the number of votes equal to the number of shares of Common Stock such shares of Series E Preferred Stock would be convertible into at the time of such voting.

The Purchase Agreement closed on March 31, 2005. On that date, in payment of the purchase price for the Series E Preferred Stock, SIBL cancelled the obligation of the Issuer to repay $2,500,000 to SIBL pursuant to that certain Commercial Loan and Security Agreement dated October 1, 2003, originally between the Issuer and Stanford Financial, which is SIBL’s predecessor in interest by assignment.

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CUSIP No. 868165 10 1		SCHEDULE 13D		Page 5 of 7

The Issuer and SIBL also entered into a Registration Rights Agreement whereby the Issuer agreed to prepare and file with the Securities Exchange Commission, no later than March 31, 2006, a registration statement so as to permit a public resale of designated securities of the Issuer (including the shares of common stock issuable upon conversion or exchange of the preferred stock).

Except as described in Item 4, the Reporting Persons do not have any plans or proposals that relate to or would result in: (i) the acquisition of additional securities of the Issuer, or the disposition of securities of the Issuer; (ii) any extraordinary corporate transaction; (iii) any sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (iv) any change in the present board of directors or management of the Issuer; (v) any material change in the present capitalization or dividend policy of the Issuer; (vi) any other material change in the Issuer’s business or corporate structure; (vii) any changes in the Issuer’s charter, bylaws or instruments corresponding thereto, or other actions which may impede the acquisition of control of the Issuer by any person; (viii) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (ix) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (x) any action similar to any of those enumerated above.

Item 5. Interest in Securities of the Issuer.

Item 5 is amended to reflect the following:

(a) The aggregate number and percentage of shares of common stock of the Issuer to which this Schedule 13D relates is 4,333,334 shares, which equals approximately 52.3% of the outstanding shares of common stock of the Issuer, and consists of 1,500,000 shares of common stock issuable upon the conversion of Series B Preferred Stock, 1,666,667 shares of common stock issuable upon the conversion of Series D Preferred Stock, and 416,667 shares of common stock issuable upon the conversion of Series E Preferred Stock, all of which are currently convertible within the next 60 days. SVC directly beneficially owns 3,916,667 of the shares to which this Schedule 13D relates and SIBL directly beneficially owns 416,667 of the shares to which this Schedule 13D relates. Stanford, as the sole shareholder of SVC and SIB Holdings, may be deemed to have indirect beneficial ownership of the 4,333,334 shares of common stock beneficially held by SVC and SIBL. Stanford disclaims beneficial ownership of these securities, and this report shall not be deemed an admission that Stanford is the beneficial owner of such securities for purposes of Section 13(d) or 13(g) of the Act.

(b) Stanford and SVC have shared voting and dispositive power as to the 4,333,334 shares.

(c) Other than as described above in Item 4, Reporting Persons have not effected any transactions in the Issuer’s common stock during the past 60 days.

(d) Not applicable.

(e) Not applicable.

Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to Securities of the Issuer.

Item 6 is amended to reflect the following:

The information set forth, or incorporated by reference, in Items 3, 4 and 5 hereof is hereby incorporated by reference.

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CUSIP No. 868165 10 1		SCHEDULE 13D		Page 6 of 7

Item 7. Material to be Filed as Exhibits.

Item 7 is amended to reflect the following:

10.1

Series E Preferred Stock Purchase Agreement

10.2

Registration Rights Agreement

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


Date: March 31, 2005		/ s / R. Allen Stanford
		R. Allen Stanford

Date: March 31, 2005		Stanford Venture Capital Holdings, Inc.

		By: / s / James M. Davis
		James M. Davis, President

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CUSIP No. 868165 10 1		SCHEDULE 13D		Page 7 of 7

EXHIBIT INDEX


Exhibit No.		Description
10.1		Series E Preferred Stock Purchase Agreement

10.2		Registration Rights Agreement

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EX-10.1 2 dex101.htm SERIES E PREFERRED STOCK PURCHASE AGREEMENT Series E Preferred Stock Purchase Agreement

Exhibit 10.1

SERIES E PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT, dated as of March 29, 2005 (this “Agreement”), is entered into by and between SUPERIOR GALLERIES, INC., a corporation formed under the laws of the State of Delaware (the “Company”), STANFORD INTERNATIONAL BANK LIMITED, an international business corporation formed under the laws of Antigua and Barbuda (the “Purchaser”) and STANFORD FINANCIAL GROUP COMPANY (“Stanford Financial”).

W I T N E S S E T H:

WHEREAS, the Company is a dealer of rare coins, fine arts and other collectibles and its common stock (the “Common Stock”) is quoted on the OTC Bulletin Board; and

WHEREAS, the Purchaser wishes to purchase from the Company, and the Company wishes to issue and sell to the Purchaser, upon the terms and conditions of this Agreement, for an aggregate purchase price of $2,500,000, 2,500,000 shares of the Company’s Series E $1.00 Convertible Preferred Stock, with a stated value of $1.00 per share (the “Series E Preferred Stock”), the terms of which are as set forth in the Certificate of Designation of Series E $1.00 Convertible Preferred Stock attached hereto as Exhibit A (the “Series E Certificate of Designation”); and

WHEREAS, the parties desire that Purchaser pay the purchase price for the Series E Preferred Stock by canceling certain indebtedness of the Company to Purchaser that is currently outstanding under that certain Commercial Loan and Security Agreement (the “Loan Agreement”) dated October 1, 2003, originally between the Company and Stanford Financial, which is the Purchaser’s predecessor in interest by assignment.

WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemptions from registration provided by Regulation D (“Regulation D”) promulgated by the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Section 4(2) of the Securities Act.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. AGREEMENT TO PURCHASE; PURCHASE PRICE

a. Purchase of Preferred Stock. Subject to the terms and conditions set forth in this Agreement, the Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to issue and sell to the Purchaser, the Series E Preferred Stock for an aggregate purchase price of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000)

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which shall be payable on the Closing Date (as defined below) by cancellation of outstanding indebtedness of the Company to the Purchaser, under the Loan Agreement, of $2,500,000. Such cancellation shall take place automatically upon the issuance to Purchaser of the Series E Preferred Stock at the Closing. By executing a counterpart of this Agreement, Stanford Financial represents and warrants to the Company that it has assigned to Purchaser a portion of Stanford Financial’s interest in the Loan Agreement and in $2,500,000 principal amount of the corresponding indebtedness of the Company to Stanford Financial thereunder, and that Purchaser is therefore legally entitled to cancel such portion of such indebtedness, as set forth above.

b. Closing. The closing of the transactions described herein shall be on March 29, 2005, or at such later date as the parties may mutually agree (the “Closing Date”). The Series E Preferred Stock to be purchased by the Purchaser hereunder shall be issued in such denominations and in such names as the Purchaser may request from the Company at least three business days prior to any closing.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER

The Purchaser represents and warrants to, and covenants and agrees with, the Company as follows:

a. Qualified Investor. The Purchaser (i) is experienced in making investments of the kind described in this Agreement and the related documents, (ii) is able, by reason of the business and financial experience of its management, to protect its own interests in connection with the transactions described in this Agreement and the related documents, (iii) is able to afford the loss of its entire investment in the Series E Preferred Stock, (iv) is an “accredited investor” as defined in Rule 501(a) of Regulation D and (v) knows of no reason to anticipate any material change in its financial condition for the foreseeable future.

b. Restricted Securities. All subsequent offers and sales by the Purchaser of the Series E Preferred Stock and the Common Stock or other securities issuable upon conversion or exercise of the Series E Preferred Stock (the “Conversion Stock”)shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from such registration.

c. Reliance of Representations. The Purchaser understands that the Series E Preferred Stock is being offered and sold to it in reliance upon exemptions from the registration requirements of the United States federal securities laws, and that the Company is relying upon the truthfulness and accuracy of the Purchaser’s representations and warranties, and the Purchaser’s compliance with its covenants and agreements, each as set forth herein, in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Series E Preferred Stock.

d. Access to Information. The Purchaser (i) has been provided with sufficient information with respect to the business of the Company for the Purchaser to determine the suitability of making an investment in the Company and such documents relating to the Company as the Purchaser has requested and the Purchaser has carefully reviewed the same,

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(ii) has been provided with such additional information with respect to the Company and its business and financial condition as the Purchaser, or the Purchaser’s agent or attorney, has requested, and (iii) has had access to management of the Company and the opportunity to discuss the information provided by management of the Company and any questions that the Purchaser had with respect thereto have been answered to the full satisfaction of the Purchaser. The information provided to the Purchaser includes that included in its Registration Statement on Form SB-2, File No. 333-119253, as effective on March 22, 2005 (the “Registration Statement”). Such Registration Statement pertains to the registration of the resale of certain securities of the Company held by, among others, certain affiliates of the Purchaser.

e. Legality. The Purchaser has the requisite corporate power and authority to enter into this Agreement.

f. Authorization. This Agreement and any related agreements, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Purchaser, and such agreements, when executed and delivered by each of the Purchaser and the Company will each be a valid and binding agreement of the Purchaser, enforceable in accordance with their respective terms, except to the extent that enforcement of each such agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors rights generally and to general principles of equity.

g. Investment Intent. The Purchaser is purchasing the Series E Preferred Stock and any Conversion Stock for investment purposes for its own account, and not with a view to or for sale in connection with any distribution thereof.

3. REPRESENTATIONS OF THE COMPANY

The Company represents and warrants to, and covenants and agrees with, the Purchaser that:

a. Organization. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware. The Company has no other interest in any other entities. The Company is duly qualified as a foreign corporation and in good standing in all jurisdictions in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. The minute books contain true and complete records of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, shareholders and committees of the board of directors of the Company from the date of organization through the date hereof. The stock record books and other similar records of the Company have been provided or made available to the Purchaser or its counsel prior to the execution of this Agreement, are complete and correct in all material respects and have been maintained in accordance with sound business practices. The Company has, prior to the execution of this Agreement, delivered to the Purchaser true and complete copies of the Company’s Certificate of Incorporation, Certificates of Designation filed prior to the date of this Agreement, and Bylaws, each as amended through the date hereof. The Company is not in violation of any provisions of its Certificate of Incorporation, Certificates of Designation or Bylaws, except for its failure to redeem its outstanding Series A Preferred Stock, as described in the Registration Statement under “Capitalization.”

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b. Capitalization. On the date hereof, the authorized capital of the Company consists of: (i) 12,500,000 shares of Common Stock, of which 4,699,942 shares are issued and outstanding, (ii) 10,000,000 shares of preferred stock, of which (A) 125,000 shares are designated as Series A $5.00 Convertible Preferred Stock with 125,000 of such shares outstanding; (B) 3,400,000 shares are designated as the Series B Preferred Stock, all of which are issued and outstanding; (C) 7,000 shares are designated as the Series C Preferred Stock, of which no shares are currently outstanding; (D) 2,000,000 shares are designated as Series D Preferred Stock, all of which are issued and outstanding; and (E) 2,500,000 shares shall be designated as Series E Preferred Stock pursuant to this Agreement. As of the date hereof, the Company has issued warrants to purchase 182,500 shares of Common Stock at exercise prices from $1.00 to $7.00 per share, and options to purchase 516,000 shares of Common Stock at exercise prices from $0.30 to $20.00 per share. Other than as described in the Registration Statement in Footnote 11 to the Financial Statements for the year ended June 30, 2004 and Footnote 9 to the Financial Statements for the quarter ended December 31, 2004, there are no outstanding rights, agreements, arrangements or understandings to which the Company is a party (written or oral) which would obligate the Company to issue any equity interest, option, warrant, convertible note, or other types of securities or to register any shares in a registration statement filed with the Commission. Other than disclosed in the Registration Statement under “Principal and Selling Shareholders” and “Description of Capital Stock,” to the Knowledge of the Company (as defined in Section 9), there is no agreement, arrangement or understanding between or among any entities or individuals which affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to any voting shares of the Company, including without limitation any voting trust agreement or proxy. Other than the redemption of the outstanding Series A Preferred Stock, as described in the Registration Statement under “Capitalization,” there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire for value any outstanding shares of capital stock or other ownership interests of the Company or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.

c. Concerning the Common Stock. The Series E Preferred Stock and the Conversion Stock, when issued, shall be duly and validly issued, fully paid and non-assessable, and will not subject the holder thereof to personal liability by reason of being such a holder.

d. Authorized Shares. The Company has available a sufficient number of authorized and unissued shares of Common Stock as may be necessary to effect conversion of the Series E Preferred Stock. The Company understands and acknowledges the potentially dilutive effect to the Common Stock of the issuance of the Conversion Stock. The Company further acknowledges that its obligation to issue shares of Common Stock upon conversion of the Series E Preferred Stock is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

e. Legality. The Company has the requisite corporate power and authority to enter into this Agreement, and to issue and deliver the Series E Preferred Stock and the Common Stock issuable upon conversion of the Series E Preferred Stock.

f. Transaction Agreements. This Agreement, the Series E Certificate of Designation and the Registration Rights Agreement (as defined below) (collectively, the

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“Primary Documents”), and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company; this Agreement has been duly executed and delivered by the Company and this Agreement is, and the other Primary Documents, when executed and delivered by the Company, will each be, a valid and binding agreement of the Company, enforceable in accordance with their respective terms, except to the extent that enforcement of each of the Primary Documents may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity.

g. Financial Statements. The financial statements and related notes thereto contained in the Company’s filings with the Commission (the “Company Financials”) are correct and complete in all material respects and have been prepared in accordance with United States generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other. The Company Financials present fairly and accurately the financial condition and operating results of the Company in all material respects as of the dates and during the periods indicated therein. Since June 30, 2004 there has been no change in any accounting policies, principles, methods or practices, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise), of the Company.

h. Commission Filings. The Company has furnished or made available to the Purchaser (by access to the Commission’s EDGAR website or otherwise) true and complete copies of all the documents it has filed with the Commission since its inception, all in the forms so filed. As of their respective filing dates, such filings complied in all material respects with the requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the Commission thereunder, as the case may be, and none of the filings with the Commission (including without limitation the Registration Statement) contained any untrue statement of a material fact or omitted any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent such filings have been all prior to the date of this Agreement corrected, updated or superseded by a document subsequently filed with Commission.

i. Non-Contravention. The execution and delivery of this Agreement and each of the other Primary Documents, and the consummation by the Company of the transactions contemplated by this Agreement and each of the other Primary Documents, do not and will not conflict with, or result in a breach by the Company of, or give any third party any right of termination, cancellation, acceleration or modification in or with respect to, any of the terms or provisions of, or constitute a default under, (A) its Certificate of Incorporation, Certificates of Designation or Bylaws, as amended through the date hereof, (B) any material indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, or (C) any existing applicable law, rule, or regulation or any applicable decree, judgment or order of any court or federal, state, securities industry or foreign regulatory body, administrative agency, or any other governmental body having jurisdiction over the Company or any of its properties or assets (collectively, “Legal Requirements”), other than those which have been waived or satisfied on or prior to the Closing Date.

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j. Approvals and Filings. Other than the completion of the filing of the Series E Certificate of Designation, no authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entry into or the performance of this Agreement and the other Primary Documents.

k. Compliance With Legal Requirements. Except as disclosed in the Registration Statement under “Capitalization” and “Risk Factors,” the Company has not violated in any material respect, and is not currently in material default under, any Legal Requirement applicable to the Company, or any of the assets or properties of the Company, where such violation could reasonably be expected to have any Material Adverse Effect (as defined below) on the business or financial condition of the Company. “Material Adverse Effect” means, with respect to any Person, a material adverse effect on (i) the business, condition, capitalization, assets, liabilities, operations or financial performance of the Person, or (ii) the ability of the Person to consummate the transactions contemplated by the Primary Documents or to perform any of its obligations under this Agreement.

l. Absence of Certain Changes. Since December 31, 2004 there has been no change nor development that may have a Material Adverse Effect on the Company, and no event has occurred or circumstance exists that may result in such a Material Adverse Effect.

m. Indebtedness to Officers, Directors and Shareholders. Except as set forth in the Registration Statement under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Certain Relationships and Related Transactions,” the Company is not indebted to any of its shareholders, officers or directors (or to members of their immediate families) in any amount whatsoever (including, without limitation, any deferred compensation or salaries payable).

n. Relationships With Related Persons. To the Knowledge of the Company, except as set forth in the Registration Statement under “Certain Relationships and Related Transactions,” no officer, director, or principal shareholder of the Company nor any Related Person (as defined below) of the Company has, or since June 30, 2002 has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in or pertaining to the business of the Company. Except as set forth in the Registration Statement under “Certain Relationships and Related Transactions,” no officer, director, or principal shareholder of the Company nor any Related Person of the Company is, or since June 30, 2002 has owned an equity interest or any other financial or profit interest in or held any management position with, a Person (as defined below) that has (i) had business dealings or a material financial interest in any transaction with the Company, or (ii) engaged in competition with the Company with respect to any line of the merchandise or services of such company (a “Competing Business”) in any market presently served by such company except for ownership of less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. Except as set forth in the Registration Statement under “Certain Relationships and Related Transactions,” no director, officer, or principal shareholder of the Company nor any Related Person of the Company is a party to any Contract with, or has claim or right against, the Company. As used in this Agreement, “Person” means any individual, corporation (including any non-profit

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corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or any governmental body; “Related Person” means, (X) with respect to a particular individual, (a) each other member of such individual’s Family (as defined below); (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family; (c) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest (as defined below); and (d) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity); (Y) with respect to a specified Person other than an individual, (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of the foregoing definition, (a) the “Family” of an individual includes (i) the individual, (ii) the individual’s spouse and former spouses, (iii) any other natural person who is related to the individual or the individual’s spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) “Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 1% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 1% of the outstanding equity securities or equity securities in a Person.

o. Full Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally) that has not been disclosed to the Purchaser (through delivery of the Registration Statement or otherwise) that could reasonably be expected to have a Material Adverse Effect upon the Company. The representations and warranties of the Company set forth in this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading.

p. Title to Properties; Liens and Encumbrances. The Company has good and marketable title to all of its material properties and assets, both real and personal, and has good title to all its leasehold interests. Except as disclosed in the Registration Statement under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and in the Financial Statements, all material properties and assets reflected in the Company Financials are free and clear of all Encumbrances (as defined below) except liens for current Taxes not yet due. As used in this Agreement, “Encumbrance” means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

q. Patents and Other Proprietary Rights. The Company has sufficient title and ownership of all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes necessary for the conduct of its business as now

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conducted and as proposed to be conducted, and to the Knowledge of the Company, such business does not and would not conflict with or constitute an infringement on the rights of others.

r. Permits. The Company has all permits, licenses and any similar authority necessary for the conduct of its business as now conducted, the lack of which would have a Material Adverse Effect on such company. The Company is not in default in any respect under any of such permits, licenses or similar authority.

s. Absence of Litigation. Except as disclosed in the Registration Statement under “Capitalization,” there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, or arbitration tribunal pending or, to the Knowledge of the Company, threatened, against or affecting the Company, in which an unfavorable decision, ruling or finding would have a Material Adverse Effect on the Company, or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, the Primary Documents.

t. No Default. Except as disclosed the Registration Statement under “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company is not in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it or its property may be bound.

u. Taxes. Except as disclosed in the Registration Statement in the Financial Statements thereto,

All Tax Returns (as defined below) required to have been filed by or with respect to the Company (including any extensions) have been so filed. All such Tax Returns are true, complete and correct in all material respects. All Taxes (as defined below) due and payable by the Company whether or not shown on any Tax Return, or claimed to be due by any Taxing Authority, (as defined below) have been paid or accrued on the balance sheet included in the Company’s latest filing with the Commission.

The Company has no material liability for Taxes outstanding other than as reflected in the balance sheet in the interim financial statements of the Company for the six-month period ended on December 31, 2004 (the “Interim Financial Statements”) or incurred subsequent to the date of the Interim Financial Statements in the ordinary course of business. The unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end, exceed by any material amount the reserve for liability for such tax (other than the reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the balance sheet included in the Interim Financial Statements and (ii) will not exceed by any material amount that reserve as adjusted for operation and transactions through the Closing Date.

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The Company is not a party to any agreement extending the time within which to file any Tax Return. No claim has ever been made by a Taxing Authority of any jurisdiction in which the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction.

The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor or independent contractor.

There has been no action by any Taxing Authority in connection with assessing additional Taxes against or in respect of the Company for any past period. There is no dispute or claim concerning any Tax liability of the Company (i) claimed, raised or, to the Knowledge of the Company, threatened by any Taxing Authority or (ii) of which the Company is otherwise aware. There are no liens for Taxes upon the assets and properties of the Company other than liens for Taxes not yet due. No Tax returns of the Company are currently the subject of audit or examination. The Company has made available to the Purchaser complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company since the fiscal year ended June 30, 2004.

There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Returns required to be filed by, or which include or are treated as including, the Company or with respect to any Tax assessment or deficiency affecting the Company.

The Company has not received any written ruling related to Taxes or entered into any agreement with a Taxing Authority relating to Taxes.

The Company does not have any liability for the Taxes of any person or entity other than the Company (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign Legal Requirements), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise.

The Company (i) has not agreed to make nor is required to make any adjustment under Section 481 of the Internal Revenue Code by reason of a change in accounting method and (ii) is not a “consenting corporation” within the meaning of Section 341(f)(1) of the Internal Revenue Code.

10.

The Company is not a party to or bound by any obligations under any tax sharing, tax allocation, tax indemnity or similar agreement or arrangement.

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11.

The Company is not involved in, subject to, or a party to any joint venture, partnership, contract or other arrangement that is treated as a partnership for federal, state, local or foreign Tax purposes.

12.

The Company was not included nor is includible, in the Tax Return of any other entity.

As used in this Agreement, a “Tax Return” means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax; “Tax” means any and all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross, receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by Taxing Authority, whether computed on a separate, consolidated, unitary, combined or any other basis; and such term includes any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments; and “Taxing Authority” means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax.

v. Certain Prohibited Activities. Neither the Company nor any of its directors, officers or other employees has (i) used any Company funds for any unlawful contribution, endorsement, gift, entertainment or other unlawful expense relating to any political activity, (ii) made any direct or indirect unlawful payment of Company funds to any foreign or domestic government official or employee, (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff, influence payment, kickback or other similar payment to any person.

w. Contracts; No Defaults. The Registration Statement identifies, in its list of exhibits, all material Contracts that are required to be filed as exhibits to a registration statement on Form SB-2 under the Securities Act of 1933, as amended. The Company has, or upon request of Purchaser shall, make available to the Purchaser true and complete copies of all such Contracts. As used in this Agreement, “Contract” means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding; “Applicable Contract” means any Contract (a) under which any of the Company has or may acquire any rights, (b) under which any of the Company has or may become subject to any obligation or liability, or (c) by which any of the Company or any of the assets owned or used by it is or may become bound.

Except as set forth in the Registration Statement under “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (i) the Company is, and has been, in material compliance with all applicable terms and requirements of each Contract under which it has or had any obligation or liability or by which it or any of the assets owned or used by it is or was bound; (ii) to the Knowledge of

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the Company, each other person or entity that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and has been, in material compliance with all applicable terms and requirements of such Contract; (iii) to the Knowledge of the Company no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a material violation or breach of, or give the Company or any other person or entity the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; and (iv) the Company has not given to or received from any other person or entity any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract.

(C) Each Applicable Contract is valid, in full force, and binding on and enforceable against the other party or parties to such contract in accordance with its terms and provisions.

(D) There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to any of the Company under current or completed Contracts with any person or entity and, to the Knowledge of the Company, no such person or entity has made written demand for such renegotiation.

(E) The Contracts relating to the sale, design, or provision of products or services by the Company have been entered into in the ordinary course of business and have been entered into without the commission of any act alone or in concert with any other person or entity, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.

x. Agent Fees. The Company has not incurred any liability for any finder’s or brokerage fees or agent’s commissions in connection with the transactions contemplated by this Agreement.

y. Insurance. The insurance policies maintained by the Company taken together, provide adequate insurance coverage for the assets and the operations of the Company for all risks normally insured against by companies carrying on the same business or businesses as the Company. All of such insurance policies are in full force and effect and all premiums, retention amounts and other related expenses due have been paid, and the Company has not received any written notice of cancellation with respect to any of the policies.

z. Employee Benefits.

Except for Plans (as defined below) administered by third parties that provide group health coverage (medical and dental), neither the Company nor any of its ERISA Affiliates (as defined below) maintains or sponsors (or ever maintained or sponsored), or makes or is required to make contributions to, any Plans;

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With respect to each Plan which provides health care coverage, the Company and each of its ERISA Affiliates have complied in all material respects with (i) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), and the applicable COBRA regulations and (ii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations thereunder, and neither the Company nor any ERISA Affiliate has incurred any liability under Section 4980B of the Internal Revenue Code;

Other than routine claims for benefits under the Plans, there are no pending, or, to the Knowledge of the Company, threatened, actions or proceedings involving the Plans, or the fiduciaries, administrators, or trustees of any of the Plans or the Company or any of its ERISA Affiliates as the employer or sponsor under any Plan, with any governmental agency, any participant in or beneficiary of any Plan or any other person whatsoever. The Company knows of no reasonable basis for any such claim, lawsuit, dispute, or controversy.

As used in this Agreement, “Plan” means (i) each of the “employee benefit plans” (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”)), of which any of the Company or any member of the same controlled group of businesses as the Company within the meaning of Section 4001(a)(14) of ERISA (an “ERISA Affiliate”) is or ever was a sponsor or participating employer or as to which the Company or any of its ERISA Affiliates makes contributions or is required to make contributions, and (ii) any similar employment, severance or other arrangement or policy of any of the Company or any of its ERISA Affiliates (whether written or oral) providing for health, life, vision or dental insurance coverage (including self-insured arrangements), workers’ compensation, disability benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, fringe benefits, or for profit sharing, deferred compensation, bonuses, stock options, stock appreciation or other forms of incentive compensation or post-retirement insurance, compensation or benefits.

aa. Private Offering. Subject to the accuracy of the Purchaser’s representations and warranties set forth in Section 2 hereof, (i) the offer, sale and issuance of the Series E Preferred Stock, and (ii) the issuance of the Conversion Stock, as contemplated by the Primary Documents, are exempt from the registration requirements of the Securities Act. The Company agrees that neither the Company nor anyone acting on its behalf will offer any of the Series E Preferred Stock or any similar securities for issuance or sale, or solicit any offer to acquire any of the same from anyone so as to render the issuance and sale of such securities subject to the registration requirements of the Securities Act. The Company has not offered or sold the Series E Preferred Stock by any form of general solicitation or general advertising, as such terms are used in Rule 502(c) under the Securities Act.

bb. Mergers, Acquisitions and Divestitures. The Company has not, since June 30, 2004 acquired any equity interest in or any major assets of any other Person, or sold any major asset owned by it in a deal the terms of which were not based on arms’ length negotiations. To the Knowledge of the Company, none of the officers or directors of the Company has received

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any benefit in connection with any of the foregoing transactions or is under any agreement or understanding with any Person (including agreements or understandings among themselves) with respect to the receipt of or entitlement to any such benefit.

4. CERTAIN COVENANTS, ACKNOWLEDGMENTS AND RESTRICTIONS

a. Transfer Restrictions. The Purchaser acknowledges that (i) neither the Series E Preferred Stock nor the Conversion Stock have been registered under the Securities Act, and such securities may not be transferred unless (A) subsequently registered thereunder or (B) they are transferred pursuant to an exemption from such registration, and (ii) any sale of the Series E Preferred Stock or the Conversion Stock (collectively, the “Securities”) made in reliance upon Rule 144 under the Securities Act (“Rule 144”) may be made only in accordance with the terms of said Rule 144. The provisions of Section 4(a) and 4(b) hereof, together with the rights of the Purchaser under this Agreement and the other Primary Documents, shall be binding upon any subsequent transferee of the Series E Preferred Stock.

b. Restrictive Legend. The Purchaser acknowledges and agrees that, until such time as the Securities shall have been registered under the Securities Act or the Purchaser demonstrates to the reasonable satisfaction of the Company and its counsel that such registration shall no longer be required, such Securities may be subject to a stop-transfer order placed against the transfer of such Securities, and such Securities shall bear a restrictive legend in substantially the following form:

THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.

c. Filings. The Company undertakes and agrees that it will make all required filings in connection with the sale of the Securities to the Purchaser as required by federal and state laws and regulations, or by any domestic securities exchange or trading market, and if applicable, the filing of a notice on Form D (at such time and in such manner as required by the rules and regulations of the Commission), and to provide copies thereof to the Purchaser promptly after such filing or filings. With a view to making available to the holders of the Securities the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit such holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 or Form SB-2, the Company shall (a) at all times make and keep public information available, as those terms are understood and defined in Rule 144, (b) file on a timely basis with the Commission all information that the Commission may require under either of Section 13 or Section 15(d) of the Exchange Act and, so long as it is required to file such information, take all actions that may be required as a condition to the availability of Rule 144 (or any successor exemptive rule hereafter in effect) with respect to the Common Stock; and (c) furnish to any holder of the Securities forthwith upon request (i) a written

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statement by the Company as to its compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company as filed with the Commission, and (iii) any other reports and documents that a holder of the Securities may reasonably request in order to avail itself of any rule or regulation of the Commission allowing such holder to sell any such Securities without registration.

d. Periodic Filings With the Commission. The Company shall, no later than the dates specified by law, make all the filings required to be filed by such dates with the Commission by the Company as a company subject to the periodic reporting requirements under the Exchange Act.

e. Reservation of Common Stock. The Company will at all times have authorized and reserved for the purpose of issuance a sufficient number of shares of Common Stock to provide for the conversion of the Series E Preferred Stock.

f. Registration Requirement. Concurrently with the execution of this Agreement, the Purchaser and the Company shall execute a registration rights agreement in the form attached hereto as Exhibit B (the “Registration Rights Agreement”).

g. Filing of the Series E Certificate of Designation. The Company shall have authorized, caused to be executed, and filed with the Secretary of State of the State of Delaware the Series E Certification of Designation by the Closing Date.

h. Return of Certificates on Conversion. Upon any conversion by the Purchaser of less than all of the Series E Preferred Stock pursuant to the terms of the Series E Certificate of Designation, the Company shall issue and deliver to the Purchaser within 7 business days of the date of conversion, a new certificate or certificates for, as applicable, the total number of shares of the Series E Preferred Stock, which the Purchaser has not yet elected to convert (with the number of and denomination of such new certificate(s) designated by the Purchaser).

i. Replacement Certificates. The certificate(s) representing the shares of the Series E Preferred Stock held by the Purchaser shall be exchangeable, at the option of the Purchaser, at any time and from time to time at the office of Company, for certificates with different denominations representing an equal aggregate number of shares of the Series E Preferred Stock, as requested by the Purchaser upon surrendering the same. No service charge will be made for such registration or transfer or exchange.

j. Approval Rights. From the date hereof and until the Closing Date, the Company shall not take any of the following actions without the prior written consent of the Purchaser, which consent will not be unreasonably withheld or delayed:

sell a material portion of the assets of the Company or any future subsidiary or merge the Company or any future subsidiaries into or with another unaffiliated company;

change the articles of incorporation, bylaws or other charter documents of the Company, except as contemplated hereby;

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change substantially or materially the nature of the business of the Company;

issue any equity securities or securities convertible into equity securities of the Company other than: (1) the Series E Preferred Stock pursuant to this Agreement; (2) any Common Stock issued upon conversion of the outstanding Series B Preferred Stock or Series D Preferred Stock; (3) Common Stock or other securities issuable under presently outstanding options or warrants as described in the Financial Statements contained in the Registration Statement; and (4) options (and Common Stock or other securities issuable upon the exercise thereof) under the any stock option plan approved by the Company’s Board of Directors;

enter into any credit facility or incur any material amount of debt, other than incurring obligations for purchases of inventory or other related assets in the ordinary course of business;

offer or sell any securities of the Company other than permitted in clause (4) above;

expand the number of members of the board of directors of the Company;

declare or pay dividends or redeem securities, except for (i) dividends upon or the redemption of the Company’s outstanding Series A Preferred Stock pursuant to the terms of the relevant certificate of designation; or (ii) any dividend or transaction relating to the Series B Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; or

enter into or modify a related-party transaction.

5. CONDITIONS TO THE COMPANY’S OBLIGATION TO ISSUE THE SHARES

The Purchaser understands that the Company’s obligation to issue the Series E Preferred Stock on the Closing Date to the Purchaser pursuant to this Agreement is conditioned upon the following (unless waived by the Company):

a. The accuracy on the Closing Date of the representations and warranties of the Purchaser contained in this Agreement as if made on such Closing Date and the performance by the Purchaser on or before such Closing Date of all covenants and agreements of the Purchaser required to be performed on or before such Closing Date.

b. The absence or inapplicability on the Closing Date of any and all laws, rules or regulations prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval, except for any stockholder or Board of Director approval or consent contemplated herein, which shall not have been obtained.

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c. All regulatory approvals or filings, if any, on the Closing Date necessary to consummate the transactions contemplated by this Agreement shall have been made as of the Closing Date.

6. CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE THE SHARES

The Company understands that the Purchaser’s obligation to purchase the Series E Preferred Stock on the Closing Date is conditioned upon each of the following, unless waived in writing by the Purchaser:

a. The Purchaser shall have completed to its satisfaction its due diligence review of the Company, the Company’s business, assets and liabilities, and the Company shall have furnished to the Purchaser and its representatives, such information as may be reasonably requested by them.

b. The accuracy on the Closing Date of the representations and warranties of the Company contained in this Agreement as if made on such Closing Date, and the performance by the Company on or before the Closing Date of all covenants and agreements of the Company required to be performed on or before the Closing Date.

c. The Company shall have delivered to the Purchaser the Series E Preferred Stock.

d. On the Closing Date, the Purchaser shall have received from the Company such other certificates and documents as it or its representatives, if applicable, shall reasonably request, and all proceedings taken by the Company or the Board of Directors of the Company, as applicable, in connection with the Primary Documents contemplated by this Agreement and the other Primary Documents and all documents and papers relating to such Primary Documents shall be satisfactory to the Purchaser.

e. All regulatory approvals or filings, if any, necessary to consummate the transactions contemplated by this Agreement shall have been made as of the Closing Date .

f. The Purchaser shall have received on the Closing Date a legal opinion from Rutan & Tucker LLP substantially in the form attached hereto as Exhibit C.

g. The Company shall have reimbursed the Purchaser the expenses incurred in connection with the negotiation or performance of this Agreement pursuant to Section 8 hereof.

7. RIGHT TO INFORMATION

As long as any portion of the Series E Preferred Stock remains outstanding, the Company hereby agrees to provide the Purchaser with:

a. audited financial statements for each fiscal year, as soon as they become available but in no event later than 90 days after the end of each such fiscal year;

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b. unaudited financial statements for each quarter, as soon as they become available but in no event later than 45 days after the end of each such quarter; and

c. budget plans as they are prepared.

8. FEES AND EXPENSES

The Company shall bear its own costs, including attorney’s fees, incurred in the negotiation of this Agreement and consummating of the transactions contemplated herein. Within 30 days of receipt of supporting documentation, the Company shall reimburse the Purchaser for all of the Purchaser’s reasonable out-of-pocket expenses incurred in connection with the negotiation or performance of this Agreement, including without limitation reasonable fees and disbursements of counsel to the Purchaser.

9. GOVERNING LAW; MISCELLANEOUS

Except for issues involving Delaware law which shall be governed by and interpreted in accordance with the laws of the State of Delaware, this Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Each of the parties consents to the jurisdiction of the federal courts of Florida or the state courts of the State of Florida in connection with any dispute arising under this Agreement or any of the transactions contemplated hereby, 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. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. This Agreement and each of the Primary Documents have 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. 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. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Series E Preferred Stock. This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. All references to the “Knowledge of the Company” means the actual knowledge of either of Silvano DiGenova and the Company’s Chief Financial Officer after reasonable investigation and due diligence. This Agreement, together with the other Primary Documents, including any certificate, schedule, exhibit or other document delivered 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. 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.

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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 (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or the next business day 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 5 days advance written notice to each of the other parties hereto.


Company:		Superior Galleries, Inc. 9478 West Olympic Blvd. Beverly Hills, California 90212 Attention: Silvano DiGenova, Chief Executive Officer Telephone: (310) 203-9855 Facsimile: (310) 203-0496

with a copy to:		Rutan & Tucker LLP 611 Anton Boulevard, 14^th Floor Costa Mesa, California 92626-1931 Attention: Thomas G. Brockington, Esq. Telephone: (714) 641-5100 Facsimile: (714) 546-9035

Purchaser:		Stanford International Bank Limited 6075 Poplar Avenue Memphis, Tennessee 38119 Attention: James M. Davis, Chief Financial Officer Telephone: (901) 537-1600 Facsimile: (901) 680-5265

With a copy to:		Stanford Financial Group 5050 Westheimer Houston, Texas 77056 Attention: Office of the General Counsel Telephone: (713) 964-5145 Facsimile: (713) 964-5245

11. SURVIVAL

The agreements, covenants, representations and warranties of the Company and the Purchaser shall survive the execution and delivery of this Agreement and the delivery of the Securities hereunder for a period of four years from the date of the Closing Date, except that:

a. the Company’s representations and warranties regarding Taxes contained in Section 3(u) of this Agreement shall survive as long as the Company remains statutorily liable for any obligation referenced in Section 3(u), and

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b. the Company’s representations and warranties contained in Section 3(b) shall survive until the Purchaser and any of its affiliates are no longer holders of any of the securities purchased hereunder.

12. INDEMNIFICATION

The Company, on the one side, and the Purchaser (each in such capacity under this section, the “Indemnifying Party”) agrees to indemnify the other party and each officer, director, employee, agent, partner, stockholder, member and affiliate of such other party (collectively, the “Indemnified Parties”) for, and hold each Indemnified Party harmless from and against: (i) any and all damages, losses, claims and other liabilities of any and every kind, including, without limitation, judgments and costs of settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of any and every kind, including, without limitation, reasonable fees and disbursements of counsel for such Indemnified Parties (all of which expenses periodically shall be reimbursed as incurred), in each case, arising out of or suffered or incurred in connection with any of the following: (a) any misrepresentation or any breach of any warranty made by the Indemnifying Party herein or in any of the other Primary Documents, (b) any breach or non-fulfillment of any covenant or agreement made by the Indemnifying Party herein or in any of the other Primary Documents, or (c) any claim relating to or arising out of a violation of applicable federal or state securities laws by the Indemnifying Party in connection with the sale or issuance of the Series B Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock or the Common Stock issuable upon conversion of the Series B Preferred Stock, the Series D Preferred Stock, or the Series E Preferred Stock (collectively, the “Indemnified Liabilities”). To the extent that the foregoing undertaking by the Indemnifying Party may be unenforceable for any reason, the Indemnifying Party shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

(Signatures on the following page)

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[SIGNATURE PAGE TO

SERIES E PREFERRED STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, this Series E Preferred Stock Purchase Agreement has been duly executed by each of the undersigned.


SUPERIOR GALLERIES, INC.

By:		/s/ Silvano DiGenova
Name:		Silvano DiGenova
Title:		Chief Executive Officer

STANFORD INTERNATIONAL BANK LIMITED

By:		/s/ James M. Davis
Name:		James M. Davis
Title:		Chief Financial Officer

STANFORD FINANCIAL GROUP COMPANY

By:		/s/ James M. Davis
Name:		James M. Davis
Title:		Chief Financial Officer

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EXHIBIT INDEX



EXHIBIT A		SERIES E CERTIFICATE OF DESIGNATION

EXHIBIT B		REGISTRATION RIGHTS AGREEMENT

EXHIBIT C		FORM OF RUTAN LEGAL OPINION

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EX-10.2 3 dex102.htm REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 29, 2005, is made by and between Superior Galleries, Inc., a Delaware corporation (the “Company”), and Stanford International Bank Limited (the “Investor”), as the holder of the Company’s Series E $1.00 Convertible Preferred Stock (the “Series E Preferred Stock”), issued pursuant to that certain Series E Preferred Stock Purchase Agreement by and between the Company and such holder dated as of March 29, 2005 (the “Purchase Agreement”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Purchase Agreement.

RECITALS:

WHEREAS, the Company desires to grant to the Investor the registration rights set forth herein with respect to the shares (the “Conversion Shares”) of Common Stock issuable upon conversion or exchange of the Series E Preferred Stock of Common Stock (all the shares of the Series E Preferred Stock to be referred to herein as the “Securities”).

NOW, THEREFORE, the parties hereto mutually agree as follows:

Section 1. Certain Definitions. As used herein the term “Registrable Security” means the Conversion Shares until (i) all Securities have been disposed of pursuant to the Registration Statement (as defined below), (ii) all Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (“Rule 144”) (or any similar provision then in force) under the Securities Act of 1933, as amended (the “Securities Act”) are met, or (iii) such time as, in the opinion of counsel to the Company reasonably satisfactory to the Investor and upon delivery to the Investor of such executed opinion, all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144 (or any similar provision then in effect). 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. As used herein the term “Holder” means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 9 hereof.

Section 2. Restrictions on Transfer. The Investor acknowledges and understands that prior to the registration of the Securities as provided herein, the Securities are “restricted securities” as defined in Rule 144. The Investor understands that no disposition or transfer of the Securities may be made by the Investor in the absence of (i) an opinion of counsel to such Investor, 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.

With a view to making available to the Investor the benefits of Rule 144 or any other similar rule or regulation of the Securities and Exchange Commission (the “Commission”) that may at any time permit the holders of the Securities to sell securities of the Company to the public pursuant to Rule 144, the Company agrees to:

(a) comply with the provisions of paragraph (c)(1) of Rule 144;

(b) file with the Commission in a timely manner all reports and other documents required to be filed with the Commission pursuant to Section 13 or 15(d) under the Exchange Act by companies subject to either of such sections, irrespective of whether the Company is then subject to such reporting requirements; and

(c) Upon request by any Holder or the Company’s transfer agent, provide an opinion of counsel, which opinion shall be reasonably acceptable to the Holder and/or the Company’s transfer agent, that the such Holder has complied with the applicable conditions of Rule 144 (or any similar provision then in force).

Section 3. Registration Rights With Respect to the Registrable Securities.

(a) The Company agrees that it will prepare and file with the Commission, no later than March 31, 2006, a registration statement (on Form S-1 or SB-2, or other appropriate registration statement form) under the Securities Act (such registration statement, including (a) all amendments and supplements thereto, (b) each prospectus contained therein, and (c) all exhibits thereto or incorporated by reference therein, the “Registration Statement”), in respect of the Holders, so as to permit a resale of the Securities under the Act by the Holders as selling stockholders and not as underwriters.

The Company shall use diligent best efforts to cause the Registration Statement to become effective as soon as practical following the filing of the Registration Statement. The number of shares designated in the Registration Statement to be registered shall include the Conversion Shares. The Registration Statement shall include appropriate language regarding reliance upon Rule 416 to the extent permitted by the Commission. The Company will notify the Holders and its transfer agent of the effectiveness of the Registration Statement within one (1) Trading Day (as defined below) of such event. As used herein “Trading Day” shall mean any business day on which the market on which the Common Stock trades is open for business.

(b) The Company will maintain the Registration Statement or post-effective amendment filed under this Section 3 effective under the Securities Act until the earlier 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 all the Holders receive an opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Holders, that the Registrable Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) 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, or (v) 3 years from the date on which the Registration Statement first became effective (the “Effective Date”).

(c) 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 subparagraph 3(a) and in complying with applicable securities and Blue Sky laws (including, without limitation, all attorneys’ fees of the Company and all other fees and disbursements of the Company’s accountants, auditors and other independent professional service providers) shall be borne by the Company. The Company shall also reimburse the fees and expenses of counsel to the Holders incurred in connection with such counsel’s review of the Registration Statement and advice concerning the Registration Statement and its filing subject to a cap of $10,000. 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 ten (10) 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 two (2) Trading Days of receipt thereof. The Company shall qualify any of the securities for sale in such states as the Holders reasonably designate and shall furnish indemnification in the manner provided in Section 6 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 the Investor with copies of the applicable Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by the Investor.

(d) The Company shall not be required by this Section 3 to include the Registrable Securities in any 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 such term is defined in Rule 144.

(f) (e) The Company shall be precluded from including in any registration statement which it is required to file pursuant to this Section 3 any other securities apart from the Registrable Securities, except for the securities issuable upon conversion of the Company’s outstanding Series B $1.00 Convertible Preferred Stock or Series D $1.00 Convertible Preferred Stock and those securities related to any qualified stock option plan approved by the Board of Directors of the Company, without the prior written consent of the Holders.

(f) If, at any time any Registrable Securities are not at the time covered by any effective Registration Statement, the Company shall determine to register under the

Securities Act (including pursuant to a demand of any stockholder of the Company exercising registration rights) any of its shares of the Common Stock (other than in connection with a merger or other business combination transaction that has been consented to in writing by holders of the Series E Preferred Stock, or pursuant to Form S-8 when such filing has been consented to in writing by holders of the Series E Preferred Stock), it shall send to each Holder written notice of such determination and, if within twenty (20) days after receipt of such notice, such Holder shall so request in writing, the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Securities that such Holder requests to be registered. Notwithstanding the foregoing, if, in connection with any offering involving an underwriting of the Common Stock to by 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 Registrable Securities from the underwriting; provided, however, that if the underwriters do not entirely exclude the Registrable Securities from such Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter’s cutback and (ii) such Holder’s percentage of ownership of all the 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 Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter’s cutback and (ii) such Holder’s Registrable Percentage; provided, however, that the aggregate value of the Registrable Securities to be included in such registration may not be so reduced to less than 20% of the total value of all securities included in such registration. 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 paragraph shall be construed to limit any registration required under the other provisions of this Agreement.

Section 4. Cooperation with Company. Each Holder will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information reasonably requested by the Company (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. Nothing in this Agreement shall obligate any Holder to consent to be named as an underwriter in any Registration Statement. The obligation of the Company to

register the Registrable Securities shall be absolute and unconditional as to those Registrable Securities which the Commission will permit to be registered without naming any Holder as underwriters. Any delay or delays caused by a Holder by failure to cooperate as required hereunder shall not constitute a Registration Default as to such Holder.

Section 5. 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), as expeditiously as possible, subject to the Holders’ assistance and cooperation as reasonably required with respect to each 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 with respect to the sale or other disposition of all Registrable Securities covered by such Registration Statement whenever any of the Holders shall desire to sell or otherwise dispose of the same (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 (A) the Registration Statement and any amendment thereto does not, when it becomes effective, 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 and (B) the prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Registration Period include 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 3(c) and reflect in such documents all such comments as the Holders (and their counsel) reasonably may propose; (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 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 lawful to do so;

(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 3(c) above), 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 markets where the Common Stock of the Company is listed as of the Effective Date, if the listing of such Registrable Securities is then permitted under the rules of such markets;

(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 file a curative amendment under Section 5(a) as quickly as reasonably possible 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 at the earliest possible time and take all lawful 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 (3) 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) take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Holders of their Registrable Securities in accordance with the intended methods therefor provided in the prospectus which are customary for issuers to perform under the circumstances;

(i) 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 practicable after it is notified of the matters to be included or incorporated in such prospectus supplement or post-effective amendment; and

(j) maintain a transfer agent and registrar for the Common Stock.

Section 6. 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, agent, representative, accountant or attorney 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 (i) 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 the Distributing Investor, its counsel, or affiliates, specifically for use in the preparation thereof or (ii) such Distributing Investor’s failure to deliver to the 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.

(b) To the maximum extent permitted by law, each Distributing Investor agrees that it will indemnify and hold harmless the Company, and each officer and director 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 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 6(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 the Registration Statement.

(c) Promptly after receipt by an indemnified party under this Section 6 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 6, 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 6 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 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 and all reasonable attorneys’ fees and expenses) shall be paid to the indemnified party, as incurred, within ten (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.

Section 7. 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 6 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 6 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 7 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 7. 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 7 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 7, in no event shall (i) any of the Distributing Investors be required to undertake liability to any person under this Section 7 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.

Section 8. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by facsimile, addressed as set forth on the signature page hereto or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of sending by reputable courier service, fully prepaid, addressed to such address, or (c) upon actual receipt of such mailing, if mailed. Any party hereto may from time to time change its address or facsimile number for notices under this Section 8 by giving at least ten (10) days’ prior written notice of such changed address or facsimile number to the other party hereto.

Section 9. Assignment. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. The registration rights granted to any Holder under this Agreement may be transferred as set forth below (provided (1) the transferee is bound by the terms of this Agreement and (2) the Company is given written notice prior to such transfer) to: (i) any partner or affiliate of such Holder; (ii) in the case of an individual, any member of the immediate family of such individual or any trust for the benefit of the individual or any such family member or members; or (iii) any other transferee which receives substantially all of the Registrable Securities (or the rights thereto) held by such Holder.

Section 10. Additional Covenants of the Company. For so long as it shall be required to maintain the effectiveness of the Registration Statement, it shall file all reports and information required to be filed by it with the Commission in a timely manner and take all such other action so as to maintain such eligibility for the use of the applicable form.

Section 11. Counterparts/Facsimile. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when together shall constitute but one and the same instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. In lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original.

Section 12. Remedies. The remedies provided in this Agreement are cumulative and not exclusive of any other remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein

shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.

Section 13. Conflicting Agreements. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise prevents the Company from complying with all of its obligations hereunder.

Section 14. Headings. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts made in Florida by persons domiciled in Miami and without regard to its principles of conflicts of laws. The Company and the Holders agree to submit themselves to the in personam jurisdiction of the state and federal courts situated within the Southern District of the State of Florida with regard to any controversy arising out of or relating to this Agreement. The non-prevailing party to any dispute hereunder shall pay the expenses of the prevailing party, including reasonable attorneys’ fees, in connection with any such dispute.

Section 16. Amendments, Waivers and Consents. Any provision in this Agreement to the contrary notwithstanding, (A) changes in or additions to this Agreement may be made, (B) compliance with any covenant or provision herein set forth may be omitted or waived, or (C) approval or consent by the Holders may be obtained, only if the Company receives consent thereto in writing from persons holding or having the right to acquire a majority of the Registrable Shares at the time such consent is given (on an as-converted, as exchanged basis). All Holders shall be bound by any amendment to this Agreement that is approved by or consented to by such persons holding or having the right to acquire a majority of the Registrable Shares.

Section 17. 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.

Section 18. Integration. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

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[SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed, as of the date and year first above written.


SUPERIOR GALLERIES, INC.

By:		/s/ Silvano DiGenova
		Silvano DiGenova, Chairman & CEO

Address:		Superior Galleries, Inc.
		9478 West Olympic Boulevard
		Beverly Hills, CA 90212
		Attention: President

INVESTOR:

STANFORD INTERNATIONAL BANK LIMITED

By:		/s/ James M. Davis
Name:		James M. Davis
Title:		Chief Financial Officer



		Address:		Stanford International Bank, Ltd..
				6075 Poplar Avenue
				Memphis, Tennessee 38119
				Attention: James M. Davis, Chief Financial Officer
				Telephone: (901) 537-1600
				Facsimile: (901) 680-5265

		With a copy to:		Stanford Financial Group
				5050 Westheimer
				Houston, Texas 77056
				Attention: Office of the General Counsel
				Telephone: (713) 964-5145
				Facsimile: (713) 964-5245

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