UNITES STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-19000
JLM COUTURE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3337553
(State or other jurisdiction of (IRS Employer)
incorporation or organization) Identification No.)
225 West 37th Street, New York, New York 10018
(212) 921-7058
Registrant's telephone number, (including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the
past 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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of
August 25, 1998, there were 1,871,681 shares of common stock, par
value $.0002 per share.
Traditional small business disclosure format (check one)
Yes X No
Page 1 of 14.
The Exhibit Index is located on page 14.
INDEX
Page
Part I. Financial Information:
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets at July 31, 1998 and
October 31, 1997 3-4
Consolidated Statements of Income for the three
and nine months ended July 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
nine months ended July 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 9-11
Part II. Other Information:
Item 2. Changes in Securities and Use of Proceeds. 12
Item 6. Exhibits and Reports on Form 8-K. 12
Signature 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
JLM COUTURE, INC.
BALANCE SHEETS
(Unaudited)
ASSETS
July 31, October 31,
1998 1997
----------- -----------
Current assets:
Cash and cash equivalents $ 253,949 $ 473,694
Accounts receivable, net of allowance
for doubtful accounts and trade dis-
counts - $280,000 at July 31, 1998 and
$355,000 at October 31, 1997 3,431,256 2,542,782
Inventories 2,563,210 1,912,049
Prepaid expenses and other current assets 618,935 364,991
--------- ---------
Total current assets 6,867,350 5,293,516
Property and equipment - at cost net of ac-
cumulated depreciation and amortization
of $416,259 at July 31, 1998 and $364,465
at October 31, 1997 251,923 286,439
Goodwill 271,130 281,693
Other assets 334,116 361,653
--------- ---------
$7,724,519 $6,223,301
========= =========
See accompanying notes to financial statements.
JLM COUTURE, INC.
BALANCE SHEETS (continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31, October 31,
1998 1997
----------- -----------
Current liabilities
Revolving line of credit $1,033,914 $ 792,707
Current portion of long-term debt 6,000 19,428
Accounts payable 1,550,537 956,849
Income taxes payable 437,307 430,485
Accrued expenses and other
current liabilities 116,218 164,722
--------- ---------
Total current liabilities 3,143,976 2,364,191
--------- ---------
Long-term debt - 64,523
Other liabilities 53,973 61,581
--------- ---------
Shareholders' equity
Preferred stock - $.0001 par value,
authorized 1,000,000 shares;
issued and outstanding- none - -
Common stock - $.0002 par value,
authorized 10,000,000 shares;
issued and outstanding 1,828,973 at
July 31, 1998 and 1,828,973 at
October 31, 1997 365 365
Additional paid-in capital 2,678,774 2,678,774
Accumulated earnings 1,914,496 1,120,932
--------- ---------
4,593,635 3,800,071
Less: Note receivable and accrued
interest (62,075) (62,075)
5,000 shares held in treasury ( 4,990) ( 4,990)
--------- ---------
Total shareholders' equity 4,526,570 3,773,006
--------- ---------
$7,724,519 $6,223,301
========= =========
See accompanying notes to financial statements.
JLM COUTURE, INC.
STATEMENT OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1998 AND 1997
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
1998 1997 1998 1997
-------- -------- -------- --------
Net sales $4,810,067 $4,280,275 $12,578,329 $11,445,427
Cost of goods sold 3,026,990 2,575,531 7,690,528 7,050,485
--------- --------- ---------- ----------
Gross profit 1,783,077 1,704,744 4,887,801 4,394,942
Selling, general and
administrative ex-
penses 1,223,913 1,170,576 3,451,987 3,028,666
--------- --------- ---------- ----------
Income from continu-
ing operations before
provision for income
taxes 559,164 534,168 1,435,814 1,366,276
Provision for income
taxes 252,150 261,742 642,250 669,475
--------- --------- ---------- -----------
Net income $ 307,014 $ 272,426 $ 793,564 $ 696,801
========= ========= ========== ===========
Net income per common
and common equivalent
share
Primary $ 0.16 $ 0.14 $ .40 $ 0.36
========= ========== ========= =========
Fully diluted $ 0.16 $ 0.14 $ .40 $ 0.36
========= ========== ========= =========
See accompanying notes to financial statements.
<PAGE>
JLM COUTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
JULY 31,
1998 1997
------------- ---------
Cash Flows from Operating Activities
Net income $ 793,564 $ 696,801
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 62,357 45,410
Provision for doubtful accounts and trade
discounts (75,000) 43,868
Changes in operating assets and liabilities
(Increase) in accounts receivable (813,474) (940,206)
(Increase) in inventories (651,161) (130,848)
(Increase) in prepaid expenses
and other current assets (253,944) (83,484)
Decrease (Increase) in other assets 27,537 (22,317)
Increase in accounts payable 593,688 399,220
Increase (decrease) in income taxes
payable and other current liabilities (41,682) 12,967
Increase (decrease) in long term
liabilities ( 7,608) 3,899
------- -------
Net Cash (used in) provided by Operating
Activities (365,723) 25,310
------- -------
Cash Flows From Investing Activities
Purchase of property and equipment (17,278) (58,039)
Investment in Subsidiary - (25,000)
------ ------
Net Cash used in Investing Activities (17,278) (83,039)
------ ------
Cash Flows from Financing Activities
Net increase (reductions) from short term
borrowing 241,207 (143,448)
Reduction of long-term debt (77,951) -
Proceeds from sale of common stock - 300,979
Proceeds from exercise of options - 82,968
------- -------
Net Cash provided by Financing Activities 163,256 240,499
------- -------
Net increase (decrease) in cash (219,475) 182,770
Cash, beginning of year 473,694 83,807
------- -------
Cash, end of period $ 253,949 $ 266,577
======= =======
See accompanying notes to financial statements.
<PAGE>
JLM COUTURE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General
The consolidated Balance Sheet as of July 31, 1998, the
consolidated Statements of Income for the nine month periods ended
July 31, 1998 and 1997 and the consolidated Statements of Cash
Flows for the nine month periods ended July 31, 1998 and 1997 have
been prepared by the Company, without audit. In the opinion of
management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows, as of
July 31, 1998 and for all periods presented have been made. The
results of operations are not necessarily indicative of the results
to be expected for the full year.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
Form 10-KSB for its fiscal year ended October 31, 1997 which was
filed with the Securities and Exchange Commission.
Note 2. Composition of Inventory
Fiscal Quarter Ended Fiscal Year Ended
April 30, 1998 October 31, 1997
------------------- ------------------
Raw materials $1,549,191 $1,180,107
Work-in-process 320,367 145,670
Finished Goods 693,652 586,272
---------- ----------
$2,563,210 $1,912,049
---------- ----------
Note 3. Revolving Line of Credit
On March 17, 1998, the Company negotiated a line of credit
with a financial institution in the maximum amount of $2,000,000.
Borrowings are collateralized by the Company's accounts receivable,
chattel paper and general intangibles. At July 31, 1998, the
Company had borrowed $1,033,914 under this line of credit.
JLM COUTURE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4. Acquisition of Business
On May 1, 1997, the Company acquired Alvina Valenta Couture
Collection, Inc. for a combination of cash and shares of the
Company's common stock. The cash portion of the purchase price
totaled $25,000 and the stock portion of the purchase price
totalled $172,900 and consisted of 36,400 shares of the Company's
common stock valued at $4.75 per share (market price of the
Company's common stock immediately preceding the acquisition date).
The acquisition was accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated
to the assets purchased and the liabilities assumed based upon the
fair values at the date of acquisition. The results of operations
of the acquired business prior to its acquisition is not material
to the Company's consolidated statements of operations. The table
below summarizes the purchase price allocation --
Current assets $98,000
Equipment and leasehold
improvements 2,000
Current liabilities (59,000)
Debt (93,000)
The excess purchase price over net assets acquired (goodwill)
of approximately $282,000 includes $30,000 of transaction costs and
has been reflected in the accompanying consolidated balance sheets
as of October 31, 1997 and July 31, 1998. The results of the
acquired business have been reflected in the accompanying
consolidated statement of operations for the quarters ended July
31, 1997 and July 31, 1998 and nine months ended July 31, 1998.
<PAGE>
JLM COUTURE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5. Long-Term Debt
Long-term debt, which was assumed in connection with the
acquisition of Alvina Valenta Couture Collection, Inc. (See Note
4), consists of the following at October 31, 1997 and July 31,
1998.
October 31 July 31
1997 1998
Small Business Administration
note payable dated December 20,
1996, with interest payable at
8.25% per annum. Monthly
principal payments of $952
through December 2003. $71,951 0
Small Business Administration
note payable dated May 4, 1994,
with interest payable at 8.5%
per annum. Monthly principal
payments of $667 through May
1999. $12,000 $ 6,000
------ -----
83,951 6,000
Current portion of long-term
debt (19,428) (6,000)
------ -----
Long-term debt $64,523 0
====== =====
JLM COUTURE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
Three months ended July 31, 1998 as compared to three months
ended July 31, 1997 and nine months ended July 31, 1998 as compared
to nine months ended July 31, 1997.
For the first nine months of the Company's fiscal year ending
October 31, 1998 ("Fiscal 1998"), revenues increased to $12,578,329
from $11,445,427, an increase of 9.9% over the same period a year
ago. Net income was $793,564 or $.40 per share for this period as
compared to net income of $696,801 or $.36 per share in the first
nine months of Fiscal 1997. Gross profit as a percentage of sales
increased to 38.9% from 38.4% in the first nine months of the prior
year. Selling, general and administrative expenses ("SGA
Expenses") as a percentage of net sales increased to 27.4% in the
current period as compared to 26.5% in the prior period due to
increased marketing costs.
For the quarter ended July 31, 1998, revenues increased to
$4,810,067 from $4,280,275, an increase of 12.4% over the
comparable period a year ago. Net income increased to $307,014 for
the quarter ended July 31, 1998 as compared to $272,426 for the
period ended July 31, 1997. Gross profits as a percentage of sales
decreased to 37.1% in the quarter ended July 31, 1998 from 39.8% in
the year ago. SGA Expenses as a percentage of sales decreased to
25.4% in the current quarter from 27.3% in the comparable period a
year ago as last year the Company incurred increased costs relating
to the acquisition of the new subsidiary.
Liquidity and Capital Resources
The Company's working capital increased to $3,723,374 at July
31, 1998 from $2,929,325 at October 31, 1997. The Company's
current ratio remained at 2.2 to 1 at July 31, 1998 from 2.2 to 1
at October 31, 1997.
During the nine months ended July 31, 1998 the Company used
cash from operating activities of $365,723 as compared to
generating $25,310 during the year earlier period. The additional
use in cash was used primarily to increase inventories as the
Company expands its product lines. The Company used cash in
investing activities during the nine months ended July 31, 1998 of
$17,278 as compared to $83,039 in the year earlier period. The
Company generated cash in financing activities during the nine
months ended July 31, 1998 of $163,256 as compared to using
$240,499 in the year earlier period. Last year this was due to
sales of Common Stock and proceeds from the exercise of options
which was partially offset by a reduction in debt. This year the
increase in borrowing was used to finance the
additional operational expenditures required and to purchase treasury
securities.
JLM COUTURE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (Cont.)
Funds generated from working capital and the Company's line of
credits are presently anticipated to be sufficient for the Company
to meet its cash flow requirements.
The Company's software is Year 2000 compliant and no
additional expense is presently anticipated.
Safe Harbor Statement
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lender.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities
On May 19, 1998 the Company issued a five year non-incentive
stock option to purchase 200,000 shares of Common Stock to Joseph
L. Murphy the President, Chief Executive Officer and a Director of
the Company. The option is exercisable at a price equal to $2.56
per share of Common Stock, and is exercisable at a rate of 50,000
shares of Common Stock immediately and 50,000 shares of Common
Stock on each of the next three yearly anniversary dates thereof.
On June 16, 1998, the Company issued non-incentive stock
options to purchase an aggregate of 20,000 shares of Common Stock
to a consultant to the Company and Daniel Sullivan, a Director of
the Company. Each such option has a four-year term and is
exercisable at a price equal to $2.75 per share of Common Stock,
that being the fair market value on the date of grant. Such
options are exercisable as to 33.3% immediately and 33.3% on each
of the next two yearly anniversary dates thereof.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Company as amended
dated December 30, 1994, incorporated by reference to
Exhibit 3.1 of the Company's annual Report on Form 10-KSB
filed for its fiscal year ended October 31, 1995 ("1995
10-K").
3.2 The Company's By-Laws are incorporated by reference to
Exhibit 3.03 of Registration Statement No. 33-10278 NY
filed on Form S-18 ("Form S-18").
10.1 Amendment No. 2 dated May 19, 1998 to Employment
Agreement dated February 1, 1995 between the Company and
Mr. Joseph L. Murphy.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
JLM COUTURE, INC.
Registrant
By: s/Joseph L. Murphy
Joseph L. Murphy, President
(Duly authorized officer)
Dated: September 18, 1998
N:\RSKLAW\HJELM\10-QSB.98<PAGE>
EXHIBIT INDEX
Page
10.1 Amendment No. 2 dated May 19, 1998 to
Employment Agreement dated February 1, 1995
between the Company and Mr. Joseph L. Murphy. A-1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 253,949
<SECURITIES> 0
<RECEIVABLES> 3,711,256
<ALLOWANCES> 280,000
<INVENTORY> 2,563,210
<CURRENT-ASSETS> 6,867,350
<PP&E> 668,182
<DEPRECIATION> 416,259
<TOTAL-ASSETS> 7,724,519
<CURRENT-LIABILITIES> 3,143,976
<BONDS> 0
0
0
<COMMON> 365
<OTHER-SE> 4,526,205
<TOTAL-LIABILITY-AND-EQUITY> 7,724,519
<SALES> 12,578,329
<TOTAL-REVENUES> 12,578,329
<CGS> 7,690,528
<TOTAL-COSTS> 7,690,528
<OTHER-EXPENSES> 3,451,987
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,663
<INCOME-PRETAX> 1,435,814
<INCOME-TAX> 642,250
<INCOME-CONTINUING> 793,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 793,564
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of this 19th
day of May, 1998 between JLM Couture, Inc., a Delaware corporation
(hereinafter called the "Company") with offices at 225 West 37th
Street, Fifth Floor, New York, New York 10018, and JOSEPH L.
MURPHY, residing at 116 West 72nd Street, New York, New York 10023
(hereinafter called the "Executive").
W I T N E S S E T H
WHEREAS, the Company is a publicly-held company which
manufactures and markets bridal gowns, bridesmaids' gowns and
accessories;
WHEREAS, the Executive is experienced in the general
administration of small publicly-held companies; and
WHEREAS, the Company and the Executive entered into an
agreement dated February 1, 1995 as amended by an amendment thereto
dated June 17, 1996 for the employment of the Executive (the
"Prior Employment Agreement"); and
WHEREAS, the Company and the Executive desire to extend the
term of the employment of the Executive and to modify the terms of
the Prior Employment Agreement; and
WHEREAS, the Company and the Executive desire to enter into an
agreement to memorialize their understandings with regard to the
employment of the Executive by the Company.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree
as follows:
1. The Prior Employment Agreement. Subject to the
provisions hereof, the Company and the Executive agree to terminate
in all respects the Prior Employment Agreement.
2. Employment Term. The Company hereby agrees to employ
the Executive and the Executive agrees to enter the employ of the
Company on the terms and conditions set forth below for a term
commencing as of the date hereof (the "Commencement Date"), and
terminating five years from such date, unless sooner terminated as
herein provided (such term of this Agreement is herein referred to
as the "Term").
3. Duties. Subject to the authority, control and direction
of the Board of Directors of the Company, the Executive shall be
appointed President and Chief Executive officer ("CEO") of the
Company, and the Executive will perform such duties and services
commensurate with his position as President and CEO of the Company,
including such duties as may from time to time be assigned to him
by the Board of Directors.
4. Time Requirements. The Executive agrees that he will
devote 80% of his business time and attention during regular
business hours to the business affairs of the Company and that
during the period of such employment the Executive will not,
without the prior permission of the Board of Directors of the
Company, engage in any other business enterprise or enterprises
which require in excess of 20% of the Executive's time or
attention. It is understood that the Executive will perform certain
of the services contemplated in this Agreement outside of the
Company's offices. The foregoing shall not prevent the purchase,
ownership or sale by the Executive of investments or securities of
publicly-held companies and any other business which is not
competitive and does not have any business relations with the
Company or any subsidiary of the Company, provided the time or
attention devoted by the Executive to such activities does not
interfere with the performance of his duties hereunder.
5. Compensation. For the full, prompt and faithful
performance of all of the duties and services to be performed by
Executive hereunder, the Company agrees to pay, and the Executive
agrees to accept, the amounts set forth below.
(a) As a base compensation, the Executive shall be paid
at a rate of $200,000 per annum during the Term (the "Base
Compensation"), payable at such regular times and intervals as the
Company customarily pays its employees. On or about January 5 of
each year during the Term, the Board of Directors of Company agrees
to review the Executive's performance hereunder and, based on such
review, to grant to the Executive a bonus in an amount equal to 5
percent (5%) of pre-tax earnings of the Company for its most recent
fiscal year.
(b) As additional compensation, the Company shall grant
to the Executive a five year option to purchase 200,000 shares of
Common Stock of the Company exercisable at $2.5625 per share, which
represents the fair market value of the Company's Common Stock on
the date of this Agreement, (the "Option"). The Option shall be
exercisable at the rate of 50,000 shares per year commencing as of
the date hereof.
(c) The Company shall provide the Executive with health
benefits on the same terms as provided to other employees of the
Company.
(d) The compensation provided for herein shall be in
additional to any retirement, profit sharing, insurance (including
medical) or similar benefit which may at any time be payable to the
Executive pursuant to any plan or policy of the Company relating to
such benefits, which benefits shall be made available to the
Executive on the same basis as they are made available to other
similarly situated executives of the Company.
6. Vacation. The Executive shall be entitled to four weeks
of vacation per year during the Term, which shall be taken at such
time or times as shall be mutually determined by the Company and
the Executive.
7. Death. In the event of the death of the Executive
during the Term or any extension thereof, the employment of the
Executive hereunder shall terminate and come to an end on the last
day of the month three months following the death of the Executive.
The estate of the Executive (or such persons as the Executive shall
designate in writing) shall be entitled to receive, and the Company
agrees to pay, the Base Compensation of the Executive up to the end
of the three month period in which such death occurs.
8. Disability. In the event that the Executive shall,
because of illness or incapacity, physical or mental, be unable to
perform the duties and services to be performed by him hereunder
for a consecutive period of six months, or nine months during any
twelve month period, the Company may terminate the employment of
the Executive hereunder after the expiration of such period. The
Executive shall be entitled to receive his base salary up to the
date of such termination.
9. Administration; Expenses. The Executive shall report to
the Board of Directors of the Company, or to a person designated by
the Board of Directors, at such intervals as may be determined from
time to time. The Executive shall be reimbursed by the Company for
all expenses reasonably incurred by him on behalf of the Company in
accordance with the Company's standard policies with respect
thereto.
10. Restrictive Covenants.
10.1 Inventions. Any program, discovery, process,
design, invention or improvement which the Executive makes or
develops during his employment by the Company, whether or not
during regular working hours or in connection with the Company's
business or research activities as then conducted or contemplated,
shall belong to the Company and shall be promptly disclosed to the
Company. During the Executive's employment and for a period of two
years thereafter, the Executive shall, without additional
compensation, execute and deliver to the Company any instruments of
transfer and take such other action as the Company may request to
carry out the provisions of this Section 10.1, including without
limitation, filing, at the Company's expense, patent applications
for anything covered by this Section 10.1 and the prompt assignment
of the same to the Company.
10.2 Covenant Not to Compete. The Executive covenants
and agrees that for a period of two years following the termination
of his employment with the Company other than as a result of a
breach of this Agreement by the Company, he shall not directly or
indirectly compete with the Company in the bridal marketplace or in
any other business in which the Company may at such time be
engaged, nor induce any person associated with or employed by the
Company or any subsidiary of the Company, to leave the employ of or
terminate his association with the Company, or any subsidiary of
the Company, or solicit the employment of any such person on his
own behalf or on behalf of any other business enterprise. In the
event of termination of this Agreement by virtue of a breach by the
Company, termination without cause or expiration of the Term, the
aforesaid covenant will be applicable for a period of one year from
such event.
10.3 Nondisclosure. The Executive covenants and agrees
for a period of two years following the termination of his
employment with the Company, he will not, directly or indirectly,
during or after the term of employment disclose to any person not
authorized by the Company to receive or use such information,
except for the sole benefit of the Company, any of the Company's
confidential or proprietary data, information, designs, styles, or
techniques, including customer lists. Notwithstanding the
foregoing, this applies solely to information that is not generally
known to anyone other than the Company, its Board of Directors or
its employees.
10.4 If any term of this Article 10 is found by any
court having jurisdiction to be too broad, then and in that case,
such term shall nevertheless remain effective, but shall be
considered amended (as to the time or area or otherwise, as the
case may be) to a point considered by said court as reasonable, and
as so amended shall be fully enforceable.
10.5 In the event that the Executive shall violate any
provision of this Agreement (including but not limited to the
provisions of this Article 10) the Executive hereby consents to the
granting of a temporary or permanent injunction against him by any
court of competent jurisdiction prohibiting him from violating any
provision of this Agreement. In any proceeding for an injunction,
the Executive agrees that his ability to answer in damages shall
not be a bar or interposed as a defense to the granting of such
temporary or permanent injunction against the Executive. The
Executive further agrees that the Company will not have an adequate
remedy at law in the event of any breach by Executive hereunder and
that the Company will suffer irreparable damage and injury if the
Executive breaches any of the provisions of this Agreement.
11. Termination for Cause. The Company may terminate the
Executive's employment without liability (other than for payments
accrued to the date of termination) if the Executive's employment
is terminated "for cause". The term "for cause" shall, for the
purposes of this Agreement, mean (i) a material breach by the
Executive of the provisions of this Agreement, (ii) the commission
by the Executive of a fraud against the Company or the conviction
of the Executive for aiding or abetting, or the commission of, a
felony or of a fraud or a crime involving moral turpitude or a
business crime, (iii) the knowing possession or use of illegal
drugs or prohibited substances, the excessive drinking of alcoholic
beverages which impairs the Executive's ability to perform his
duties hereunder, (iv) being under the influence of such drugs,
substances or alcohol during the Executive's hours of employment,
or (v) any violation of the Company's corporate policies described
in the Company's employee handbook, which handbook may supplemented
or amended by the Company from time to time, a copy of which has
been provided to the Executive. In the event of such termination
for cause, Executive shall be entitled to receive his base salary
up to the date of such termination.
12. No Impediments. The Executive warrants and represents
that he is free to enter into this Agreement and to perform the
services contemplated thereby and that such actions will not
constitute a breach of, or default under, any existing agreement.
13. No Waiver. The failure of any of the parties hereto
to enforce any provision hereof on any occasion shall not be deemed
to be a waiver of any preceding or succeeding breach of such
provision or of any other provision.
14. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto and no amendment,
modification or waiver of any provision herein shall be effective
unless in writing, executed by the party charged therewith.
15. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed
by the laws of the State of New York applicable to agreements to be
wholly performed therein.
16. Binding Effect. This Agreement shall bind and inure
to the benefit of the parties, their successors and assigns.
17. Assignment and Delegation of Duties. This Agreement
may not be assigned by the parties hereto except that the Company
shall have the right to assign this Agreement in connection with a
sale or transfer of all or substantially all of its assets, a
merger or consolidation. This Agreement is in the nature of a
personal services contract and the duties imposed hereby are non-
delegable.
18. Paragraph Headings. The paragraph headings herein have
been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.
19. Notices. Any notice under the provisions of this
Agreement shall be given by registered or certified mail, return
receipt requested, directed to the addresses set forth above,
unless notice of a new address has been sent pursuant to the terms
of this paragraph.
20. Unenforceability; Severability. If any provision of
this Agreement is found to be void or unenforceable by a court of
competent jurisdiction, the remaining provisions of this Agreement,
shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part has been severed
and deleted.
21. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
JLM COUTURE, INC.
By:
Daniel M. Sullivan, Chairman
Joseph L. Murphy
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