Unassociated Document


    
      EXHIBIT
10.4

      


      DEBT
CONVERSION AGREEMENT

      

      

    

     

    This Debt
Conversion Agreement (“Agreement”) is made
this 27th day of January, 2010 (the “Effective Date”), by
and between Stanford International Bank, Ltd., an entity organized under the
laws of Antigua (“Stanford”), and DGSE
Companies, Inc., a Nevada corporation (the “Company”) and is
acknowledged and agreed to by Superior Galleries, Inc., a subsidiary of the
Company (“Superior”).

     

    WITNESSETH:

     

    WHEREAS, Superior and Stanford are
parties to that certain Amended and Restated Commercial Loan and Security
Agreement dated as of May 30, 2007 ( the “Credit Agreement”)
and as of the date hereof, the books and records of Stanford reflect total
outstanding principal in the amount of $10,550,000 (such amount, together with
all accrued but unpaid interest with respect thereto, the “Outstanding Debt”)
under the Credit Agreement.

     

    WHEREAS, the Company desires to issue
1,000 shares (the “Shares”) of its
common stock, $0.01 par value per share (“Common Stock”), in
full satisfaction of the Outstanding Debt, and in consideration for receiving
the Shares, Stanford agrees to cancel the Outstanding Debt and terminate the
Credit Agreement and all other agreements between the Company and
Stanford.

     

    WHEREAS, the United States District
Court for the Northern District of Texas, Dallas Division (the “Court”) entered an
order on February 17, 2009 appointing Ralph S. Janvey as receiver (the “Receiver”) for the
assets of Stanford, Stanford Group Company, Stanford Capital Management, LLC, R.
Allen Stanford, James M. Davis and Laura Pendergest-Holt, and the entities they
own or control (the “Receivership
Estate”).

     

    WHEREAS, in connection with this
Agreement, the Company, Stanford and certain other parties named therein, have
entered into that certain Purchase and Sale Agreement of even date herewith (the
“Purchase
Agreement”), pursuant to which Stanford will issue and sell the Shares
and all other equity securities it owns in the Company to the Buyers (as defined
therein).

     

    WHEREAS, the Company, Stanford and Dr.
L.S. Smith are also parties to that certain Corporate Governance Agreement dated
May 30, 2007 (the “Corporate Governance
Agreement”) pursuant to which Stanford has the right to nominate up to
two independent directors so long as Stanford Beneficially Owns (as defined
therein) at least 15% of the outstanding shares of Common Stock.

     

    WHEREAS, upon approval of the Purchase
Agreement by the Court and after Closing, Stanford shall no longer have any
rights under the Corporate Governance Agreement.

     

    NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants and agreements herein
contained, Stanford and the Company hereby agree as follows:

     

    
      	
              1.  

            	
              DEFINED
      TERMS: Any
      capitalized terms used in this Agreement and not otherwise defined herein
      shall have the meaning given to them in the Purchase
      Agreement.

            


    

     

    
      	
              2.  

            	
              ISSUANCE
      AND SALE OF SHARES:  Subject to
      approval of this Agreement by the Court (as evidenced by entry of a Sale
      Order), the Company shall issue the Shares to Stanford, at the Closing,
      and deliver to Stanford one or more certificates representing the Shares,
      registered in the name of Stanford or its
  nominees.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.  

            	
              CANCELLATION
      OF THE OUTSTANDING DEBT; TERMINATION OF SECURITY INTEREST: In consideration for
      receiving the Shares, Stanford hereby agrees that, as of the Closing, the
      Outstanding Debt shall be canceled and the Credit Agreement and all other
      agreements between the Company and Stanford shall be
      terminated.  Stanford acknowledges and agrees that upon the
      termination of the Credit Agreement, the security interest it holds in
      Superior pursuant to the Credit Agreement shall be terminated and
      released.  Stanford hereby authorizes the Company to file any
      termination statements or other filings pursuant to the provisions of the
      Uniform Commercial Code with respect to the termination of such security
      interest and agrees to execute any and all further documents as the
      Company may deem necessary to cause the termination and release of such
      security interest.

            


    

     

    
      	
              4.  

            	
              REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY:  The Company
      hereby represents and warrants to Stanford as
  follows:

            


    

     

    
      
        	
              	
                A. 

              	
                Power and
      Authority. The Company has the full corporate power and authority
      to execute and deliver this Agreement, to perform its obligations
      hereunder, and to consummate the transactions contemplated hereby,
      including the issuance of the
Shares.

              


      

    

     

    
      
        	
              	
                B. 

              	
                Valid Issuance of
      Shares.  The Shares, when issued and delivered in
      accordance with the terms and for the consideration set forth in this
      Agreement, will be validly issued, fully paid and nonassessable and free
      of restrictions on transfer other than restrictions on transfer under
      applicable state and federal securities laws and liens or encumbrances
      created by or imposed by Stanford.  Based in part upon the
      representations of Stanford in Section 5 of this Agreement, the Shares
      will be issued in compliance with or exempt from the registration or
      qualification requirements of all applicable federal and state securities
      laws.

              


      

    

     

    
      	
              5.  

            	
              REPRESENTATIONS
      AND WARRANTIES OF STANFORD:  Stanford
      hereby represents and warrants to the Company as
  follows:

            


    

     

    
      	
            	
              A.  

            	
              Power and
      Authority. Subject to Court approval (as evidenced by entry of a
      Sale Order), Stanford has the full corporate power and authority to
      execute and deliver this Agreement, to perform its obligations hereunder,
      and to consummate the transactions contemplated
  hereby.

            


    

     

    
      	
            	
              B.  

            	
              Accredited
      Investor.  Stanford is an accredited investor as defined
      in Rule 501(a) of Regulation D promulgated under the Securities
      Act of 1933, as amended (the “Securities
      Act”). Stanford has such knowledge and experience in financial and
      business matters that it is capable of evaluating the merits and risks of
      an investment in the Shares.

            


    

     

    
      	
            	
              C.  

            	
              Disclosure of
      Information. Stanford has had an opportunity to discuss the
      Company's business, management and financial affairs with the Company's
      management. Stanford (i) has made its own independent investigation of the
      Company and has been furnished with such information relating to the
      Company and the Shares as Stanford has requested and (ii) has relied
      solely upon the information made available by the Company, the Company's
      representations and warranties contained in Section 4 hereof and its own
      analysis and due diligence, in making the decision to acquire the Shares
      pursuant to this Agreement. Stanford understands that its acceptance of
      the Shares in exchange for the satisfaction of the Outstanding Debt
      involves a high degree of risk.  Stanford has sought such
      accounting, legal and tax advice as it has considered necessary to make an
      informed investment decision with respect to its acquisition of the
      Shares.

            


    

     

    
      
        
        

      

      
        - 2
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              D.  

            	
              Investment
      Representation. Stanford is acquiring the Shares for its own
      account and not with a view to distribution in violation of any securities
      laws.  Stanford has been advised and understands that the Shares
      have not been registered under the Securities Act or under the “blue sky”
      laws of any jurisdiction and the Shares may be resold only if registered
      pursuant to the provisions of the Securities Act or if an exemption from
      registration is available.  Stanford has been advised and
      understands that the Company, in issuing the Shares, is relying upon,
      among other things, the representations and warranties of Stanford
      contained in this Section 5 in concluding that such issuance is a “private
      offering” and is exempt from the registration provisions of the Securities
      Act.

            


    

     

    
      	
            	
              E.  

            	
              Legends.
      Stanford understands that the Shares may bear the following
      legend:

            


    

     

    “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO
SUCH TRANSFER MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.”

     

    
      	
            	
              F.  

            	
              Knowledge of the
      Receiver: To the extent that the Receiver or the Receivership
      Estate is deemed to have made any of the representations of Stanford in
      this Agreement, any such representation shall be made subject to the
      Receiver’s knowledge.  All such representations shall be binding
      on the Receiver and the Receivership
Estate.

            


    

     

    
      	
            	
              G.  

            	
              Access
      to Information:  Without
      limitation to Section 5(C), Stanford has had access to all reports
      required to be filed by the Company (the "SEC Reports") under the 1934 Act
      as well as other material information concerning the Company which is
      known to the Buyers.  Stanford represents that it has had the
      opportunity to ask questions of, and receive answers from, the Company and
      the Buyers regarding the foregoing documents and
    information.

            


    

     

    
      	
              6.  

            	
              MUTUAL
      RELEASE:

            


    

     

    
      	
            	
              A.  

            	
              Stanford, on its own behalf and on behalf
      of its past, present
      and future successors, assigns, agents, representatives, and attorneys,
      hereby completely releases, waives and forever discharges Superior, the Company and Dr.
      L.S. Smith (only with respect to the Corporate Governance Agreement),
      their past, present and future affiliates, and each of their past, present
      and future successors, assigns, shareholders, lenders, officers,
      directors, employees, agents, representatives and attorneys from any and
      all claims, rights, demands, actions, obligations, liabilities and causes
      of action of any and every kind, nature, and character whatsoever, known
      and unknown, which Stanford may now have or may in the future
      have, arising from or relating to the Outstanding Debt, the Credit
      Agreement and the Corporate Governance Agreement (the “Stanford
      Released
      Claims”), whether
      based on tort, contract (express or implied) or any federal, state or
      local law, statute or regulation; provided, however, that this Agreement
      does not release or discharge the Company from its obligations under this
      Agreement or the
      Purchase Agreement;
      provided, further, that this release shall not extend to any claims
      related to fraudulent inducement, conspiracy, theft or similar
      misconduct.

            


    

     

    
      
        
        

      

      
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              B.  

            	
              The Company, on its own behalf and
      on behalf of Superior and Dr. L.S. Smith (only with respect to the
      Corporate Governance Agreement), hereby completely releases, waives and
      forever discharges Stanford and the Receiver from any and all claims,
      rights, demands, actions, obligations, liabilities and causes of action of
      any and every kind, nature, and character whatsoever, known and unknown,
      which Stanford may now have or may in the future have, arising from or
      relating to the Outstanding Debt, the Credit
      Agreement and the Corporate Governance Agreement (the “Company
      Released
      Claims”), whether
      based on tort, contract (express or implied) or any federal, state or
      local law, statute or regulation; provided, however, that this Agreement
      does not release or discharge Stanford from its obligations under this
      Agreement or the Purchase Agreement; provided, further, that this
      release shall not extend to any claims related to fraudulent inducement,
      conspiracy, theft or similar misconduct.

            


    

     

    
      	
            	
              C.  

            	
              The Parties hereto
      understand and
      agree that the release contained in
      this Section 6 is a full and final release covering all Stanford Released
      Claims and Company Released Claims, except as set forth in the provisos of Sections 6(A) and
      6(B) above.

            


    

     

    
      	
            	
              D.  

            	
              Stanford,
      the Company and Superior hereby acknowledge that it or its attorneys or
      agents may hereafter discover claims or facts in addition to or different
      from those which they now know or believe to exist with respect to the
      Stanford Released Claims or the Company Released Claims, but that it is
      Stanford’s, the Company’s and Superior’s intention hereby fully, finally
      and forever to settle and release all of the Stanford Released Claims and
      the Company Released Claims, except as set forth in the provisos of
      Sections 6(A) and 6(B).  In furtherance of each Party’s
      intention, the release herein given shall be and remain in effect as a
      full and complete release notwithstanding the discovery or existence of
      any such additional or different claim or
fact.

            


    

     

    
      	
            	
              E.  

            	
              Each
      of Stanford, the Company and Superior hereby represents and warrants
      that it has not heretofore assigned, transferred, granted, or purported to
      assign, transfer or grant, any of the claims, demands and cause of actions
      disposed of by this Section 6.  Each of Stanford, the Company
      and Superior agrees that it shall not (i) institute a lawsuit, arbitration
      or other legal proceeding based upon, arising out of, or relating to any
      of the claims, demands and causes of action disposed of by this Section 6,
      except as set forth in the provisos of Sections 6(A) or 6(B), (ii)
      participate, assist or cooperate in any such proceedings, unless and to
      the extent required or compelled by law, or (iii) encourage, assist and/or
      solicit any third party to institute any such
  proceeding.

            


    

     

    
      	
              7.  

            	
              EFFECTIVENESS:  The
      effectiveness of this Agreement and the consummation of the transactions
      contemplated hereby are conditioned upon the Court’s approval (as
      evidenced by entry of a Sale Order) and the occurrence of the Closing
      pursuant to the terms of the Purchase Agreement.  In the event
      that the Court does not approve this Agreement or the Purchase Agreement
      or the Closing does not occur, this Agreement shall be of no force or
      effect.

            


    

     

    
      	
              8.  

            	
              ENTIRE
      AGREEMENT:  This
      Agreement contains the entire agreement of the parties with respect to the
      subject matter hereof, and supersedes all prior agreements, representation
      and warranties, written or oral, with respect to the subject matter
      hereto.

            


    

     

    
      
        
        

      

      
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              9.  

            	
              WAIVERS
      AND AMENDMENTS: Any term or provision
      of this Agreement may be amended or waived, or the time for its
      performance may be extended, only in writing by the party or parties
      entitled to the benefit thereof.

            


    

     

    
      	
              10.  

            	
              SUCCESSORS
      AND ASSIGNS: Stanford shall have
      the right to assign its rights and obligations under this
      Agreement.  The Company shall not assign any interest in this
      Agreement to any other party without the prior consent of
      Stanford.  Subject to any limitations on assignment, this
      Agreement shall bind and benefit the parties and their respective
      representatives, successors and
assigns.

            


    

     

    
      	
              11.  

            	
              FURTHER
      ASSURANCES:  Each party
      shall from time to time, before and after Closing, at the other party’s
      request, execute and deliver such further documents and instruments and
      take such further action as either party may reasonably require to
      consummate the transactions contemplated by this
  Agreement.

            


    

     

    
      	
              12.  

            	
              GOVERNING
      LAW: This
      Agreement shall be construed in accordance with the laws of the State of
      Texas notwithstanding any contrary “choice of laws” provision of that or
      any other State.  Each party hereto agrees that it shall bring
      any action or proceedings with respect of any claim arising out of or
      related to this Agreement, whether in tort or contract (express or
      implied) or at law or in equity, exclusively in the
  Court.

            


    

     

    
      	
              13.  

            	
              NOTICES: Any notice, consent or
      other communication required or permitted hereunder shall be given to the
      parties at their respective addresses and in the manner provided for in
      the Purchase Agreement.

            


    

     

    
      	
              14.  

            	
              COUNTERPARTS/FACSIMILE
      SIGNATURES:
      This Agreement may be executed in multiple counterparts, including emailed
      or faxed counterparts, each of which shall be deemed to be an original,
      but all of which, taken together, shall constitute one and the same
      agreement.

            


    

     

    
      	
              15.  

            	
              HEADINGS:  The
      headings herein are for reference only and shall not affect the
      interpretation of this Agreement.

            


    

     

    
      	
              16.  

            	
              SEVERABILITY:  Whenever
      possible, each provision of this Agreement shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any
      provision of this Agreement is held to be prohibited by or invalid under
      applicable law, such provision shall be ineffective only to the extent of
      such prohibition or invalidity in such jurisdiction without invalidating
      the remainder of such provision or the remaining provisions of this
      Agreement.

            


    

     

     

     (Signature
Page Follows)

     

    
      
        
        

      

      
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    IN WITNESS WHEREOF, the signatories
hereto have executed this Agreement as of the Effective Date.

    
 

    
      
        	 	

                DGSE
      COMPANIES, INC.,

                a
      Nevada corporation

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	 
      	 
	 	 	Dr.
      L.S. Smith	 
	 	 	Chief
      Executive Officer	 
	 	 	 	 


      

    

    
      
 

      
        
          	 	

                  

                    STANFORD INTERNATIONAL BANK,
      LTD.,

                    an
      entity organized under the laws of Antigua

                  

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 
      	 
	 	 	Name:
      Ralph S. Janvey	 
	 	 	Title:
      Receiver	 
	 	 	 	 


        

         

      

    

    Acknowledged
and Agreed to:

    superior
galleries, inc.

    


    


    ____________________________

    By:  Scott
Williamson

    Chief
Operating Officer

    


    


    
      
        
        

      

      
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