JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on December 9, 1997
--------------------------
To the Shareholders of JACO ELECTRONICS, INC.
Please be advised that the annual meeting of shareholders (the
"Annual Meeting") of Jaco Electronics, Inc. (the "Company") will be held on
December 9, 1997, at the Huntington Hilton, 598 Broad Hollow Road, Melville, New
York 11747.
The Annual Meeting will be held for the following purposes:
1. To elect five Directors of the Company to hold office
until the next annual meeting of shareholders or until
their successors are duly elected and qualified;
2. To adopt and approve an amendment to the Company's 1993
Non-Qualified Stock Option Plan, as amended, ("1993
Non-Qualified Plan") to increase the aggregate number
of shares of common stock, par value $.10 per share
("Common Stock") which may be issued upon the exercise
of all options granted under the 1993 Non- Qualified
Plan from 293,333 shares of Common Stock (as adjusted
from 200,000 shares of Common Stock to reflect a 10%
stock dividend paid on March 10, 1995 and a 4-for-3
stock split effected on September 22, 1995) to 600,000
shares of Common Stock;
3. To adopt and approve an amendment to the Company's 1993
Non-Qualified Plan to incorporate certain provisions of
Section 162(m) of the Internal Revenue Code;
4. To adopt and approve the Jaco Electronics, Inc.
Restricted Stock Plan; and
5. To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
October 27, 1997 as the record date for the determination of the shareholders
entitled to notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof. Only shareholders of record at the close of business on
the record date are entitled to notice of and to vote at the Annual Meeting.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE
MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY
TIME BEFORE YOUR PROXY IS VOTED.
By Order of the Board of Directors,
Joel H. Girsky,
Date: November 3, 1997 Chairman
<PAGE>
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Jaco Electronics, Inc. (the "Company")
of proxies to be voted at the annual meeting of shareholders (the "Annual
Meeting") to be held on December 9, 1997, at 9:30 a.m., at the Huntington
Hilton, 598 Broad Hollow Road, Melville, New York, 11747, and any and all
adjournments thereof.
The solicitation will be by mail, and the cost of such
solicitation, including the reimbursement of brokerage firms and others for
their expenses in forwarding proxies and proxy statements to the beneficial
owners of the Company's common stock, will be borne by the Company.
The shares of common stock represented by each duly executed
proxy received by the Board of Directors before the Annual Meeting will be voted
at the Annual Meeting as specified in the proxy. A shareholder may withhold
authority to vote for all of the nominees by marking the appropriate box on the
accompanying proxy card or may withhold authority to vote for an individual
nominee by striking a line through such nominee's name in the appropriate space
on the accompanying proxy card. UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN,
EACH PROPERLY EXECUTED PROXY WILL BE VOTED FOR (i) THE ELECTION OF DIRECTORS
NAMED IN THIS PROXY STATEMENT AND THE FORM OF PROXY, (ii) THE ADOPTION AND
APPROVAL OF AN AMENDMENT TO THE 1993 NON-QUALIFIED STOCK OPTION PLAN (THE "1993
NON-QUALIFIED PLAN") TO INCREASE THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
WHICH MAY BE ISSUED UPON THE EXERCISE OF ALL OPTIONS GRANTED UNDER THE 1993
NON-QUALIFIED PLAN FROM 293,333 SHARES TO 600,000 SHARES, (iii) THE ADOPTION AND
APPROVAL OF AN AMENDMENT TO THE 1993 NON-QUALIFIED PLAN TO INCORPORATE CERTAIN
PROVISIONS OF SECTION 162(m) OF THE INTERNAL REVENUE CODE, AND (iv) THE ADOPTION
AND APPROVAL OF THE COMPANY'S RESTRICTED STOCK PLAN. Shareholders who execute
proxies nevertheless retain the right to revoke them at any time before they are
voted by submitting new proxies bearing a later date, by submitting written
revocations to the named proxies, or by attending the Annual Meeting and voting
thereat.
This Proxy Statement, the accompanying form of proxy, and the
1997 Annual Report to Shareholders, are first being sent to shareholders on or
about November 7, 1997.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has designated October 27, 1997, as the
record date (the "Record Date") for determining the shareholders entitled to
notice of the Annual Meeting and to vote
<PAGE>
thereat. On the Record Date, the total number of shares of common stock of the
Company, $0.10 par value per share (the "Common Stock"), outstanding and
entitled to vote was 3,888,221 (excluding 87,500 shares of treasury stock). The
holders of all outstanding shares of Common Stock are entitled to one vote for
each share of Common Stock registered in their names on the books of the Company
at the close of business on the Record Date. The presence in person or by proxy
of a majority of the outstanding shares of the Common Stock entitled to vote at
the Annual Meeting will be necessary to constitute a quorum. Abstentions and
broker non-votes on any item will not be counted as voting in respect of such
item; they will be counted only for purposes of determining whether a quorum is
present at the Annual Meeting.
PRINCIPAL SHAREHOLDERS; SHARES HELD BY MANAGEMENT
The following table sets forth the number and percentage of
shares of Common Stock owned as of October 24, 1997 by (i) each director of the
Company and each nominee for director, (ii) all persons who, to the knowledge of
the Company, are the beneficial owners of more than 5% of the outstanding shares
of Common Stock, (iii) each of the executive officers and a former key employee
named in the Summary Compensation Table, and (iv) all of the Company's
Directors, executive officers and such former key employee, as a group. Each
person named in the table has sole investment power and sole voting power with
respect to the shares of Common Stock set forth opposite such person's name,
except as otherwise indicated.
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
<S> <C> <C>
* Joel H. Girsky
President, Treasurer
and Director 547,540(3) 13.6%
</TABLE>
* Nominee for election to the Board of Directors.
** Less than 1%.
1 Includes shares of Common Stock issuable pursuant to options and warrants
exercisable within sixty (60) days from the date hereof. Also includes
shares of Common Stock awarded under the Jaco Electronics, Inc. Restricted
Stock Plan ("Restricted Stock Plan") which are subject to approval of the
Restricted Stock Plan by the Company's shareholders.
2 Based upon (i) 3,888,221 shares of Common Stock issued and outstanding
(excluding 87,500 shares of treasury stock), plus, if appropriate, (ii)
the number of shares of Common Stock awarded under the Restricted Stock
Plan (which are subject to approval of the Restricted Stock Plan by the
Company's shareholders), and/or (iii) the number of shares of Common Stock
which may be acquired by the named person or by all persons included in
the group pursuant to the exercise of options and warrants exercisable
within sixty (60) days from the date hereof.
3 Includes 81,400 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Non-Qualified Plan and 25,000
shares of Common Stock awarded under to the Restricted Stock Plan (which
are subject to approval of the Restricted Stock Plan by the Company's
shareholders).
2
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
- ------------------------ ------------------ -----------
<S> <C> <C>
* Charles B. Girsky
Executive Vice President and
Director 287,274(4) 7.2%
*Stephen A. Cohen
Director 28,255(5) **
*Edward M. Frankel
Director 23,466(5) **
*Joseph F. Hickey, Jr. 18,500(6)
Director **
Jeffrey D. Gash
Vice President, Finance 19,565(7) **
Herbert Entenberg
Vice President of Management
and Information Systems,
and Secretary 11,167(8) **
</TABLE>
- --------
4 Includes 243,577 shares of Common Stock owned by the Girsky Family Trust,
15,000 shares of Common Stock acquirable pursuant to the exercise of
options granted under the Company's 1993 Non-Qualified Plan and 25,000
shares of Common Stock awarded under the Restricted Stock Plan (which are
subject to approval of the Restricted Stock Plan by the Company's
shareholders).
5 Includes 23,466 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Stock Option Plan For Outside
Directors.
6 Includes 1,000 shares of Common Stock and 17,500 shares of Common Stock
acquirable by Cleary Gull Reiland and McDevitt Inc. pursuant to warrants
granted to it by the Company. The reporting person disclaims beneficial
ownership of the shares of Common Stock acquirable upon the exercise of
the warrants, except to the extent of his pecuniary interest therein.
7 Includes 9,033 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Non-Qualified Plan and 10,000
shares of Common Stock awarded under the Restricted Stock Plan (which are
subject to approval of the Restricted Stock Plan by the Company's
shareholders).
8 Consists of 6,167 shares of Common Stock acquirable pursuant to the
exercise of options granted under the Company's 1993 Non-Qualified Plan
and 5,000 shares of Common Stock awarded under the Restricted Stock Plan
(which are subject to approval of the Restricted Stock Plan by the
Company's shareholders).
3
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
- ------------------------ ------------------ -----------
<S> <C> <C>
Denis Haggerty
(former Vice President of Marketing) 5,000(9) **
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 350,000(10) 9.0%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 590,700(11) 15.2%
Liberty Investment Management, Inc.
2502 Rocky Point Drive, Suite 500
Tampa, Fl 33607 203,300(12) 5.2%
State Retirement and Pension System
of Maryland
301 West Preston Street, Room 901A
Baltimore, MD 21201 195,000(13) 5.0%
Wellington Trust Company, NA
75 State Street
Boston, MA 02109 195,000(14) 5.0%
</TABLE>
- --------
9 Consists of 5,000 shares of Common Stock acquirable pursuant to the
exercise of options granted under the Company's 1993 Non-Qualified Plan.
Effective December 31, 1996, Mr. Haggerty ceased to serve as an officer of
the Company.
10 These securities are owned by T. Rowe Price New Horizons Fund, Inc. for
which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment advisor. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
Based upon Amendment No. 1 to the Schedule 13G dated February 14, 1997.
11 These securities are held in investment advisory accounts of Heartland
Advisors, Inc. Based upon Amendment No. 2 to Schedule 13G dated October 7,
1997.
12 Based upon a Schedule 13G dated February 15, 1997. 13 Based upon a Schedule
13G dated February 11, 1997. 14 Based upon a Schedule 13G dated January 27,
1997.
4
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
- ------------------------ ------------------ -----------
<S> <C> <C>
Wellington Management Company, LLP 384,000(15) 9.9%
75 State Street
Boston, MA 02109
All Directors, executive officers
and former key employee
as a group (9 persons) 940,767(16) 22.8%
</TABLE>
1. ELECTION OF DIRECTORS
Five directors are to be elected to serve until the next
annual meeting of shareholders and until their successors are elected and shall
have qualified. Directors shall be elected by shareholders holding a plurality
of the shares of Common Stock present at the Annual Meeting. It is the intention
of the persons named in the form of proxy, unless authority is withheld, to vote
the proxies given them for the election of all nominees hereinafter named, all
of whom are presently directors of the Company. In the event, however, that any
one of them is unable or declines to serve as a director, the appointees named
in the form of proxy reserve the right to substitute another person of their
choice as nominee, in his place and stead, or to vote for such lesser number of
directors as may be presented by the Board of Directors in accordance with the
Company's By-Laws.
The nominees for the Board of Directors of the Company are as
follows:
Stephen A. Cohen
Edward M. Frankel
Charles B. Girsky
Joel H. Girsky
Joseph F. Hickey, Jr.
Information about the foregoing nominees is set forth under "Management."
Unless marked to the contrary, the shares of Common Stock
represented by the enclosed Proxy will be voted FOR the election of the nominees
named above as directors.
- --------
15 According to the Schedule 13G dated January 24, 1997, includes shares of
Common Stock owned of record by Wellington Trust Company, NA and the State
Retirement and Pension System of Maryland.
16 Includes 181,032 shares of Common Stock acquirable pursuant to the
exercise of options and warrants and 65,000 shares of Common Stock awarded
under the Restricted Stock Plan (which are subject to approval of the
Restricted Stock Plan by the Company's shareholders).
5
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE
TO THE BOARD OF DIRECTORS.
The Board of Directors held four meetings during the year
ended June 30, 1997 ("Fiscal 1997"). Each director (during the period in which
each such director served) attended at least seventy-five (75%) percent of the
aggregate of (i) the total number of meetings of the Board of Directors, plus
(ii) the total number of meetings held by all committees of the Board of
Directors on which the director served.
The Board of Directors has a standing Audit Committee, a
standing Option Committee, and a standing Compensation Committee. The Audit
Committee reviews the work and reports of the Company's independent accountants.
During Fiscal 1997, the Audit Committee was comprised of Stephen A. Cohen and
Edward M. Frankel. The Audit Committee met once during Fiscal 1997. The Option
Committee, composed of Messrs. Cohen and Frankel, assisted the Board of
Directors in the administration of the Company's 1993 Non-Qualified Plan. The
Option Committee met once during Fiscal 1997. The Compensation Committee makes
recommendations to the Board of Directors concerning compensation arrangements
for directors, executive officers, and senior management of the Company. The
Compensation Committee met twice during Fiscal 1997. During Fiscal 1997, the
Compensation Committee was comprised of Messrs. Cohen and Frankel.
MANAGEMENT
Executive Officers and Directors
The directors and executive officers of the Company, their
ages, and their positions and terms of office with the Company are set forth
below.
6
<PAGE>
<TABLE>
<CAPTION>
Name Age Title
<S> <C> <C>
* Joel H. Girsky 58 Chairman of the Board, President, Treasurer, and
Director
* Charles B. Girsky 63 Executive Vice President and Director
* Stephen A. Cohen 60 Director
* Edward M. Frankel 59 Director
* Joseph F. Hickey, Jr. 39 Director
Jeffrey D. Gash 44 Vice President, Finance
Herbert Entenberg 63 Vice President of Management and Information
Systems, and Secretary
</TABLE>
- ---------------
* Nominee for election to the Board of Directors.
Joel H. Girsky has been a Director and executive officer of the Company
since it was founded in 1961. He also is a director of Nastech Pharmaceutical
Company, Inc. of Hauppauge, New York, and Frequency Electronics, Inc. of
Uniondale, New York. Messrs. Joel H. Girsky and Charles B. Girsky are brothers.
Charles B. Girsky became an executive officer of the Company
on August 2, 1985 and has been its Executive Vice President since January 1988.
Since April, 1984, he has been President of Distel, Inc., a wholly-owned
subsidiary of the Company since August, 1985. He was a founder, Director, and
the President of the Company from 1961 through January, 1983, and was elected a
Director of the Company again in 1986. Messrs. Charles B. Girsky and Joel H.
Girsky are brothers.
Stephen A. Cohen has been a Director of the Company since
1970. Since August, 1989, he has practiced law as a member of Morrison Cohen
Singer & Weinstein, LLP, general counsel to the Company.
Edward M. Frankel became a Director of the Company in May,
1984. For more than five years, he has been President of Vitaquest
International, Inc., a distributor of vitamins and health and beauty products,
and its predecessor entities.
Joseph F. Hickey, Jr. became a Director of the Company on May 28, 1997.
Since February 1, 1991, he has been employed by Cleary Gull Reiland and McDevitt
Inc., an investment banking firm located in Milwaukee, Wisconsin. Currently he
is the managing director at Cleary Gull Reiland and McDevitt Inc. syndication
department.
7
<PAGE>
Jeffrey D. Gash became Vice President of Finance of the
Company in January, 1989, and was Controller of the Company for more than five
years prior thereto. He has also served in similar capacities with the Company's
subsidiaries.
Herbert Entenberg has served as Vice President of Management
and Information Systems, and Secretary since 1988. Mr. Entenberg oversees
management information systems and operations of the Company and is responsible
for developing and implementing the Company's inventory control system.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth, for the Company's three most
recently ended fiscal years, the compensation paid or accrued to the President
of the Company and to the executive officers and a former key employee of the
Company, other than the President, whose aggregate annual salary and bonus for
the Company's last fiscal year exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and Other
Princpal Annual
Position Year Salary($) Bonus($)Compensation($)
<S> <C> <C> <C> <C>
Joel H. Girsky, 1995 300,000 193,000 --
Chairman of the Board 1996 325,000 387,000 --
President, and Treasurer(1) 1997 325,000 210,000 --
Charles B. Girsky, 1995 206,720 42,073 --
Executive Vice President 1996 225,000 96,535 --
1997 225,000 73,475 --
Jeffrey D. Gash, 1995 96,347 10,000 --
Vice President, Finance 1996 96,000 42,595 --
1997 104,808 25,000 --
Herbert Entenberg
Vice President of 1995 102,816 16,155 --
Management and 1996 102,560 20,188 --
Information Systems, 1997 102,560 10,481 --
and Secretary
Denis Haggerty* 1995 90,348 36,964 --
Vice President, Marketing 1996 90,000 58,389 27,651(3)
1997 71,539 40,510 --
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards Payouts
Name and Restricted All Other
Principal Stock Options/ LTIP Compensation
Position Year Awards($) SARs(#) Payouts($) ($)(2)
<S> <C> <C> <C> <C> <C>
Joel H. Girsky, 1995 -- -- -- 72,100
Chairman of the Board 1996 -- -- -- 84,301
President, and Treasurer(1) 1997 150,000** 15,399 -- 73,924
Charles B. Girsky, 1995 -- -- -- 3,947
Executive Vice President 1996 -- 15,000 -- 5,608
1997 150,000** 25,000 -- 4,976
Jeffrey D. Gash, 1995 -- -- -- 1,806
Vice President, Finance 1996 -- 5,000 -- 1,841
1997 60,000** 10,000 -- 2,004
Herbert Entenberg
Vice President of 1995 -- -- -- 3,538
Management and 1996 -- 2,500 -- 3,197
Information Systems, 1997 30,000** 5,000 -- 3,343
and Secretary
Denis Haggerty* 1995 -- -- -- 11,029
Vice President, Marketing 1996 -- 5,000 -- 11,302
1997 -- -- -- 5,881
</TABLE>
8
<PAGE>
- -----------------------
(1) Mr. Joel Girsky entered into a four-year employment agreement with the
Company, effective as of July 1, 1993, to serve as the Company's Chairman,
President and Treasurer. Pursuant to the agreement, Mr. Girsky received a
base salary of $250,000 for the fiscal year ended June 30, 1994, $300,000
for the fiscal year ended June 30, 1995, and $325,000 for the fiscal years
ended June 30, 1996 and June 30, 1997. In addition, he was entitled to
receive a cash bonus equal to four percent (4%) of the Company's earnings
before income taxes for each year in which such earnings were in excess of
$1,000,000, and six percent (6%) of the Company's earnings before income
taxes for each year in which such earnings were in excess of $2,500,000.
Mr. Girsky or his estate, as the case may be, was entitled to receive a
payment of $500,000 if he died or became permanently disabled during the
term of the employment agreement. The death and disability benefit is
funded by a "key man" life insurance policy maintained by the Company. In
the event of Mr. Girsky's cessation of employment with the Company, upon
his request, the Company was obligated to transfer such policy to Mr.
Girsky. Thereafter, the Company would have no further liability for the
payment of such benefit or the premiums on such policy. In addition,
pursuant to the terms of the employment agreement, Mr. Girsky was to
receive deferred compensation which accrued at the rate of $50,000 per
year, and became payable in a lump sum at the later of (i) Mr. Girsky's
attainment of age 60, or (ii) his cessation of employment, with or without
cause, by the Company at any time after July 1, 1993. In the event of a
change in control resulting in termination of Mr. Girsky's employment, Mr.
Girsky would have received between $450,000 and $600,000, depending on the
date of termination. Mr. Joel Girsky and the Company intend to enter into a
new employment agreement during the fiscal year ending June 30, 1998.
(2) Includes auto expenses, 401(k) matching contributions by the Company,
premiums paid on group term life insurance, taxable portion of split dollar
life insurance policies and deferred compensation accrued in connection
with Mr. Joel Girsky's employment agreement with the Company, as described
in footnote (1) above. Auto expenses for Fiscal 1997 for the Named
Executives were as follows: Mr. Joel Girsky -- $16,871, Mr. Charles Girsky
-- $3,322, Mr. Gash -- $624, Mr. Entenberg -- $2,154 and Mr. Haggerty --
$4,800. 401(k) matching contributions for Fiscal 1997 for the Named
Executives were as follows: Mr. Joel Girsky -- $1,000, Mr. Charles Girsky
-- $952, Mr. Gash -- $1,298, Mr. Entenberg -- $950 and Mr. Haggerty --
$519. Premiums paid on group term life insurance for Fiscal 1997 for the
Named Executives were as follows: Mr. Joel Girsky -- $450, Mr. Charles
Girsky $702, Mr. Gash -- $82, Mr. Entenberg -- $239 and Mr. Haggerty --
$562. The taxable portion of split dollar life insurance policies for Mr.
Joel Girsky was $5,603 for Fiscal 1997. $50,000 deferred compensation was
accrued in Fiscal 1997 in connection with Mr. Joel Girsky's employment
agreement with the Company.
(3) Includes information regarding value realized (market value on date of
exercise less exercise price) on stock options previously granted under the
Company's option plans and exercised during fiscal 1996 by Mr. Haggerty.
* Effective December 31, 1996, Mr. Haggerty ceased serving as an officer of
the Company.
** Subject to approval of the Restricted Stock Plan by the Company's
shareholders.
9
<PAGE>
Stock Options
The following tables set forth information concerning the
grant of stock options made during Fiscal 1997 to each of the persons described
in the Summary Compensation Table on pages 8 and 9 and the number and value of
unexercised options held by them at the fiscal year-end.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(1)
Percent of Potential Realizable Value
Total at Assumed Annual Rates
Options/ of Stock Price Appreciation
SARs For Option Term(2)
Options/ Granted to
SARs Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10%($)
---- ------------- ------------ ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel H. Girsky 15,399 11% $ 7.00 June 8, 2002 $29,781 $ 65,809
Charles B. Girsky 25,000 19% $7.00 June 8, 2002 $48,349 $106,839
Jeffrey D. Gash 10,000 7% $7.00 June 8, 2002 $19,340 $ 42,739
Herbert Entenberg 5,000 4% $7.00 June 8, 2002 $ 9,670 $ 21,368
Denis Haggerty* -- -- -- -- -- --
</TABLE>
(1) The options in the table were granted on June 9, 1997 under the Company's
1993 Non-Qualified Plan and have exercise prices equal to the fair market value
of the Common Stock on the date of grant. The options become exercisable one
year from the date of grant.
(2) The potential realizable value assumes that the stock price increases from
the date of grant until the end of the option term (5 years) at the annual rate
of 5% and 10%. The assumed annual rates of appreciation are computed in
accordance with the rules and regulations of the Securities and Exchange
Commission. No assurance can be given that the annual rates of appreciation
assumed for the purposes of the table will be achieved, and actual results may
be lower or higher.
* Effective December 31, 1996, Mr. Haggerty ceased serving as an officer of the
Company.
AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money
Acquired Option/SARs at Option/SARs at
on Value FY-End (#) FY-End ($)(1)
---------------------------- ----------------------
Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Joel H. Girsky -- -- 81,400 15,399 189,662 2,926
Charles B. Girsky -- -- 15,000 25,000 -- 4,750
Jeffrey D. Gash -- -- 9,033 10,000 9,397 1,900
Herbert Entenberg -- -- 6,167 5,000 8,874 950
Denis Haggerty* -- -- 5,000 -- -- --
</TABLE>
- -------------------------------
(1) Based on the fair market value per share of the Common Stock at year
end, minus the exercise or base price on "in-the-money" options. The
closing sale price for the Company's Common Stock as of June 30, 1997 on
the NASDAQ National Market System was $7.19.
* Effective December 31, 1996, Mr. Haggerty ceased serving as an officer of the
Company.
10
<PAGE>
Compensation of Directors
Pursuant to the Company's 1993 Stock Option Plan for Outside Directors
(the "Outside Directors Plan"), the Company's outside directors (directors who
are not employees of the Company) were each granted options on December 31, 1993
to purchase 14,667 shares of Common Stock. In addition, the Outside Directors
Plan provides that each outside director shall also be granted on each December
31 subsequent to December 31, 1993 stock options to purchase 2,933 shares of
Common Stock. All options granted under the Outside Directors' Plan are
immediately exercisable, and the exercise price per share of each option is
equal to the fair market value of the shares of Common Stock on the date of
grant.
Employment Contracts and Termination of Employment
and Change-In-Control Arrangements
The Company's employment agreement with Mr. Joel Girsky is described in
the footnotes to the Summary Compensation Table on pages 8 and 9 of this Proxy
Statement.
Compensation Committee Interlocks and Insider Participation
Stephen A. Cohen, a Director of the Company, is a member of Morrison
Cohen Singer & Weinstein, LLP, general counsel to the Company. Mr. Cohen
currently owns 4,789 shares of Common Stock and options to purchase an
additional 23,466 shares of Common Stock. Mr. Cohen is one of the two members of
the Company's Compensation Committee, the committee responsible for determining
and administering the Company's compensation policies for the remuneration of
the Company's senior management.
Board Compensation Committee Report on Executive Compensation
Introduction
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is composed of non-employee directors. The Committee is authorized
by the Board of Directors to administer the Company's compensation policies for
the remuneration of the Company's senior executive officers (collectively,
"Executives"). In determining the cash and non-cash compensation of Executives,
the Committee evaluates both individual and corporate performance from both a
short-term and long-term perspective.
Philosophy
The Company's compensation program for Executives ("Program") seeks to
motivate and reward each Executive based on the achievement of the business
objectives of the Company, superior corporate performance of the Company, and
the Executive's role in attaining such results.
11
<PAGE>
The Program enables the Company to reward and retain highly qualified executives
and, through the use of equity-based incentives, to direct Executive's long-term
focus on maximizing shareholder value. In determining compensation of
Executives, the Committee considers the nature of each Executive's work and
responsibilities, his or her leadership and technical skills, unusual
accomplishments or achievements on the Company's behalf, years of service, the
Executive's total compensation package (cash and non-cash compensation) and the
Company's financial condition generally.
Components of Executive Compensation
Historically, the Company's executive employees have received cash-based
and equity-based compensation.
Cash-Based Compensation: Base salary represents the primary cash
component of an Executive's compensation, and is determined by evaluating the
responsibilities associated with an Executive's position at the Company and his
or her overall level of experience. In addition, the Committee, in its
discretion, may award bonuses. The Committee believes that the Executives are
best motivated through a combination of stock option awards and cash incentives.
Equity-Based Compensation: Equity-based compensation principally has
been in the form of stock options granted pursuant to the Company's 1993
Non-Qualified Plan. The Committee believes that stock options represent an
important component of a well-balanced compensation program. Because stock
option awards provide value only in the event of share price appreciation, stock
options enhance management's focus on maximizing long term shareholder value,
and thus provide a direct relationship between an executive's compensation and
the shareholders' interests. No specific formula is used to determine option
awards for an Executive. Rather, individual award levels are based upon the
subjective evaluation of each Executive's overall past and expected future
contributions to the success of the Company. In addition, the Company is seeking
shareholder approval of the Restricted Stock Plan. Under the Restricted Stock
Plan, the Board of Directors may award to the Executives a certain number of
shares of Common Stock at a purchase price determined by the Board of Directors.
The award of shares of Common Stock under the Restricted Stock Plan are subject
to restrictions on transfer. The Committee believes that such awards under the
Restricted Stock Plan will enhance the alignment of an Executive's interest with
that of the shareholders, because the Executive may be able to realize greater
value with increased stock performance.
Compensation of the Chief Executive Officer
The philosophy, factors, and criteria of the Committee generally
applicable to the Company's senior management is applicable to the Chief
Executive Officer.
Stephen A. Cohen
Edward M. Frankel
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Directors' and Officers' Liability Insurance
The Company has purchased a directors' and officers' liability insurance
policy, as permitted by Article 7 of the New York Business Corporation Law.
National Union Insurance Company issued the policy, which provides coverage of
$5,000,000 for an annual premium of $70,000. The policy, which expired on
February 5, 1997, was renewed on such day and is currently in effect with
improved terms and conditions.
Comparative Stock Performance Graph
The following is a graph comparing the annual percentage change in the
cumulative total shareholder return of the Company's Common Stock with the
cumulative total returns of the published Dow Jones Equity Market Index and Dow
Jones Industrial & Commercial Services -- General Services Index, for the
Company's last five (5) fiscal years:
[Chart and Graph]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Jaco Electronics, Inc. 100 214 193 258 410 291
Dow Jones Equity Market Index 100 115 116 146 184 246
Dow Jones Industrial & Commercial Services - General Services 100 109 108 127 153 175
</TABLE>
13
<PAGE>
2. APPROVAL AND ADOPTION OF AN AMENDMENT TO THE 1993 NON-
QUALIFIED STOCK OPTION PLAN TO INCREASE THE AGGREGATE NUMBER
OF SHARES AVAILABLE UNDER THE PLAN
The Board of Directors of the Company is submitting to the shareholders
of the Company, for their approval and adoption, an amendment to the Company's
1993 Non-Qualified Stock Option Plan to provide for an increase in the number of
shares of Common Stock reserved for issuance under the 1993 Non-Qualified Plan
from 293,333 shares (as adjusted from 200,000 shares of Common Stock to reflect
a 10% stock dividend paid on March 10, 1995 and a 4-for-3 stock split effected
on September 22, 1995) to 600,000 shares (the "Share Amendment"). On May 28,
1997, the Board of Directors unanimously adopted and approved (i) the Share
Amendment, subject to approval by the Company's shareholders, and (ii) an
amendment pursuant to Section 162(m) of the Internal Revenue Code (the "Code")
which may, depending on the facts and circumstances existing at the time of
issuance of an option, permit the income recognized in connection with awards
under the 1993 Non-Qualified Plan to be excluded for purposes of determining
whether a covered employee's compensation exceeds $1,000,000, subject to
approval by the Company's shareholders. In addition, the Board adopted and
approved an update of the 1993 Non-Qualified Plan in regard to amendments in the
Securities and Exchange Commission rules and regulations under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") . The vote of a
majority of the shares of Common Stock present at the Annual Meeting is required
to adopt the Share Amendment. As of June 9, 1997, there were outstanding under
the Company's 1993 Non-Qualified Plan options to purchase 293,333 shares of
Common Stock at a weighted average exercise price of $7.56 per share with
expiration dates ranging from February 21, 1999 to June 8, 2002.
Purpose
The purpose of the 1993 Non-Qualified Plan is to enable the Company,
and its affiliated companies ("Affiliates") to attract and retain the best
available personnel for positions of substantial responsibility, and to provide
additional incentives to officers and other key employees of the Company, its
Affiliates and any future parent or subsidiary of the Company to promote the
success of the Company. Options granted under the 1993 Non-Qualified Plan are
not intended to be characterized as incentive stock options under Internal
Revenue Code ss.422. Proceeds of cash or property received by the Company from
the sale of Common Stock pursuant to options granted under the 1993
Non-Qualified Plan shall be used for general corporate purposes.
Summary of the 1993 Non-Qualified Stock Option Plan
The following is a summary of the material provisions of the 1993
Non-Qualified Plan as currently in effect. This summary is in all respects
qualified in its entirety by reference to the complete text of the 1993
Non-Qualified Plan attached hereto as Exhibit A.
Administration. The 1993 Non-Qualified Plan is administered by a committee
(the "Committee") composed of either (i) the full Board of Directors; or (ii) a
committee of Directors appointed by the Board of Directors. The Committee shall
be composed of not fewer than two (2)
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<PAGE>
directors. If the Committee is composed of other than the entire Board, all of
the members of the Committee shall be Non-Employee Directors, as such term is
defined under Rule 16b-3 promulgated under the Exchange Act. In addition, the
Committee may (but need not) be composed of members also characterized as
"outside directors" within the meaning of Treasury Department Regulations
interpreting Section 162(m) of the Internal Revenue Code. The Committee has
complete authority to interpret all provisions of the 1993 Non-Qualified Plan
consistent with applicable laws, to prescribe the form of instruments evidencing
the stock options granted under the 1993 Non-Qualified Plan, to prescribe,
amend, and rescind rules and regulations for its administration, and to make all
other determinations necessary or advisable for the administration of the 1993
Non-Qualified Plan. Since May 28, 1997, the Board has been administering the
Plan.
Eligibility. Options may be granted under the 1993 Non-Qualified Plan
to any employee of the Company or any of its Affiliates who, in the judgment of
the Committee, has or is expected to make key contributions to the success of
the Company and its Affiliates. The Committee must designate the optionees to
whom options are to be granted, and must specify the number of shares of Common
Stock subject to each option, the duration and exercise price of each option,
the time or times within which all or portions of each option may be exercised,
and whether cash, Common Stock, or other property may be accepted in full or
partial payment upon the exercise of an option. No single individual shall be
eligible to receive options to purchase more than 150,000 shares of Common Stock
(as such shares may be adjusted in accordance with the provisions of Section 6
of the 1993 Non-Qualified Plan) in any one calendar year. There are currently a
total of 90 employees eligible for the grant of options under the 1993
Non-Qualified Plan.
Shares. Prior to the adoption and approval of Share Amendment, options may
be granted for up to an aggregate of 293,333 shares of Common Stock (as adjusted
from 200,000 shares of Common Stock to reflect a 10% stock dividend paid on
March 10, 1995 and a 4-for-3 stock split effected on September 22, 1995),
subject to adjustment in the event of certain changes in the Company's
capitalization. If any option is terminated, in whole or in part, for any reason
other than the exercise thereof, the shares of Common Stock allocated to the
option or portion thereof so terminated may be reallocated to another option or
options to be granted. The closing price of the Company's Common Stock on
November 3, 1997, on the Nasdaq market was $7.13.
Option Price. The option price for options granted under the 1993
Non-Qualified Plan shall be either 100% of the Fair Market Value of the Common
Stock at the time such option is granted or a value to be determined in
accordance with the procedures established by the Committee. As used in the 1993
Non-Qualified Plan, "Fair Market Value" means the closing price of the Common
Stock as reported by the National Association of Securities Dealers (as
published by the Wall Street Journal, if published).
Maximum Term. No option shall be exercisable more than five years from the
date it was granted.
Termination of Option. If an optionee shall cease to be employed by the
Company and/or any of its Affiliates for any reason other than death, the
optionee may exercise his or her option(s) at any time during the three-month
period after such cessation of employment, but only to the extent
15
<PAGE>
that such option(s) would have been exercisable on the date of termination. If
termination of an optionee's employment is due to disability, such three-month
period shall be extended to six months. If an optionee's employment is
terminated for "cause" as defined in the 1993 Non-Qualified Plan, his or her
option(s) shall terminate at the time the notice of termination is given by the
Company or the Affiliate to such optionee. If an optionee dies while in the
employ of the Company or any of its Affiliates or within three months after
cessation of such employment, the optionee's estate or beneficiary may exercise
any outstanding options within three months of the optionee's death, but only to
the extent that such options were exercisable on the date of the optionee's
death.
Method of Exercise. An option shall be exercised by so notifying the
Treasurer of the Company in writing, stating the number of shares of Common
Stock with respect to which the option is being exercised, and tendering payment
therefor. Payment shall be made in either cash or Common Stock.
Adjustments. Subject to certain changes in the Company's capital
structure, appropriate adjustments shall be made to the aggregate number of
shares of Common Stock with respect to which options may be granted and to the
number of shares of Common Stock subject to each outstanding option.
Amendment and Termination of the 1993 Non-Qualified Plan. No option may
be granted after June 10, 2003. The Board of Directors, acting by a majority of
its members, exclusive of Board members who are eligible to receive options,
without further action on the part of the shareholders, has the authority to
alter, amend, or suspend the 1993 Non-Qualified Plan; provided, however, the
Board of Directors may not (a) change the total number of shares of Common Stock
available for options under the 1993 Non-Qualified Plan (except for appropriate
adjustments as described in the 1993 Non-Qualified Plan), (b) materially modify
the eligibility requirements of the 1993 NonQualified Plan, (c) decrease the
minimum option price or otherwise materially increase the benefits accruing to
participants under the 1993 Non-Qualified Plan, (d) extend the duration of the
1993 NonQualified Plan, or (e) increase the maximum term of the options;
provided, further, no such action shall materially and adversely affect any
outstanding options without the consent of the respective optionees.
Federal Tax Consequences. Options granted under the 1993 Non-Qualified
Plan are not intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986 as amended (the "Code"), but
rather are considered to be so-called non-qualified stock options for federal
income tax purposes. No income will be recognized by a recipient at the time of
the grant of a non-qualified stock option. On exercise of a non-qualified stock
option, the amount by which the fair market value of the Common Stock on the
date of exercise exceeds the option exercise price will be taxable to the
recipient as ordinary income. The subsequent disposition of shares acquired upon
exercise of a non-qualified stock option will ordinarily result in capital gain
or loss.
A recipient who is an officer or a director of the Company or a beneficial owner
of more than 10% of any class of registered equity securities of the Company
should consult with his or her tax advisor as to whether, as a result of Section
16(b) of the Exchange Act and the rules and regulations
16
<PAGE>
thereunder, the timing of income recognition is deferred for any period
following the exercise of a non-qualified stock option (the "Deferral Period").
If there is a Deferral Period, recognition of income by the recipient could, in
certain instances, be deferred until the expiration of the Deferral Period
absent a written election (pursuant to Section 83(b) of the Code) filed with the
Internal Revenue Service within 30 days after the date of transfer of the shares
of Common Stock pursuant to the exercise of the non-qualified stock option to
include in income, as of the transfer date, the excess (on such date) of the
fair market value of such shares over their exercise price. The ordinary income
recognized with respect to the transfer of shares to a Company employee upon
exercise of a non-qualified stock option will be subject to both wage
withholding and employment taxes.
A recipient's tax basis and the shares of Common Stock received on exercise of a
non-qualified stock option will be equal to the amount of any cash paid on
exercise plus the amount of ordinary income recognized by such individual as a
result of the receipt of such shares. The recipient's holding period, for income
tax purposes, for the shares so acquired would begin just after the transfer of
the shares or, in the case of an officer or beneficial owner of more than 10% of
any class of registered equity securities of the Company who does not make a
Section 83(b) election, just after the expiration of any Deferral Period.
Generally, the Company will be entitled to a tax deduction in connection with
the recipient's exercise of a non-qualified stock option in an amount equal to
the income recognized by the recipient, subject to the possible application of
Sections 162(m) and 280G of the Code.
Section 162(m) of the Code denies a deduction to any publicly held corporation
for compensation paid to certain "covered employees" in a taxable year to the
extent that such compensation exceeds $1,000,000. "Covered employees" are a
corporation's chief executive officer on the last day of the taxable year and
any other individual whose compensation is required to be reported to
shareholders under the Exchange Act by reason of being among the four most
highly compensated officers (other than the chief executive officer) for the
taxable year and who are employed on the last day of the taxable year.
Compensation paid under certain qualified performance-based compensation
arrangements, which (among other things) provide for compensation based on
pre-established performance goals established by a compensation committee that
is composed solely of two or more "outside directors", is not considered in
determining whether a "covered employee's" compensation exceeds $1,000,000.
Whether an award of options under the 1993 Non-Qualified Plan will satisfy the
requirements of Section 162(m) of the Code for performance-based compensation
will depend upon the specific facts and circumstances existing at the time of
the issuance of the option. Accordingly, the income recognized in connection
with the awards under the 1993 Non-Qualified Plan may be included in a "covered
employee's" compensation for a purpose of determining whether such person's
compensation exceeds $1,000,000.
In the event that exercisability of an option granted under the 1993
Non-Qualified Plan is accelerated because of a change in ownership (as defined
in Code Section 280G(b)(2)) of the Company, a portion of the ordinary income to
the recipient resulting from the exercise of such option may, either alone or
together with any other payments made to the recipient, constitute an excess
parachute payment under Section 280G of the Code. In such event, subject to
certain exceptions, a portion of
17
<PAGE>
such amount would be nondeductible to the Company and the recipient would be
subject to a 20% excise tax on such portion of such amount.
Unless marked to the contrary, the shares of Common Stock
represented by the enclosed Proxy will be voted FOR the approval and adoption of
the Share Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE SHARE AMENDMENT TO THE 1993 NON-QUALIFIED
STOCK OPTION PLAN.
3. APPROVAL AND ADOPTION OF AN AMENDMENT TO THE 1993 NONQUALIFIED STOCK
OPTION PLAN TO INCORPORATE CERTAIN PROVISIONS OF SECTION 162(m) OF THE INTERNAL
REVENUE CODE.
The Board of Directors of the Company is submitting to the shareholders
of the Company, for their approval and adoption, an amendment to the Company's
1993 Non-Qualified Plan to incorporate certain provisions of Section 162(m) of
the Code ("Section 162(m) Amendment"). Section 162(m) of the Code denies a
deduction to any publicly held corporation for compensation paid to certain
"covered employees" in a taxable year to the extent that such compensation
exceeds $1,000,000. "Covered employees" are a corporation's chief executive
officer on the last day of the taxable year and any other individual whose
compensation is required to be reported to shareholders under the Exchange Act
by reason of being among the four most highly compensated officers (other than
the chief executive officer) for the taxable year and who are employed on the
last day of the taxable year. Compensation paid under certain qualified
performance-based compensation arrangements, which (among other things) provide
for compensation based on pre-established performance goals established by a
compensation committee that is composed solely of two or more "outside
directors", is not considered in determining whether a "covered employee's"
compensation exceeds $1,000,000. Whether an award of options under the 1993
Non-Qualified Plan will satisfy the requirements of Section 162(m) of the Code
for performance-based compensation will depend upon the specific facts and
circumstances existing at the time of the issuance of the option. Accordingly,
the income recognized in connection with the awards under the 1993 Non-Qualified
Plan may be included in a "covered employee's" compensation for a purpose of
determining whether such person's compensation exceeds $1,000,000.
Specifically, the Section 162(m) Amendment adds provisions to the 1993
Non-Qualified Plan that (i) limit the number of shares of Common Stock for which
an option can be granted under the 1993 Non-Qualified Plan in any calendar year
to 150,000 shares of Common Stock (as such number of shares may be adjusted in
accordance with the provisions of Section 6 hereof), and (ii) provide that the
Committee administering the 1993 Non-Qualified Plan may be "outside directors"
within the meaning of Treasury Department regulations interpreting Section
162(m) of the Code. A vote of a majority of the shares of Common Stock present
at the Annual Meeting is required to adopt the Section 162(m) Amendment.
For a description of the "Purpose of the 1993 Non-Qualified Plan" and a
"Summary of the 1993 Non-Qualified Plan", see pages 14-18 of this Proxy
Statement.
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<PAGE>
Unless marked to the contrary, the shares of Common Stock
represented by the enclosed Proxy will be voted FOR the approval and adoption of
the Section 162(m) Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE SECTION 162(m) AMENDMENT TO THE 1993
NON-QUALIFIED STOCK OPTION PLAN.
4. APPROVAL AND ADOPTION OF THE JACO ELECTRONICS, INC. RESTRICTED
STOCK PLAN
The Board of Directors of the Company is submitting to the shareholders of
the Company, for their approval and adoption, the Jaco Electronics, Inc.
Restricted Stock Plan (the "Restricted Stock Plan"), a copy of which is attached
hereto as Exhibit B. On May 28, 1997, the Board of Directors of the Company
unanimously adopted and approved the Restricted Stock Plan. The vote of a
majority of the shares of Common Stock present at the Annual Meeting is required
to adopt the Restricted Stock Plan. On June 9, 1997, the Board of Directors
awarded in the aggergate 65,000 shares of Common Stock of the Company subject to
the restrictions set forth in Section 6.7 of the Restricted Stock Plan (the
"Restricted Stock") to certain employees, executive officers named in the
Summary Compensation Table, and employee Directors of the Company (subject to
approval of the Restricted Stock Plan by the Company's shareholders). There are
currently a total of 90 employees, executive officers named in the Summary
Compensation Table and employee Directors eligible for awards under the
Restricted Stock Plan. The grant of Restricted Stock is conditioned on the
approval of the Restricted Stock Plan by the shareholders of the Company.
Purpose.
The purpose of the Restricted Stock Plan is to advance the interests of
the Company and its shareholders by affording to key management employees an
opportunity to acquire or increase their proprietary interest in the Company by
purchasing Restricted Stock under the terms set forth therein. The Restricted
Stock Plan is intended to serve as an employment incentive through which the
Company seeks to motivate, retain and attract those highly competent individuals
upon whose judgment, initiative, leadership and continued efforts the success of
the Company in large measure depends.
Summary of the Jaco Electronics, Inc. Restricted Stock Plan.
The following is a summary of the material features of the Restricted
Stock Plan and is qualified in its entirety by reference to the complete text of
the Restricted Stock Plan attached hereto as Exhibit B.
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<PAGE>
Administration. The Plan shall be administered by the Board of
Directors of the Company. Subject to the express provisions of the Restricted
Stock Plan, the Board of Directors shall have the sole discretion and authority
to determine (a) from among eligible employees of the Company those who may
purchase Restricted Stock, (b) the time or times at which Restricted Stock may
be purchased, (c) the number of shares of Restricted Stock which may be
purchased, (d) the duration of the restrictions on the Restricted Stock, (e) the
manner and type of restrictions to be imposed on the Restricted Stock, and (f)
the valuation of the consideration to be paid for the Restricted Stock, provided
that the consideration may not be less than the par value thereof and that such
consideration need not be the same for each grant thereunder. Subject to the
express provisions of the Restricted Stock Plan, the Board of Directors shall
also have the sole discretion and complete authority to interpret the Restricted
Stock Plan, to prescribe, amend, and rescind rules and regulations relating to
it, to determine the details and provisions of each escrow agreement and stock
purchase agreement executed by a Participant (as defined below) pursuant to the
Restricted Stock Plan, and to take all such other and further steps as may or
shall be necessary or advisable to administer the Restricted Stock Plan .
Eligibility. Any key employee of the Company shall be eligible to
participate in the Restricted Stock Plan. The Board may select any eligible key
employee ("Participant") who may purchase shares of Common Stock in accordance
with such determinations as the Board from time to time in its sole discretion
shall make ("Restricted Stock"). The Restricted Stock Plan does not entitle a
Participant to purchase Restricted Stock unless such employee is selected by the
Board of Directors. A Participant who has been eligible and/or selected by the
Board of Directors to purchase Restricted Stock in one year may not necessarily
be eligible and/or selected to purchase Restricted Stock in subsequent years.
The Board of Directors may, before it approves the purchase of Restricted Stock
or as a condition of such approval, require the Participant by whom the purchase
is to be made to enter into an escrow agreement and/or stock purchase agreement
with the Company containing such terms and conditions as the Board of Directors
may prescribe.
Shares. 300,000 shares of Common Stock (subject to adjustment) have
been reserved for issuance by the Company under the Restricted Stock Plan. Such
shares may consist, either in whole or in part, of the Company's authorized and
unissued shares or the Company's authorized and issued shares thereafter
re-acquired by the Company and held in its treasury, as may from time to time be
determined by the Board of Directors. Any of such shares which remain unsold at
the termination of the Restricted Stock Plan shall cease to be reserved for the
purposes of the Restricted Stock Plan. The certificates representing Restricted
Stock shall each bear restrictive legends under the conditions set forth in
Section 6.7(d) of the Restricted Stock Plan. The holder of Restricted Stock
shall be a shareholder and have all the rights of a shareholder with respect to
such shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such shares; provided, that such
shares of Restricted Stock, and any new, additional or different securities the
holder may become entitled to receive with respect to such shares by virtue of a
stock split or stock dividend or any other change in the corporate or capital
structure of the Company, shall be subject to the restrictions imposed on the
Restricted Stock under the Restricted Stock Plan.
20
<PAGE>
Restricted Stock Purchase. All Restricted Stock purchased pursuant to
the Restricted Stock Plan shall be authorized by minutes of a meeting or the
written consent of the Board of Directors, which shall specify the terms and
provisions to be contained in the stock purchase agreement and/or the escrow
agreement to be executed by the Participant, in accordance with the Restricted
Stock Plan. The Participant shall be required, at the time he or she purchases
Restricted Stock, to represent to the Company in writing that he or she will
hold the Restricted Stock for his or her own account for investment only and not
with a view to distribution or resale and that the he or she will not make any
sale, transfer or other disposition of any shares of Restricted Stock purchased
except pursuant to registration under the Securities Act or pursuant to an
opinion of counsel satisfactory in form and substance to the Board of Directors,
that the sale, transfer or other disposition may be made without such
registration. The escrow agreement and the stock purchase agreement shall be
executed by an authorized officer of the Company. Notwithstanding anything
contained in the Restricted Stock Plan, the Restricted Stock purchased pursuant
thereto must be held for not less than six months following the date of
acquisition.
Restricted Stock Purchase Price. The per share Restricted Stock price
shall be determined by the Board of Directors, but the per share price shall not
be less than the par value of the Common Stock of the Company on the date the
Restricted Stock is purchased. The purchase price for the Restricted Stock shall
be paid in cash.
Adjustments. In the event that the Common Stock of the Company is
changed into or exchanged for a different number or kind of shares or other
securities of the Company or another corporation by reason of a merger,
consolidation or other reorganization, recapitalization, reclassification,
combination of shares, stock split-up or stock dividend, there will be
appropriate adjustments made to the aggregate number of shares of Restricted
Stock purchased under the Restricted Stock Plan, both as to the number or
subject shares and the price. In addition, any new or additional or different
shares or securities which are distributed to any Participant, in his/her
capacity as the owner of Restricted Stock purchased under the Restricted Stock
Plan, will bear a restrictive legend as set forth in the Restricted Stock Plan.
Restrictions. The Board of Directors may impose some or all of the
restrictions set forth in Section 6.7 of the Restricted Stock Plan and/or such
other restrictions on any shares sold pursuant to the Restricted Stock Plan as
they may deem advisable in their sole discretion, including without limitation,
restrictions under the Securities Act of 1933, as amended, under the
requirements of any stock exchange upon which such shares or shares of the same
class are then listed, and under any state or local blue sky or securities laws
applicable to such shares. Three of the restrictions imposed on Restricted Stock
in Section 6.7 of the Restricted Stock Plan include: (1) if a Participant's
employment with the Company is terminated by the Company based upon Discharge
For Cause (as defined in the Restricted Stock Plan), or by the act of the
Participant, within five (5) years from the date Restricted Stock was purchased
under the Restricted Stock Plan, the Company shall have the option for a period
of sixty (60) days after such termination of employment, to buy any or all of
the shares purchased by such terminated employee which are, at such time,
subject to restriction as provided in the applicable Stock Purchase Agreement,
for an amount equal to the Product of (x) the consideration paid by the
terminated employee to the Company to acquire such shares, multiplied by (y) the
number of shares which the Company repurchases ("Repurchase Price"); (2) if a
21
<PAGE>
Participant shall, within five (5) years from the date Restricted Stock shall
have been purchased, directly or indirectly, own, manage, operate, control, be
employed by, or participate in, as a partner, joint venturer, employee, agent,
salesman, officer, director, five percent (5%) shareholder, or be connected in
any manner with the ownership, management, operation, control, employment or
participation as a partner, joint venturer, employee, agent, salesman, officer,
director, or five percent (5%) shareholder, of any business similar to the type
of business conducted by the Company at that time, as determined in the sole
discretion of the Board of Directors, the Company shall have the option for a
period of sixty (60) days after such determination by the Board of Directors, to
buy any or all of the shares purchased by such Participant which are, at such
time, subject to restriction as provided in the applicable Stock Purchase
Agreement, for an amount equal to the Repurchase Price; (3) if, within twelve
months of the date on which Restricted Stock is purchased hereunder, the Company
shall not have filed a registration statement under the Securities Act for the
offer and sale of shares of its Common Stock and any such registration statement
shall not have been declared effective by the Securities and Exchange
Commission, then the Company shall have the option for a period of sixty (60)
days after the end of such twelve month period to buy any or all of the shares
purchased hereunder for an amount equal to the Repurchase Price.
Removal of Restrictions. Certain of the restrictions under the
Restricted Stock Plan shall automatically terminate and the restrictions shall
be removed in accordance with Section 6.9 thereof, immediately following a
"Change of Control of the Company" and/or if the Participant is terminated by
the Company under circumstances which do not constitute a Discharge for Cause. A
"Change of Control of the Company" for the purposes of the Restricted Stock Plan
means a dissolution or liquidation of the Company or a merger, consolidation,
sale of all or substantially all of its assets, or other corporate
reorganization in which the Company is not the surviving corporation.
Transferability. No Restricted Stock shall be transferred by a Participant
otherwise than by Last Will and Testament or the laws of Descent and
Distribution.
Amendment and Termination of the Stock Plan. The Restricted Stock Plan
will terminate on May 28, 2002, unless terminated earlier by the Board of
Directors. No further shares of Restricted Stock shall be sold or issued after
the termination date. The termination of the Restricted Stock Plan, however,
shall not affect any restrictions previously imposed on shares issued pursuant
to the Restricted Stock Plan. The Board of Directors of the Company may, at any
time and from time to time, amend or modify the Restricted Stock Plan; provided,
however, that no amendment to the Restricted Stock Plan may provide for a
purchase price for the Restricted Stock of less than the par value thereof or
change the manner for removal of the restrictions set forth in Section 6.9
thereof.
Federal Tax Consequences. A Participant receiving Restricted Stock may
elect under Section 83(b) of the Code to include in ordinary income, as
compensation, at the time Restricted Stock is first transferred to him, the
excess of the fair market value of such shares at the time of the transfer over
the amount paid, if any, by the recipient for such shares. Unless an election
under Section 83(b) of the Code is timely made by the recipient (not later than
the expiration of thirty days following the time of the transfer of the stock to
him) taxable income will not be recognized by the recipient until such shares
are no longer subject to a substantial risk of forfeiture (the "Restrictions").
However, when the Restrictions lapse, the recipient will recognize ordinary
income in an amount
22
<PAGE>
equal to the excess of the fair market value of the Common Stock on the date of
lapse over the amount paid, if any, by the recipient for such shares. Such
ordinary income recognized by a recipient who is a Company employee will be
subject to both wage withholding and employment taxes.
If a Section 83(b) election is made, any dividends received on shares which are
subject to Restrictions will be treated as dividend income. If a recipient does
not make an election under Section 83(b), dividends received on the Common Stock
prior to the time the Restrictions on such shares lapse will be treated as
additional compensation income, and not dividend income, for federal income tax
purposes, and generally will be subject to wage withholding and employment
taxes.
A recipient's tax basis in Restricted Stock received pursuant to the Restricted
Stock Plan will be equal to the sum of the price paid for such shares, if any,
and the amount of ordinary income recognized by such recipient with respect to
the receipt of such shares or the lapse of Restrictions thereon. The recipient's
holding period for such shares for purposes of determining gain or loss on
subsequent sale will begin immediately after the transfer of such shares to the
recipient if a Section 83(b) election is made with respect to such shares, or
immediately after the Restrictions on such shares lapse if no Section 83(b)
election is made.
In general, a deduction will be allowed to the Company for federal income tax
purposes, subject to the application of Sections 162(m) and 280G of the Code, in
an amount equal to the ordinary income recognized by the recipient with respect
to restricted stock awarded pursuant to the Restricted Stock Plan. If,
subsequent to the lapse of Restrictions on his or her Common Stock, the
recipient sells such shares, the difference, if any, between the amount realized
from such sale and the tax basis of such shares will ordinarily result in
capital gain or loss.
If a Section 83(b) election is made and, before the Restrictions on the shares
lapse, the shares which are subject to such election are in effect forfeited:
(i) no deduction will be allowed to such recipient for the amount included in
the income of such recipient by reason of the Section 83(b) election, and (ii)
the recipient will realize a loss in an amount equal to the excess, if any, of
the amount paid by the recipient for such shares over the amount received by the
recipient upon forfeiture (which loss would ordinarily be a capital loss). In
such an event, the Company will be required to include in its income the amount
of any deduction previously allowable to it in connection with the transfer of
such shares. A recipient will realize gain in an amount equal to the excess, if
any, of the amount received by the recipient upon such resale or forfeiture over
the recipient's tax basis in such shares (which gain would ordinarily be capital
gain).
Section 162(m) of the Code denies a deduction to any publicly held corporation
for compensation paid to certain "covered employees" in a taxable year to the
extent that such compensation exceeds $1,000,000. "Covered employees" are a
corporation's chief executive officer and any other individual whose
compensation is required to be reported to shareholders under the Exchange Act
by reason of being among the four most highly compensated officers (other than
the chief executive officer) for the taxable year. Compensation paid under
certain qualified performance-based compensation arrangements which (among other
things) provide for compensation based on pre-established performance goals
established by a compensation committee that is composed solely of two or more
"outside directors", is not considered in determining whether a "covered
employee's"
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<PAGE>
compensation exceeds $1,000,000. Awards under the Restricted Stock Plan will not
satisfy the requirements of Section 162(m) of the Code for performance based
compensation, so that the income recognized in connection with the awards
thereunder will be included in a "covered employee's" compensation for purposes
of determining whether such covered employee's compensation exceeds $1,000,000.
In the event that the lapse of Restrictions on any shares awarded under the
Restricted Stock Plan is accelerated because of a change of ownership of the
Company (as defined in Code Section 280G(b)(2)), a portion of the income to the
recipient resulting from the lapse of such Restrictions, either alone or
together with any other payments made to the recipient, may constitute an excess
parachute under Section 280G of the Code. In such event, subject to certain
exceptions, a portion of such amount would be nondeductible to the Company and
the recipient would be subject to a 20% excise tax on such portion of such
amount.
Unless marked to the contrary, the shares of Common Stock represented by
the enclosed Proxy will be voted FOR the approval and adoption of the Restricted
Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE JACO
ELECTRONICS, INC. RESTRICTED STOCK PLAN.
The following table sets forth the benefits or amounts that have been
allocated to each of the following groups under the 1993 Non-Qualified Plan and
the Restricted Stock Plan being acted upon.
<TABLE>
<CAPTION>
NEW PLAN AND AMENDED PLAN BENEFITS
1993 Non-Qualified Stock Option Plan and Restricted Stock Plan
Group or Dollar Number of
Name and Position Value ($)(1) Options/Shares
1993 Non-Qualified Stock Option Plan:
<S> <C> <C>
Joel H. Girsky, $174,196 96,799
Chairman of the Board,
President and Treasurer
Charles B. Girsky,
Executive Vice President $ 0 40,000
Jeffrey D. Gash,
Vice President, Finance $ 8,631 19,033
Herbert Entenberg,
Vice President of Management Information
and Systems, and Secretary $ 8,177 11,167
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Group or Dollar Number of
Name and Position Value ($)(1) Options/Shares
<S> <C> <C>
Non-Executive-Officer
Directors as a Group $ 0 0
Executive Officers as a Group $191,004 166,999
Employees as a Group $16,355 126,334
</TABLE>
<TABLE>
<CAPTION>
Jaco Electronics, Inc. Restricted Stock Plan:
<S> <C> <C>
Joel H. Girsky, $150,000 25,000
Chairman of the Board,
President and Treasurer
Charles B. Girsky,
Executive Vice President $150,000 25,000
Jeffrey D. Gash,
Vice President, Finance $60,000 10,000
Herbert Entenberg,
Vice President of Management Information and
Systems, and Secretary $30,000 5,000
Non-Executive-Officer
Directors as a Group $0 0
Executive Officers as a Group $390,000 65,000
Employees as a Group $150,000 25,000
</TABLE>
(1) Based on the difference between the closing price of the Common Stock of
the Company, as listed on the Nasdaq National Market, on October 13, 1997
of $7.00, and (a) the fair market value on the date of grant for options
granted under the 1993 Non-Qualified Stock Option Plan, between $4.77 per
share and $12.75 per share, and (b) the purchase price for shares of common
stock granted under the Restricted Stock Plan, which was $1.00 per share.
Some of the options granted under the 1993 Non-Qualified Stock Option Plan
are currently exercisable. Awards of Restricted Stock are subject to
forfeiture if the Restricted Stock Plan is not approved by Company's
shareholders.
INDEPENDENT AUDITORS
The Board of Directors selected Grant Thornton LLP as independent auditors
for its fiscal year ended June 30, 1997. Grant Thornton LLP were also auditors
for the fiscal year ended June 30, 1996. The Company has not chosen an
independent auditor for the fiscal year ending June 30, 1998, as the Company,
historically, does not choose its auditors until near the end of the fiscal
year. Representatives of Grant Thornton LLP will be present at the Annual
Meeting, will be afforded an
25
<PAGE>
opportunity to make a statement, and will be available to respond to appropriate
inquiries from shareholders.
CERTAIN TRANSACTIONS
During the fiscal year ended June 30, 1997, the Company incurred
approximately $602,000 of rental expenses in connection with its main
headquarters and centralized inventory distribution facility, located in
Hauppauge, New York, which was paid to Bemar Realty Company ("Bemar"), the owner
of such premises. Bemar is a partnership consisting of Messrs. Joel Girsky and
Charles Girsky, both of whom are officers, directors and principal shareholders
of the Company. The lease on the property, which is net of all expenses,
including taxes, utilities, insurance, maintenance and repairs was renewed on
January 1, 1996 and expires on December 31, 2003. The current rental rate is
lower than the rate paid under the prior lease.
During the fiscal year ended June 30, 1996, Joel H. Girsky, the Chairman,
President and Treasurer of the Company, was indebted to the Company under demand
loans bearing interest at a rate of 9 3/4% per annum, the greatest amount of
which indebtedness was $313,808 during such fiscal year. Such indebtedness was
repaid in full on October 27, 1995.
In September 1995, the Company's Board of Directors adopted a policy
prohibiting the Company from making any loan or advance of money or property to,
or guaranteeing the obligation of, any non-employee director of the Company and
limiting the Company's ability to make such loans, advances or guarantees to
employee directors and executive officers of the Company or its subsidiaries
unless a majority of independent disinterested outside directors determine that
such loan, advance or guarantee may reasonably be expected to benefit the
Company. See also "Executive Compensation -- Compensation Committee Interlocks
and Insider Participation."
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than ten percent of
the Common Stock (the "Ten Percent Shareholders") to file with the Securities
and Exchange Commission initial reports of beneficial ownership on Form 3 and
reports of changes in beneficial ownership on Form 4 or Form 5. Executive
officers, directors, and Ten Percent Shareholders are required to furnish the
Company with copies of such Forms. Based solely on a review of such Forms
furnished to the Company, the Company believes that during Fiscal 1997, the
Company's executive officers, directors, and Ten Percent Shareholders complied
with all applicable Section 16(a) filing requirements.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholders wishing to present proposals at the 1998 annual meeting of
shareholders and wishing to have their proposals presented in the proxy
statement distributed by the Board of Directors in connection with the 1998
annual meeting of shareholders must submit their proposals,
26
<PAGE>
in writing, to the attention of the Vice President, Finance of the Company, on
or before June 30, 1998.
GENERAL
The Board of Directors knows of no other matters which are likely to be
brought before the Annual Meeting. If, however, any other matters are properly
brought before the Annual Meeting, the persons named in the enclosed proxy or
their substitutes shall vote thereon in accordance with their judgment pursuant
to the discretionary authority conferred by the form of proxy.
By Order of the Board of Directors,
Joel H. Girsky, Chairman
Hauppauge, New York
November 3, 1997
27
<PAGE>
EXHIBIT A
JACO ELECTRONICS, INC.
1993 Non-Qualified Stock Option Plan, As Amended
1. Purpose: The purpose of the Jaco Electronics, Inc. 1993
Non-Qualified Stock Option Plan (the "Plan") as hereinafter set forth, is to
enable Jaco Electronics, Inc., ("Jaco") a New York corporation, and its
affiliated companies (hereinafter referred to, individually and/or collectively,
as the "Corporation") to attract and retain the best available personnel for
positions of substantial responsibility and to provide additional incentives to
officers and other key employees of the Corporation and any future parent or
subsidiary of the Corporation to promote the success of the Corporation. Options
granted under the Plan are not intended to be incentive stock options under
Internal Revenue Code ss. 422. Proceeds of cash or property received by the
Corporation from the sale of common stock of the Corporation pursuant to options
granted under the Plan will be used for general corporate purposes.
2. Administration.
(a) The Plan shall be administered by a committee (the "Committee")
composed of either the entire Board of Directors (the "Board") of the
Corporation, or a committee thereof appointed by the Board. The
Committee shall be composed of not less than two (2) directors. If the
Committee is composed of other than the entire Board, all of the
members of the Committee shall be "Non-Employee Directors", as such
term is defined in subparagraph 2(b) hereof. In addition, the
Committee may (but need not) be composed of members characterized as
"outside directors" within the meaning of the Treasury Department
Regulations interpreting Section 162(m) of the Internal Revenue Code.
The Committee may have responsibilities in addition to the
administration of the Plan. The Executive Committee or Compensation
Committee of the Board may be designated as the Committee which
administers the Plan. Subject to the express provisions of the Plan,
the Committee may interpret the Plan, prescribe, amend and rescind
rules and regulations relating to it, determine the terms and
provisions of participants' agreements (which need not be identical)
and make such other determinations as it deems necessary or advisable
for the administration of the Plan. The decisions of the Committee on
matters within their jurisdiction under the Plan shall be conclusive
and binding. No member of the Committee shall be liable for any action
taken or determination made in good faith.
(b) The term "Non-Employee Director" as used in this Plan, shall mean a
director of the Company who satisfies the definition thereof under
Rule 16b-3 promulgated under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"). Any such person shall
A-1
<PAGE>
comply with the requirements of Rule 16b-3 promulgated under the Exchange Act,
as from time to time in effect.
3. Eligibility. Options may be granted under this Plan to any
employee of the Corporation or its affiliates, who, in the opinion of the
Committee, has or is expected to make key contributions to the success of the
Corporation. The Committee shall determine, within the limits of the express
provisions of the Plan, those employees to whom, and the time or times at which,
options shall be granted. The Committee shall also determine the number of
shares to be subject to each option, the duration of each option, the exercise
price (option price) under each option, the time or times within which (during
the term of the option) all or portions of each option may be exercised, and
whether cash, common stock of the Corporation, or other property may be accepted
in full or partial payment upon exercise of an option. In making such
determinations, the Committee may take into account the nature of the services
rendered by the employee, his/her present and potential contributions to the
Corporation's success and such other factors as the Committee in its discretion
shall deem relevant.
4. Common Stock. Options may be granted for a number of shares not to
exceed, in the aggregate, 600,000 shares of common stock of the Corporation,
$0.10 par value per share ("Common Stock"), except as such number of shares
shall be adjusted in accordance with the provisions of Section 6 hereof. No
single individual may be granted in any one calendar year options to purchase
more than 150,000 shares of Common Stock (as such number of shares may be
adjusted in accordance with the provisions of Section 6 hereof). Such shares may
be either authorized but unissued shares or reacquired shares or other treasury
shares. In the event that any option granted under the Plan expires unexercised,
or is surrendered by a participant for cancellation, or is terminated or ceases
to be exercisable for any other reason without having been fully exercised prior
to the end of the period during which options may be granted under the Plan, the
shares which had been subject to such option, or to the unexercised portion
thereof, shall again become available for new options to be granted under the
Plan to any eligible employee (including the holder of such former option) at an
option price determined in accordance with Section 5(a) hereof, which price may
then be greater or less than the option price of such former option.
5. Required Terms and Conditions of Options. The options
granted under the Plan shall be in such form and upon such terms and conditions
as the Committee shall from time to time determine subject to the provisions of
the Plan, including the following:
(a) Option Price. The option price of each option to purchase Common Stock
shall be at either 100% of the Fair Market Value (as defined below) of the
Common Stock subject to such option at the time such option is granted, or at
such value to be determined in accordance with procedures established by the
Committee; provided that the option price shall in no event be less than the par
value of the Common Stock subject to such option. As used herein, Fair Market
Value shall mean the closing price of the Common Stock as reported by the
National Association of Securities Dealers (as published by the Wall Street
Journal, if published).
A-2
<PAGE>
(b) Maximum Term. No option shall be exercisable after the expiration of
five years from the date it is granted.
(c) Installment Exercise Limitations. At the discretion of the Committee,
options may become exercisable in such number of cumulative annual installments
as the Committee may establish.
(d) Termination of Option. In the event an optionee shall cease to be
employed by the Corporation for any reason other than death, the optionee shall
have the right, subject to the provisions of Sections 5(b) and 6 hereof, to
exercise his option at any time within three months after such cessation of
employment, but only as to such number of shares as to which his option was
exercisable at the date of such cessation of employment. Notwithstanding the
provisions of the preceding sentence, (i) if cessation of employment occurs by
reason of the disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code), such three month period shall be extended to six months; and (ii)
if employment is terminated at the request of the Corporation for "cause", the
participant's right to exercise his option shall terminate at the time notice of
termination of employment is given by the Corporation to such optionee. For
purposes of this provision, "cause" shall include: (i) committing a criminal act
against, or in derogation of the interest of the Corporation, (ii) divulging
confidential information about the Corporation; (iii) interfering with the
relationship between the Corporation and any supplier, client, customer or
similar person; or (iv) performing any similar action that the Committee, in its
sole discretion, may deem to be sufficiently injurious to the interest of the
Corporation to constitute "cause" for termination. If a participant dies while
in the employ of the Corporation or its subsidiaries or within three months
after cessation of such employment, his estate, personal representative or the
person that acquires his option by bequest or inheritance or by reason of his
death shall have the right, subject to the provisions of Section 5(b) and 6
hereof, to exercise his option at any time within three months from the date of
his death, but only as to the number of shares as to which his option was
exercisable on the date of his death. In any such event, unless so exercised
within the period as aforesaid, the option shall terminate at the expiration of
said period. The time of cessation of employment and whether an authorized leave
of absence or absence on military or government service shall constitute
cessation of employment, for the purpose of the Plan, shall be determined by the
Committee.
(e) Method of Exercise. Options may be exercised by giving written notice
to the Treasurer of the Corporation, stating the number of shares of Common
Stock with respect to which the option is being exercised and tendering payment
therefor. Payment for Common Stock, whether in cash or other shares of Common
Stock shall be made in full at the time that an option, or any part thereof, is
exercised. Notwithstanding the foregoing, payment for Common Stock may not be
made with other shares of Common Stock acquired through previous exercise of a
stock option under this Plan if such Common Stock has not been held by the
participant at least six months from date of exercise.
A-3
<PAGE>
6. Adjustments.
(a) The aggregate of shares of Common Stock with respect to which options
may be granted hereunder and the number of shares of Common Stock subject to
each outstanding option, may all be appropriately adjusted, as the Committee may
determine, for any increase or decrease in the number of shares of issued Common
Stock resulting from a subdivision or consolidation of shares whether through
reorganization, payment of a share dividend or other increase or decrease in the
number of such shares outstanding effected without receipt of consideration by
the Corporation; provided, however, that no adjustment in the number of shares
with respect to which options may be granted under the Plan or in the number of
shares subject to outstanding options shall be made except in the event, and
then only to the extent, that such adjustment, together with all respective
prior adjustments which were not made as a result of this provision, involves a
net change of more than ten percent (i) from the number of shares of Common
Stock with respect to which options may be granted under the Plan or (ii) with
respect to each outstanding option, from the respective number of shares of
Common Stock subject thereto on the date of grant thereof.
(b) Subject to any required action by the shareholders, if the Corporation
shall be a party to a transaction involving a sale of substantially all its
assets, a merger or a consolidation, any option granted hereunder shall pertain
to and apply to the securities to which a holder of the number of shares of
Common Stock subject to the option would have been entitled if he actually owned
the stock subject to the option immediately prior to the time any such
transaction became effective; provided, however, that all unexercised options
under the Plan may be canceled by the Corporation as of the effective date of
any such transaction, by giving notice to the holders thereof of its intention
to do so and by permitting the exercise, during the 30-day period preceding the
effective date of such transaction of all partly or wholly unexercised options
in full (without regard to installment exercise limitations).
(c) In the case of dissolution of the Corporation, every option outstanding
hereunder shall terminate; provided, however that each option holder shall have
30 days' prior written notice of such event, during which time he shall have a
right to exercise his partly or wholly unexercised option (without regard to
installment exercise limitations).
(d) On the basis of information known to the Corporation, the Committee
shall make all determinations under this Section 6, including whether a
transaction involves a sale of substantially all of the Corporation's assets;
and all such determinations shall be conclusive and binding.
7. Option Agreements. Each optionee shall agree to such terms
and conditions in connection with the exercise of an option, including
restrictions on the disposition of the Common Stock acquired upon the exercise
thereof, as the Committee may deem appropriate. Option agreements need not be
identical. The certificates evidencing the shares of Common Stock acquired upon
exercise of an option may bear a legend referring to the terms and conditions
contained in the
A-4
<PAGE>
respective option agreement and the Plan, and the Corporation may place a stop
transfer order with its transfer agent against the transfer of such shares.
8. Certain Legal and Other Requirements.
(a) The obligation of the Corporation to sell and deliver Common Stock
under options granted under the Plan shall be subject to all applicable laws,
regulations, rules and approvals, including, but not by way of limitation, the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, or any state securities laws, if deemed necessary or appropriate by the
Board, of the Common Stock reserved for issuance upon exercise of options.
Nothing herein shall be construed to obligate the Corporation to effect any such
registration or qualification. The certificates evidencing the Common Stock
issued upon exercise of options may be legended to indicate a lack of such
registration or qualification. The Corporation may require any optionee, as a
condition of exercising his option, or at any time thereafter, to represent in
writing that he is acquiring (or has acquired) the Common Stock for his own
account and not with a view to distribution; notwithstanding the foregoing, the
Corporation's failure or refusal to request and/or obtain such representation
shall not be construed as a waiver of any provision hereof.
(b) A participant shall have no rights as a shareholder with respect to any
shares covered by an option granted to, or exercised by, him until the date of
delivery of a stock certificate to him for such shares. No adjustment other than
pursuant to Section 6 hereof shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is delivered.
9. Non-transferability. During the lifetime of an optionee,
any option granted to him shall be exercisable only by him or by his guardian or
legal representative. No option shall be assignable or transferable, except by
will or by the laws of descent and distribution. The granting of an option shall
impose no obligation upon the employee to exercise such option or right.
10. No Contract of Employment. Neither the adoption of this
Plan nor the grant of any option shall be deemed to obligate the Corporation to
continue the employment of any optionee for any particular period, nor shall the
granting of an option constitute a request or consent to postpone the retirement
date of any employee.
11. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as Directors or as members of the
Committee, the members of the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal therein) to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as
A-5
<PAGE>
to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for gross negligence or misconduct in the performance
of his duties; provided that within 60 days after institution of any such
action, suit or proceeding, a Committee member shall, in writing, offer the
Corporation the opportunity, at its own expense, to handle and defend the same.
12. Termination and Amendment of Plan. No options shall be
granted under the Plan more than ten years after the date the Plan was adopted.
The Board, acting by a majority of its members, exclusive of Board members who
are eligible to receive options, without further action on the part of the
shareholders, may from time to time alter, amend or suspend the Plan or any
option granted hereunder or may at any time terminate the Plan; provided,
however, that the Board may not (i) change the total number of shares of Common
Stock available for options under the Plan, except as provided in Section 6
hereof, (ii) extend the duration of the Plan, (iii) increase the maximum term of
options, (iv) decrease the minimum option price or otherwise materially increase
the benefits accruing to participants under the Plan, or (v) materially modify
the eligibility requirements of the Plan; and provided further, that no such
action shall materially and adversely affect any outstanding options without the
consent of the respective optionees.
13. Effective Date.
The Plan shall become effective upon adoption by the Board; provided,
however, that it shall be submitted for approval by the holders of a majority of
the outstanding shares of Common Stock of the Corporation within twelve months
thereafter, and options made available prior to such shareholder approval shall
become null and void if such shareholder approval is not obtained.
A-6
<PAGE>
EXHIBIT B
JACO ELECTRONICS, INC.
RESTRICTED STOCK PLAN
(Limited to 300,000 Shares)
ARTICLE I.
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
1. "Board" shall mean the Board of Directors of the Company.
2. "Change of Control of the Company" shall have the meaning
given in Section 6.7 hereof.
3. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
4. "Common Stock" shall mean the common stock of the Company,
par value $.10 per share.
5."Company" shall mean Jaco Electronics, Inc., a New York
corporation.
6. "Discharge for Cause" shall mean termination of employment
due to (i) such acts or conduct on the part of the Participant which is
contrary to the interests of the Company, as determined by the Board;
(ii) the occurrence of an event described in Section 6.7(b) hereof;
(iii) the commission of any crime or act of material dishonesty by the
Participant; or (iv) the commission of any willful, malicious, grossly
negligent or reckless act by the Participant which is deemed, in the
reasonable judgment of the Board, detrimental to the business,
prospects or reputation of the Company. Notwithstanding anything to the
contrary contained herein, however, the term "Discharge for Cause" or
"Cause" shall not include a determination by a Board constituted at any
time following a Change of Control of the Company (as defined below).
7. "Effective Date of the Plan" shall be as defined in Section
2.3 hereof.
8. "Escrow Agent" shall mean any escrow agent or its successor
designated by the Board to act under the provisions of the Escrow
Agreement.
B-1
<PAGE>
>
9. "Escrow Agreement" shall mean the form of escrow agreement
as determined from time to time by the Board.
10. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
11. "Fair Market Value" shall mean, in the event that the
Stock is not listed on a national securities exchange, such value as
may be determined by the Board, or, in the event that the Stock is
listed on Nasdaq (or any other exchange on which it may be listed), the
average of the highest price and the lowest price per share at which
the Stock is sold in the regular way on Nasdaq (or any other exchange
on which it may be listed) on the day Restricted Stock is purchased
hereunder, or in the absence of any reported sales on such day, the
first preceding day on which there were such sales, provided such price
shall not be less than the par value of the Stock.
12. "Key Management Employees" shall mean officers of the
Company and those key or outstanding employees of the Company, from
time to time, designated by the Board.
13. "Participant" shall mean a person who has purchased
Restricted Stock pursuant to the provisions hereof and which has not
been forfeited under the Plan.
14. "Plan" shall mean the Jaco Electronics, Inc. Restricted
Stock Plan, the terms of which are set forth herein.
15. "Restricted Stock" shall mean Common Stock delivered to or
held by a Participant which is subject to the restrictions described in
Section 6.7 hereof and any new, additional or different stock or
securities of the Company or some other corporation, which a
Participant may become entitled to receive with respect to such shares
by virtue of a stock split or stock dividend or any other change in the
corporate or capital structure of the Company. Shares of Restricted
Stock delivered pursuant to the Plan, at the election of the Board, may
consist either in whole or in part of the Company's authorized and
unissued shares or the Company's authorized and issued shares
thereafter re-acquired by the Company and held in its treasury, as may
from time to time, be determined by the Board.
16. "Securities Act" shall mean the Securities Act of 1933, as
amended.
17. "Stock" shall mean the Common Stock of the Company or, in
the event that the outstanding shares of Stock are hereafter changed
into or exchanged for shares of a different stock or securities of the
Company or some other corporation, any new, additional or different
stock or securities of the Company or some other corporation. Shares of
Stock
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delivered pursuant to the Plan, at the election of the Board, may
consist either in whole or in part of the Company's authorized and
unissued shares or the Company's authorized and
issued shares thereafter re-acquired by the Company, and held in its
treasury, as may from time to time be determined by the Board.
18."Stock Purchase Agreement" shall mean the form of stock
purchase agreement as determined from time to time by the Board.
19. "Subsidiary" shall mean any corporation, the majority of
the outstanding capital stock of which is owned, directly or
indirectly, by the Company, and as defined in Section 425 of the Code.
ARTICLE II.
THE PLAN
2.1 Name. This Plan shall be known as the "Jaco Electronics, Inc.
Restricted Stock Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by affording Key Management Employees an
opportunity to acquire or increase their proprietary interest in the Company by
purchasing Restricted Stock under the terms set forth herein. This Plan is
intended to serve as an employment incentive through which the Company seeks to
motivate, retain and attract those highly competent individuals upon whose
judgment, initiative, leadership and continued efforts the success of the
Company in large measure depends.
2.3 Effective Date. The Plan shall become effective upon the earlier of
the date of its adoption by the Board, or its approval by the holders of a
majority of the shares of Common Stock of the Company represented by the next
annual or special meeting of the shareholders of the Company.
ARTICLE III.
PARTICIPANTS
Any Key Management Employee of the Company shall be eligible to
participate in the Plan. The Board may select any eligible Key Management
Employee who may purchase Restricted Stock in accordance with such
determinations as the Board from time to time in its sole discretion shall make.
The Plan does not entitle an eligible Key Management Employee to purchase
Restricted Stock unless such employee is selected by the Board. A Key Management
Employee who has been eligible and/or selected by the Board to purchase
Restricted Stock in one year may not necessarily be eligible and/or selected to
purchase Restricted Stock in subsequent years. The Board may, before
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it approves the purchase of Restricted Stock or as a condition of such approval,
require the Participant by whom the purchase is to be made to enter into an
Escrow Agreement and/or Stock Purchase Agreement with the Company containing
such terms and conditions as the Board may prescribe. Nothing contained in the
Plan shall give any employee the right to be retained in the employ of the
Company or affect the right of the Company to dismiss any employee. The adoption
of the Plan shall not constitute a contract between the Company and any
employee.
ARTICLE IV.
ADMINISTRATION
4.1 Duties and Powers of the Board. The Plan shall be administered by
the Board. Subject to the express provisions of the Plan, the Board shall have
the sole discretion and authority to determine (a) from among eligible Key
Management Employees those who may purchase Re stricted Stock, (b) the time or
times at which Restricted Stock may be purchased, (c) the number of shares of
Restricted Stock which may be purchased, (d) the duration of the restrictions on
the Restricted Stock, (e) the manner and type of restrictions to be imposed on
the Restricted Stock, and (f) the valuation of the consideration to be paid for
the Restricted Stock, provided that the consideration may not be less than the
par value thereof and that such consideration need not be the same for each
grant hereunder. Subject to the express provisions of the Plan, the Board shall
also have the sole discretion and complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Escrow Agreement and Stock Purchase
Agreement, and to take all such other and further steps as may or shall be
necessary or advisable to administer the Plan.
The Board may employ such legal counsel, consultants and agents as they
may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant. None of the members of the
Board shall be liable for any action or determination made in good faith with
respect to the Plan or any Restricted Stock purchased under it and the Company
shall indemnify and hold harmless each member of the Board against any
liability, cost or expense (including reasonable counsel fees) arising out of
any act or omission to act in connection with the Plan, unless arising out of
such person's own fraud, bad faith or willful misconduct.
4.2 Majority Rule. Any resolution adopted by the Board in accordance
with the by-laws of the Company, and provided a quorum is present in accordance
with such by-laws, shall be deemed sufficient for purposes of taking any action
required to be taken by the Board hereunder.
4.3 Company Assistance. The Company shall supply full and timely
information to the Board on all matters relating to Participants, their
employment, death, retirement, disability or other termination of employment,
and such other pertinent facts as the Board may require. The Company
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shall furnish the Board with such clerical and other assistance as is necessary
in the performance of their duties.
ARTICLE V.
SHARES OF RESTRICTED STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to a Three Hundred Thousand (300,000)
adjustment pursuant to the provisions of Section 5.3 hereof, the number of
shares of Restricted Stock which may be issued and sold hereunder shall not
exceed Three Hundred Thousand (300,000) shares. Such shares may consist, either
in whole or in part, of the Company's authorized and unissued shares or the
Company's authorized and issued shares thereafter re-acquired by the Company and
held in its treasury, as may from time to time be determined by the Board. Any
of such shares which remain unsold at the termination of the Plan shall cease to
be reserved for the purposes of the Plan.
5.2 Shareholder Approval. The Company may, but shall not be required to, issue
or deliver any certificate for restricted stock which may be purchased under the
Plan, prior to approval of the Plan by a resolution adopted by the holders of a
majority of the outstanding shares of Stock of the Company present at an annual
or special meeting of shareholders. If such shareholder approval is not
obtained, the Company may determine that Restricted Stock previously purchased
pursuant to the Plan shall be void and thereupon the Company shall have no
liability whatsoever in connection with any such Restricted Stock other than to
return the purchase price paid therefor.
5.3 Antidilution. In the event that the Stock hereafter is changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of merger, consolidation, or other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up, or stock dividend, then:
(a) The aggregate number and kind of shares in the Plan
shall be adjusted appropriately;
(b) The number of shares of Restricted Stock purchased by a
Participant pursuant hereto shall be adjusted appropriately, both as to
the number of subject shares and the price; and
(c) Such new or additional or different shares or securities
which are distributed to a Participant, in his capacity as the owner of
Restricted Stock purchased hereunder, shall be legended in accordance
with Section 6.7(d) hereof and shall be subject to all of the
conditions and restrictions applicable to Restricted Stock issued as
provided herein.
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Any adjustments required hereunder and the manner of application of the
foregoing provisions shall be determined solely by the Board, and any such
adjustment may provide for the elimination of fractional share interests.
ARTICLE VI.
RESTRICTED STOCK PURCHASE
6.1 Restricted Stock Purchase. All Restricted Stock purchased pursuant
hereto shall be authorized by minutes of a meeting or the written consent of the
Board, which shall specify the terms and provisions to be contained in the Stock
Purchase Agreement and/or the Escrow Agreement, in accordance with the Plan. The
Escrow Agreement and the Stock Purchase Agreement shall be executed by an
authorized officer of the Company. Notwithstanding anything contained herein,
the Restricted Stock purchased pursuant hereto must be held for not less than
six months following the date of acquisition.
6.2 Restricted Stock Price. The per share Restricted Stock price shall
be determined by the Board, but the per share price shall not be less than the
par value of the Restricted Stock on the date the Restricted Stock is purchased.
The purchase price for the Restricted Stock shall be paid in cash.
6.3 Section 83(b) Election. A Participant who files an election with
the Internal Revenue Service to include the fair market value of any Restricted
Stock in gross income while it is still subject to restrictions shall promptly
furnish the Company with a copy of such election together with information as to
the amount of any federal, state, local or other taxes required to be withheld
to enable the Company to claim an income tax deduction with respect to such
election.
6.4 Withholding. All Restricted Stock purchased pursuant hereto and
dividends on such Restricted Stock shall be subject to withholding as required
by applicable federal, state and local laws, and the Board may make such
arrangements for the payment of any withholding taxes on Restricted Stock
purchased pursuant hereto as they deem satisfactory, including but not limited
to (i) reducing the number of shares of Restricted Stock otherwise deliverable,
based upon their Fair Market Value, to permit deduction of the amount of any
such withholding taxes from the amount which may otherwise be purchased under
the Plan, (ii) deducting the amount required to be withheld from salary or any
other amount then or thereafter payable to a Participant, and (iii) requiring a
Participant to pay to the Company the amount required to be withheld as a
condition of releasing the Restricted Stock and any other distributions related
thereto.
6.5 Nontransferability of Restricted Stock. Unless otherwise permitted
hereunder, no Restricted Stock shall be transferred by a Participant otherwise
than by Last Will and Testament or the laws of Descent and Distribution.
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At such time that a Participant purchases Restricted Stock pursuant
hereto, the Participant shall represent to the Company in writing that he or she
will hold the Restricted Stock for his or her own account for investment only
and not with a view to distribution or resale and that the Participant will not
make any sale, transfer or other disposition of any shares of Restricted Stock
purchased except pursuant to registration under the Securities Act or pursuant
to an opinion of counsel satisfactory in form and substance to the Board, that
the sale, transfer or other disposition may be made without such registration.
6.6 No Alienation of Benefits. Except insofar as may otherwise be
required by law, no Restricted Stock held at any time pursuant to an Escrow
Agreement shall be subject in any manner to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of
any kind nor in any manner be subject to the debts or liabilities of any person
and any attempt to so alienate or subject any such amount, whether presently or
thereafter payable, shall be void. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge, attach, charge, or otherwise encumber
any Restricted Stock purchased under the Plan, or any part thereof, or if by
reason of his of her bankruptcy or other event happening at any such time such
amount would be made subject to his debts or liabilities or would otherwise not
be enjoyed by him or her, then the Board, if it so elects, may direct that such
Restricted Stock be withheld and that the same or any part thereof be paid or
applied to or for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and proportion as the Board may
deem proper, in their sole discretion.
6.7 Restrictions Imposed. The Board may impose any or all of the
restrictions enumerated in subsections (a), (b) and (c) of this Section 6.7 or
such other restrictions as provided in subsection (e) below, with respect to any
Restricted Stock purchased hereunder:
(a) If a Participant's employment with the Company shall be
terminated by the Company based upon Discharge For Cause, or by the act
of the Participant, within five (5) years from the date Restricted
Stock shall have been purchased hereunder, the Company shall have the
option for a period of sixty (60) days after such termination of
employment, to buy any or all of the shares purchased by such
terminated employee which are, at such time, subject to restriction as
provided in the applicable Stock Purchase Agreement, for an amount
equal to the Product of (x) the consideration paid by the terminated
employee to the Company to acquire such shares, multiplied by (y) the
number of shares which the Company repurchases ("Repurchase Price").
The provisions of this paragraph shall automatically terminate and the
restrictions shall be removed in accordance with Section 6.9 hereof,
immediately following a "Change of Control of the Company". A "Change
of Control of the Company" shall mean a dissolution or liquidation of
the Company or a merger, consolidation, sale of all or substantially
all of its assets, or other corporate reorganization in which the
Company is not the surviving corporation.
(b) If a Participant shall, within five (5) years from the
date Restricted Stock shall have been purchased, directly or
indirectly, own, manage, operate, control, be employed by,
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>
or participate in, as a partner, joint venturer, employee, agent,
salesman, officer, director, five percent (5%) shareholder, or be
connected in any manner with the ownership, management, operation,
control, employment or participation as a partner, joint venturer,
employee, agent, salesman, officer, director, or five percent (5%)
shareholder, of any business similar to the type of business conducted
by the Company at that time, as determined in the sole discretion of
the Board, the Company shall have the option for a period of sixty (60)
days after such determination by the Board, to buy any or all of the
shares purchased by such Participant which are, at such time, subject
to restriction as provided in the applicable Stock Purchase Agreement,
for an amount equal to the Repurchase Price. The provisions of this
paragraph shall automatically terminate and the restrictions shall be
removed in accordance with Section 6.9 hereof, immediately following a
Change of Control of the Company or if the Participant is terminated by
the Company under circumstances which do not constitute a Discharge for
Cause.
(c) If, within twelve months of the date on which Restricted
Stock is purchased hereunder, the Company shall not have filed a
registration statement under the Securities Act for the public offer
and sale of shares of its Common Stock and any such registration
statement shall not have been declared effective by the Securities and
Exchange Commission, then the Company shall have the option for a
period of sixty (60) days after the end of such twelve month period to
buy any or all of the shares purchased hereunder for an amount equal to
the Repurchase Price.
(d) Stock certificates evidencing Restricted Stock purchased
by a Participant shall be issued and delivered in the sole name of the
Participant and each such certificate shall bear the following legends:
(i) "The shares of Jaco Electronics, Inc. $.10 par
value common stock evidenced by this certificate are subject
to repurchase by Jaco Electronics, Inc., and such shares may
not be sold or otherwise transferred, pledged or hypothecated
except pursuant to the provisions of the Escrow Agreement
and/or Stock Purchase Agreement by and between the Escrow
Agent, Jaco Electronics, Inc. and the registered owner of such
shares."; and
(ii) "This stock certificate may not be sold,
transferred, pledged or hypothecated unless it has first been
registered under the Securities Act of 1933, as amended, or
unless counsel for Jaco Electronics, Inc. has given an opinion
that registration under said Act is not required, except that
after a Change of Control of the Company, an opinion of
counsel that registration under said Act is not required, may
be provided by counsel independent of Jaco Electronics, Inc.
These shares are subject to the terms of an Escrow Agreement
and/or Stock Purchase Agreement with the Escrow Agent, Jaco
Electronics Inc. and the registered owner of such shares."
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>
No such share may be sold, transferred, or otherwise alienated
or hypothecated so long as the certificate evidencing such share bears
the legends provided above.
The foregoing provisions in subsection (d) hereof shall not be
effective if and to the extent that the shares of Stock delivered under
the Plan are covered by an effective and current registration statement
under the Securities Act, or if and so long as the Board determines
that application of such provisions is no longer required. In making
such determination, the Board shall rely upon an opinion of counsel for
the Company, except that after a Change of Control of the Company, an
opinion of counsel that registration under the Securities Act is not
required may be provided by counsel independent of the Company.
(e) The Board may impose some or all of the restrictions set
forth in this Section and/or such other restrictions on any shares sold
pursuant to the Plan as they may deem advisable in their sole
discretion, including without limitation, restrictions under the
Securities Act, under the requirements of any stock exchange upon which
such shares or shares of the same class are then listed, and under any
state or local blue sky or securities laws applicable to such shares.
(f) In the event the Company exercises its sixty (60) day
option with respect to any shares, the Company may set off the
Repurchase Price from any obligation or liability to a Participant,
whether as compensation or otherwise.
6.8 Rights as Shareholder. Subject to the provisions of Section 6.9
hereof, a certificate or certificates for all shares of Restricted Stock
registered in the name of a Participant shall be delivered to him or her as soon
as reasonably practicable and he or she shall thereupon be a shareholder and
have all the rights of a shareholder with respect to such shares, including the
right to vote and receive all dividends or other distributions made or paid with
respect to such shares; provided, that such shares of Restricted Stock, and any
new, additional or different securities the Participant may become entitled to
receive with respect to such shares by virtue of a stock split or stock dividend
or any other change in the corporate or capital structure of the Company, shall
be subject to the restrictions theretofore imposed on the Restricted Stock.
6.9 Removal of Restrictions. (a) If (i) a Participant shall die, retire
or become permanently and totally disabled as determined in accordance with
applicable Company personnel policies, or (ii) there is a Change of Control of
the Company, at any time within five (5) years from the date Restricted Stock
shall have been purchased hereunder, the events of forfeiture specified in
Section 6.7(a) and (b) hereof (but not Section 6.7(c)) or as otherwise
determined by the Board shall terminate, and upon surrender and presentation to
the Company of the legended certificates evidencing such shares, replacement
certificates shall be issued and delivered to the Participant, free from the
legend provided for in Section 6.7(d)(i) hereof or any other restrictions on the
sale or other transfer of such shares, pursuant to the Plan, but legended in
accordance with Section 6.7(d)(ii) hereof, and such shares shall, nonetheless,
remain subject to the Securities Act and the Exchange Act, unless an opinion of
counsel is provided in accordance with Section 6.7(d) hereof.
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>
(b) If the Company chooses not to exercise its sixty (60) day
option with respect to any shares or such sixty (60) day option period
has expired pursuant to Section 6.7(a) hereof, the events of forfeiture
specified in Section 6.7(a) hereof shall terminate, and upon surrender
and presentation to the Company of the legended certificates evidencing
such shares, replacement certificates shall be issued and delivered to
the Participant, free from the legend provided for in Section 6.7(d)(i)
hereof or any other restrictions on the sale or transfer of such
shares, pursuant to the Plan, but legended in accordance with Section
6.7(d)(ii) hereof, and such shares shall, nonetheless, remain subject
to the Securities Act and the Exchange Act, unless an opinion of
counsel is provided in accordance with Section 6.7(d) hereof.
(c) If the Company chooses not to exercise its sixty (60) day
option with respect to any shares or such sixty (60) day option period
has expired pursuant to Section 6.7(b) hereof, the events of forfeiture
specified in Section 6.7(b) hereof shall terminate, and upon surrender
and presentation to the Company of the legended certificates evidencing
such shares, replacement certificates shall be issued and delivered to
the Participant, free from the legend provided for in Section 6.7(d)(i)
hereof or any other restrictions on the sale or transfer of such
shares, pursuant to the Plan, but legended in accordance with Section
6.7(d)(ii) hereof, and such shares shall, nonetheless, remain subject
to the Securities Act and the Exchange Act, unless an opinion of
counsel is provided in accordance with Section 6.7(d) hereof.
(d) If a Participant's Stock Purchase Agreement provides for
the release from restriction of portions of the Restricted Stock upon
the passage of time, then upon the passage of such time periods, the
events of forfeiture specified in Section 6.7(a) and 6.7(b) hereof
shall terminate as to such portions of the Restricted Stock and upon
surrender and presentation to the Company of the legended certificates
evidencing such shares, replacement certificates shall be issued and
delivered to the Participant, free from the legend provided for in
Section 6.7(d)(i) hereof or any other restrictions on the sale or
transfer of such shares, pursuant to the Plan, but legended in
accordance with Section 6.7(d)(ii) hereof, and such shares shall,
nonetheless, remain subject to the Securities Act and the Exchange Act,
unless an opinion of counsel is provided in accordance with Section
6.7(d) hereof.
6.10 Escrow. In order to enforce the restrictions imposed upon shares
issued under the Plan, the Board may require any Participant to deposit with the
Escrow Agent all certificates for Restricted Stock together with stock powers,
appropriately endorsed in blank and to enter into an Escrow Agreement providing
that the certificates representing shares issued pursuant to the Plan shall
remain in the physical custody of the Escrow Agent until any or all of the
restrictions imposed pursuant to the Plan have terminated.
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ARTICLE VII.
STOCK CERTIFICATES
The Company may, but shall not be required to, issue or deliver any
certificate for shares of Restricted Stock purchased hereunder or any portion
thereof, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which the
Stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any federal or state law or under the rules or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body, which the Board shall in their sole
discretion deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency which the Board shall in their
sole discretion determine to be necessary or advisable;
(d) Compliance with all terms and provisions of the Plan, the
Stock Purchase Agreement and the Escrow Agreement;
(e) The lapse of such reasonable period of time following the
purchase of the Restricted Stock as the Board from time to time in
their sole discretion may establish for reasons of administrative
convenience; and
(f) The approval of the Plan by the holders of a majority of
the shares of Stock of the Company present at an annual or special
meeting of the shareholders of the Company; and
Nothing herein contained shall be construed as imposing any obligation on the
Board or the Com pany to undertake or complete any act with respect to
subparagraphs (a), (b) and (c) of this Article VII.
ARTICLE VIII.
TERMINATION, AMENDMENT, AND MODIFICATION OF PLAN
8.1 Termination. The Plan shall terminate and no further shares shall
be sold or issued hereunder on or after the fifth anniversary of the Effective
Date, or such earlier date as may be
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determined by the Board. The termination of the Plan, however, shall not affect
any restrictions previously imposed on shares issued pursuant to the Plan.
8.2 Amendment and Modification. The Board may at any time terminate,
and may at any time and from time to time and in any respect amend or modify,
the Plan; provided, however, that no amendment to the Plan may provide for a
purchase price for the Restricted Stock of less than the par value thereof or
change the manner for removal of the restrictions set forth in Section 6.9
hereof.
No termination, amendment, or modification of the Plan shall in any
manner affect any Stock Purchase Agreement or Escrow Agreement theretofore
executed pursuant to the Plan without the consent of the Participant.
ARTICLE IX.
MISCELLANEOUS
9.1 Employment. Nothing in the Plan or in any Stock Purchase Agreement
relating hereto shall confer upon any employee the right to continue in the
employ of the Company.
9.2 Other Compensation Plans. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation plans for employees of the Company.
9.3 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
9.4 Singular, Plural, Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
9.5 Headings, etc., No Part of Plan. Headings or Articles and Sections
hereof are inserted for convenience and reference and they constitute no part of
the Plan.
9.6 Unfunded Plan. The Plan is intended to constitute an unfunded
deferred compensation arrangement for a select group of management, key or
outstanding personnel.
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JACO ELECTRONICS, INC.
Proxy for Annual Meeting of Shareholders - December 9, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Charles B. Girsky and Joel H.
Girsky, and each of them, proxies of the undersigned (the "Proxies"), with the
power to appoint a substitute, to represent and to vote all shares of common
stock of Jaco Electronics, Inc. (the "Company"), $0.10 par value per share (the
"Common Stock"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company, to be held on
December 9, 1997, and all adjournments thereof, as follows:
*1. To vote on the election of each of the following nominees to
the Board of Directors, as indicated:
FOR all nominees listed below (except as marked to the controry)--
WITHHOLD AUTHORITY to vote for all nominees listed below.--
Stephen A. Cohen, Edward M. Frankel, Charles B. Girsky, Joel H.
Girsky and Joseph F. Hickey, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name above.)
*2. To adopt and approve an amendment to the Company's 1993
Non-Qualified Stock Option Plan, as amended ("1993 Non-Qualified
Plan"), to increase the aggregate number of shares of Common Stock
issued upon the exercise of all options granted under the 1993
Non-Qualified Plan from 293,333 shares of Common Stock to 600,000
shares of Common Stock.
|_| For |_| Against |_| Abstain
*3. To adopt and approve an amendment to the Company's 1993
Non-Qualified Plan to incorporate certain provisions of Section
162(m) of the Internal Revenue Code.
*4. To adopt and approve the Jaco Electronics, Inc. Restricted Stock Plan.
|_| For |_| Against |_| Abstain
5. To vote, in the discretion of the Proxies, on such other matters as may
properly come before the meeting.
*The shares of Common Stock represented by this Proxy shall be voted as directed
above by the shareholder. In the absence of such direction, the shares of Common
Stock shall be voted FOR the matters set forth in items 1, 2, 3 and 4.
Receipt of the Notice of Annual Meeting, the Proxy Statement, and the Annual
Report to Shareholders is hereby acknowledged.
Date:__________________, 1997
__________________________
__________________________
__________________________
Signatures of Shareholders
Please sign as name appears hereon. If signing as attorney, executor,
administrator, trustee, guardian, or other fiduciary, please give your full
title as it appears. If shares of Common Stock are held jointly, each named
shareholder should sign.
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
#159637-v3
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