Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE 14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant ¨
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the
Commission only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§ 240.14a-12
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a 6(i)(4) and 0
11.
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of each class of securities to which transaction
applies:
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number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0 11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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Proposed
maximum aggregate value of transaction:
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paid previously with preliminary
materials.
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box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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Amount
Previously Paid:
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Schedule or Registration Statement No.:
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11311
Reeder Road
Dallas,
Texas 75229
(972)
484-3662
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON APRIL 30, 2010
TO THE
STOCKHOLDERS OF DGSE COMPANIES, INC.:
Notice Is
Hereby Given that the annual meeting of stockholders of DGSE Companies,
Inc., a Nevada corporation (the "Company"), will be held on Friday, April 30,
2010 at 2:00 p.m. local time, at our principal offices located at 11311 Reeder
Road, Dallas, Texas 75229.
At the
annual meeting you will be asked to:
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1.
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Elect
five directors to the Company’s board of directors to serve until our next
annual meeting of stockholders and until their respective successors are
elected and qualified;
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2.
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Ratify
the selection of Cornwell Jackson Inc. as the independent registered
public accounting firm of the Company for its fiscal year ending
December 31, 2010; and
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3.
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Transact
such other business as may properly come before the meeting or any
adjournment or postponement
thereof.
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The
foregoing items of business are more fully described in the accompanying proxy
statement.
The board
of directors has fixed the close of business on April 7, 2010 as the record date
for the determination of stockholders entitled to notice of and to vote at this
annual meeting and at any adjournment or postponement thereof.
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By
Order of the Board of Directors,
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/s/ Dr. L.S. Smith
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Dr.
L.S. Smith
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Chairman
and Secretary
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Dallas,
Texas
April 9,
2010
ALL
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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Important
Notice Regarding the Availability of Proxy Materials for the Stockholder
Meeting to be Held on
April
30, 2010: The Proxy Statement and Annual Report to Stockholders
are available at
http://dgse.investorroom.com.
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DGSE
COMPANIES, INC.
11311
Reeder Road
Dallas,
Texas 75229
(972)
484-3662
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To be
held April 30, 2010
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
The
enclosed proxy solicitation is being made to the holders of record on April 7,
2010 of common stock of DGSE Companies, Inc., a Nevada corporation, on
behalf of our board of directors for use at our annual meeting of stockholders
to be held on April 30, 2010 at 2:00 p.m. local time, which we refer to as our
annual meeting, or at any adjournment or postponement thereof, for the purposes
set forth herein and in the accompanying notice of annual
meeting. Our annual meeting will be held at our principal offices
located at 11311 Reeder Road, Dallas, Texas 75229. This proxy
statement is dated April 9, 2010 and is first being mailed to stockholders
entitled to vote at our annual meeting on or about April 15, 2010.
Solicitation
We will
bear the entire cost of solicitation of proxies, including preparation,
assembly, printing and mailing of this proxy statement, the proxy and any
additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of common stock beneficially owned
by others to forward to such beneficial owners. We may reimburse
persons representing beneficial owners of common stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of our
company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
Voting
Rights and Outstanding Shares
In order
to conduct business at our annual meeting, a quorum must be present. The holders
of a majority of the votes entitled to be cast by holders of our common stock at
our annual meeting, present in person or represented by proxy, constitutes a
quorum under our bylaws. We will treat shares of our common stock represented by
a properly signed and returned proxy, including abstentions and broker
non-votes, as present at our annual meeting for the purposes of determining the
presence of a quorum. If a quorum is not present, we anticipate that our annual
meeting will be adjourned to solicit additional proxies.
We have
designated a record date of April 7, 2010 for our annual
meeting. Only stockholders of record at the close of business on the
record date will be entitled to notice of and to vote at our annual
meeting. At the close of business on the record date we
had 10,289,252 shares of common stock outstanding and entitled to
vote. Except as provided below, on all matters to be voted upon at
our annual meeting, each holder of record of common stock on the record date
will be entitled to one vote for each share held.
All votes
will be tabulated by the inspector of elections appointed for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes. Abstentions and broker non-votes will be counted towards
the tabulation of votes cast on proposals presented to the stockholders for the
purposes of determining the presence of a quorum and will have the same effect
as negative votes. If you sign your proxy card or broker voting
instruction card with no instructions, your shares will be voted in accordance
with the recommendations of our Board.
Revocability
of Proxies
Any
person giving a proxy pursuant to this solicitation has the power to revoke it
at any time before it is voted. It may be revoked by filing with our
corporate secretary at our principal offices, 11311 Reeder Road, Dallas, Texas
75229, a written notice of revocation or a duly executed proxy bearing a later
date, or it may be revoked by attending the meeting and voting in
person. Attendance at the meeting will not, by itself, revoke a
proxy.
If you
have instructed your broker to vote your shares, you must follow directions
received from your broker to change those instructions.
Stockholder
Proposals
Requirements for Stockholder
Proposals to be Brought Before an Annual Meeting. For stockholder
nominations to our board of directors or other proposals to be considered at an
annual meeting of our stockholders, the stockholder must have given us timely
notice of the proposal or nomination in writing to our corporate secretary
pursuant to Rule 14a-4 (c) under the Exchange Act. To be timely for our 2011
annual meeting, a stockholder’s notice must be delivered to or mailed and
received by our corporate secretary at our principal executive offices not later
than March 10, 2011.
Requirements for Stockholder
Proposals to be Considered for Inclusion in DGSE’s Proxy Materials.
Stockholder proposals submitted pursuant to Rule 14a-8(e) under the Exchange Act
for inclusion in our proxy materials and intended to be presented at our 2011
annual meeting must be received by our corporate secretary in writing not later
than March 5, 2011 to be considered for inclusion in our proxy materials for
that meeting. The proposal also must meet the other requirements of the rules of
the SEC relating to stockholder proposals.
Copies
of Annual Report
A copy of
the our Annual Report on Form 10-K for our fiscal year ended December 31, 2009,
as filed with the SEC, is enclosed herewith. We will furnish an
additional copy of these reports to our stockholders without charge upon written
request to the attention of our corporate secretary addressed to DGSE Companies,
Inc., 11311 Reeder Road, Dallas, Texas 75229.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
There are
five nominees for election to our board of directors. Each director
to be elected will hold office until the next annual meeting of stockholders and
until his or her successor is elected and has qualified, or until such
director’s earlier death, resignation or removal. Each nominee listed
below is currently a director of our company. All five of the
directors were elected by the stockholders at our 2008 annual
meeting.
We
encourage our board members to attend our annual meetings of
stockholders. Two of the seven directors who were members of our
board at the time of our 2008 annual meeting of stockholders attended the 2008
annual meeting of stockholders.
Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the five nominees named below. In the
event that any nominee is unavailable for election as a result of an unexpected
occurrence, those shares will be voted for the election of a substitute nominee
proposed by our board or management. Each person nominated for
election has agreed to serve if elected and management has no reason to believe
that any nominee will be unable to serve.
The five
candidates receiving the highest number of affirmative votes cast at the meeting
will be elected directors.
Nominees
The names
of the nominees and certain information about them are set forth
below:
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Name
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Age
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Position
and Offices
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Year
First Elected
Director
or Appointed
Officer
of Company
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Dr.
L.S. Smith, Ph.D.
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63
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Chairman
of the board of directors, chief executive officer, secretary and
director
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1980
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William
H. Oyster
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57
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Director,
president, and chief operating officer
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1990
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Dr.
William P. Cordeiro, Ph.D.
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66
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Director
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1999
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Craig
Alan-Lee
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53
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Director
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2004
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David
Rector
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63
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Director
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2007
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Dr. L.S. Smith has served as
chairman of our board of directors, and as our chief executive officer and
secretary, since 1980. Dr. Smith obtained a B.A. in political science
from UCLA in 1967, an M.P.A. in public administration from UCLA in 1969, and an
M.A., E.M.B.A. and Ph.D. in management form the Peter Drucker School of
Management in 1981, 1984 and 1991, respectively.
Mr. William H. Oyster has
served as a director, and as our president and chief operating officer, since
January 1990. Mr. Oyster obtained an A.A.S. in nursing from Grayson
County College in 1976.
Dr. William P. Cordeiro, Ph.D.
has served as a director and an independent member and financial expert
of our audit committee since June 1999. He has served as the director
of the Smith School of Business and Economics, California State University –
Channel Islands since June 1990. He has also been a partner of
Bartik, Cordeiro & Associates, Inc., a management consulting firm, since
January 1990. Dr. Cordeiro obtained a B.S. in biology from the
University of San Francisco in 1966, an M.B.A. in finance from University of
Southern California in 1969, an M.A. in management from Claremont Graduate
School in 1982 and a Ph.D. in executive management from Claremont Graduate
School in 1986.
Mr. Craig Alan-Lee has served
as a director and independent member of our audit committee since December
2004. He has served as a senior loan consultant with Castle Funding,
Inc., a mortgage loan company, since November 1994.
Mr. David Rector has served
as a principal of David Stephen Group, which provides enterprise consulting
services to emerging and developing companies in a variety of industries, since
1985. Prior to that, he served as president, chief executive officer
and chief operating officer of Nanoscience Technologies, Inc., a development
stage company engaged in the development and commercialization of DNA
nanotechnology, from June 2004 to December 2006. He has also served as a
director of Senesco Technologies, Inc., a research and development company
focused on genetic technologies to improve commercial agriculture and to treat
major medical conditions in humans, since 2002, and as a director of Superior
Galleries, Inc. from May 2003 until May 2007. Mr. Rector obtained a
B.S. in business from Murray State University in 1969.
There are
no family relationships among any of our executive officers and
directors.
Corporate
Governance Agreement
In
connection with our acquisition of Superior Galleries, Inc., in May 2007, we
entered into a corporate governance agreement with Stanford International Bank,
Ltd., our largest stockholder and a lender to Superior Galleries, and Dr. Smith,
our second-largest stockholder and our chairman and chief executive
officer. Pursuant to the corporate governance agreement, subject to
the applicable fiduciary duties of our board of directors and compliance with
applicable law, we have agreed to recommend up to five nominees to constitute
our board of directors.
Pursuant
to the corporate governance agreement with Stanford International Bank, each of
Dr. Smith and Mr. Oyster has the right to be nominated for election to our board
as long as each of Dr. Smith and Mr. Oyster, respectively, serves as an
executive officer of our company.
In
addition, Dr. Smith has the right to nominate two "independent directors" (as
defined in the corporate governance agreement) for election to our board as long
as he beneficially owns at least 10% of our outstanding shares of common
stock. Dr. Smith has exercised this right to nominate Dr. Cordeiro
and Mr. Alan-Lee for election to our board.
Stanford
International Bank has the right to nominate two "independent directors" (as
defined in the corporate governance agreement) for election to our board as long
as it beneficially owns at least 15% of our outstanding shares of common
stock. Stanford International Bank exercised this right for our 2008
annual meeting to nominate Mr. Richard M. Gozia and Mitchell T. Stoltz for
election to our board. Mssrs. Gozia and Mitchell were elected to our
board of directors at our 2008 annual meeting of
stockholders. However, Mssrs. Gozia and Stoltz resigned from our
board on March 31, 2009. The board of directors did not appoint
replacements for Mssrs. Gozia and Stoltz. Stanford International Bank
has not exercised its right to nominate directors for our 2010 annual
meeting. Stanford International Bank is currently in
receivership. Stanford International Bank nor the receiver have
contacted us regarding the nomination of directors.
OUR
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE
FOREGOING
NOMINEES TO OUR BOARD OF DIRECTORS.
*****
PROPOSAL
TWO
RATIFICATION
OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our audit
committee has selected Cornwell Jackson Inc. as our independent registered
public accounting firm for the fiscal years ending December 31,
2010. Cornwell Jackson has served as our independent registered
public accounting firm since October 2004 and audited our financial statements
for the 2009 fiscal year. A representative of Cornwell Jackson is
expected to be present at the annual meeting, will have the opportunity to make
a statement if he or she desires to do so, and is expected to be available to
respond to appropriate questions. Stockholder ratification of the
selection of Cornwell Jackson is not required by our bylaws or
otherwise. However, we are submitting the selection of Cornwell
Jackson to our stockholders for ratification as a matter of good corporate
governance. If our stockholders fail to ratify the selection, our
audit committee will consider whether or not to retain that
firm. Even if the selection is ratified, our audit committee in its
discretion may direct the appointment of a different independent registered
public accounting firm at any time during the year if it determines that such a
change would be in the best interest of our company and our
stockholders.
The
affirmative vote of a majority of the votes cast at the meeting, either in
person or by proxy, is required to ratify the selection of Cornwell
Jackson. Abstentions will be counted toward the tabulation of votes
cast on proposals presented to the stockholders for the purpose of determining a
quorum and will have the same effect as negative votes. Broker
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
Independent
Registered Public Accountants Fees
The
following table presents fees billed by Cornwell Jackson for professional
services rendered for the fiscal years ended December 31, 2009 and
2008.
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Audit
Fees (1)
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$ |
92,763 |
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$ |
84,459 |
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Audit
Related Fees (2)
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15,595 |
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3,318 |
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Tax
Fees (3)
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23,155 |
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17,883 |
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All
Other Fees (4)
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32,786 |
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19,926 |
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Total
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$ |
164,299 |
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$ |
125,586 |
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(1)
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Represents
the aggregate fees billed by Cornwell Jackson for professional services
rendered for the audit of our annual financial statements for the fiscal
year indicated above.
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(2)
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Represents
the aggregate fees billed by Cornwell Jackson for professional services
rendered in various audit related matters during 2009 and
2008. During 2009, Cornwell Jackson provided additional
professional services in connection with responding to SEC comment letters
on our Form 10K for the year ended December 31, 2008 and on our Form 10Q’s
filed during 2009.
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(3)
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Represents
the aggregate fees billed by Cornwell Jackson for professional services
rendered in various tax matters during 2009 and 2008. During
2009, Cornwell Jackson provided additional tax
research.
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(4)
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Represents
the aggregate fees billed by Cornwell Jackson for professional services
rendered for the review of quarterly reports on Form 10-Q for the periods
ended March 31, June 30 and September 30 for the fiscal years indicated
above. During 2009, Cornwell Jackson provided additional
consulting and research services.
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Audit
Committee Pre-Approval Policies and Procedures
All audit
and non-audit services are pre-approved by our audit committee, which considers,
among other things, the possible effect of the performance of such services on
the registered public accounting firm’s independence. Our audit
committee pre-approves the annual engagement of the principal independent
registered public accounting firm, including the performance of the annual audit
and quarterly reviews for the subsequent fiscal year, and pre-approves specific
engagements for tax services performed by such firm. Our audit
committee has also established pre-approval policies and procedures for certain
enumerated audit and audit related services performed pursuant to the annual
engagement agreement, including such firm’s attendance at and participation at
board and committee meetings; services of such firm associated with SEC
registration statements, periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings, such as
comfort letters and consents; such firm’s assistance in responding to any SEC
comments letters; and consultations with such firm as to the accounting or
disclosure treatment of transactions or events and/or the actual or potential
impact of final or proposed rules, standards or interpretations by the
Securities and Exchange Commission, Public Company Accounting Oversight Board
(PCAOB), Financial Accounting Standards Board (FASB), or other regulatory or
standard-setting bodies. Our audit committee is informed of each
service performed pursuant to its pre-approval policies and
procedures.
Our audit
committee has considered the role of Cornwell Jackson in providing services to
us for the fiscal year ended December 31, 2009 and has concluded that such
services are compatible with the firm’s independence.
OUR
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF CORNWELL JACKSON
INC. AS OUR INDEPENDENT AUDITORS.
*****
BOARD
AND COMMITTEE MATTERS AND CORPORATE GOVERNANCE MATTERS
We
maintain a corporate governance page on our website which includes our Code of
Business Conduct and Ethics, which includes a whistleblower protection policy
and the charter for our audit committee of our board of
directors. The corporate governance page can be found at www.DGSE.com
by clicking on "About Us" and then on the "DGSE Code of Business Conduct &
Ethics" link.
Our
policies and practices reflect corporate governance initiatives that are
designed to be compliant with the listing requirements of NYSE Amex (formerly
known as the American Stock Exchange) and the corporate governance requirements
of the Sarbanes-Oxley Act of 2002, including:
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a
majority of our board members are independent of our company and our
management;
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all
members of our audit committee are independent (within the meaning of the
NYSE Amex listing standards);
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the
independent members of our board meet regularly without the presence of
management;
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we
have a clear code of business conduct and ethics that applies to our
principal executive officers, our directors and all of our employees, and
is monitored by our audit
committee;
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the
charter of our audit committee clearly establishes its roles and
responsibilities;
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we
have a specific telephone number available to all employees;
and
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our
audit committee has procedures in place for the anonymous submission of
employee complaints on accounting, internal accounting controls, or
auditing matters.
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Board
of Directors
Our board
of directors currently consists of five directors including
Dr. L.S. Smith (chairman), William H. Oyster, Dr. William
P. Cordeiro, Craig Alan-Lee and David Rector. Two directors who were
elected at our 2008 annual meeting, Richard M. Gozia and Mitchell T. Stoltz,
resigned on March 31, 2009. Our board of directors did not appoint
replacements for Mssrs. Gozia and Stoltz. During 2009, our board of
directors met four times and acted by unanimous written consent
once. All members of our board were present at each
meeting.
Independence
of the Board of Directors
Our
company is a "controlled company" within the meaning of the NYSE Amex listing
standards because our two largest stockholders, Dr. Smith and Stanford
International Bank, who have entered into a corporate governance agreement with
our company and have filed Schedule 13Ds with the SEC as a group, collectively
hold approximately 64% of the voting power of our
company. Accordingly, we are not obligated to comply with the
independent director requirements of the NYSE Amex listing
standards.
Pursuant
to the corporate governance agreement, four of the directors which Stanford
International Bank and Dr. Smith have the right to nominate must be
"independent" as defined by the corporate governance agreement. The
agreement defines as independent a nominee or director who, amongst other
things, is an individual our board has determined, in the case of a director
standing for re-election, or our board is reasonably likely to determine, in the
case of a new director nominee, to be independent within the meaning of the
applicable listing rules of our principal trading market (currently NYSE Amex)
and the applicable rules under the Exchange Act.
After
review of all relevant transactions or relationships between each director, or
any of his or her family members, and us, our senior management and our
independent registered public accounting firm, our board of directors has
affirmatively determined that three of our five directors — Dr. Cordeiro and
Messrs. Alan-Lee and Rector — are "independent" within the meaning of the
applicable NYSE Amex listing standards and our corporate governance
agreement.
Executive
Sessions
As
required under the NYSE Amex listing standards, during the calendar year ended
December 31, 2009, our independent directors met at least once in a regularly
scheduled executive session at which only independent directors were
present.
Risk
Oversight
Our
board and/or executive management takes an active role in overseeing management
of the Company’s risks. The board and executive management receives regular
reports from members of senior management on areas of material risk to the
Company, including operational, financial, strategic, competitive, reputational,
legal and regulatory risks. The board also meets with senior management annually
for a strategic planning session and discussion of the key risks inherent in our
short- and long-term strategies at the development stage, and also receives
periodic updates on any strategic initiatives throughout the year.
Stockholder
Communications with the Board of Directors
We have
adopted a formal process by which stockholders may communicate with our board of
directors. Our board recommends that stockholders initiate any
communications with the board in writing and send them in care of the investor
relations department by mail to our principal offices at 11311 Reeder Road,
Dallas, Texas 75229. This centralized process will assist the board
in reviewing and responding to stockholder communications in an appropriate
manner. The name of any specific intended board recipient should be
noted in the communication. The board has instructed the investor
relations department to forward such correspondence only to the intended
recipients; however, the board has also instructed the investor relations
department, prior to forwarding any correspondence, to review such
correspondence and, in its discretion, not to forward certain items if they are
deemed of a personal, illegal, commercial, offensive or frivolous nature or
otherwise inappropriate for the board’s consideration. In such cases,
that correspondence will be forwarded to our corporate secretary for review and
possible response. This information is also contained on our website
at www.DGSE.com.
Information
Regarding the Board of Directors Committees
During
2009, the only standing committee of our board of directors was the audit
committee. Because our company is a "controlled company" under the
NYSE Amex listing standards, our board is not obligated by those listing
standards to have, and our board does not have, a nominating committee or a
compensation committee, or any committees performing similar
functions. The audit committee was established in accordance with
Section 3(a)(58) of the Exchange Act. The charter has been
adopted, and in some cases amended and restated to, among other things, reflect
changes to the NYSE Amex listing standards and SEC rules adopted to implement
provisions of the Sarbanes-Oxley Act of 2002. The charter can be
found on our website at www.DGSE.com.
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oversees
our financial reporting process on behalf of the board and reports the
results of their activities to the
board;
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sets
the overall corporate "tone" for quality financial reporting, sound
business risk practices, and ethical
behavior;
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together
with the board, evaluates and, where appropriate, replaces our independent
registered public accounting
firm;
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discusses
with our independent registered public accounting firm their independence
from management and our company and the matters included in the written
disclosures required by the Independence Standards
Board;
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·
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annually
reviews and recommends to the board the selection of our independent
registered public accounting firm;
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|
·
|
reviews
the interim financial statements with management prior to the filing of
our quarterly reports on Form 10-Q and discusses the results of the
quarterly review and any other matters required to be communicated to the
audit committee by the independent registered public accounting firm under
generally accepted auditing standards;
and
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|
|
·
|
reviews
with management and the independent registered public accounting firm the
financial statements to be included in our annual report on Form 10-K (or
the annual reports to our stockholders if distributed prior to the filing
of a Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements,
and discusses the results of the annual audit and any other matters
required to be communicated to the audit committee by the independent
registered public accounting firm under generally accepted auditing
standards.
|
The audit
committee has the authority to retain special legal, accounting or other
advisors or consultants as it deems necessary or appropriate to carry out its
duties. The audit committee is currently composed of Dr. William P.
Cordeiro, Ph.D. (chairman), David Rector and Craig Alan-Lee. The
audit committee met four times during 2009.
Our board
of directors annually reviews the NYSE Amex listing standards definition of
independence for audit committee members and has determined that all members of
our audit committee are independent (as independence is currently defined in
Rule 4350(d)(2)(A) of the NYSE Amex listing standards). Our
board of directors has determined that each member of the audit committee is
able to read and understand fundamental financial statements, including our
company’s balance sheet, income statement and cash flow
statement. Our board has also determined that Dr. Cordeiro and Mr.
Rector each qualifies as an "audit committee financial expert," as defined in
applicable SEC rules. In making such determinations, the board made a
qualitative assessment of Dr. Cordeiro’s and Mr. Rector’s level of knowledge and
experience based on a number of factors, including each individual’s formal
education and experience. See "Report of the Audit
Committee."
The audit
committee has discussed with Cornwell Jackson, our independent registered public
accounting firm, the matters required to be discussed by the Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The
audit committee has also received the written disclosures and the letter from
Cornwell Jackson required by Independent Standards Board Standard No. 1
(Independence Discussion with Audit Committees) and the audit committee has
discussed with Cornwell Jackson the independence of Cornwell Jackson as auditors
of the Company. Based on the foregoing, the audit committee
recommended to the board that our audited financial statements be included in
our annual report on Form 10-K for the year ended December 31, 2009 for filing
with the SEC.
Consideration
of Director Nominees
Because
our company is a "controlled company" for purposes of the NYSE Amex listing
standards, our board is not required by those listing standards either to have a
nominating committee or to have director nominees selected, or recommended for
the board’s selection, either by a majority of the independent directors or a
nominating committee composed solely of independent directors. Our
board has not established a standing nominating committee or a charter with
respect to the nominating process. Instead, our entire board is
involved in the director nomination process.
Our board
is of the view that such a committee is unnecessary given that almost all
directors are nominated pursuant to the corporate governance agreement and the
fact that all directors are considered by and recommended to our stockholders by
the full board, which is comprised of a majority of independent
directors. If our board established such a committee, its membership
would consist of the independent directors or a subset of them. To
date, all director nominees recommended to the stockholders have been identified
by stockholders, current directors or management, and we have never engaged a
third party to identify director candidates.
Director
Qualifications
Our board
believes that new candidates for director should have certain minimum
qualifications, including having the knowledge, capabilities, experience and
contacts that complement those currently existing within our company; having the
ability to meet contemporary public company board standards with respect to
general governance; stewardship, depth of review, independence, financial
certification, personal integrity and responsibility to stockholders; a genuine
desire and availability to participate actively in the development of our
future; and an orientation toward maximizing stockholder value in realistic time
frames. The board also considers such factors as ability to
contribute strategically through relevant industry background and experience;
independence from our company and current board members; and a recognizable name
that would add credibility and value to our company and its
stockholders. The board may modify these qualifications from time to
time.
Evaluating
Nominees for Director
Most of
our nominees for election as directors are nominated pursuant to the corporate
governance agreement. With respect to these nominees, our board
reviews candidates to ensure they are "independent", as defined in the corporate
governance agreement. Under that agreement, a nominee is
"independent" if he or she (i) is not and has never been an officer or
employee of DGSE or Stanford International Bank or their respective affiliates
or associates, or of any entity that derived 5% or more of its revenues or
earnings in any of its three most recent fiscal years from transactions
involving DGSE or Stanford International Bank or any affiliate or associate of
any of them, (ii) has no affiliation, compensation, consulting or
contracting arrangement with DGSE or Stanford International Bank or their
respective affiliates or associates or any other entity such that a reasonable
person would regard such individual as likely to be unduly influenced by
management of DGSE or Stanford International Bank, respectively, or their
respective affiliates or associates, and (iii) is a director our board has
determined, or a nominee our board is reasonably likely to determine, to be
"independent" within the meaning of the applicable listing rules of our
principal trading market (currently the NYSE Amex market) and Section 10A(m)(3)
of the Exchange Act and Rule 10A-3(b)(1) promulgated thereunder.
With
respect to nominees not nominated pursuant to the corporate governance
agreement, our board reviews candidates for director nominees in the context of
the current composition of our board, our operating requirements and the
long-term interests of our stockholders. In conducting this
assessment, our board currently considers, among other factors, diversity, age,
skills, and such other factors as it deems appropriate given the current needs
of our board and our company, to maintain a balance of knowledge, experience and
capability. In the case of incumbent directors whose terms of office
are set to expire, our board reviews the directors’ overall service to our
company during his or her term, including the number of meetings attended, level
of participation, quality of performance, and any other relationships and
transactions that might impair the director’s independence. In the
case of new director candidates, our board also determines whether the nominee
must be independent, which determination is based upon applicable NYSE Amex
listing standards, applicable SEC rules and regulations and the advice of
counsel, if necessary. Our board then uses its network of contacts to
compile a list of potential candidates, but may also engage, if it deems
appropriate, a professional search firm. Our board conducts any
appropriate and necessary inquiries into the backgrounds and qualifications of
possible candidates after considering the function and needs of our
board. Our board meets to discuss and consider such candidates’
qualifications and then selects a nominee for recommendation to our stockholders
by majority vote.
To date,
our board has not paid a fee to any third party to assist in the process of
identifying or evaluating director candidates. To date, our board has
not rejected a timely director nominee from a stockholder or group of
stockholders that beneficially owned, in the aggregate, more than 5% of our
voting stock.
Stockholder
Nominations
The board
applies the same guidelines (described above) to stockholder nominees as applied
to nominees from other sources. Any stockholder who wishes to
recommend a prospective director nominee for the board’s consideration may do so
by giving the candidate’s name and qualifications in writing to our chairman of
the board at our principal executive offices at 11311 Reeder Road, Dallas, Texas
75229. The proposing stockholder should also include his or her
contact information and a statement of his or her share ownership, as well as
any other information required by our bylaws.
Code
Of Business Conduct And Ethics
We have
adopted a "Code of Business Conduct and Ethics" that applies to all employees,
including our executive officers. A copy of our Code of Business
Conduct and Ethics is posted on our internet site at www.DGSE.com. In the event
we make any amendments to, or grant any waivers of, a provision of the Code of
Business Conduct and Ethics that applies to the principal executive officer,
principal financial officer, or principal accounting officer that requires
disclosure under applicable SEC rules, we intend to disclose such amendment or
waiver and the reasons therefor on a Form 8-K or on our next periodic
report.
AUDIT
COMMITTEE REPORT
Introductory Note: The material in this Audit Committee
Report is not "soliciting material" and is being furnished to, but not deemed
filed with, the SEC. This report is not deemed to be incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such acts.
The
following is the report of the audit committee with respect to our audited
financial statements for the fiscal year ended December 31,
2009.
The audit
committee has reviewed and discussed the audited financial statements of DGSE
Companies, Inc. with senior management. The audit committee has discussed with
Cornwell Jackson, our independent registered public accounting firm, the matters
required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit
Committees, which includes, among other items, matters related to the
conduct of the audit of our financial statements. The Audit Committee has also
received written disclosures and the letter from Cornwell Jackson required by
Independence Standards Board Standard No. 1, which relates to the accounting
firm’s independence from our company, and has discussed with Cornwell Jackson
its independence from our company.
Based on
the review and discussions referred to above, the audit committee recommended to
the board of directors that audited financial statements be included in our
company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2009.
The Audit
Committee acts pursuant to the Audit Committee Charter adopted by the board of
directors. Each of the members of the audit committee qualifies as an
independent director under the current listing standards of the American Stock
Exchange. The Charter of the Audit Committee is attached as Annex 1 to this
proxy statement.
AUDIT
COMMITTEE
Dr.
William P. Cordeiro, Ph.D. (Chairman)
David
Rector
Craig
Alan-Lee
EXECUTIVE
OFFICERS
Set forth
below is information regarding our executive officers. All executive
officers serve at the pleasure of our board of directors.
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|
Dr.
L.S. Smith*
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|
63
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|
Chairman
of the board, chief executive officer and president
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William
H. Oyster*
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|
57
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|
President
and chief operating officer
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|
John
Benson
|
|
64
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|
Chief
financial officer
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S.
Scott Williamson
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|
51
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|
Executive
vice president – consumer finance
|
*
Biographical information about Dr. Smith and Mr. Oyster is set forth under
Proposal One, above.
John Benson joined our
company in December 1992 as chief financial officer. Between January and May
2007, Mr. Benson served on the board of directors of Superior Galleries, Inc.
Mr. Benson obtained his BBA from Texas A&M University in 1968 and is a
certified public accountant in the State of Texas.
S. Scott Williamson joined
our company as executive vice president – consumer finance and became president
of our subsidiary, American Pay Day Centers, Inc. in May 2004. Between 2002 and
2004, Mr. Williamson served as president of Texas State Credit Co., a finance
company with 63 locations. From 2001 to 2002, Mr. Williamson served as chief
financial officer for Westgate Fabrics, LLC, a distributor of decorative
fabrics. Before that, Mr. Williamson served as an executive vice president of
operations for First Cash Financial Services, Inc., a national markets finance
company. Mr. Williamson has also served on the board of directors of
Superior Galleries, Inc. from January 2007 to May 2007. Mr.
Williamson obtained his B.B.A. in accounting from the University of Oklahoma in
1980 and is a certified public accountant.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the ownership of our
common stock as of June 26, 2009 by (i) each director, (ii) each of the named
executive officers reflected in the Summary Compensation Table, (iii) all
our executive officers and directors as a group, and (iv) all those known by us
to be beneficial owners of more than five percent of our common
stock.
Name and Address
of Beneficial Owner
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|
Amount and Nature
of Beneficial Ownership(1)
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Dr.
L. S. Smith, Ph.D.
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|
|
6,731,947 |
(2), (8)
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65.4 |
% |
|
Director,
chairman and chief executive officer
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|
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519
Interstate 30, #243
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Rockwall,
Texas 75087
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William
H. Oyster
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|
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290,115 |
(4)
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|
|
2.8 |
% |
|
Director,
president and chief operating officer(3)
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|
|
|
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John
Benson
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161,500 |
(5)
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1.6 |
% |
|
Chief
financial officer(3)
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S.
Scott Williamson
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20,000 |
(6)
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* |
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Executive
vice president(3)
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Dr.
William P. Cordeiro, Ph.D.
|
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27,500 |
(7)
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* |
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Director
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P.O.
Box 6010
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Malibu,
California 90264
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Craig
Alan-Lee
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325,000 |
(8), (9)
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3.2 |
% |
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Director
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11230
Dilling Street
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North
Hollywood, California 91602
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David
Rector
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5,462 |
(10)
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* |
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Director(3)
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Stanford
International Bank, Ltd.
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6,731,947 |
(11)
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65.4 |
% |
|
No.
11 Pavilion Drive
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St.
John’s, Antigua, West Indies
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All
directors and officers
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7,561,524 |
(12)
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73.5 |
% |
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as
a group (8 individuals)
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(1)
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Based
upon information furnished to us by the directors and executive officers
or obtained from our stock transfer books showing 10,289,252 shares
of common stock outstanding as of April 7, 2010. We are
informed that these persons hold the sole voting and dispositive power
with respect to the common stock except as otherwise stated in the
footnotes below. For purposes of computing "beneficial
ownership" and the percentage of outstanding common stock held by each
person or group of persons named above as of April 7, 2010, any security
which such person or group of persons has the right to acquire within 60
days after such date is deemed to be outstanding for the purpose of
computing beneficial ownership and the percentage ownership of such person
or persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. A "*"
indicates less than one percent.
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(2)
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Includes
577,777, 267,857 and 100,000 shares currently exercisable under stock
options with exercise prices of $2.25, $1.12 and $0.78 per share,
respectively; 493,282 shares subject to proxies pursuant to which Dr. L.S.
Smith holds sole voting power; and 3,390,727 shares subject to a corporate
governance agreement with Stanford International Bank, Ltd. and
us. The corporate governance agreement entitles Stanford
International Bank and Dr. Smith to each nominate two independent
directors to our board of directors and entitles Dr. Smith and Mr. Oyster
to be nominated to our board for so long as he remains an executive
officer of our company. Pursuant to this agreement, Dr. Smith
has shared voting power with respect to the 3,390,727 shares beneficially
owned by Stanford International Bank. Dr. Smith disclaims
beneficial ownership of the 3,884,009 shares subject to the proxies or the
corporate governance agreement.
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(3)
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The
address for Messrs. Oyster, Benson, Williamson and Rector is 11311 Reeder
Road, Dallas,
Texas 75229.
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(4)
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Includes
250,000 shares currently exercisable under stock options with an average
exercise price of $2.23 per share. In addition, W.H. Oyster has granted
Dr. L.S. Smith a proxy to vote 38,615 of his currently outstanding
shares.
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(5)
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Includes
150,000 shares currently exercisable under stock options with an average
exercise price of $2.02 per share. In addition, John Benson has granted
Dr. L.S. Smith a proxy to vote his 11,500 shares currently
outstanding.
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(6)
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Includes
20,000 shares currently exercisable under stock options with an exercise
price of $2.43 per share.
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(7)
|
Includes
22,500 shares currently exercisable under stock options with an exercise
price of $2.47 per share and 5,000 shares owned by Bartik, Cordeiro &
Associates, as to which Dr. Cordeiro has shared voting and investment
powers.
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(8)
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Craig
Alan-Lee has granted Dr. L.S. Smith a proxy to vote his 320,000 shares
currently outstanding.
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(9)
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Includes
5,000 shares currently exercisable under a stock option with an exercise
price of $2.82 per share.
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(10)
|
Includes
2,731 and 2,731 shares currently exercisable under stock options with an
exercise price of $7.32 and $10.07, respectively, per
share.
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(11)
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Includes
422,817 shares currently issuable upon the exercise of stock purchase
warrants with an exercise price of $1.89 per share and 3,164,665 shares
beneficially owned by Dr. Smith subject to the corporate governance
agreement described above. On February 16, 2009, the United
States District Court for the Northern District of Texas, Dallas Division,
issued an order taking possession of all securities, properties and other
assets of Stanford International Bank and appointing Ralf S. Janvey as
receiver for all those assets. Mr. Janvey has sole voting and
dispositive power with respect to the shares held by Stanford
International Bank. Pursuant to the corporate governance
agreement, Stanford International Bank has shared voting power with
respect to the 3,164,665 shares beneficially owned by Dr.
Smith. Stanford International Bank disclaims beneficial
ownership of the 3,164,665 shares subject to the corporate governance
agreement.
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(12)
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Includes
577,777, 267,857, 250,000, 150,000, 100,000, 45,000, 10,000 and 20,000
shares currently exercisable under stock options with an exercise price or
average price, as the case may be, of $2.25, $1.12, $2.23, $2.02, $0.78,
$2.47, $2.82 and $2.43, respectively, per share, and 493,282 shares
subject to proxies granting Dr. L.S. Smith sole voting
powers.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our officers, directors and persons who own
more than 10% of any class of our securities registered under Section 12(g) of
the Exchange Act to file reports of ownership and changes in ownership with the
SEC. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
which they file.
Based
solely on a review of copies of such reports furnished to us and written
representations that no other reports were required during our fiscal year ended
December 31, 2009, we believe that all persons subject to the reporting
requirements pursuant to Section 16(a) filed the required reports on a timely
basis with the SEC.
Compensation
Discussion and Analysis
Since we
have elected to be classified as a "controlled company" within the meaning of
the NYSE Amex listing standards, we do not have a compensation committee of our
board of directors, or any committee performing similar functions.
Management
and/or the board of directors typically begins the process of determining the
amount and mix of total compensation to be paid to our senior executives,
including our named executive officers, in December of each year and finalizes
the amounts the following January. This enables them to examine and consider our
performance during the previous year in establishing the current year’s
compensation.
Management
and/or the board of directors has traditionally relied heavily on the input and
recommendations of our Chief Executive Officer, Dr. L.S. Smith, who reviews and
makes recommendations with respect to our executive compensation programs. The
board believes Dr. Smith’s unique insight into our business, his role as
CEO of our company, his day-to-day interaction with our senior executives, as
well as his years of experience in the industry, provides a valuable resource to
management and the board of directors.
Executive
Compensation
The
following information is furnished with respect to each of our most highly
compensated executive officers whose cash compensation from us and our
subsidiaries during our last fiscal year exceeded $100,000.
Summary
Compensation Table
Name and Principal Position
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All Other
Compensation
($)
|
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Dr.
L.S. Smith
|
|
2009
|
|
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425,000 |
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|
106,500 |
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|
9,000 |
(1) |
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|
540,500 |
|
|
Chief
executive officer
|
|
2008
|
|
|
425,000 |
|
|
|
106,500 |
|
|
|
9,000 |
(1) |
|
|
540,500 |
|
|
John
Benson
|
|
2009
|
|
|
175,000 |
|
|
|
— |
|
|
|
– |
|
|
|
175,000 |
|
|
Chief
financial officer
|
|
2008
|
|
|
175,000 |
|
|
|
— |
|
|
|
– |
|
|
|
175,000 |
|
|
William
H. Oyster
|
|
2009
|
|
|
250,000 |
|
|
|
62,500 |
|
|
|
– |
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312,500 |
|
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President
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2008
|
|
|
250,000 |
|
|
|
62,500 |
|
|
|
– |
|
|
|
312,500 |
|
|
(1)
|
In
fiscal year 2008 and 2009, Dr. Smith was provided a monthly automobile
allowance and a $2,000 per month home office
allowance.
|
Grants
of Plan-Based Awards
We did
not grant any awards under any plan in fiscal year 2008 and 100,000 shares were
granted to our Chief executive officer under our 2006 plan during the fiscal
year 2009.
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes unexercised options to purchase shares of our common
stock and equity plan awards outstanding at December 31, 2009 for each executive
officer identified in the Summary Compensation Table above. All
options were fully vested and exercisable at the time of grant and expire 180
days after termination of service:
Name and Principal Position
|
|
Number of Securities Underlying
Unexercised Options
(#)
Exercisable
|
|
|
Option Exercise
Price
($)
|
|
|
Dr.
L.S. Smith
|
|
|
577,777 |
|
|
|
2.25 |
|
|
Chief
executive officer
|
|
|
267,857 |
|
|
|
1.12 |
|
|
|
|
|
100,000 |
|
|
|
0.78 |
|
|
John
Benson
|
|
|
50,000 |
|
|
|
1.625 |
|
|
Chief
financial officer
|
|
|
25,000 |
|
|
|
2.25 |
|
|
|
|
|
25,000 |
|
|
|
2.125 |
|
|
|
|
|
50,000 |
|
|
|
2.25 |
|
|
William
H. Oyster
|
|
|
100,000 |
|
|
|
2.25 |
|
|
President
|
|
|
50,000 |
|
|
|
2.125 |
|
|
|
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|
100,000 |
|
|
|
2.25 |
|
Option
Exercises and Stock Vested
No
executive officer identified in the Summary Compensation Table above exercised
an option in fiscal year 2009, and no shares of stock vested with respect to any
of those executive officers.
Pension
Benefits
We do not
have any plan which provides for payments or other benefits at, following, or in
connection with retirement.
We do not
have any defined contribution or other plan which provides for the deferral of
compensation on a basis that is not tax-qualified.
Employment
Agreements
Smith Employment
Agreement. The employment agreement for Dr. Smith sets forth
the terms of his employment with us as chairman and chief executive officer. The
agreement has an initial 3-year term, and will be automatically renewed
thereafter for successive one-year terms unless either party provides at least
120 days notice not to renew. It provides for a base annual salary of at least
$425,000. In addition, it provides for an annual bonus in an amount not less
than one-half of his annual salary, payable on each January 31 in respect of the
prior calendar year, with half of the payment being contingent upon our stock
price having increased at least 10% during that calendar year. For purposes of
the 2007 calendar year, the first day was deemed to be May 30, 2007, the date of
the closing of the acquisition of Superior Galleries, and the 10% increase
requirement will be prorated accordingly. In addition, Dr. Smith will be
entitled to life insurance of $2,000,000, disability insurance equal to half of
his base salary, medical insurance and other benefits.
Oyster Employment
Agreement. The new employment agreement for Mr. Oyster sets
forth the terms of his employment with us as president and chief operating
officer. The agreement has an initial 5-year term, and will be automatically
renewed thereafter for successive one-year terms unless either party provides at
least 120 days notice not to renew. It provides for a base annual salary of at
least $250,000. In addition, it provides for an annual bonus in an
amount not less than one-half of his annual salary, payable on each April 30 in
respect of the prior calendar year, with half of the payment being contingent
upon our EBIT (earnings before interest and taxes) having increased at least 6%
during that calendar year. In addition, Mr. Oyster will be entitled to life
insurance of $1,000,000, disability insurance equal to half of his base salary,
medical insurance and other benefits.
Benson Employment
Agreement. The new employment agreement for Mr. Benson sets
forth the terms of his employment with us as chief financial officer. The
agreement has an initial 2-year term. It provides for a base annual salary of
$175,000 and an annual bonus to be determined by our board of directors. Upon
the termination of his employment, Mr. Benson will be entitled to, among other
things, (1) in case of termination by DGSE during the initial term other
than for cause, base salary for the remainder of the initial term plus six
months; and (2) in case of termination by DGSE after the initial term other
than for cause, three months of annual base salary.
Potential
Payments Upon Termination Or Change-In-Control
Under the
employment agreements with Dr. Smith and Mr. Oyster, if the executive were to be
terminated due to an illness, injury or other incapacity which prevents him from
carrying out or performing fully the essential functions of his duties for a
period of 180 consecutive days, or due to his death, the executive (or his legal
representative) would be entitled to receive his salary for a period of one year
following the date of termination and the pro rata portion of this
bonus for the prior calendar year. If Dr. Smith would have been terminated for
either reason on January 1, 2008 and his new employment agreement had then been
in effect, we would have been obligated to pay him $425,000 in 26 bi-weekly
installments of $16,346 each. If Mr. Oyster would have been terminated for
either reason on January 1, 2008 and his new employment agreement had then been
in effect, we would have been obligated to pay him $250,000 in 26 bi-weekly
installments of $9,615 each.
In the
event either executive were to be terminated for "cause", he would be entitled
to the pro rata share
of the bonus paid to him for the calendar year immediately preceding his
termination. If either executive would have been terminated for "cause" on
January 1, 2008 and his new employment agreement had then been in effect, we
would not have been obligated to pay him any additional severance
pay.
In the
event either executive were to be terminated other than for "cause", or if
either executive resigns for "good reason", he would be entitled to receive a
lump sum payment of (i) his base salary for the remainder of the current
year, plus (ii) the maximum bonus he would have been entitled to receive
for the current year, plus (iii) three years salary based on the salary
then in effect. If Dr. Smith would have been terminated other than for "cause"
or resigned for "good reason" on January 1, 2008 and his new employment
agreement had then been in effect, we would have been obligated to pay him a
lump sum payment of $1.91 million. If Mr. Oyster would have been terminated
other than for "cause" or resigned for "good reason" on January 1, 2008 and his
new employment agreement had then been in effect, we would have been obligated
to pay him a lump sum payment of $1.13 million.
In the
event either executive were to resign other than for "good reason", he would be
entitled to receive a lump sum payment of (i) his base salary for the
remainder of the current year, plus (ii) a pro rata share of the maximum
bonus he would have been entitled to receive for the current year, plus
(iii) one year salary based on the salary then in effect. If Dr. Smith
would have resigned other than for "good reason" on January 1, 2008 and his new
employment agreement had then been in effect, we would have been obligated to
pay him a lump sum payment of $850,000. If Mr. Oyster would have resigned other
than for "good reason" on January 1, 2008 and his new employment agreement had
then been in effect, we would have been obligated to pay him a lump sum payment
of $500,000.
In
addition, in the event of the termination of Dr. Smith’s employment, DGSE would
be required to maintain medical health benefits for Dr. Smith and his wife until
both are covered by a comparable health insurance plan provided by a subsequent
employer or their earlier death. This obligation has an estimated present cost
to us of $32,100 (assuming payment for a 36-month period). In the event of the
termination of Mr. Oyster’s employment, we would be required to maintain medical
health benefits for Mr. Oyster and his wife for a period of 18 months or, if
earlier, until both are covered by a comparable health insurance plan provided
by a subsequent employer. This obligation has an estimated cost to us of
$17,200.
In the
event of the termination of either executive’s employment, other than for
termination by the executive for "good reason", the executive may not for a
period of two years compete with us in the state in which we conduct business
during the employment term.
For
purposes of the two executives’ new employment agreements:
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"cause"
is defined as (i) conviction of the executive for a felony involving
dishonest acts during the term of the agreement, (ii) any "willful"
and material misapplication by the executive of company funds, or any
other material act of dishonesty committed by him, or (iii) the
executive’s "willful" and material breach of the agreement or "willful"
and material failure to substantially perform his duties thereunder (other
than a failure resulting from mental or physical illness) after written
demand for substantial performance is delivered by the our board of
directors which specifically identifies the manner in which the board
believes the executive has not substantially performed his duties and the
executive fails to cure his nonperformance. We are obligated to provide
the executive 30 days written notice setting forth the specific reasons
for its intention to terminate the executive for cause and an opportunity
for the executive to be heard before our board of directors, and to
deliver to the executive a notice of termination from the board of
directors stating that a majority of the board found, in good faith, that
the executive had
engaged in the "willful" and material conduct referred to in the
notice;
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an
act or failure to act is "willful" if done, or omitted to be done, by the
executive in bad faith and without reasonable belief that his action or
omission was in our best interest;
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"good
reason" is defined as (i) a change in the executive’s status or
positions with us that, in his reasonable judgment, represents a demotion,
(ii) the assignment to the executive of any duties or
responsibilities that, in the executive’s reasonable judgment, are
inconsistent with his existing status or position, (iii) layoff or
involuntary termination of the executive’s employment, except in
connection with the termination of the executive’s employment for "cause"
or as a result of his retirement, disability or death, (iv) a
reduction by us in the executive’s base salary, (v) any "change in
control" occurring more than one year after the effective date of the
agreement, (vi) the failure by us to continue in effect any employee
benefit plan in which the executive is participating at the effective date
of the agreement, other than as a result of the normal expiration of the
plan in accordance with its terms, except to the extent that we provide
the executive without substantially equivalent benefits, (vii) the
imposition of any requirement that the executive be based outside the
Dallas-Fort Worth metropolitan area, (viii) our failure to obtain the
express assumption of the agreement by any successor, or (ix) any
violation by us of any agreement (including the new employment agreement)
between us and the executive; and
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"change
in control" is defined as (A) any person or group becomes the
beneficial owner of shares representing 20% or more of the combined
outstanding voting power of our company, (B) in any 12-month period,
our directors at the beginning of that period cease to constitute a
majority of our board of directors and a majority of the initial directors
still in office neither elected all of the new directors nor nominated
them all for election by our stockholders, or (C) a person or group
acquires in any 12-month period gross assets of our company constituting
at least 50% of the fair market value of all our gross
assets.
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Under the
new employment agreement of Mr. Benson, if DGSE were to terminate Mr. Benson’s
employment during the initial 2-year term, he would be entitled to receive a
lump sum payment of (i) his base salary for the remainder of the initial
term, plus (ii) six months salary based on the salary then in effect. If
Mr. Benson would have been terminated by us on January 1, 2008 and his new
employment agreement had then been in effect, we would have been obligated to
pay him a lump sum payment of $437,500. If we were to terminate Mr. Benson’s
employment after the initial 2-year term, he would be entitled to receive a lump
sum payment of three months salary based on his salary then in
effect.
In the
event Mr. Benson were to resign upon not less than 30 days notice to us, and we
were immediately to relieve Mr. Benson of his duties, he would be entitled to
receive a lump sum payment of his salary until the date his resignation were to
be effective. If Mr. Benson would have delivered a resignation notice to us on
January 1, 2008 indicating his decision to resign on March 1, 2008, his new
employment agreement had then been in effect and we would have immediately
relieved him of his duties and terminated the employment agreement, we would
have been obligated to pay him a lump sum payment of $29,000.
Compensation
of Directors
The
following table sets forth information concerning the compensation of our
directors during our 2009 fiscal year, except for directors who are also named
executive officers and whose compensation is reflected in the Summary
Compensation Table.
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Fees
Earned or
Paid in
Cash
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Dr.
William P. Cordeiro, Ph.D.
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$ |
20,000 |
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0 |
(1) |
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$ |
20,000 |
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Craig
Alan-Lee
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$ |
18,000 |
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0 |
(2) |
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$ |
18,000 |
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David
Rector
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$ |
18,000 |
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0 |
(3) |
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$ |
18,000 |
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(1)
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Dr.
Cordeiro has been granted options to purchase 32,500 shares of DGSE’s
common stock at an exercise price equal to the then fair market value of
DGSE’s common stock.
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(2)
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Mr.
Alan-Lee has been granted an option to purchase 15,000 shares of DGSE’s
common stock at an exercise price equal to the then fair market value of
DGSE’s common stock.
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(3)
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Mr.
Rector has been granted an option to purchase 10,000 shares of DGSE’s
common stock at an exercise price equal to the then fair market value of
DGSE’s common stock.
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Directors
who are also employees of DGSE do not receive any compensation for serving as a
director or as a member of a committee of the board of
directors.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Transactions
with Related Persons
Our
company has not entered into any transaction since the beginning of our 2009
fiscal year required to be disclosed in this proxy statement, other than
transactions described elsewhere herein.
Review,
Approval or Ratification of Transactions with Related Persons
We have
adopted a written policy regarding the review, approval or ratification of
transactions with designated related persons, which is available from our
website, www.DGSE.com. In accordance with the policy, our audit
committee or the chairperson of our audit committee reviews transactions in
which the amount involved exceeds $120,000 and in which any related person had,
has, or will have a direct or indirect material interest. In general,
the policy applies to the following categories of related
persons: directors, nominees, executive officers, and stockholders
owning five percent or more of our outstanding stock, and their respective
immediate family members. The committee or chairperson approves or
ratifies only those transactions which are in, or not inconsistent with, the
best interests of our company and our stockholders. The audit
committee chairperson reviews and approves or ratifies transactions when it is
not practicable or desirable to delay review of a transaction until our audit
committee can meet. The chairperson reports any transactions with
related persons he has approved or ratified to our audit committee and any
transactions with related persons he or the audit committee has approved or
ratified to our board. Our audit committee will annually review any
previously approved or ratified related person transactions that remain
ongoing.
HOUSEHOLDING
OF PROXY MATERIALS
Some
banks, brokers and other nominee record holders may be participating in the
practice of "householding" proxy statements and annual reports. This means that
only one copy of our proxy statement or annual report to stockholders may have
been sent to multiple stockholders in each household. We will promptly deliver a
separate copy of either document to any stockholder upon written or oral
request. To make such a request, please contact us at DGSE Companies, Inc., c/o
Corporate Secretary, 11311 Reeder Road, Dallas, Texas 75229 or by phone at (972)
484-3662. Any stockholder who wants to receive separate copies of our
proxy statement or annual report in the future, or any stockholder who is
receiving multiple copies and would like to receive only one copy per household,
should contact the stockholder’s bank, broker, or other nominee record holder,
or the stockholder may contact us at the above address and phone
number.
OTHER
MATTERS
The board
of directors knows of no other matters that will be presented for consideration
at our annual meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best
judgment.
Any
stockholder or stockholder’s representative who, because of a disability, may
need special assistance or accommodation to allow him or her to participate at
the annual meeting may request reasonable assistance or accommodation from us by
contacting us at DGSE Companies, Inc., c/o Corporate Secretary, 11311 Reeder
Road, Dallas, Texas 75229 or by phone at (972)
484-3662. To provide us sufficient time to arrange for reasonable
assistance or accommodation, please submit all requests by April 16,
2010.
Whether
you intend to be present at the annual meeting or not, we urge you to return
your signed proxy card promptly.
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By
Order of the Board of Directors
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April 9,
2010
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/s/ Dr. L.S. Smith
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Dr.
L.S. Smith
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Chairman
of the Board
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