SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
--------------
( ) Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number 1-11048
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Dallas Gold and Silver Exchange, Inc.
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(Name of small business issuer)
Nevada 88-0097334
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
2817 Forest Lane, Dallas, Texas 75234
- ----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number, including area code) (972) 484-3662
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 28, 2000
- ---------------------------- -------------------------------
Common Stock, $.01 per value 4,509,157
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<CAPTION>
PART I. FINANCIAL INFORMATION
Dallas Gold and Silver Exchange, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, 2000 December 31, 1999
----------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 837,588 $ 1,263,716
Marketable securities-trading 3,086,728
Trade receivables 601,115 735,778
Inventories 5,274,226 5,510,097
Prepaid expenses 101,158 65,983
------------ ------------
Total current assets 6,814,087 10,662,302
MARKETABLE SECURITIES - AVAILABLE FOR SALE 1,334,480 15,000
PROPERTY AND EQUIPMENT - AT COST, NET 1,341,507 1,232,409
GOODWILL, NET OF ACCUMULATED AMORTIZATION 1,467,122 498,431
OTHER ASSETS 87,005 57,213
------------ ------------
$ 11,044,201 $ 12,465,355
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 3,290,389 $ 4,507,110
Current maturities of long-term debt 125,189 250,047
Accounts payable - trade 812,409 943,879
Accrued expenses 128,771 401,340
Accrued compensation 116,000 370,641
Customer deposits 92,670 90,193
Federal income taxes payable 5,038 116,578
Deferred income taxes 596,770 620,844
------------ ------------
Total current liabilities 5,167,236 7,300,632
LONG-TERM DEBT, less current maturities 1,771,706 1,387,889
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 10,000,000
shares; issued and outstanding 4,526,657 shares at 45,267 43,679
March 31, 2000 and 4,367,9125 shares at December 31, 1999
Additional paid-in capital 4,335,586 3,967,931
Accumulated other comprehensive loss (53,662) (6,930)
Accumulated deficit (113,760) (227,846)
------------ ------------
4,213,431 3,776,834
Less common treasury shares, 17,500 shares (108,172) --
------------ ------------
Total shareholders' equity 4,105,259 3,776,834
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$ 11,044,201 $ 12,465,355
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2
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<TABLE>
<CAPTION>
Dallas Gold and Silver Exchange, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
March 31, 2000 March 31, 1999
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<S> <C> <C>
Revenue
Sales $ 5,575,601 $ 4,629,461
Pawn services charges 19,760 13,475
Gain (loss) on marketable securities - trading 269,363 (596,257)
Other Income 2,400 355
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5,867,124 4,047,034
Costs and expenses
Cost of goods sold 4,274,587 3,981,379
Consulting service costs 28,463 52,455
Selling, general and administrative expenses 1,216,595 518,585
Depreciation and amortization 65,021 29,572
Interest expense 108,372 54,720
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5,693,038 4,636,711
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Income before income taxes 174,086 (589,677)
Income tax expense (benefit) 60,000 (200,490)
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Net income (loss) $ 114,086 $ (389,187)
=========== ===========
Earnings per common share
Basic $.03 $(.09)
Diluted $.02 $(.09)
Weighted average number of common shares
Basic 4,405,614 4,178,912
Diluted 4,768,446 4,178,912
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3
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<TABLE>
<CAPTION>
Dallas Gold and Silver Exchange, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
Reconciliation of net income to net cash provided by
(used in) operating activities
Net income (loss) $ 114,086 $ (389,187)
Common stock issued for services 10,250 25,000
Depreciation and amortization 65,021 29,572
Deferred taxes (24,074) (215,130)
(Increase) decrease in operating assets and liabilities
Net change in marketable securities 1,767,248 648,058
Trade receivables 134,663 70,711
Inventories 235,871 (261,099)
Prepaid expenses and other current assets (35,175) (22,622)
Accounts payable and accrued expenses (658,680) (680,498)
Customer deposits 2,477 14,772
Federal income taxes payable (111,540) 14,640
----------- -----------
Total net cash provided (used in) operating activities 1,500,147 (765,783)
Cash flows from investing activities
Decrease in notes receivable officers -- 801
Purchase of Fairchild International, Inc. (230,000)
Purchase of property and equipment (150,690) (70,078)
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Net cash used in investing activities (380,690) (69,277)
Cash flows from financing activities
Repayment of indebtness (1,357,474) (41,005)
Purchase and retirement of common stock (79,934) (35,958)
Purchase of common treasury stock (108,172)
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Net cash used in financing activities (1,545,585) (76,963)
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Net decrease in cash and cash equivalents (426,128) (912,023)
Cash and cash equivalents at beginning of year 1,263,716 1,004,836
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Cash and cash equivalents at end of period $ 837,588 $ 92,813
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Supplemental schedule of noncash, investing and financing activities:
During 2000, debt amounting to $ 75,000 was converted to common stock.
In connection with the Company's acquisition of Fairchild International, Inc.,
62,745 shares of common stock were issued with a value of $320,000 and a note
payable was issued for $450,000.
4
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<TABLE>
<CAPTION>
(1) Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements of
Dallas Gold and Silver Exchange, Inc. and Subsidiaries include the
financial statements of Dallas Gold and Silver Exchange, Inc. and its
wholly-owned subsidiaries, DGSE Corporation, DLS Financial Services, Inc.,
National Jewelry Exchange, Inc., Silverman Consultants, Inc. and eye media,
inc. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
The Company's operating results for the three month period ended March 31,
2000, are not necessarily indicative of the results that may be expected
for the year ended December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31,
1999.
On March 2, 2000, the Company acquired certain assets of Fairchild
International, Inc. The purchase price consisted of $350,000 in cash, a
promissory note for $450,000 and 62,745 shares of the Company's common
stock. The acquisition has been accounted for as a purchase. Accordingly, a
portion of the purchase price has been allocated to net tangible and
intangible assets acquired based on their estimated fair values.
(2) - Earnings per share
A reconciliation of the income and shares of the basic earnings per common
share and diluted earnings per common share for the period ended March 31.
2000 is as follows:
2000
-------------------------------------------
Per-share
Income Shares amount
------------ ---------- --------
<S> <C> <C> <C>
Basic earnings per common share
Income from operations allocable to
common stockholders $114,086 4,405,614 $.03
===
Effect of dilutive securities
Stock options and warrants -- 154,499
Convertible debt 3,877 208,333
-------- ---------
Diluted earnings per common share
Income from operations available to common
stockholders plus assumed conversions $117,963 4,768,446 $.02
======== ========= ===
No reconciliation for 1999 is provided because the effect is not dilutive.
(3) - Business segment information
The Company's operations by business segment were as follows:
Consulting Corporate
Software Liquidations Jewelry Services & other Consolidated
-------- ------------ ------- ---------- --------- ------------
Revenues
2000 $ 46,595 $1,296,330 $ 4,252,470 $ 271,729 $ - $ 5,867,124
1999 - - 4,642,953 (595,919) - 4,047,034
Operating income (loss)
2000 $ 16,063 $ (148,849) $ 104,379 $ 236,256 $( 33,763) $ 174,086
1999 - - 70,522 (635,199) (25,000) (589,677)
Identifiable assets
2000 $ 90,319 $3,865,731 $ 5,058,470 $2,029,681 $ - $11,044,201
1999 - - 2,457,277 2,990,466 - 5,447,743
5
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(3) - Business segment information, continued
Capital expenditures
2000 $ 6,000 $ - $ 144,690 $ - $ - $ 150,690
1999 70,078 70,078
Depreciation and
amortization
2000 $ 969 $ 36,012 $ 23,633 $ 4,407 $ - $ 65,201
1999- 25,372 4,200 29,572
(4) - Other comprehensive income
Other comprehensive income at December 31, 1999 and March 31, 2000 is as follows
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------------ ---------- ----------
Other comprehensive income (loss) at $ (10,500) $ 3,570 $ (6,930)
December 31, 1999
Unrealized holding losses arising during 2000 (70,806) 24,074 (46,732)
------------ --------- ----------
Other comprehensive income (loss) at
March 31, 2000 $ (81,306) $ 27,644 $ (53,662)
=========== ========= ==========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
Quarter ended March 31, 2000 vs 1999:
Sales for the first quarter of 2000 increased $946,140 or 20.4% when compared to
the corresponding quarter of 1999. The increase was the result of software sales
in the amount of $46,595, sales in the amount of $1,296,330 from the liquidation
business which the Company acquired in August 1999 and a decrease in sales in
the amount of $390,483 from the jewelry segment. The decrease in sales from the
jewelry segment was due to a $1,355,179 decline in precious metals sales. Pawn
service fees increased by 46.6% due to the acquisition of National Jewelry
Exchange, Inc. (formerly Beltline Pawn) in December 1998. Gain (loss) on
marketable securities - trading are the result of realized and unrealized gains
and losses on trading securities. Cost of sales increased by $293,208 primarily
due to the increase in sales volume.
General and administration expenses increased by $698,010 primarily due to the
acquisition of Silverman Consultants, Inc. in August 1999, payroll and related
cost and higher advertising cost. Interest expense increased by $53,652 due to
the debt assumed in the Silverman acquisition. Depreciation and amortization
expense increased by $35,449 due to depreciation on assets acquired in the
Silverman acquisition and amortization of goodwill.
Income tax expense and benefit are provided at the corporate rate of 34% for
both 2000 and 1999.
6
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Liquidity and Capital Resources
- -------------------------------
During the first quarter of 2000, the Company's sold $ 1,965,802 of marketable
securities. A portion of these funds were used to retire debt in the amount of $
1,357,474, the purchase and retirement of common stock in the amount of $79,934
and the purchase of common treasury stock in the amount of $ 108,172. Also,
during March 2000 the Company acquired certain assets of Fairchild
International, Inc. A cash payment in the amount of $ 350,000 was required as
part of the purchase price. In addition, during the first quarter of 2000, the
Company reduced accounts payable and accrued expenses by $ 658,680 and paid
federal income taxes in the amount of $ 115,000.
Management of the Company expects capital expenditures to total approximately
$100,000 during the balance of 2000. It is anticipated that these expenditures
will be funded from the Company's current working capital position.
From time to time, management has adjusted the Company's inventory levels to
meet seasonal demand or in order to meet working capital requirements.
Management is of the opinion that if additional working capital is required by
the Company, additional loans can be obtained from individuals or from
commercial banks. If necessary, inventory levels may be adjusted or a portion of
the Company's investments in marketable securities may be liquidated in order to
meet unforseen working capital requirement.
PART II. OTHER INFORMATION
- ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - 10.1 Bill of Sale and Asset Purchase Agreement
27 Financial Data Schedule
Reports on Form 8-K - None
7
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SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dallas Gold and Silver Exchange, Inc.
By: /s/ L. S. Smith Dated: May 12, 2000
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the date indicated.
By: /s/ L. S. Smith Dated: May 12, 2000
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: May 12, 2000
-------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: May 12, 2000
-------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
8
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EXHIBIT - 10.1
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BILL OF SALE
AND
ASSET PURCHASE AGREEMENT
by and among
DALLAS GOLD AND SILVER EXCHANGE, INC.
a Nevada corporation
("Buyer")
FAIRCHILD INTERNATIONAL, INC.,
a Texas corporation, d/b/a Fairchild Estate Buyers
(To be renamed Outreach Technologies and Research, Inc.)
("Seller")
and
MACK H. HOSKINS
("Shareholder")
Dated: March 2, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FAIRCHILD
<PAGE>
BILL OF SALE AND ASSET PURCHASE AGREEMENT
THIS BILL OF SALE AND ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into this day of March 2, 2000, by and among DALLAS GOLD AND
SILVER EXCHANGE, INC., a Nevada corporation ("Buyer"), FAIRCHILD INTERNATIONAL,
INC., a Texas corporation doing business as Fairchild Estate Buyers (to be
renamed Outreach Technologies and Research, Inc.) ("Seller"), and MACK H.
HOSKINS ("Shareholder").
RECITALS:
A. Seller is engaged in the business of the purchase and sale of new
and used fine watches (the "Business").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain of Seller's assets used in the Business, free and clear of any
and all liens, claims, charges, liabilities, encumbrances and security interests
of whatsoever kind and nature, except only for the Assumed Liabilities (as
hereinafter defined), upon the terms and conditions set forth in this Agreement.
C. Shareholder is the sole shareholder of Seller, and Shareholder
desires to cause Seller to perform its obligations under this Agreement and to
make certain representations and warranties to Buyer in connection with the
transactions contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth below, the parties hereby agree as follows:
1. Purchase and Sale of Purchased Assets. Seller hereby sells, assigns,
transfers, conveys and delivers to Buyer, and Buyer hereby purchases from
Seller, free and clear of any and all liens, claims, charges, liabilities,
encumbrances and security interests of whatsoever kind and nature, except only
the Assumed Liabilities, all of the following assets (collectively, the
"Purchased Assets"):
(a) Equipment. All furniture, office furniture, fixtures,
equipment, racking, office equipment, computer equipment and hardware
(together with all intellectual property used by Seller in the Business
in the operation of such computer equipment and hardware including, but
not limited to, all software and rights of Seller under licenses
related to Seller's use of such computer equipment, hardware and
software), machinery, parts (but excluding all watch bands and other
watch related parts) and tools, whether owned, leased or used by Seller
in the Business (the "Equipment"), including, but not limited to, the
Equipment described in Schedule 1(a) attached hereto;
(b) Contracts. All of Seller's service and provider contracts
and all other business contracts to which the Seller is a party or that
FAIRCHILD
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are required or beneficial for Buyer's operation of the Business (the
"Contract(s)"), including, but not limited to, the Contracts set forth
on Schedule 1(b) attached hereto;
(c) Intellectual Property. All intellectual property rights
owned by or licensed to Seller, including, but not limited to, all
know-how, trade secrets, business and marketing plans, copyrights, all
registered or unregistered trademarks, service marks and trade names,
proprietary information, ideas, licenses, processes, formulas, computer
programs, covenants by others not to compete, Seller's rights to email
addresses, Internet domain names, URLs, web sites and such other
computer records, computer numbers and passwords used by Seller, or
Shareholder, in connection with the Business, all names and slogans
used by Seller in the conduct of the Business, all applications for any
of the above and any right to recovery for infringement thereof
(including past infringement) and any and all goodwill associated
therewith or connected with the use thereof (the "Intellectual
Property") including without limitation, the Intellectual Property
listed on Schedule 1(c) attached hereto. The Intellectual Property
shall include, but not be limited to, all right, title and interest in
and to the names, Fairchild International, Inc., Fairchild Estate
Buyers and any derivations of any such names.
(d) Licenses, Permits and Approvals. All of Seller's licenses,
permits, approvals and authorizations of whatsoever kind and type,
governmental or private, issued, applied for, or pending (the "Licenses
and Permits"). Schedule 1(d) attached hereto contains a complete list
of all Licenses and Permits used by and required of Seller in the
conduct of the Business;
(e) Telephone and Facsimile Numbers. All telephone and
facsimile numbers used by Seller, including, but not limited to, those
telephone and facsimile numbers listed on Schedule 1(e) attached
hereto;
(f) Customer and Supplier Lists. Seller's customer and
supplier lists, true, correct and complete copies of which are attached
as Schedule 1(f) hereto, and all customer and supplier records related
to the Business;
(g) Deposits and Prepaid Expenses. All of Seller's right,
title, interest and equity in and to deposits and prepaid expenses,
including without limitation those deposits and prepaid expenses set
forth on Schedule 1.2(g) (the "Deposits");
(h) Capital and Operating Leases. All of Seller's right,
title, interest and equity under the equipment leases identified in
Schedule 1(h) attached hereto including, but not limited to, all
deposits and prepaid expenses related to all leases of Equipment;
(i) Books and Records. Except as set forth in Section 2
hereof, all books and records regarding the Business of Seller,
including, without limitation, maintenance and asset history records,
but excluding all inventory, employee and tax records; provided,
however, that access thereto shall be provided to Buyer pursuant to
Section 9(b) hereof; and
FAIRCHILD 2
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(j) Claims and Rights. All of Seller's claims and rights
associated in any way with the Purchased Assets and the Contracts.
(k) Goodwill. The goodwill of Seller's Business or associated
with the Purchased Assets.
(l) Other Property. All other or additional privileges,
rights, interests, properties and assets of every kind and description
and wherever located, that are used or intended for use in connection
with, or that are necessary to the continued conduct of the Business.
2. Excluded Assets. The following assets shall be excluded from the
purchase and sale contemplated by this Agreement (the "Excluded Assets"):
(a) Accounts Receivable. All accounts receivable of Seller;
(b) Inventory. All inventory of Seller;
(c) Cash. All of Seller's cash on hand and in banks;
(d) Bank Accounts. All right, title and interest in and to
Seller's bank accounts;
(e) Real Estate. All of Seller's ownership and leasehold
interests in real estate, wherever situated;
(f) Rights Hereunder. All of Seller's rights hereunder;
(g) Corporate Documents. All of Seller's corporate charter
documents, minute and stock record books and corporate seals; and
(h) Employee Records. All of Seller's records with respect to
inventory and employees, provided that access thereto shall be provided
to Buyer pursuant to Section 9(b) hereof.
(i) Leasehold Deposit. Seller's leasehold deposit.
3. Assumption of Certain Liabilities.
(a) Assumed Liabilities. Buyer hereby assumes and agrees to
undertake, pay, perform and/or discharge only the Liabilities of Seller
arising from and after the Closing Date pursuant to the Contracts set
forth on Schedule 1(b) attached hereto, but in each case only to the
extent the Contract is not in default and only to the extent that the
Liability relates to the performance of the applicable Contract by
Buyer or its assignee after the Closing and from a set of circumstances
that began after the Closing ("Assumed Liabilities"). For purposes of
this Agreement the term "Liability" shall mean any commitments, debts,
liabilities, obligations (including contract and capitalization lease
FAIRCHILD 3
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obligations), indebtedness, accounts payable and accrued expenses of
any nature whatsoever (whether any of the foregoing are known or
unknown, secured or unsecured, asserted or unasserted, absolute or
contingent, direct or indirect, accrued or unaccrued, liquidated or
unliquidated and/or due or to become due), including any liability or
obligation for Taxes.
(b) No Third Party Beneficiaries or Expansion of Rights.
Notwithstanding anything contained herein to the contrary, nothing in
this Agreement, express or implied, is intended to or shall be
construed to confer upon, or give to, any person, partnership,
corporation or other entity other than Seller and Shareholder, any
remedy or claim under or by reason of this Agreement or any terms,
covenants or conditions hereof, and all the terms, covenants and
conditions, promises and agreements contained in this Agreement shall
be for the sole and exclusive benefit of Seller and Shareholder.
This Agreement shall, in all events, be construed so that the
assumption by Buyer of the Assumed Liabilities, and the delegation
thereof by Seller, shall in no way expand or increase the rights and/or
remedies of any third party against either Buyer or Seller as compared
to the rights and/or remedies that such third party would have had
against Seller had Buyer not assumed such liabilities. Without limiting
the generality of the preceding sentence, the assumption by Buyer of
the Assumed Liabilities shall not create any third party beneficiary
rights.
(a) Excluded Liabilities. Except only for the Assumed
Liabilities, Buyer shall not be required to directly or indirectly pay,
perform, discharge, or in any manner become obligated for, any
Liabilities of Seller or Shareholder whatsoever (the "Excluded
Liabilities").
(b) Payment of Accrued Payroll, Vacation and Sick Pay. Prior
to or at the Closing (as hereinafter defined), Seller shall have paid
to its employees all accrued payroll, vacation and sick pay and
associated taxes to which such employees are entitled through the
Closing Date.
2. Purchase Price; Manner of Payment; Allocation.
(a) Purchase Price and Manner of Payment. The total purchase
price for the Purchased Assets (the "Purchase Price") shall be payable
at Closing as follows:
(i) Buyer shall deliver to Seller a cashier's check in the
amount of Three Hundred Forty Four Thousand Dollars ($344,000) (the
"Cash Payment");
(ii) Buyer shall deliver to Seller its promissory note (the
"Note") in the form of Exhibit A attached hereto in the principal
amount of Four Hundred Fifty Thousand Dollars ($450,000); and
(iii) Buyer shall issue to Seller 62,745 shares (the "Shares")
of the common stock, par value $.01 per share (the "Common Stock") of
Buyer.
FAIRCHILD 4
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(b) Purchase Price Allocation. The Purchase Price shall be
allocated amongst the Purchased Assets as set forth in Exhibit B
attached hereto (the "Allocation"). Buyer and Seller agree to report
the transactions set forth herein for federal and state tax purposes in
accordance with the Allocation, including, but not limited to, for
purposes of filing IRS Form 8594.
3. Noncompetition, Nonsolicitation and Confidentiality Agreements. At
Closing, Mack H. Hoskins, Tom Larson, David Larson and Mark Brown shall each
enter into a Noncompetition, Nonsolicitation and Confidentiality Agreement with
Buyer in substantially the form of Exhibit C hereto (the "Noncompetition,
Nonsolicitation and Confidentiality Agreement"). In consideration in part of the
covenants of each of Tom Larson, David Larson and Mark Brown contained in their
respective Noncompetition, Nonsolicitation and Confidentiality Agreement, at
Closing Buyer shall pay to each of them Two Thousand Dollars ($2,000) by
delivery of a check.
4. Representations and Warranties of Seller and Shareholder. Seller and
the Shareholder jointly and severally represent and warrant to Buyer as follows:
(a) Organization. Seller is a corporation duly organized,
validly existing and in good standing under laws of the State of Texas
and is duly qualified to do business in each other jurisdiction wherein
such qualification is required of Seller.
(b) Capital Stock. Seller has authorized capital stock
consisting of One Million (1,000,000) shares of common stock, par value
$1.00 per share, of which One Thousand (1,000) shares are presently
issued and outstanding and are all held beneficially and of record by
Shareholder. There are no other authorized or outstanding securities of
Seller, of any class, kind or character. There are no outstanding
subscriptions, options, warrants or other rights, agreements or
commitments obligating Seller to issue any additional shares of capital
stock of Seller, or any options or rights with respect thereto, or any
securities convertible into or exchangeable for any shares of capital
stock of Seller.
(c) Enforceability and Authority. This Agreement and the other
documents and instruments executed by Seller in connection herewith
(the "Other Documents"), have been duly executed and delivered by the
Seller and constitute legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
Seller has full power and authority (both legal and corporate) to
execute and deliver this Agreement and the Other Documents, and to
perform its obligations hereunder and thereunder, and all required
approvals of the Board of Directors of Seller and the shareholders of
Seller have been duly and properly obtained.
(d) Title. Seller has and is conveying good and marketable
title to the Purchased Assets, free and clear of any and all liens,
claims, charges, liabilities, encumbrances and security interests of
every kind and nature, except only for the Assumed Liabilities. Upon
Closing, Buyer will own the Purchased Assets free and clear of all
FAIRCHILD 5
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liens, claims, charges, liabilities, encumbrances and security
interests of whatsoever kind and nature ("Liens").
(e) Taxes. Seller has properly completed and filed in correct
form and on a timely basis all tax returns, and other required tax
forms, with respect to all sales, excise, transaction privilege,
business license, employment, withholding, income, franchise and real
and personal property taxes, and all other local, state and federal
taxes (collectively, the "Taxes") that are required of Seller to be
filed prior to the date hereof, and has timely paid all Taxes and all
assessments of every kind and nature owing by Seller as such Taxes and
assessments have accrued and/or become due or payable.
(f) Conflicts; Consents. Except as set forth on Schedule 6(f)
attached hereto, neither the execution and delivery of this Agreement
and/or the Other Documents, nor the consummation of the transactions
contemplated hereby or thereby will conflict with, violate or result in
a breach of or default under (with or without the giving of notice or
the passage of time, or both): (i) the Articles of Incorporation or the
Bylaws of Seller; (ii) any license, instrument, contract or agreement
(including any Contract) to which Seller is a party or by which Seller
or any of the Purchased Assets are bound; or (iii) any law, order,
rule, regulation, writ, injunction or decree that is applicable to
Seller or any Shareholder, or that may affect any of the Purchased
Assets. Neither the execution and delivery of this Agreement, nor of
any of the Other Documents, nor the consummation by Seller or
Shareholder of the transactions contemplated hereby or thereby, will
require any consent or approval of, or any filing with, any entity or
other person, including any governmental entity or body, except as set
forth on Schedule 6(f) attached hereto.
(g) Condition of Equipment. Except as otherwise specifically
noted on Schedule 1(a), the Equipment set forth on Schedule 1(a)
attached hereto constitute all material tangible personal property used
by Seller in the Business, and is sufficient to enable Buyer to conduct
the Business in the same manner after the Closing as Seller operated
and conducted the Business immediately prior to the Closing. Except as
otherwise specifically noted on Schedule 1(a) attached hereto, all
Equipment is in first-class condition and repair, and is in first-class
operating condition and is adequately insured against damage and loss
through the Closing Date. All Equipment is located at the location set
forth on Schedule 6(g) attached hereto.
(h) Names. The only names under which Seller has conducted the
Business are "Fairchild International, Inc." and "Fairchild Estate
Buyers."
(i) Liabilities of Seller. Seller has no Liabilities, except
(i) those reflected in the balance sheet contained in the most recent
Financial Statements, (ii) Liabilities incurred in the ordinary course
of business since the date of the most recent Financial Statements
(none of which results from, or was caused by any breach of contract,
breach of representation or warranty, tort, infringement or violation
of law) and (iii) except as may be set forth on Schedule 6(i) attached
hereto.
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(j) Litigation and Related Matters. Except as disclosed on
Schedule 6(j)(l) attached hereto, there is no litigation pending or
threatened relating to or that could adversely affect the Purchased
Assets or Buyer's use of the Purchased Assets after the Closing, and no
basis for any such litigation. The Seller has duly complied with, and
the Business and its operations, assets, equipment, leaseholds and
other facilities are in compliance with, the provisions of all federal,
state and local environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated thereunder (the
"Environmental Laws"). Neither Shareholder nor Seller have received
notice of, nor do they know of, any past, present or future events,
conditions, circumstances, practices, incidents or actions that may
interfere with or prevent compliance or continued compliance, or that
might constitute a violation of, any Environmental Laws which relate to
the use, ownership or occupancy of real estate or the operation of the
Business. Except as set forth on Schedule 6(j)(2) attached hereto,
Seller does not have any obligations, contingent or otherwise, under
any employment or consulting agreement with any individual, nor does
Seller have any such obligations under any collective bargaining
agreement or other contract with a labor union or other labor or
employee group. Seller is in full compliance with all federal, state or
other applicable laws, domestic or foreign, regarding employment and
employment practices, terms and conditions of employment and wages and
hours, and has not and is not engaged in any unfair labor practice.
(k) Contracts. Each of the Contracts is in full force and
effect as of the Closing, and there are no existing defaults or
breaches under any of the Contracts, and no event or condition exists
which, with the passage of time and/or with or without the giving of
notice, could constitute a default or a breach under any of the
Contracts. None of the Contracts will be terminated or breached as a
result of the transactions contemplated herein.
(l) Financial Statements. The financial statements of Seller
attached to Schedule 6(l) hereto are true, correct and complete, and
fairly present the financial condition of Seller during the periods
covered, and were prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods
(the "Financial Statements"). Since the date of the most recent
Financial Statements, the Business has been operated in the ordinary
course consistent with past practice and there has not been (a) any
material adverse change in the Business, operations, properties,
condition (financial or otherwise), prospects, assets or liabilities of
the Business (contingent or otherwise, whether due or to become due,
known or unknown), (b) any pending or threatened litigation or disputes
affecting the Business, (c) any transaction or contract, except normal
transactions or contracts consistent in nature and scope with prior
practices and entered into in the ordinary course of business
consistent with past practices, (d) any sale, transfer, distribution or
other disposition of any Purchased Assets by Seller, (e) any material
damage, destruction or loss by Seller of the Purchased Assets, (f) any
grant or credit to any customer or supplier on terms more favorable
than the terms on which credit has been extended to such customer or
supplier in the past nor changed the terms of any credit previously
extended, or (g) any other change in the nature of, or the manner of
conducting the Business..
FAIRCHILD 7
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(m) Product and Service Warranties. There is no claim against
or liability of Seller on account of product or service warranties or
with respect to the sale or lease of products or performance of
services, and there is no basis for any such claim on account of
products heretofore sold or leased or services performed.
(n) Solvency. Seller is not now insolvent, nor will Seller be
rendered insolvent by the consummation of the transactions contemplated
by this Agreement. In addition, immediately after giving effect to the
transactions contemplated by this Agreement, (1) Seller will be able to
pay its debts as they become due, (2) Seller will not have unreasonably
small capital and will not have insufficient capital with which to
conduct their present or proposed business and (3) taking into account
pending and threatened litigation, final judgments against Seller in
actions for money damages are not reasonably anticipated to be rendered
at a time when, or in amounts such that, Seller will be unable to
satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum probable amount of such judgments in
any such actions and the earliest reasonable time at which such
judgments might be rendered). The cash available to Seller, after
taking into account all other anticipated uses of the cash of Seller,
will be sufficient to pay all such judgments promptly in accordance
with their terms. As used in this Section, (x) "insolvent" means, for
any person or entity, that the sum of the present fair saleable value
of its assets does not and/or will not exceed its obligations for
borrowed money and other probable liabilities, and (y) the term "debts"
includes any legal liability, whether matured or unmatured, liquidated
or unliquidated, absolute, fixed or contingent, disputed or undisputed
or secured or unsecured.
(o) Claims and Prepayments. Seller does not currently have any
outstanding and/or unresolved claims or issues asserted by customers.
Seller does not have any prepayments or deposits from customers other
than those listed in Schedule 6(o) attached hereto.
(p) Compliance with Law. Seller has not violated or failed to
comply with any federal, state or local law, constitution, ordinance,
code, rule or regulation of any federal, state, municipal or other
governmental department, commission, board, agency or authority or any
judgment, order, unit, injunction or decree of any court applicable to
the Business.
(q) Accuracy of Documents, Representations and Warranties. The
copies of all documents furnished to Buyer or its representatives by or
on behalf of Shareholder or Seller, or their respective
representatives, are true, correct and complete. No representation or
warranty of Seller or Shareholder contained in this Agreement or any of
the other documents delivered by or on behalf of Seller or Shareholder,
or their respective representatives, pursuant to or in connection with
this Agreement, or any other document or instrument executed by Seller
or Shareholder in connection herewith or therewith, or any of the
transactions contemplated hereby or thereby, contains any untrue
statement of a material fact, or omits to state any material fact
required to be stated herein or therein in order to make the statements
contained herein or therein not misleading.
FAIRCHILD 8
<PAGE>
(r) Private Offering. The Shares and the Note are being issued
without registration under federal or state securities laws by reason
of an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act") set forth in Section
4(2) and appropriate exemptions under any applicable state securities
law. The availability of such exemptions, and the ability of Buyer to
issue the Shares and the Note to Seller is conditioned upon and subject
to the following representations and warranties of Seller:
(i) Seller is an "accredited investor" within the
meaning of Rule 501 of Regulation D of the Securities act of
1933, as amended (the "Securities Act");
(ii) Seller has adequate net worth and means for
providing for its current financial needs and contingencies
and has no need for liquidity in the Shares or the Note;
(iii) Seller has substantial experience, or is
managed or directed by a person having substantial experience,
in making investment decisions of this type;
(iv) Seller is acquiring the Shares and the Note for
investment and not with a view to the resale or distribution
thereof;
(v) Seller is aware that the transfer rights of
Seller are restricted by the Securities Act and applicable
state securities laws and that the certificates evidencing the
Shares will bear a restrictive legend prohibiting the transfer
thereof except in compliance with applicable state and federal
securities laws, and may not be transferred except in
compliance therewith;
(vi) Seller has reviewed the Reports (as hereinafter
defined), and understands all risk involved in acquiring the
Shares and the Note;
(vii) Seller has been afforded by Buyer the
opportunity to ask questions and receive answers concerning
the issuance of the Shares and the Note and to obtain any
additional information to verify the accuracy of the
information contained in the Reports and any exhibits thereto;
(viii) Seller is a Texas corporation with its
principal place of business located in the State of Texas; and
(ix) Seller will not offer, sell, pledge or otherwise
dispose of any or all of the Shares unless (i) Seller delivers
to Buyer an opinion in form and substance and from counsel
reasonably satisfactory to Buyer to the effect that
registration under the Securities Act and applicable state
securities laws is not required, or (ii) the Shares are sold
pursuant to an effective registration statement.
5. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Buyer as follows:
FAIRCHILD 9
<PAGE>
(a) Ownership. Shareholder is the sole shareholder of Seller,
and has good and marketable title to and rightful possession of all of
the shares of the capital stock of Seller, free and clear of any and
all liens, claims, charges, encumbrances and security interests of any
nature or type whatsoever.
(b) Enforceability and Capacity. This Agreement and all other
documents and instruments executed and delivered by Shareholder in
connection with this Agreement including Shareholder's Noncompetition,
Nonsolicitation and Confidentiality Agreement constitute legal, valid
and binding obligations of Shareholder, enforceable against Shareholder
in accordance with their respective terms. Shareholder has the full
power and legal capacity to execute and deliver this Agreement and all
such other agreements, documents and instruments to be executed and
delivered by Shareholder pursuant hereto including Shareholder's
Noncompetition, Nonsolicitation and Confidentiality Agreement, and to
perform all obligations hereunder and thereunder.
6. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Texas.
(b) Enforceability and Authority. This Agreement and the other
documents and instruments executed by Buyer in connection herewith have
been duly executed and delivered by Buyer and constitute legal, valid
and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has full power and
authority (both legal and corporate) to execute and deliver this
Agreement and the other documents and instruments executed and
delivered by Buyer in connection with this Agreement.
(c) Consents. Neither the execution and delivery of this
Agreement, nor any of the other documents and instruments executed by
Buyer in connection with this Agreement, nor the consummation by Buyer
of the transactions contemplated hereby or thereby, will require any
consent or approval of, or any filing with, any entity or other person,
including any governmental entity or body, except as set forth on
Schedule 8(c) attached hereto.
(d) Financial Statements. Buyer has made available to Seller
(i) Buyer's annual report on Form 10-KSB for the fiscal year ended
December 31, 1998 and Buyer's Quarterly Reports on Form 10-QSB for the
fiscal quarters ended March 31, 1999, June 30, 1999, and September 30,
1999, respectively (ii) Buyer's Proxy Statement for its 1999 Annual
Meeting of Stockholders, and (iii) each of Buyer's Current Reports on
Form 8-K relating to an event or transaction occurring since September
30, 1999, each in the form filed with the U.S. Securities and Exchange
Commission (collectively, the "Reports"). Each of the consolidated
balance sheets included in or incorporated by reference into the
Reports (including the related notes and schedules) fairly presents, in
FAIRCHILD 10
3
<PAGE>
all material respects, the financial position of Buyer and its
subsidiaries as of its date, and each of the consolidated statements of
income and of cash flows included in or incorporated by reference into
the Reports (including any related notes and schedules) fairly
presents, in all material respects, the results of operations, retained
earnings and cash flows, as the case may be, of Buyer and its
subsidiaries for the period set forth therein (subject, in the case of
unaudited statements to normal year-end audit adjustments) in each case
in accordance with generally accepted accounting principles as in
effect from time to time applied on a consistent basis. Each Report did
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading at the time of filing.
(e) Shares. The Shares to be issued to Seller in connection
with the consummation of the transaction contemplated by this Agreement
will be validly issued and outstanding, fully paid and nonassessable.
The Shares will be "restricted securities" (as such term is defined in
Rule 144 promulgated under the Securities Act) and will not be
registered with the U.S. Securities and Exchange Commission under the
Securities Act.
7. Covenants.
(a) Change of Name. On the Closing Date, Seller and
Shareholder shall execute such documents and resolutions as are
necessary to change Seller's name to another name which is not
deceptively similar to any name used by Seller prior to the Closing
Date and, within twenty (20) days thereafter, Seller shall deliver to
Buyer a copy of the Amendment to Seller's Articles of Incorporation
reflecting such change of name and certified by the Secretary of State
of Texas. Further, Seller shall, within five days following the
Closing, execute and file with the Secretary of State of Texas and such
other appropriate authorities, such documents and/or instruments
necessary to abandon Seller's use of the assumed name "Fairchild Estate
Buyers." Seller, Shareholder and Thomas W. Larson agree not to operate
any future or present business activity under the names (including
assumed names) "Fairchild International," "Fairchild Estate Buyers" or
any derivatives thereof.
(b) Inspection of Records. Seller shall make its books and
records applicable to its day to day operations (including work papers
in the possession of Seller's accountants) available for inspection by
Buyer, or by Buyer's authorized representatives, for reasonable
business purposes at all reasonable times during normal business hours,
for a period of two (2) years after the Closing. As used in this
Section 9(b), the right of inspection shall include the right to make
extracts or copies at Buyer's expense.
(c) Payment of Taxes. Following the Closing, Seller shall file
in a timely manner all requisite federal, state, local and other
governmental income, payroll, excise, sales, personal property, real
estate, and franchise or other tax reports or returns required to be
filed and shall pay in a timely manner all taxes, interest and
penalties due in accordance with such returns. In addition, Seller
shall pay in a timely manner all such taxes which would not require the
filing of returns and which are required to be paid by it or by any
FAIRCHILD 11
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person from who it may have an obligation to collect the same. Any
sales, transfer or similar taxes payable with respect to the sale of
the Purchased Assets to Buyer pursuant to this Agreement shall be paid
by Seller.
8. Survival; Indemnification; Offset; Third-Party Claims.
(a) Survival. The representations, warranties, covenants and
indemnifications set forth herein shall survive the execution and
delivery of this Agreement and all of the agreements contemplated by
this Agreement. The representations, warranties, covenants and
indemnifications contained herein shall not be affected by any
investigation, verification, approval or subsequent notice made by or
on behalf of any party hereto. No specific representation or warranty
shall limit the generality or applicability of a more general
representation or warranty.
(b) Indemnification by Seller and Shareholder. Seller and the
Shareholder, jointly and severally, covenant and agree to defend,
indemnify and hold Buyer and Buyer's officers, directors, stockholders,
successors and assignees harmless, from and against any and all
damages, losses, Liabilities, fines, penalties, costs and expenses
(including, but not limited to, reasonable counsel fees and costs and
expenses incurred in the investigation, defense or settlement of any
claim covered by this indemnity, but excluding any Assumed Liability)
with respect to or arising out of any demand, claim, inquiry,
investigation, proceeding, action or cause of action, environmental
assessment and/or remediation expense that Buyer or its officers,
directors, stockholders, successors or assignees may suffer or incur by
reason of:
(i) any breach of, or any inaccuracy in, any
representation or warranty of Seller or Shareholder contained
herein or in any document or instrument executed and delivered
pursuant hereto or thereto, including any Other Document;
(ii) the non-performance of any covenant or
obligation to be performed by Seller or Shareholder contained
herein or in any document or instrument executed and delivered
pursuant hereto or thereto, including any Other Document;
(iii) any Liability of Seller of any nature,
presently existing or arising out of any state of facts
existing on or prior to the Closing Date, or arising after the
Closing Date in connection herewith or arising out of the
conduct of the Business or any use or ownership of any of the
Purchased Assets on or prior to the Closing Date;
(iv) any Liability of any nature, presently existing
or arising out of any pending or threatened litigation,
claims, investigations, inquiries, regulatory audits or
assessments, or similar proceedings against Seller and/or its
directors, officers, shareholders, employees, agents or
representatives, as well as any future litigation, claims,
investigations, inquiries, regulatory audits or assessments,
or other similar proceedings against Seller and/or its
directors, officers, shareholders, employees, agents or
representatives;
FAIRCHILD 12
<PAGE>
(v) any Liability arising from any employment
relationship or for any salary or other compensation or
benefits attributable to service or employment with Seller or
any of its affiliates (including any employee benefit plan,
all Liabilities under the Occupational Safety and Health Act
("OSHA"), any Liabilities under the Employee Retirement Income
Security Act, as amended, or the Internal Revenue Code of
1986, as amended, and any Liabilities to any governmental body
or authority or related to any failure to comply with
applicable law, regulations, etc. in each case arising from
facts or circumstances existing on or prior to the Closing
Date;
(vi) any Excluded Liability, including, without
limitation, any Tax liabilities;
(vii) any actual or threatened violation of, or
non-compliance with, or remedial obligation arising under, any
Environmental Laws arising from any event, condition,
circumstance, activity, practice, incident, action or plan
existing or occurring prior to the Closing relating in any way
to the assets or the business of Seller;
(viii) Seller's failure to comply with the laws of
any jurisdiction with respect to the bulk sales laws that may
be applicable to the sale of the Purchased Assets to Buyer as
contemplated hereby.
(c) Offset. Buyer shall be entitled to offset against any
sums, now or at anytime hereafter due and owing to Seller or the
Shareholder, and their permitted successors, heirs, legal
representatives, executors and assigns, including, without limitation,
any amounts due under the Note, by any amount(s) owing to Buyer from
Seller or the Shareholder whether arising out of an obligation for
indemnification pursuant to this Section 10 or otherwise.
(d) Third-Party Claims. Promptly upon receipt of notice of any
claim, demand or assessment or the commencement of any suit, action or
proceeding with respect to which indemnity may be sought pursuant to
this Section 10, Buyer shall notify in writing, if possible, within
sufficient time to respond to such claim or answer or otherwise plea in
such action, the party(ies) from whom indemnification is sought
(individually or collectively, as applicable, the "Indemnitor"). In
case any claim, demand or assessment shall be asserted, or suit, action
or proceeding is commenced against Buyer, the Indemnitor shall be
entitled, at the Indemnitor's expense, to participate therein, and, to
the extent that it or they may wish, to assume the defense, conduct or
settlement thereof, at its or their own expense, with counsel
satisfactory to Buyer, whose consent to the selection of counsel shall
not be unreasonably withheld or delayed, provided that the Indemnitor
confirms to Buyer that it is a claim to which Buyer's rights of
indemnification apply within ten (10) days of receiving notice from
FAIRCHILD 13
<PAGE>
Buyer. The Indemnitor shall have the right to settle or compromise
monetary claims; however, as to any other claim, the Indemnitor shall
first obtain the prior written consent from Buyer, which consent shall
be exercised in Buyer's sole discretion. After notice from the
Indemnitor to Buyer of the Indemnitor's intent to so assume the
defense, conduct, settlement or compromise of such action, the
Indemnitor shall not be liable to Buyer for any legal or other expenses
(including, without limitation, settlement costs) subsequently incurred
by Buyer in connection with the defense, conduct or settlement of such
action by Buyer while the Indemnitor is diligently defending,
conducting, settling or compromising such action. The Indemnitor shall
keep Buyer apprised of the status of the suit, action or proceeding and
shall make the Indemnitor's counsel available to Buyer, at the
Indemnitor's expense, upon the request of Buyer. Buyer shall cooperate
with the Indemnitor in connection with any such claim and shall make
personnel, books and records and other information relevant to the
claim available to the Indemnitor to the extent that such personnel,
books and records and other information are in the possession and/or
control of Buyer. If the Indemnitor decides not to participate or does
not respond within ten (10) days of receiving notice from Buyer, then
Buyer shall be entitled, at the Indemnitor's expense, to defend,
conduct, settle or compromise such matter with counsel selected by
Buyer.
9. Shareholder's Guarantee of Obligations.
(a) Shareholder hereby absolutely and unconditionally
guarantees the full, prompt and complete payment and performance by
Seller, when and as due, of each and every obligation of Seller arising
out of and/or pursuant to this Agreement and/or any of the Other
Documents.
(b) Shareholder hereby expressly waives any right to require
Buyer to:
(i) proceed against Seller; or
(ii) pursue any other remedy in Buyer's power.
Shareholder also expressly waives any defense arising by reason of any
disability or other defense of Seller or by reason of the cessation of
or from any cause whatsoever (other than full performance by Seller) of
the liability of Seller for all or any part of the obligations
hereunder. Shareholder waives due diligence, presentment, notice of
default, demand for performance or payment, notice of non-performance,
protest, notice of dishonor and notice of acceptance of the provisions
of this Section 11, and all rights and privileges that Shareholder
might otherwise have to require Buyer to pursue any other remedy
available to it in any particular manner or order.
(a) Shareholder agrees that the provisions of this Section 11
shall apply to and be binding upon Shareholder and Shareholder's heirs,
legal representatives and permitted assigns. The provisions of this
Section 11 shall inure to the benefit of Buyer and its successors and
assigns.
(b) No delay or failure of Buyer, in exercising any right
hereunder shall affect that right nor shall any single or partial
exercise of any right hereunder preclude further exercise thereof.
FAIRCHILD 14
<PAGE>
2. Bill of Sale; Assumption of Liabilities. This Agreement is intended
to also operate as a bill of sale and shall be evidence of the transfer of the
Purchased Assets as provided for herein and the assumption by Buyer of the
Assumed Liabilities, and such transfer and assumption is made based in
substantial part on the representations and warranties and obligations provided
for herein.
3. Time and Place of Closing. The transactions contemplated by this
Agreement shall be consummated at a closing (the "Closing") held on the date
hereof (the "Closing Date") at the Dallas, Texas offices of Arter & Hadden LLP,
or at such other place as the parties may mutually designate, and shall be
effective at 12:01 a.m., Dallas, Texas Time, on March 3, 2000.
4. Expenses; Brokers.
(a) Each of the parties hereto shall pay its own legal,
accounting and other expenses incurred in connection herewith and the
transactions contemplated hereby.
(b) Each of the parties hereto represents and warrants that no
finder, broker or other person is entitled to any commission, fee or
other compensation in connection with any of the transactions
contemplated by this Agreement.
5. Severable Provisions; Enforceability. Each provision of this
Agreement is intended to be severable. If any provision hereof shall be declared
by a court of competent jurisdiction to be illegal, unenforceable or invalid for
any reason whatsoever, such illegality, unenforceability or invalidity will not
affect the validity of the remainder of this Agreement or applicable provision.
In the event of a breach or threatened breach by Seller or Shareholder of any
representation, warranty or covenant herein, Buyer shall be entitled to obtain,
without the necessity of posting any bond therefor, an order for specific
performance requiring Seller and/or Shareholder to fully, promptly and
completely perform any of its, their and/or his obligations hereunder. The
remedies provided in this Section 15 shall be in addition to and not in lieu of
any other remedies of Buyer at law or in equity, which remedies shall be
cumulative.
6. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, REGARDLESS OF ANY
CONFLICT OF LAW RULES TO THE CONTRARY.
7. Entire Agreement. This Agreement and the exhibits and schedules
attached hereto constitute the entire Agreement among the parties with respect
to the purchase and sale of the Purchased Assets and the other matters
referenced herein. This Agreement, therefore, supersedes any and all prior
agreements, arrangements, communications, and representations, whether oral or
written, among the parties, or any of them, relating to the subject matters
hereof.
8. Construction. The parties hereto acknowledge that each party was
represented by legal counsel, or had the opportunity to obtain legal counsel, in
connection with this Agreement and that each party and each party's counsel, as
applicable, have reviewed and revised this Agreement, or have had an opportunity
to do so, and that any rule of construction to the effect that ambiguities are
FAIRCHILD 15
<PAGE>
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
9. Further Assurances. Each party hereto agrees to do all acts and
things and to make, execute, and deliver such written instruments as shall from
time to time be reasonably required to further evidence the sale and transfer of
the Purchased Assets, and to carry out the terms and provisions of this
Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
assigns, legal representatives, executors, heirs and successors. This Agreement
may not be assigned by the Seller or the Shareholder without the prior written
consent of the Buyer.
11. Amendment, Modification or Waiver. No amendment, modification or
waiver of any condition, provision or term of this Agreement shall be valid or
of any effect unless made in writing, signed by the party or parties to be bound
and specifying with particularity the nature and extent of such amendment,
modification or waiver.
12. Notices. Any notice or other communication required or permitted to
be given to any party pursuant to this Agreement shall be in writing and shall
be deemed to have been delivered: (a) if mailed, three (3) days after deposited
in the United States mail, postage prepaid; (b) if telecopied, upon delivery;
(c) if hand-delivered, upon delivery against receipt or upon refusal to accept
the notice; or (d) if delivered by Federal Express or other similar courier, one
(1) day after deposited with such courier, postage prepaid, in each case,
addressed to such party at the address set forth below:
(a) If to the Seller or Shareholder:
Fairchild International, Inc.
(To be renamed Outreach Technologies and Research, Inc.)
9330 LBJ Freeway #850
Dallas, Texas 75243
Attention: Mack H. Hoskins
Facsimile:214.238.7706
With a copy to:
Sullivan, Ave & Holston
3100 Monticelo
Suite 725
Dallas, Texas 75205
Facsimile: 214.528.9581
(a) If to Buyer:
Dallas Gold and Silver Exchange, Inc.
519 IH 30, Suite 243
Rockwall, Texas 75087
Attention: Dr. L.S. Smith
Facsimile: 972.772.3093
FAIRCHILD 16
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With a copy to:
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attention: Robin Bradford, Esq.
Facsimile: 214.741.7139
or to such other place as the respective addressee may have designated in a
written notice to the other party as provided in this Section. Notices may be
given by each party's respective legal counsel.
1. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.
2. Execution by Facsimile; Delivery of Original Signed Agreement. This
Agreement may be executed by facsimile, and shall be deemed effectively executed
upon the receipt by Buyer, Seller and Shareholder of the last page of this
Agreement duly executed by the other parties hereto. Each party to this
Agreement agrees to deliver two (2) original, inked and signed copies of this
Agreement within four (4) days of faxing the executed last page hereof.
[Signature Page Follows]
FAIRCHILD 17
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller, and Shareholder have executed and
delivered this Agreement as of the day and year first above written.
BUYER:
DALLAS GOLD AND SILVER EXCHANGE, INC.,
a Nevada corporation
By: -----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
SELLER:
FAIRCHILD INTERNATIONAL, INC., a Texas
corporation, d/b/a Fairchild Estate Buyers
(To be renamed )
---------------------------
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
SHAREHOLDER:
-----------------------------------------
Mack H. Hoskins
Guaranty
The undersigned hereby guarantees, unconditionally and absolutely, the
payment and performance by the Seller, when and as due, of all indebtedness,
liabilities and obligations of Seller to Buyer arising out of and/or pursuant to
this Agreement and/or any of the Other Documents. The undersigned further
executes this Agreement to evidence its agreement to the covenant set forth in
Section 9(a) herein.
-----------------------------------
Thomas W. Larson
Address:
-------------------------
-------------------------
FAIRCHILD 18
<PAGE>
LIST OF EXHIBITS
Exhibit A - Promissory Note
Exhibit B - Purchase Price Allocation
Exhibit C - Noncompetition, Nonsolicitation and Confidentiality Agreement
FAIRCHILD
<PAGE>
LIST OF SCHEDULES
Schedule 1(a) - Equipment
Schedule 1(b) - Contracts
Schedule 1(c) - Intellectual Property
Schedule 1(d) - Licenses and Permits
Schedule 1(e) - Telephone and Facsimile Numbers
Schedule 1(f) - Customer and Supplier Lists
Schedule 1(g) - Deposits
Schedule 1(h) - Capital Leases
FAIRCHILD 2
<PAGE>
EXHIBIT A
---------
PROMISSORY NOTE
$450,000.00 March __, 2000
FOR VALUE RECEIVED, on or before March __, 2005 ("Maturity Date"), the
undersigned (hereinafter referred to as "Borrower"), promises to pay to the
order of FAIRCHILD INTERNATIONAL, INC. ("Payee") at its offices in Dallas
County, Texas at 9330 LBJ Freeway, #850, Dallas, Texas, the principal amount of
FOUR HUNDRED FIFTY THOUSAND AND NO/100 ($450,000.00) ("Total Principal Amount"),
together with interest on the unpaid portion of the Total Principal Amount from
the date hereof until paid and at a fixed rate per annum equal to eight percent
(8%) per annum, calculated on the basis of the actual days elapsed in a year of
365 or 366 days as applicable as follows:
(i) nineteen (19) consecutive equal quarterly installments of
principal and interest in the amount of TWENTY SEVEN THOSUAND THREE
HUNDRED SEVENTY THREE AND 14/100 DOLLARS ($27,373.14) each, on March
31, June 30, September 30, December 31 of each year commencing June 30,
2000; and
(ii) a final payment in the amount of the outstanding
principal balance of this Note, together with all accrued but unpaid
interest, shall be due and payable at the Maturity Date.
Upon the occurrence of any Event of Default (as hereinafter defined),
the unpaid principal balance of this Promissory Note ("Note") shall thereafter
bear interest at a fixed rate per annum equal to the lesser of (a) the Maximum
Rate (as hereinafter defined) or (b) ten percent (10%) per annum, calculated on
the basis of actual days elapsed in a year of 365 or 366 days as applicable. The
term "Maximum Rate," as used herein, shall mean at the particular time in
question the maximum rate of interest which, under applicable law, may then be
charged on this Note.
Borrower may from time to time prepay all or any portion of the
principal of this Note without premium or penalty. All payments and prepayments
shall be applied first to unpaid, accrued interest, then to principal and any
remaining amount to any unpaid collection costs; provided, however, upon an
Event of Default, Payee reserves the right to apply payments among principal,
interest and collection charges at its discretion. All payments and prepayments
on this Note shall be made in lawful money of the United States of America in
immediately available funds, at the address of Payee indicated above, or such
other place as the holder of this Note shall designate in writing to Borrower.
If any payment on this Note shall become due on a day which is not a business
day, such payment shall be made on the next succeeding business day.
This Note has been executed and delivered pursuant to that certain
Asset Purchase Agreement of even date herewith by and among Borrower, Mack H.
Hoskins and Payee ("Purchase Agreement") and is subject to the terms and
provisions of the Purchase Agreement including, without limitation, Sections
6(r) and 10(c).
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay when due any installment of
principal of or interest on this Note; or
(b) the bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a receiver for any of
the property of, or the liquidation, termination, dissolution or death
or legal incapacity of, any party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise;
the holder of this Note may, at its option, without further notice or demand,
(i) declare the outstanding principal balance of and accrued but unpaid interest
on this Note at once due and payable, (ii) pursue any and all other rights,
FAIRCHILD 3
<PAGE>
remedies and recourses available to the holder hereof, at law or in equity, or
(iii) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy or recourse available to the holder hereof upon
the occurrence of an Event of Default hereunder shall not constitute a waiver of
the right of the holder of this Note to exercise the same at that time or at any
subsequent time with respect to such Event of Default or any other Event of
Default. The rights, remedies and recourses of the holder hereof, as provided in
this Note, shall be cumulative and concurrent and may be pursued separately,
successively or together as often as occasion therefore shall arise, at the sole
discretion of the holder hereof. The acceptance by the holder hereof of any
payment under this Note which is less than the payment in full of all amounts
due and payable at the time of such payment shall not constitute a waiver of or
impair, reduce, release or extinguish any right, remedy or recourse of the
holder hereof, or nullify any prior exercise of any such right, remedy or
recourse.
If this Note is placed in the hands of an attorney for collection, or
is collected in whole or in part by suit or through probate, bankruptcy or other
legal proceedings of any kind, Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection, including but not
limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Note
severally waive presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration and
dishonor, diligence in enforcement and indulgences of every kind and without
further notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral, indulgences or partial payments,
either before or after maturity.
Neither Payee nor Borrower may sell, transfer, assign or otherwise
convey this Note or any of their respective rights hereunder without the prior
written consent of the other party.
THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
DALLAS GOLD AND SILVER EXCHANGE, INC.
By:
----------------------------------
Name:
----------------------------------
Its:
----------------------------------
FAIRCHILD 4
<PAGE>
EXHIBIT B
---------
EXHIBIT B
PURCHASE PRICE ALLOCATION
General Intangibles $ 954,000
Office Equipment and Fixtures 240,000
----------
Total $1,194,000
==========
FAIRCHILD
<PAGE>
EXHIBIT C
---------
NON-COMPETITION, NON-SOLICITATION AND
CONFIDENTIALITY AGREEMENT
(Agreement to Preserve Corporate Opportunity)
THIS NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY AGREEMENT
(Agreement to Preserve Corporate Opportunity) (the "Agreement"), dated as of the
2nd day of March, 2000 (the "Effective Date") between DALLAS GOLD AND SILVER
EXCHANGE, INC., a Nevada corporation ("Buyer"), and MACK H. HOSKINS
("Promisor").
WITNESSETH:
A. Promisor is the is the sole shareholder of Fairchild International,
Inc. ("Seller").
B. As of the Effective Date, Buyer is purchasing from Seller under a
Bill of Sale and Asset Purchase Agreement ("Purchase Agreement"), dated as of
March 2, 2000, all of the Purchased Assets described therein.
C. Under the Purchase Agreement, Promisor will receive substantial
consideration, both directly as an individual and otherwise as the sole
shareholder of Seller.
D. In light of Promisor's relationship with Seller, Seller's ownership
of Purchased Assets, and the contributions of Promisor in the past to the growth
and development of the Business, one of the conditions to the consummation by
Buyer of the transactions contemplated in the Purchase Agreement is that the
Promisor enter into this Agreement for the purpose of transferring to Buyer the
goodwill, proprietary rights and going concern value of the Business.
E. Buyer considers this Agreement to be integral to the transactions
contemplated by the Purchase Agreement and would not consummate such
transactions without the Promisor's execution of this Agreement.
NOW, THEREFORE, for the purposes of inducing Buyer to consummate the
transactions contemplated in the Purchase Agreement, to transfer the goodwill,
proprietary rights and going concern value to the Buyer of the Business, and in
consideration of the premises and of the mutual covenants contained herein and
in the Purchase Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. Except to the extent specifically defined in this
Agreement, all capitalized terms used herein shall have the meanings ascribed to
such terms in the Purchase Agreement. For the purposes of this Agreement, the
following definitions shall apply:
(a) The term "Confidential Information" shall mean all of the
confidential and proprietary information of the Business and its
FAIRCHILD
<PAGE>
customers, existing as of the date hereof or created in the future,
including, but not limited to, all information relating to the
financial conditions, results of operations, business, properties,
assets, liabilities or future prospects of the Business or any customer
or supplier of the Business, including, but not limited to, special
arrangements regarding pricing of products or services, including
pricing by customer and price protection agreements, proprietary
production and fabrication methods, the Business' cost of manufacturing
and fabricating products and component costs related thereto and cost
of rendering services, volume of products purchased by the Business and
the Business' major customers, customer lists, sales and profit
information for the Business on each product and service within its
product and service lines, any trade secrets, including, but not
limited to, information concerning products, developments,
manufacturing techniques, new product plans, equipment, inventions,
discoveries, patent applications, ideas, designs, engineering drawings,
sketches, renderings, other drawings, manufacturing and test data,
computer programs, methods, research, procurement and sales activities
and procedures, promotion and pricing techniques and credit and
financial data concerning customers of the Business as well as
information relating to the management, operation or planning of the
Business, and technical proprietary information and any other
intangible assets whether communicated orally, electronically, in
writing or in any other tangible media.
(b) The term "Agreement Period" shall mean the period of time
commencing on and including the Effective Date to and including the
fifth (5th) anniversary from the Effective Date.
(c) "Territory" shall mean the geographic area within a fifty (50) mile
radius of any place of business operated by the Seller or Buyer or any
customer or supplier of the Seller or Buyer.
(d) "Business" shall mean the purchase and sale of new and used fine
watches conducted by Seller in the Territory prior to the Effective
Date and by the Buyer in the Territory after the Effective Date.
2. Confidentiality. Promisor acknowledges that all of the Confidential
Information, in whole and in part, is a valuable, special and unique asset to
the Buyer, access to and knowledge of which have been gained by virtue of
Promisor's ownership of Seller and Seller's ownership of the Business. In light
of the highly competitive nature of the industry in which Buyer conducts its
business, the Promisor agrees that all Confidential Information, as defined
herein, is confidential. In recognition thereof, Promisor covenants and agrees
to maintain the Confidential Information in strictest confidence and not to
knowingly use any of such Confidential Information for his own benefit or for
the benefit of any third party or to disclose or reveal any of the Confidential
Information to any unauthorized person for any reason whatsoever at any time.
The restrictions in this Section 2 on the use and disclosure of the Confidential
Information shall not apply to Confidential Information (a) generally available
in the public domain other than as a result of a breach of this Agreement, (b)
disclosed in published literature or generally available in the industry other
than as a result of any breach of this Agreement or of the proprietary rights of
the Business, the Buyer or its Affiliates, and (c) any Confidential Information
required to be disclosed by Promisor under applicable law, provided that,
consistent with such applicable law, Promisor agrees, prior to such disclosure,
to provide Buyer with sufficient notice of the intended disclosure to permit
Buyer to obtain protective orders or other appropriate relief.
3. Return of Information. At any time at the request of Buyer, Promisor
agrees that he will return to Buyer any physical embodiment of any Confidential
Information, any confidential or proprietary information of any customer of the
Business, or any extracts therefrom or summaries or compilations thereof held by
FAIRCHILD 2
<PAGE>
or under the control of Promisor and will permanently erase or delete any such
information stored electronically, magnetically or otherwise on machines or
devices owned or controlled by Promisor.
4. Non-Solicitation. During the Agreement Period, Promisor covenants
and agrees not to, directly or indirectly, solicit, take away, hire, employ or
endeavor to employ any person who is an employee of Buyer, any Affiliate of
Buyer or the Business or, directly or indirectly, divert or attempt to divert
from Buyer, any Affiliate of Buyer or the Business any business whatsoever by
influencing or attempting to influence any person or business entity which is a
customer of, or has a similar business relationship with, Buyer, any Affiliate
of Buyer or the Business or from which Buyer or any Affiliate of Buyer, or the
Business is soliciting business of the type carried on by the Business on the
date hereof.
5. Competition. During the Agreement Period, Promisor covenants and
agrees that he will not, directly or indirectly:
(a) in the Territory, whether as an officer, director,
proprietor, employee, partner, investor, consultant, advisor, agent or
otherwise, be employed by, perform services for, consult with,
participate in, or be connected with, in a managerial, administrative,
marketing, sales or purchasing capacity, any business engaged in by the
Business or Buyer (or any of Buyer's or Business' Affiliates) as of the
Effective Date (collectively the "Business Activities") or own, manage,
operate, control, solicit business for, or be connected with the
ownership, management, operation or control of any business that is in
competition with any Business Activities; provided, however, that the
foregoing shall not be deemed to prevent Promisor from owning less than
five percent (5%) of any class of securities of any entity registered
under the Securities Exchange Act of 1934, as amended; or
(b) engage in any Business Activities by supplying products or
providing services of the type included within the Business Activities
to any customer with whom the Business has done any business within
three (3) years prior to the date hereof, whether as an officer,
director, proprietor, employee, partner, investor (other than as a
holder of less than five percent (5%) of any class of securities of any
entity registered under the Securities Exchange Act of 1934, as
amended), consultant, advisor, agent or otherwise; or
(c) directly or indirectly assist others in engaging in any of
the Business Activities in the manner prohibited to Promisor.
FAIRCHILD 3
<PAGE>
6. Non-Interference; Non-Disparagement. Promisor agrees that he will
not, at any time, directly or indirectly, take any action that interferes with
any relationship between the Business and any other person or entity. Promisor
further agrees that he will not, at any time, disparage or intentionally do
anything that might result in the disparagement in any material respect of the
name of the Business or Buyer or the name or reputation of the products and
services sold and distributed by the Business or Buyer.
7. Remedy. The Promisor acknowledges and agrees that Buyer's remedy at
law for a breach or threatened breach of any of the provisions of this Agreement
would be inadequate and, in recognition of this fact, in the event of a breach
or threatened breach by such Promisor of any of the provisions of this
Agreement, the Promisor agrees, that in addition to its remedy at law, at
Buyer's option, all amounts then or thereafter due the Promisor from Buyer may
be terminated and Buyer, without posting any bond, shall also be entitled to
obtain, and the Promisor agrees not to oppose a request for, equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which then may be available.
The Promisor acknowledges that the granting of a temporary injunction, temporary
restraining order or permanent injunction merely prohibiting the violation of
the covenants set forth herein would not be an adequate remedy upon breach or
threatened breach of this Agreement, and consequently agrees upon any such
breach or threatened breach to the granting of injunctive relief prohibiting the
sale or marketing of products and provision of services of the kind marketed,
sold or provided by the Business. Nothing herein contained shall be construed as
prohibiting Buyer from pursuing, in addition, any other remedies available to it
for such breach or threatened breach. If Promisor violates the restrictive
covenants of this Agreement and Buyer brings legal action for injunctive or
other relief under this Paragraph 7, Buyer shall not be deprived of the benefit
of the full period of the Agreement Period as a result of the time that Promisor
was in breach of this Agreement and the time involved in Buyer obtaining relief.
8. Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. Neither the failure nor any delay on the part of a
party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or any other right, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence.
9. Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, then the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. Notwithstanding the
foregoing, it is expressly understood and agreed that although the Promisor and
Buyer consider the restrictions contained in this Agreement to be reasonable for
the purposes of preserving the goodwill, proprietary rights and going concern
value of the Buyer and to protect the Buyer's business opportunities, if a final
judicial determination is made by a court having jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction on the activities of the Promisor, the provisions of
FAIRCHILD 4
<PAGE>
this Agreement shall not be rendered void but shall be deemed amended to apply
to such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable. Alternatively, if the court
referred to above finds that any restriction contained in this Agreement is
unenforceable, and such restriction or remedy cannot be amended so as to make it
enforceable, such finding shall not effect the enforceability of any of the
other restrictions contained therein or the availability of any other remedy.
10. Miscellaneous.
Notices. Any notice or other communication in connection with
this Agreement shall be deemed to be delivered if in writing (or in the
form of a telecopy) addressed to either Buyer or Promisor, as the case
may be, at the address set forth in the Purchase Agreement (i) when
actually delivered, or telecopied to said address, (ii) when, in the
case of a letter, five (5) business days shall have elapsed after the
same shall have been deposited in the United States mail, postage
prepaid, certified and return receipt requested, and (iii) in the case
of a notice sent via an established commercial overnight delivery
service, at the close of business on the next business day following
the date on which the same shall have been delivered to such service.
(b) Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of Buyer and its successors and
assigns. Neither this Agreement nor any right, duty or interest
hereunder may be assigned by Promisor.
(c) Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions
contemplated herein and may not be amended or modified except by an
instrument in writing signed by all parties hereto.
(d) Headings. The headings of the sections to this Agreement
are intended solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions hereof.
(e) Law Governing; Venue. This Agreement shall be governed by
and enforced in accordance with the laws of the State of Texas, without
regard to the conflicts of laws provisions thereof. Venue for any
action hereunder shall lie solely in Dallas County, Texas.
(f) Enforcement. The provisions of this Agreements are for the
benefit of Buyer and its Affiliates, and may be enforced by any such
corporation or their assignees as permitted by subsection (b) of this
Section.
FAIRCHILD 5
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DALLAS GOLD AND SILVER EXCHANGE, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
MACK H. HOSKINS
---------------------------------------
FAIRCHILD 6
<PAGE>
SCHEDULE 1(a)
FAIRCHILD
<PAGE>
SCHEDULE 1(b)
None
FAIRCHILD
<PAGE>
SCHEDULE 1(c)
FAIRCHILD
<PAGE>
SCHEDULE 1(d)
None
FAIRCHILD
<PAGE>
SCHEDULE 1(e)
FAIRCHILD
<PAGE>
SCHEDULE 1(f)
Customer & Supplier Lists
FAIRCHILD
<PAGE>
SCHEDULE 1(g)
None
FAIRCHILD
<PAGE>
SCHEDULE 1(h)
None
FAIRCHILD
<PAGE>
SCHEDULE 6(f)
None
FAIRCHILD
<PAGE>
SCHEDULE 6(g)
9330 LBJ Freeway, Suite 850, Dallas, Texas 75243
FAIRCHILD
<PAGE>
SCHEDULE 6(i)
None
FAIRCHILD
<PAGE>
SCHEDULE 6(j)(1)
None
FAIRCHILD
<PAGE>
SCHEDULE 6(j)(2)
None
FAIRCHILD
<PAGE>
SCHEDULE 6(l)
FAIRCHILD
<PAGE>
SCHEDULE 6(o)
None
FAIRCHILD
<PAGE>
SCHEDULE 8(c)
None
FAIRCHILD
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000701719
<NAME> DALLAS GOLD AND SILVER EXCHANGE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 838
<SECURITIES> 0
<RECEIVABLES> 601
<ALLOWANCES> 0
<INVENTORY> 5,274
<CURRENT-ASSETS> 6,814
<PP&E> 2,294
<DEPRECIATION> 953
<TOTAL-ASSETS> 11,044
<CURRENT-LIABILITIES> 5,167
<BONDS> 1,772
<COMMON> 45
0
0
<OTHER-SE> 4,060
<TOTAL-LIABILITY-AND-EQUITY> 11,044
<SALES> 5,576
<TOTAL-REVENUES> 5,867
<CGS> 4,275
<TOTAL-COSTS> 5,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> 174
<INCOME-TAX> 60
<INCOME-CONTINUING> 114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-BASIC> .03
<EPS-DILUTED> .02
</TABLE>
