Al Zuni of Arizona, Inc. - Page 3




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                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          At the time the petitions were filed, Khalaf’s residence was                
          located in New Mexico.                                                      
               Al Zuni was incorporated in 1976 as an Arizona corporation             
          engaged in the business of buying and selling Native American               
          jewelry.                                                                    
               Since the early 1980's, Khalaf was the sole shareholder of             
          Al Zuni.  From 1976 and through the years in issue, Khalaf                  
          traveled throughout the Southwestern United States purchasing and           
          reselling on behalf of Al Zuni Native American jewelry.                     
               Native Americans who live on reservations and who make and             
          sell jewelry often do not have easy access to banks and typically           
          would sell jewelry to Khalaf only for cash.  Thus, over the                 
          years, Khalaf purchased for cash the items of jewelry that were             
          added to Al Zuni’s jewelry inventory.                                       
               In September of 1992, on Al Zuni’s books and records there             
          was recorded a debt obligation of Al Zuni to Khalaf in the amount           
          of $196,510.                                                                
               In mid-September of 1992, a transaction was entered into               
          between Al Zuni and Khalaf in which Al Zuni transferred to Khalaf           
          all of its then extant jewelry inventory.                                   
               In minutes of a special meeting of Al Zuni's board of                  
          directors that was held on September 15, 1992, the transfer of a            
          portion of Al Zuni's jewelry inventory to Khalaf is described as            
          a transfer in payment of Al Zuni's above-mentioned $196,510 debt            


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