FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 1998
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________________
Commission File Number 0-5896
JACO ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-1978958
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
145 OSER AVENUE, HAUPPAUGE, NEW YORK 11788
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (516) 273-5500
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO __
Number of Shares of Registrant's Common Stock Outstanding as of November 11,
1998 - 3,653,521 (Excluding 412,200 Shares of Treasury Stock).
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<CAPTION>
FORM 10-Q September 30, 1998
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1998 1998
----------- -----------
ASSETS
Current Assets
<S> <C> <C>
Cash $ 1,519,542 $ 562,556
Marketable securities 687,060 764,810
Accounts receivable - net 21,331,931 21,887,618
Inventories 35,756,451 35,737,288
Prepaid expenses and other 1,074,337 1,203,198
Prepaid income taxes 762,613 610,132
Deferred income taxes 824,000 772,500
----------- -----------
Total current assets 61,955,934 61,538,102
Property, plant and equipment - net 7,102,677 6,102,445
Deferred income taxes 342,000 333,000
Excess of cost over net assets acquired - net 3,729,796 3,776,912
Other assets 1,589,426 1,668,830
----------- -----------
$74,719,833 $73,419,289
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1998
Page 3
<TABLE>
<CAPTION>
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1998 1998
------------ -----------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $ 18,012,534 $ 18,394,251
Current maturities of long term debt and
capitalized lease obligations 733,613 663,198
------------- ------------
Total current liabilities 18,746,147 19,057,449
Long term debt and capitalized lease obligations 19,661,795 17,036,593
Deferred compensation 712,500 700,000
SHAREHOLDERS' EQUITY
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized 10,000,000 shares,
$.10 par value; issued 4,065,721 shares
and 3,657,321 and 3,866,221
shares outstanding, respectively 406,572 406,572
Additional paid-in capital - net 22,430,045 22,396,295
Accumulated other comprehensive income 118,135 164,385
Retained earnings 14,835,851 15,077,957
Treasury stock (2,191,212) (1,419,962)
------------ ------------
Total shareholders' equity 35,599,391 36,625,247
---------- ----------
$74,719,833 $73,419,289
=========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q September 30, 1998
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
NET SALES $33,256,456 $36,878,534
COST AND EXPENSES
Cost of goods sold 26,554,068 29,061,380
---------- ----------
Gross profit 6,702,388 7,817,154
Selling, general and administrative expenses 6,795,052 6,877,115
------------ ------------
Operating (loss) profit (92,664) 940,039
Interest expense 313,442 272,009
------------ ------------
(Loss) earnings before income taxes (406,106) 668,030
Income tax benefit (provision) 164,000 (270,000)
------------ ------------
NET (LOSS) EARNINGS $ (242,106) $ 398,030
============ ============
Net (loss) earnings per common share
Basic and diluted $ (0.06) $ 0.10
============ ============
Weighted average common shares outstanding
Basic 3,830,397 3,888,221
Diluted 3,830,397 3,943,192
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q September 30, 1998
Page 5
<TABLE>
<CAPTION>
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
Accumulated
Additional Other
Common Stock Paid-In Comprehensive Retained Treasury
Shares Amount Capital Income Earnings Stock
--------------- -------------- ---------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1998 4,065,721 $406,572 $ 22,801,295 $ 164,385 $15,077,957 $ (1,419,962)
Deferred compensation expense
Purchase of treasury stock (771,250)
Unrealized loss on marketable
securities - net (46,250)
Net loss $ (242,106)
--------------- -------------- ---------------- -------------- ----------------- ---------------
Balance at September 30, 1998 4,065,721 $406,572 $ 22,801,295 $ 118,135 $14,835,851 $ (2,191,212)
=============== ============== ================ ============== ================= ===============
</TABLE>
Total
Deferred Shareholders'
Compensation Equity
--------------- --------------
Balance at July 1, 1998 $ (405,000) $36,625,247
Deferred compensation expense 33,750 33,750
Purchase of treasury stock (771,250)
Unrealized loss on marketable
securities - net (46,250)
Net loss (242,106)
--------------- --------------
Balance at September 30, 1998 $ (371,250) $35,599,391
=============== ==============
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1998
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
Cash flows from operating activities
<S> <C> <C>
Net (loss) earnings $ (242,106) $ 398,030
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 375,299 330,083
Deferred compensation 46,250 12,500
Deferred income tax benefit (29,000) (55,000)
Provision for doubtful accounts 120,814 89,375
Changes in operating assets and liabilities,
Decrease (increase) in operating assets - net 392,090 (702,433)
(Decrease) increase in operating liabilities - net (381,717) 318,005
----------------- -----------------
Net cash provided by operating activities 281,630 390,560
----------------- -----------------
Cash flows from investing activities
Capital expenditures (742,538) (260,536)
Decrease (increase) in other assets 46,071 (6,130)
----------------- -----------------
Net cash used in investing activities (696,467) (266,666)
----------------- -----------------
Cash flows from financing activities
Borrowings under line of credit 15,987,250 35,455,080
Payments under line of credit (13,656,102) (35,489,278)
Principal payments under equipment financing
and term loans (188,075) (151,352)
Purchase of treasury stock (771,250)
----------------- -----------------
Net cash provided by (used in) financing activities 1,371,823 (185,550)
----------------- -----------------
NET INCREASE (DECREASE) IN CASH 956,986 (61,656)
----------------- -----------------
Cash at beginning of period 562,556 463,352
----------------- -----------------
Cash at end of period $ 1,519,542 $ 401,696
================= =================
Supplemental schedule of non-cash financing and
investing activities
Equipment under capital leases $ 552,544
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1998
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
1) The accompanying condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring accrual adjustments, which are
in the opinion of management, necessary for a fair presentation of the
consolidated financial position and the results of operations at and for the
periods presented. Such financial statements do not include all the information
or footnotes necessary for a complete presentation. Therefore, they should be
read in conjunction with the Company's audited consolidated statements for the
year ended June 30, 1998 and the notes thereto included in the Company's annual
report on Form 10-K. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
2) The Company has a $30,000,000 term loan and revolving line of credit facility
with its banks, which are based principally on eligible accounts receivables and
inventories as defined in the agreement. The agreement was amended to: (i)
extend the maturity date to September 13, 2000, (ii) change the interest rate to
a rate based on the average 30 day LIBOR rate plus 3/4 % to 1 1/4% depending on
the Company's performance for the immediately preceding four fiscal quarters
measured by a certain financial ratio, and (iii) changed the requirements of
certain financial covenants. The applicable interest rate may be adjusted
quarterly and borrowings under this facility are collateralized by substantially
all of the assets of the Company.
3) The Board of Directors of the Company has authorized the purchase of up to
650,000 shares of its outstanding common stock under a stock repurchase program.
The purchases may be made by the Company from time to time on the open market.
The Company has made purchases of 412,200 shares of its common stock as of
November 12, 1998 for aggregate consideration of $2,204,514.
4) For interim financial reporting purposes, the Company uses the gross profit
method for computing inventories, which consists of goods held for resale.
5) In fiscal 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share." SFAS No.
128 replaces the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and, where appropriate, restated to
conform to the SFAS No. 128 computation.
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FORM 10-Q September 30, 1998
Page 8
The number of shares used in the Company's basic and diluted earnings
per share computations are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------------------
1998 1997
----------------- ------------------
Weighted average common shares
outstanding net of treasury shares,
<S> <C> <C>
for basic earnings per share 3,830,397 3,888,221
Common stock equivalents for
stock options 54,971
----------------- ------------------
Weighted average common shares
outstanding for diluted earnings per share 3,830,397 3,943,192
================= ==================
</TABLE>
6) The company has adopted SFAS No. 130 "Reporting Comprehensive Income" which
establishes guidance for the reporting and display of comprehensive income and
its components. The purpose of reporting comprehensive income is to report a
measure of all changes in equity that resulted from recognized transactions and
other economic events of the period other than transactions with stockholders.
Adoption of SFAS No. 130 had no economic impact on the Company's consolidated
financial position, net earnings, stockholders' equity or cash flows, although
the presentation of certain items has changed.
Comprehensive income and its components, net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------------------
1998 1997
----------------- ------------------
(in thousands)
<S> <C> <C>
Net (loss) earnings $(242) $398
Other comprehensive income:
Net unrealized investments (losses) gains (46) 30
----------------- ------------------
Comprehensive (loss) income $(288) $428
================= ==================
</TABLE>
The components of accumulated other comprehensive income included in
the accompanying condensed consolidated balance sheets and consolidated
statement of changes in shareholders' equity consists of net unrealized
investment gains as of the end of the period.
<PAGE>
FORM 10-Q September 30, 1998
Page 9
7) The Financial Accounting Standard Board issued Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ( "SFAS 131"). SFAS 131 established standards to report
information about operating segments and related discussions about products and
services, geographic areas and major customers. SFAS 131 is effective for fiscal
years beginning after December 15, 1997. This statement permits early
application and requires restatement for all prior period. SFAS 131 is not
required to be applied to interim financial statements in the initial year of
adoption. Management believes that the adoption of this statement will not have
any material impact on previously reported information.
8) The Company has entered into three employment agreements during the current
fiscal year with its Chairman and two other key executives. The agreements are
for four years and are renewable for one year periods thereafter, they provide
for base salary along with cash bonuses which are dependent upon the Company's
performance. In addition, among other items, the agreements have made provisions
in the event of a change in control of the Company.
JACO ELECTRONICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements in this filing, and elsewhere, which look forward in time
involve risks and uncertainties which may effect the actual results of
operations. The following important factors, among others, have affected and, in
the future, could affect the Company's actual results: dependence on a limited
number of suppliers for products which generate a significant portion of the
Company's sales, the effect upon the Company of increases in tariffs or duties,
changes in trade treaties, strikes or delays in air or sea transportation and
possible future United States legislation with respect to pricing and/or import
quotas on products imported from foreign countries, and general economic
downturns in the electronics distribution industry which may have an adverse
economic effect upon manufacturers, end-users of electronic components and
electronic component distributors.
GENERAL
Jaco is a distributor of electronic components, provider of contract
manufacturing and value-added services. Products distributed by Jaco include
semiconductors, capacitors, resistors, electromechanical devices, flat panel
displays and monitors, and power supplies used in the assembly and manufacturing
of electronic equipment.
The Company's customers are primarily small and medium sized
manufacturers. The trend for these customers has been to shift certain
manufacturing functions to third parties (outsourcing). The Company intends to
seek to capitalize on this trend toward outsourcing by increasing sales of
products enhanced by value-added services. Value-added services currently
provided by Jaco consist of configuring complete computer systems to customer
specifications both in tower and desktop configurations, kitting (e.g. supplying
sets of specified quantities of products to a customer that are prepackaged for
ease of feeding the customer's production lines), and contract manufacturing
through the Company's wholly owned subsidiary Nexus Custom Electronics, Inc.
<PAGE>
FORM 10-Q September 30, 1998
Page 10
Results of Operations
The following table sets forth certain items in the Company's statement of
earnings as a percentage of net sales for the periods shown
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 79.8 78.8
------------ ------------
Gross profit 20.2 21.2
Selling, general and
administrative expenses 20.4 18.6
------------ ------------
Operating (loss) profit (.2) 2.6
Interest expense 1.0 0.8
------------ ------------
(Loss) earnings before income taxes (1.2) 1.8
Income tax (benefit) expense (0.5) 0.7
------------ ------------
NET (LOSS) EARNINGS (0.7%) 1.1%
============ ===========
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Net sales for the first quarter of fiscal 1999 decreased 10% to $33.3
million as compared to $36.9 million for the first quarter of fiscal 1998. The
Company's first quarter results were impacted by the continued industry wide
pressures on pricing; compounded by the softening demand for electronic
components which has affected the electronics industry for over two years. The
Company derived approximately $3.2 million in sales from contract manufacturing.
The Company believes that with the expansion of the semiconductor management
group, flat panel display division and field application engineer program it is
positioned for future growth and will benefit from these strategic investments.
Gross profit margin as a percentage of net sales was 20.2% for the
three months ended September 30, 1998 compared to 21.2% for the comparable
period last fiscal year. The Company's product mix has remained relatively
constant. The decrease in margin is attributable to the pressure on pricing that
has existed due to the excess availability of components.
Selling, general and administrative expenses decreased to $6.8 million
for the first quarter of fiscal 1999 compared to $6.9 million and $7.5 million
for the first and fourth quarters of fiscal 1998 respectively. The Company
implemented cost saving initiatives of overhead items that the Company believes
to be non-essential to future growth.
<PAGE>
FORM 10-Q September 30, 1998
Page 11
Interest expense increased to $313,000 for the three months ended
September 30, 1998 compared to $272,000 for the comparable period last fiscal
year. The increase was primarily attributable to the increased borrowings
resulting from the Company's purchasing of approximately 209,000 shares of its
common stock for an aggregate consideration of $771,000 through its stock
repurchase program and maintaining higher levels of inventory during this fiscal
quarter compared to the same quarter last fiscal year.
Net loss for the three months ended September 30, 1998 was $242,000 or
approximately $.06 per share diluted, compared to net earnings of $398,000 or
$.10 per share diluted for the three months ended September 30, 1997. The
decrease in sales during this fiscal quarter and decrease in gross profit
dollars resulted in the reported loss during the quarter ended September 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's agreement with its banks, as amended, provides the
Company with a $30,000,000 term loan and revolving line of credit facility based
principally on eligible accounts receivable and inventories of the Company as
defined in the agreements expiring September 13, 2000. The interest rate of the
credit facility is based on the average 30 day LIBOR rate plus 3/4% to 1-1/4%
depending on the Company's performance for the immediately preceding four fiscal
quarters measured by a certain financial ratio, and may be adjusted quarterly.
The outstanding balance on the revolving line of credit facility was $17,643,943
at September 30, 1998. The term loan, with a remaining balance of $535,714 at
September 30, 1998, requires monthly principal payments of $17,857, together
with interest through September 13, 2000, with a final payment of $107,146 due
on September 13, 2000. Borrowings under this facility are collateralized by
substantially all of the assets of the Company. The agreement contains
provisions for maintenance of certain financial ratios, all of which the Company
is in compliance with at September 30, 1998, and prohibits the payment of cash
dividends.
For the three months ended September 30, 1998, the Company's net cash
provided by operating activities was approximately $.3 million as compared to
net cash provided by operating activities of $.4 million for the three months
ended September 30, 1997. Net cash used in investing activities increased to $.7
million for the three months ended September 30, 1998, as compared to $.3
million for the three months ended September 30, 1997. The increase is primarily
attributable to the increase in capital expenditures during the quarter of $.7
million which almost entirely represented equipment required by the contract
manufacturing operation. Net borrowings under the Company's line of credit
increased during the quarter by approximately $2.3 million due primarily to the
purchase of $.8 million of treasury stock by the Company and an increase in the
days outstanding of the Company's accounts receivable, resulting in reduced
collections. The Company's cash expenditures may vary significantly from current
levels, based on a number of factors, including, but not limited to, future
acquisitions if any.
For the first three months of fiscal 1999 and fiscal 1998 inventory
turnover was 3.0x and 3.4x, respectively. The average days outstanding of the
Company's accounts receivable at September 30, 1998 was 59 days, as compared to
55 days at September 30, 1997.
The Board of Directors of the Company had authorized the purchase of up to
250,000 shares of its common stock under a stock repurchase program. During the
quarter, the Board of Directors authorized the repurchase of up to an additional
400,000 shares of the Company's common stock. The purchases may be made by the
Company from time to time on the open market at the Company's discretion and
will be dependent on market conditions. Through November 12, 1998, the Company
has purchased 412,200 shares of its common stock for aggregate consideration of
$2,204,515 under this program.
The Company believes that cash flow from operations and funds available
under its credit facility will be sufficient to fund the Company's capital needs
for at least the next twelve months.
Year 2000 Compliance
The year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond
<PAGE>
FORM 10-Q September 30, 1998
Page 12
the year 1999, which could cause a system failure or other computer errors,
leading to disruptions in operations. In April 1996, the Company developed a
three-phase program for Y2K information systems compliance. Phase I was to
identify those systems with which the Company has exposure to Y2K issues. Phase
II was the development and implementation of action plans to be Y2K compliant in
all areas by late 1998. Phase III, to be fully completed by mid 1999, is the
final major area of exposure to ensure compliance. The Company has identified
three major areas determined to be critical for successful Y2K compliance: (1)
financial and informational system applications, (2) manufacturing applications
and (3) third party relationships.
As of September 1, 1998, Jaco has completed the redesign and
development of an entirely new distribution software system. All of the dates in
this new database are 8 characters, including the century. The system has been
tested and has been in production as of September 1, 1998. The systems include
customer order entry, purchase order entry to the Company's manufacturers,
warehousing and inventory control.
The financial systems, Accounts Payable and General Ledger have been
Y2K compliant since April 1997. The Accounts Receivable system is Y2K compliant
as of September 1, 1998.
Jaco's distribution facilities: warehouse, shipping and other physical
handling have been tested and are Y2K compliant.
The Company, as it relates to the contract manufacturing operations in
accordance with Phase I of the program, is in the process of conducting an
internal review of all systems and contacting all software suppliers to
determine major areas of exposure to Y2K issues. In the financial and
information systems area a number of applications have been identified as Y2K
compliant due to their recent implementation. The contract manufacturing core
financial and reporting systems are not Y2K compliant but are scheduled to be
complete and fully tested by mid 1999. In the third party area, the Company has
contacted most of its major third parties.
These parties state that they intend to be Y2K compliant by the year 2000.
The Company believes it will cost approximately $1.5 million to replace
the core financial, reporting and distribution software systems. The Company
utilized outside consultants to undertake a portion of the work. The Company
does not expect the cost that will be incurred to be material in connection with
the contract manufacturing area and the third party area.
INFLATION
Inflation has not had a significant impact on the Company's operations
during the last three fiscal years.
<PAGE>
FORM 10-Q September 30, 1998
Page 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to Report
Item 2. Changes in Securities and Use of Proceeds
Nothing to Report
Item 3. Defaults Upon Senior Securities
Nothing to Report
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to Report
Item 5. Other Information
Nothing to Report
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.13 Employment agreement between
Joel Girsky and the Company
10.14 Employment agreement between
Charles Girsky and the Company
10.15 Employment agreement between
Jeffrey D. Gash and the Company
27.1 Financial Data Schedule
99.8.3 Amendment to Second Restated
and Amended Loan and Security Agreement
dated July 1, 1998
99.8.4 Amendment to Second Restated
and Amended Loan and Security Agreement
dated September 21, 1998
b) Reports on Form 8-K None
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JACO ELECTRONICS, INC.
(Registrant)
BY: Jeffrey D. Gash
Jeffrey D. Gash, Vice President/Finance
(Principal Financial Officer)
DATED: November 16, 1998
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made effective as of the 1st day of
July, 1998 (the "Effective Date"), by and between Jaco Electronics, Inc., a New
York corporation having offices at 145 Oser Avenue, Hauppauge, New York 11788
("Jaco"), and Charles Girsky, residing at 3455 Twin Lake Ridge, Westlake
Village, California 91361 ("Girsky").
WHEREAS, Girsky is Executive Vice President of Jaco;
WHEREAS, Girsky has been employed from and after July 1, 1998,
pursuant to an oral agreement of employment consistent with the terms hereof;
and
WHEREAS, Jaco desires to have the continued services of
Girsky, and Girsky desires to continue to be employed by Jaco, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. Term of Employment; Duties.
1.1 Jaco hereby employs Girsky as Executive Vice President of
Jaco, and Girsky hereby agrees to serve Jaco in such capacity and to perform
such duties consistent therewith as Jaco's Board of Directors and/or the
President from time to time shall determine for a period commencing on the
Effective Date and ending on the fourth (4th) anniversary of the Effective Date
(the "Initial Term"), provided, however, the term of this Employment Agreement
shall be
1
<PAGE>
automatically extended after each anniversary date of the Effective Date for an
additional one year period following the Initial Term, unless either Jaco or
Girsky shall provide a notice of non-renewal to the other party (the "Notice of
Non-Renewal"), which notice shall be in writing and shall be delivered not less
than 90 days prior to an anniversary date after the Effective Date (the
"Employment Period"). In the event that a Notice of Non-Renewal is delivered by
either party, this Employment Agreement shall continue for a period of three (3)
years following the anniversary date which follows immediately after the date
that a valid and effective Notice of Non-Renewal is delivered. By way of
example, if the Notice of Non-Renewal is delivered after the second anniversary
date and not less than 90 days prior to the third anniversary date of the
Effective Date, this Employment Agreement shall continue until the sixth
anniversary date of the Effective Date.
2. Compensation.
2.1 For all services rendered pursuant to the terms hereof,
Girsky shall receive a base salary of $225,000 for each of the 12 month periods
(a "Contract Year") ending June 30, 1999, and each June 30, thereafter ("Base
Salary"), which Base Salary shall be paid to Girsky in equal periodic
installments not less frequently than monthly. In addition and not in lieu
thereof, Girsky shall be entitled to receive such fringe benefits and to
participate in such benefit plans and programs as are generally made available
by Jaco to other senior executive employees, including, but not limited to,
health insurance.
2.2 Girsky shall receive a cash bonus (the "Cash Bonus") for
each Contract Year equal to (i) two percent (2%) of Jaco's annual earnings
before income taxes for the corresponding fiscal year if such earnings before
income taxes are in excess of $1,000,000, and not more than
2
<PAGE>
$2,500,000 or (ii) three percent (3%) of Jaco's earnings before income taxes for
the corresponding fiscal year if such earnings before income taxes are in excess
of $2,500,000 up to a maximum annual Cash Bonus of $360,000. If Jaco's earnings
before income taxes are in excess of $12,000,000 for any such fiscal year, in
addition to the Cash Bonus of $360,000, Girsky shall receive such number of
common stock options of Jaco as shall be negotiated between Girsky and Jaco at
such time (the "Option Bonus" and, together with the Cash Bonus, the
"Performance Bonus"). As used herein, the term "earnings before income taxes"
shall mean the income of Jaco before extraordinary items and before payment of
income taxes as shown on Jaco's consolidated financial statements prepared in
accordance with generally accepted accounting principles. The Performance Bonus
shall be payable every year on November 1 for the preceding fiscal year.
2.3 Upon Girsky's death, his legal representative(s) shall be
paid the sum of $1,000,000 (the "Death Benefit") within fifteen (15) days of
Jaco's receipt of the proceeds of the insurance on Girsky's life purchased
pursuant to the provisions of Section 2.4 below. If, for any reason, at the time
of Girsky's death, Jaco does not have in force an insurance policy on Girsky's
life, then, notwithstanding anything in this Employment Agreement to the
contrary, the Death Benefit shall be due and payable within fifteen (15) days of
Girsky's death.
2.4 Jaco shall use its best efforts to purchase insurance on
the life of Girsky, as well as annuities or other endowment policies
(collectively, "Policies"), in sufficient amounts fully to fund its obligations
to Girsky under Section 2.3 above. All such policies shall be and shall remain
the property of Jaco. Girsky shall cooperate fully with Jaco to enable Jaco to
obtain such policies.
2.5 The obligations of Jaco to Girsky hereunder are general
unsecured obligations of Jaco to Girsky, and Girsky shall have no security
interest or other interest of any nature
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whatsoever in the Policies or the proceeds thereof (except as provided in
Section 2.6 below), or in any other assets of Jaco. Jaco, in its absolute
discretion, may establish any reserves or special accounts or segregate assets
to fund such obligations. Girsky shall not sell, transfer, assign, pledge,
encumber, hypothecate or otherwise alienate any right or entitlement of his
hereunder. No such purported sale, transfer, assignment, pledge, encumbrance,
hypothecation or other alienation shall have any force or effect or in any way
be binding upon or be enforceable against Jaco. Except as otherwise provided by
law, no such right or entitlement shall be subject to attachment or garnishment.
2.6 If, at any time, Girsky ceases to be an employee of Jaco
other than on account of death, Jaco, at Girsky's option, shall transfer and
assign to Girsky all its right, title and interest in the Policies and Jaco
shall cause the premiums on the Policies to be fully paid up to the date of
Girsky's termination. Girsky shall refund to Jaco the pro rata portion
(determined by the straight-line method) of premiums on the Policies, if any,
paid by Jaco for any period beyond the termination date. Upon such termination
of Girsky's employment and upon complete assignment of all of the Policies to
Girsky, Jaco shall have no further liability to Girsky for payment of premiums
under the Policies or otherwise in respect of its obligations under Sections 2.3
and 2.4 hereof.
3. Services to be Provided.
3.1 Girsky shall devote his best efforts and substantially all
of his working time to the business of Jaco.
3.2 Girsky shall perform all duties, obligations, and
responsibilities assigned to him by the Board of Directors and/or the President
and ordinarily performed by a person employed
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as a senior executive officer, and shall devote his full attention to the
performance of the duties assigned to him.
3.3 If duly elected, Girsky shall also serve as a director of
Jaco and as officer and/or director of any of its subsidiaries, whether now
existing or hereafter established or acquired, and he shall perform such duties
as are assigned to him, from time to time, by the Board of Directors and/or the
President of Jaco or any of its subsidiaries.
4. Termination of Employment.
4.1 During the Employment Period, Girsky's employment may be
terminated by the Board of Directors of Jaco on the occurrence of any one or
more of the following events:
(a) The death of Girsky;
(b) Subject to the provisions of Section 4.2
below, the disability of Girsky;or
(c) For "Cause",which shall mean (i) the willful
failure by Girsky
substantially to perform his duties hereunder for reasons other than death or
disability; (ii) the willful engaging by Girsky in misconduct materially
injurious to Jaco; or (iii) the commission by Girsky of an act constituting
common law fraud or a felony.
4.2 If Girsky becomes mentally or physically disabled for a
period of six (6) consecutive months so that he is not able to perform his
duties substantially as contemplated herein ("Disability"), Jaco's obligations
to pay the Base Salary and the Performance Bonus shall cease from and after the
last day of such six (6) month period and shall not be resumed unless and until
Girsky shall have returned to his duties on a full time basis for a period of
two (2) consecutive months.
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During such two (2) month period, Girsky shall be paid at the rates of Base
Salary and Performance Bonus which would then have been prevailing hereunder had
he not become so disabled. If Girsky's Disability becomes permanent, Jaco, at
its option, may terminate Girsky's employment with Jaco and its obligation
hereunder to pay the Base Salary and the Performance Bonus. Girsky's Disability
shall be deemed to have become permanent when, as a result of the injury or
sickness, Girsky becomes wholly and continuously disabled and is thus prevented
from performing the material and substantial duties of his employment as set
forth in Section 1.1 above and while under the care of a physician.
5. Reimbursement of Expenses. Jaco shall reimburse Girsky for all reasonable
expenses incurred in connection with the promotion of the business of Jaco,
including expenses for travel, entertainment and similar expenses incurred by
Girsky on Jaco's behalf. No such reimbursement shall be made except upon the
presentation by Girsky of an itemized account of such expenses or other evidence
thereof for which reimbursement then is being sought, all in form reasonably
satisfactory to Jaco.
6. Indemnity. Jaco, to the maximum extent it may provide indemnification to an
officer or director under applicable law, shall indemnify Girsky and hold him
harmless from any and all liability arising out of any act or failure to act
undertaken by him in good faith while performing services for Jaco, and shall
use its best efforts to obtain coverage for him under any insurance policy now
in force or hereafter obtained during the Employment Period covering officers
and directors of Jaco against claims made against them or any of them for any
act or failure to act in such capacities.
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Jaco shall pay all expenses, including reasonable attorneys' fees, actually or
necessarily incurred by Girsky in connection with the defense of any action,
suit, or proceeding arising out of any such claim and in connection with any
appeal arising therefrom.
7. Disclosure of Information. All memoranda, notes, records, or other documents
made or compiled by Girsky or made available to him during the course of his
employment with Jaco concerning the business of Jaco shall be Jaco's property
and shall be delivered to Jaco by Girsky on the termination of Girsky's
employment. Unless authorized by Jaco, Girsky shall not use for himself or
others or divulge to others, any proprietary or confidential information of Jaco
obtained by him as a result of his employment. For purposes of this Section 7,
the term "proprietary or confidential information" shall mean all information
which (i) is known only to Girsky or to Girsky and employees, former employees,
consultants of Jaco, or others in a confidential relationship with Jaco, (ii)
relates to specific matters such as trade secrets, customers, potential
customers, vendor lists, pricing and credit techniques, research and development
activities, books and records, and commission schedules, as they may exist from
time to time, which Girsky may have acquired or obtained by virtue of work
heretofore or hereafter performed for or on behalf of Jaco or which he may
acquire or may have acquired knowledge of during the performance of such work,
and (iii) is not readily available to others. In the event of a breach or a
threatened breach by Girsky of the provisions of this Section 7, Jaco shall be
entitled to an injunction restraining Girsky from disclosing, in whole or in
part, the aforementioned proprietary or confidential information of Jaco, or
from rendering any services to any person, firm, corporation, association, or
other entity to whom or to which such proprietary or confidential information,
in whole or in part, has been disclosed or
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is threatened to be disclosed. Nothing contained herein shall be construed as
prohibiting Jaco from pursuing any other remedies available to Jaco for such
breach or threatened breach, including the recovery of damages from Girsky.
8. Restrictive Covenants.
8.1 Girsky hereby acknowledges and recognizes the highly
competitive nature of Jaco's business and, accordingly, in consideration of the
premises contained herein, agrees that during the Employment Period and
thereafter until the Designated Date (as hereinafter defined) he will not: (i)
directly or indirectly engage in any Competitive Activity (as hereinafter
defined), whether such engagement shall be as an officer, director, employee,
consultant, agent, lender, stockholder, or other participant; or (ii) assist
others in engaging in any Competitive Activity. The term "Competitive Activity"
shall mean and shall include soliciting, raiding, enticing, or inducing,
individually or in concert with others, (i) any person or entity to be a
customer for the same or similar services for which that person or entity
engaged Jaco, if such person or entity (A) was a customer of Jaco's during the
Employment Period or at any time thereafter prior to the Designated Date, or (B)
was solicited by Jaco to be a customer during the one-year period prior to the
termination of this Employment Agreement; (ii) any manufacturer or supplier
whose products are distributed by Jaco at the time this Employment Agreement is
terminated to act as a manufacturer or supplier for any other party of the same
or similar goods that it supplies to Jaco; or (iii) any employee of Jaco to
leave Jaco or to do business with any enterprise or business which competes with
Jaco.
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8.2 As used in this Section 8, the "Designated Date"shall
mean any of the following dates:
(a) in the event Girsky willfully terminates his
employment with Jaco in violation of this Employment Agreement prior to the
expiration of the Employment Period, the term "Designated Date" shall mean the
first anniversary of the date of such termination;
(b) in the event Jaco terminates the employment
of Girsky under this Employment Agreement for Cause, the term "Designated Date"
shall mean the first anniversary of the date of such termination; or
(c) in the event Jaco terminates the employment
of Girsky without cause, the term "Designated Date" shall mean the date of such
termination.
8.3 It is the desire and intent of the parties that the
provisions of this Section 8 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Section 8 shall be
adjudicated to be invalid or unenforceable in any such jurisdiction, such
provision of this Section 8 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision of this Section 8 in the
particular jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 8 is adjudicated to be too
broad to permit enforcement thereof to its fullest extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Girsky hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.
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8.4 In the event of a breach or threatened breach by Girsky of
the provisions of this Section 8, Jaco shall be entitled to an injunction
restraining him from such breach. Nothing contained herein shall be construed as
prohibiting Jaco from pursuing any other remedies available to it for such
breach or threatened breach or any other breach of this Employment Agreement.
9. Consolidation; Merger; Change of Control.
9.1 In the event of any consolidation or merger of Jaco into
or with another corporation during the Employment Period, and Jaco is not the
surviving entity, or the sale of all or substantially all of the assets of Jaco
to another corporation during the Employment Period, or in the event that fifty
(50%) percent or more of the voting common stock of Jaco shall be owned by one
or more individuals or entities, who are acting in concert or as part of an
affiliated group (other than a group one of the members of which is Girsky) at
any time during the Employment Period, (the occurrence of any of the foregoing,
a "Change of Control"), then (i) Jaco shall pay or cause to be paid to Girsky a
certified or cashier's check in an amount equal to two hundred and fifty percent
(250%) of the average of Girsky's Base Salary plus Cash Bonus for the previous
five (5) years; and (ii) this Employment Agreement may be assigned by Jaco or
any such successor or surviving corporation on sixty (60) days prior written
notice to Girsky; provided, however, such assignment shall not cause Girsky's
principal place of employment to be moved to any space located more than
forty-five (45) miles from Girsky's principal place of employment prior to a
Change of Control without his prior written consent.
9.2 Notwithstanding the provisions of Section 9.1 above, any
such payments shall be made only in an amount which, when taken together with
the present value of all other payments
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to Girsky that are contingent on a Change in Control of Jaco, computed in
accordance with the provisions of Section 280G(d)(4) of the Internal Revenue
Code of 1986 (the "Code"), does not equal or exceed three times Girsky's "Base
Amount", as computed in accordance with Code Section 280G(b)(3).
10. Notices. Any notices required or permitted to be given under the provisions
of this Employment Agreement shall be in writing and delivered personally, sent
by recognized overnight courier or mailed by certified or registered mail,
return receipt requested, postage prepaid to the persons and at the addresses
first set forth above, or to such other person at such other address as any
party may request by notice in writing to the other party to this Employment
Agreement. Notices which are hand delivered or delivered by recognized overnight
courier shall be effective on delivery. Notices which are mailed shall be
effective on the third day after mailing.
11. Construction, This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
12. Successors and Assigns. This Employment Agreement shall be binding on the
successors and assigns of Jaco and shall inure to the benefit and be enforceable
by and against its successors and assigns. This Employment Agreement is personal
in nature and may not be assigned or transferred by Girsky without the prior
written consent of Jaco.
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13. Entire Agreement. This Employment Agreement contains the entire
understanding and agreement between the parties relating to the subject matter
hereof, and neither this Employment Agreement nor any provision hereof may be
waived, modified, amended, changed, discharged, or terminated, except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge, or termination is sought.
14. Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and all of which
counterparts shall together constitute a single agreement.
15. Illegality. In case any one or more of the provisions of this Employment
Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, the legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16. Captions. The captions of the sections hereof are for convenience only and
shall not control or affect the meaning or construction of any of the terms or
provisions of this Employment Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
JACO ELECTRONICS, INC.
By: JOEL H., GIRSKY
President
CHARLES GIRSKY
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made effective as of the 1st day of
July, 1997 (the "Effective Date"), by and between Jaco Electronics, Inc., a New
York corporation having offices at 145 Oser Avenue, Hauppauge, New York 11788
("Jaco"), and Joel H. Girsky, residing at 29 Winter Lane, Dix Hills, New York
11746 ("Girsky").
WHEREAS, Girsky is Chairman of the Board of Directors
("Chairman"), President,and Treasurer of Jaco;
WHEREAS, Girsky's last written employment agreement with Jaco
expired on June 30, 1997; and
WHEREAS, Girsky has been employed from and after July 1, 1997,
pursuant to an oral agreement of employment consistent with the terms hereof;
and
WHEREAS, Jaco desires to have the continued services of
Girsky, and Girsky desires to continue to be employed by Jaco, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. Term of Employment; Duties.
1.1 Jaco hereby employs Girsky as Chairman and President of
Jaco, and Girsky hereby agrees to serve Jaco in such capacities and to perform
such duties consistent therewith as Jaco's Board of Directors from time to time
shall determine for a period commencing on the
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Effective Date and ending on the fourth (4th) anniversary of the Effective Date
(the "Initial Term"), provided, however, the term of this Employment Agreement
shall be automatically extended after each anniversary date of the Effective
Date for an additional one year period following the Initial Term, unless either
Jaco or Girsky shall provide a notice of non-renewal to the other party (the
"Notice of Non-Renewal"), which notice shall be in writing and shall be
delivered not less than 90 days prior to the third anniversary date after the
Effective Date (the "Employment Period"). In the event that a Notice of
Non-Renewal is delivered by either party, this Employment Agreement shall
continue for a period of three (3) years following the anniversary date which
follows immediately after the date that a valid and effective Notice of
Non-Renewal is delivered. By way of example, if the Notice of Non-Renewal is
delivered after the second anniversary date and not less than 90 days prior to
the third anniversary date of the Effective Date, this Employment Agreement
shall continue until the sixth anniversary date of the Effective Date.
2. Compensation.
2.1 For all services rendered pursuant to the terms hereof,
Girsky shall receive a base salary of $325,000 for each of the 12 month periods
(a "Contract Year") ending June 30, 1998, and each June 30, thereafter ("Base
Salary"), which Base Salary shall be paid to Girsky in equal periodic
installments not less frequently than monthly. In addition and not in lieu
thereof, Girsky shall be entitled to receive such fringe benefits and to
participate in such benefit plans and programs as are generally made available
by Jaco to other senior executive employees, including, but not limited to,
health insurance.
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2.2 Girsky shall receive a cash bonus (the "Cash Bonus") for
each Contract Year equal to (i) four percent (4%) of Jaco's annual earnings
before income taxes for the corresponding fiscal year if such earnings before
income taxes are in excess of $1,000,000, and not more than $2,500,000 or (ii)
six percent (6%) of Jaco's earnings before income taxes for the corresponding
fiscal year if such earnings before income taxes are in excess of $2,500,000 up
to a maximum annual Cash Bonus of $720,000. If Jaco's earnings before income
taxes are in excess of $12,000,000 for any such fiscal year, in addition to the
Cash Bonus of $720,000, Girsky shall receive such number of common stock options
of Jaco as shall be negotiated between Girsky and Jaco at such time (the "Option
Bonus" and, together with the Cash Bonus, the "Performance Bonus"). As used
herein, the term "earnings before income taxes" shall mean the income of Jaco
before extraordinary items and before payment of income taxes as shown on Jaco's
consolidated financial statements prepared in accordance with generally accepted
accounting principles. The Performance Bonus shall be payable every year on
November 1 for the preceding fiscal year.
2.3 In addition to the Base Salary and Performance Bonus and
not in lieu thereof, in accordance with Section 2.4 hereof, Girsky shall receive
as additional compensation the product of $50,000, multiplied by the number of
years which shall have passed since July 1, 1984 and until the end of the last
day on which Girsky shall be employed hereunder ("Deferred Compensation"). Jaco
may, but shall not be obligated to, set aside funds with which to pay the
Deferred Compensation, it being understood and agreed that such funds are and
shall be the sole and exclusive property of Jaco, free from any lien or claim of
Girsky. Should Girsky so request, Jaco, in its sole and absolute discretion,
may, but shall not be obligated to, invest such funds in one or more nationally
recognized, institutionally managed mutual funds which invest in publicly traded
equity
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or debt securities. Should Girsky make any such request and should Jaco make any
such investment in accordance with such request, the Deferred Compensation shall
be increased by an amount equal to any after tax gain or after tax income
realized therefrom or reduced by an amount equal to any loss realized therefrom,
as the case may be. For purposes of calculating after tax gain, income or loss
for purposes of this Section 2.3, it shall be assumed that Jaco is taxable on
its income at the highest applicable marginal rates.
2.4 The Deferred Compensation shall become payable to Girsky
in its entirety not later than January 15th of the year next following the later
to occur of the following events:
(a) Girsky's attainment of age 60; or
(b) Girsky's cessation of employment hereunder
for any reason; provided, however, if Girsky continues to be employed by
Jaco after the expiration of this Employment Agreement in a substantially
similar executive position to that provided for hereunder, the Deferred
Compensation shall not become payable to him until cessation of such
employment, whether or not such employment is pursuant to a written agreement.
2.5 (a) Upon Girsky's death, his legal representative(s) shall
be paid the sum of $1,500,000 (the "Death Benefit") within fifteen (15) days of
Jaco's receipt of the proceeds of the insurance on Girsky's life purchased
pursuant to the provisions of Section 2.6 below. If, for any reason, at the time
of Girsky's death, Jaco does not have in force an insurance policy on Girsky's
life, then, notwithstanding anything in this Employment Agreement to the
contrary, the Death Benefit shall be due and payable within fifteen (15) days of
Girsky's death.
(b) Upon Girsky's retirement on account of
permanent disability (as that term is defined in Section 4.2 below) during the
term hereof, he shall be paid the sum of $500,000
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(the "Disability Benefit") in twelve (12) equal monthly installments, commencing
with the month in which Jaco receives the proceeds of the annuity or other
endowment policy purchased for Girsky's benefit pursuant to the provisions of
Section 2.6 below. If, for any reason, at the time of Girsky's retirement on
account of permanent disability, Jaco does not have in force an annuity or other
endowment policy for the benefit of Girsky, then, notwithstanding anything in
this Employment Agreement to the contrary, Jaco shall commence monthly payments
of the Disability Benefit in the month next succeeding the month of Girsky's
retirement on account of permanent disability.
2.6 Jaco shall use its best efforts to purchase insurance on
the life of Girsky, and insurance against Girsky becoming disabled, as well as
annuities or other endowment policies (collectively, "Policies"), in sufficient
amounts fully to fund its obligations to Girsky under Section 2.5 above. All
such policies shall be and shall remain the property of Jaco. Girsky shall
cooperate fully with Jaco to enable Jaco to obtain such policies.
2.7 The obligations of Jaco to Girsky hereunder are general
unsecured obligations of Jaco to Girsky, and Girsky shall have no security
interest or other interest of any nature whatsoever in the Policies or the
proceeds thereof (except as provided in Section 2.8 below), or in any other
assets of Jaco. Jaco, in its absolute discretion, may establish any reserves or
special accounts or segregate assets to fund such obligations. Girsky shall not
sell, transfer, assign, pledge, encumber, hypothecate or otherwise alienate any
right or entitlement of his hereunder. No such purported sale, transfer,
assignment, pledge, encumbrance, hypothecation or other alienation shall have
any force or effect or in any way be binding upon or be enforceable against
Jaco. Except as otherwise provided by law, no such right or entitlement shall be
subject to attachment or garnishment.
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2.8 If, at any time, Girsky ceases to be an employee of Jaco
other than on account of death or retirement on account of permanent disability,
Jaco, at Girsky's option, shall transfer and assign to Girsky all its right,
title and interest in the Policies and Jaco shall cause the premiums on the
Policies to be fully paid up to the date of Girsky's termination. Girsky shall
refund to Jaco the pro rata portion (determined by the straight-line method) of
premiums on the Policies, if any, paid by Jaco for any period beyond the
termination date. Upon such termination of Girsky's employment and upon complete
assignment of all of the Policies to Girsky, Jaco shall have no further
liability to Girsky for payment of premiums under the Policies or otherwise in
respect of its obligations under Sections 2.5 and 2.6 hereof.
3. Services to be Provided.
3.1 Girsky shall devote his best efforts and substantially all
of his working time to the business of Jaco.
3.2 Girsky shall perform all duties, obligations, and
responsibilities assigned to him by the Board of Directors and ordinarily
performed by a person employed as a senior executive officer, and shall devote
his full attention to the performance of the duties assigned to him.
3.3 If duly elected, Girsky shall also serve as a director of
Jaco and as an officer and/or director of any of its subsidiaries, whether now
existing or hereafter established or acquired, and he shall perform such duties
as are assigned to him, from time to time, by the Board of Directors of Jaco or
any of its subsidiaries.
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4. Termination of Employment.
4.1 During the Employment Period, Girsky's employment may be
terminated by the Board of Directors of Jaco on the occurrence of any one or
more of the following events:
(a) The death of Girsky;
(b) Subject to the provisions of Section 4.2
below, the disability of Girsky; or
(c) For "Cause", which shall mean (i) the
willful failure by Girsky substantially to perform his duties hereunder for
reasons other than death or disability; (ii) the willful engaging by Girsky
in misconduct materially injurious to Jaco; or (iii) the commission by
Girsky of an act constituting common law fraud or a felony.
4.2 If Girsky becomes mentally or physically disabled for a
period of six (6) consecutive months so that he is not able to perform his
duties substantially as contemplated herein ("Disability"), Jaco's obligations
to pay the Base Salary and the Performance Bonus shall cease from and after the
last day of such six (6) month period and shall not be resumed unless and until
Girsky shall have returned to his duties on a full time basis for a period of
two (2) consecutive months. During such two (2) month period, Girsky shall be
paid at the rates of Base Salary and Performance Bonus which would then have
been prevailing hereunder had he not become so disabled. If Girsky's Disability
becomes permanent, Jaco, at its option, may terminate Girsky's employment with
Jaco and its obligation hereunder to pay the Base Salary and the Performance
Bonus. Girsky's Disability shall be deemed to have become permanent when, as a
result of the injury or sickness, Girsky becomes wholly and continuously
disabled and is thus prevented from performing the material and substantial
duties of his employment as set forth in Section 1.1 above and while under the
care of
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a physician.
5. Reimbursement of Expenses. Jaco shall reimburse Girsky for all reasonable
expenses incurred in connection with the promotion of the business of Jaco,
including expenses for travel, entertainment and similar expenses incurred by
Girsky on Jaco's behalf. No such reimbursement shall be made except upon the
presentation by Girsky of an itemized account of such expenses or other evidence
thereof for which reimbursement then is being sought, all in form reasonably
satisfactory to Jaco.
6. Indemnity. Jaco, to the maximum extent it may provide indemnification to an
officer or director under applicable law, shall indemnify Girsky and hold him
harmless from any and all liability arising out of any act or failure to act
undertaken by him in good faith while performing services for Jaco, and shall
use its best efforts to obtain coverage for him under any insurance policy now
in force or hereafter obtained during the Employment Period covering officers
and directors of Jaco against claims made against them or any of them for any
act or failure to act in such capacities. Jaco shall pay all expenses, including
reasonable attorneys' fees, actually or necessarily incurred by Girsky in
connection with the defense of any action, suit, or proceeding arising out of
any such claim and in connection with any appeal arising therefrom.
7. Disclosure of Information. All memoranda, notes, records, or other documents
made or compiled by Girsky or made available to him during the course of his
employment with
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Jaco concerning the business of Jaco shall be Jaco's property and shall be
delivered to Jaco by Girsky on the termination of Girsky's employment. Unless
authorized by Jaco, Girsky shall not use for himself or others or divulge to
others, any proprietary or confidential information of Jaco obtained by him as a
result of his employment. For purposes of this Section 7, the term "proprietary
or confidential information" shall mean all information which (i) is known only
to Girsky or to Girsky and employees, former employees, consultants of Jaco, or
others in a confidential relationship with Jaco, (ii) relates to specific
matters such as trade secrets, customers, potential customers, vendor lists,
pricing and credit techniques, research and development activities, books and
records, and commission schedules, as they may exist from time to time, which
Girsky may have acquired or obtained by virtue of work heretofore or hereafter
performed for or on behalf of Jaco or which he may acquire or may have acquired
knowledge of during the performance of such work, and (iii) is not readily
available to others. In the event of a breach or a threatened breach by Girsky
of the provisions of this Section 7, Jaco shall be entitled to an injunction
restraining Girsky from disclosing, in whole or in part, the aforementioned
proprietary or confidential information of Jaco, or from rendering any services
to any person, firm, corporation, association, or other entity to whom or to
which such proprietary or confidential information, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing contained herein shall
be construed as prohibiting Jaco from pursuing any other remedies available to
Jaco for such breach or threatened breach, including the recovery of damages
from Girsky.
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8. Restrictive Covenants.
8.1 Girsky hereby acknowledges and recognizes the highly
competitive nature of Jaco's business and, accordingly, in consideration of the
premises contained herein, agrees that during the Employment Period and
thereafter until the Designated Date (as hereinafter defined) he will not: (i)
directly or indirectly engage in any Competitive Activity (as hereinafter
defined), whether such engagement shall be as an officer, director, employee,
consultant, agent, lender, stockholder, or other participant; or (ii) assist
others in engaging in any Competitive Activity. The term "Competitive Activity"
shall mean and shall include soliciting, raiding, enticing, or inducing,
individually or in concert with others, (i) any person or entity to be a
customer for the same or similar services for which that person or entity
engaged Jaco, if such person or entity (a) was a customer of Jaco's during the
Employment Period or at any time thereafter prior to the Designated Date, or (b)
was solicited by Jaco to be a customer during the one-year period prior to the
termination of this Employment Agreement; (ii) any manufacturer or supplier
whose products are distributed by Jaco at the time this Employment Agreement is
terminated to act as a manufacturer or supplier for any other party of the same
or similar goods that it supplies to Jaco; or (iii) any employee of Jaco to
leave Jaco or to do business with any enterprise or business which competes with
Jaco.
8.2 As used in this Section 8, the "Designated Date"
shall mean any of the following dates:
(a) in the event Girsky willfully terminates his
employment with Jaco in violation of this Employment Agreement prior to the
expiration of the Employment Period, the term "Designated Date" shall mean the
first anniversary of the date of such termination;
10
<PAGE>
(b) in the event Jaco terminates the employment
of Girsky under this Employment Agreement for Cause, the term "Designated Date"
shall mean the first anniversary of the date of such termination; or
(c) in the event Jaco terminates the employment
of Girsky without cause, the term "Designated Date" shall mean the date of such
termination.
8.3 It is the desire and intent of the parties that the
provisions of this Section 8 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Section 8 shall be
adjudicated to be invalid or unenforceable in any such jurisdiction, such
provision of this Section 8 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision of this Section 8 in the
particular jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 8 is adjudicated to be too
broad to permit enforcement thereof to its fullest extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Girsky hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.
8.4 In the event of a breach or threatened breach by Girsky of
the provisions of this Section 8, Jaco shall be entitled to an injunction
restraining him from such breach. Nothing contained herein shall be construed as
prohibiting Jaco from pursuing any other remedies available to it for such
breach or threatened breach or any other breach of this Employment Agreement.
11
<PAGE>
9. Consolidation; Merger; Change of Control.
9.1 In the event of any consolidation or merger of Jaco into
or with another corporation during the Employment Period, and Jaco is not the
surviving entity, or the sale of all or substantially all of the assets of Jaco
to another corporation during the Employment Period, or in the event that fifty
(50%) percent or more of the voting common stock of Jaco shall be owned by one
or more individuals or entities, who are acting in concert or as part of an
affiliated group (other than a group one of the members of which is Girsky) at
any time during the Employment Period, (the occurrence of any of the foregoing,
a "Change of Control"), then (i) Jaco shall pay or cause to be paid to Girsky a
certified or cashier's check in an amount equal to two hundred and ninety-nine
percent (299%) of the average of Girsky's Base Salary plus Cash Bonus for the
previous five (5) years; and (ii) this Employment Agreement may be assigned by
Jaco or any such successor or surviving corporation on sixty (60) days prior
written notice to Girsky; provided, however, such assignment shall not cause
Girsky's principal place of employment to be moved to any space located more
than forty-five (45) miles from Girsky's principal place of employment prior to
a Change of Control without his prior written consent.
9.2 Notwithstanding the provisions of Section 9.1
above, any such payments shall be made only in an amount which, when taken
together with the present value of all other payments to Girsky that are
contingent on a Change in Control of Jaco, computed in accordance with the
provisions of Section 280G(d)(4) of the Internal Revenue Code of 1986
(the "Code"), does not equal or exceed three times Girsky's "Base Amount",
as computed in accordance with Code Section 280G(b)(3).
12
<PAGE>
10. Notices. Any notices required or permitted to be given under the provisions
of this Employment Agreement shall be in writing and delivered personally, sent
by recognized overnight courier or mailed by certified or registered mail,
return receipt requested, postage prepaid to the persons and at the addresses
first set forth above, or to such other person at such other address as any
party may request by notice in writing to the other party to this Employment
Agreement. Notices which are hand delivered or delivered by recognized overnight
courier shall be effective on delivery. Notices which are mailed shall be
effective on the third day after mailing.
11. Construction, This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
12. Successors and Assigns. This Employment Agreement shall be binding on the
successors and assigns of Jaco and shall inure to the benefit and be enforceable
by and against its successors and assigns. This Employment Agreement is personal
in nature and may not be assigned or transferred by Girsky without the prior
written consent of Jaco.
13. Entire Agreement. This Employment Agreement contains the entire
understanding and agreement between the parties relating to the subject matter
hereof, and neither this Employment Agreement nor any provision hereof may be
waived, modified, amended, changed, discharged, or terminated, except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge, or termination is sought.
13
<PAGE>
14. Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and all of which
counterparts shall together constitute a single agreement.
15. Illegality. In case any one or more of the provisions of this Employment
Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, the legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16. Captions. The captions of the sections hereof are for convenience only and
shall not control or affect the meaning or construction of any of the terms or
provisions of this Employment Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
JACO ELECTRONICS, INC.
By: HERBERT ENTENBERG
Vice President
JOEL H. GIRSKY
15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made effective as of the 1st day of
July, 1998 (the "Effective Date"), by and between Jaco Electronics, Inc., a New
York corporation having offices at 145 Oser Avenue, Hauppauge, New York 11788
("Jaco"), and Jeffrey D. Gash, residing at 12 Carpenter Lane, Hauppauge, New
York 11788 ("Gash").
WHEREAS, Gash is the Vice President of Finance of Jaco;
WHEREAS, Gash has been employed from and after July 1, 1998,
pursuant to an oral agreement of employment consistent with the terms hereof;
and
WHEREAS, Jaco desires to have the continued services of Gash,
and Gash desires to continue to be employed by Jaco, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. Term of Employment; Duties.
1.1 Jaco hereby employs Gash as Vice President of Finance of
Jaco, and Gash hereby agrees to serve Jaco in such capacity and to perform such
duties consistent therewith as Jaco's Board of Directors and/or President from
time to time shall determine for a period commencing on the Effective Date and
ending on the fourth (4th) anniversary of the Effective Date (the "Initial
Term"), provided, however, the term of this Employment Agreement shall be
1
<PAGE>
automatically extended after each anniversary date of the Effective Date for an
additional one year period following the Initial Term, unless either Jaco or
Gash shall provide a notice of non-renewal to the other party (the "Notice of
Non-Renewal"), which notice shall be in writing and shall be delivered not less
than 90 days prior to an anniversary date after the Effective Date (the
"Employment Period"). In the event that a Notice of Non-Renewal is delivered by
either party, this Employment Agreement shall continue for a period of three (3)
years following the anniversary date which follows immediately after the date
that a valid and effective Notice of Non-Renewal is delivered. By way of
example, if the Notice of Non-Renewal is delivered after the second anniversary
date and not less than 90 days prior to the third anniversary date of the
Effective Date, this Employment Agreement shall continue until the sixth
anniversary date of the Effective Date.
2. Compensation.
2.1 For all services rendered pursuant to the terms hereof,
Gash shall receive a base salary of $125,000 for each of the 12 month periods (a
"Contract Year") ending June 30, 1999, and each June 30, thereafter ("Base
Salary"), which Base Salary may be reviewed by the Board of Directors and the
President for each of the Contract Years after the fiscal year ending June 30,
1998, to determine whether the Base Salary should be increased for any such
year. The Base Salary shall be paid to Gash in equal periodic installments not
less frequently than monthly. In addition and not in lieu thereof, Gash shall be
entitled to receive such fringe benefits and to participate in such benefit
plans and programs as are generally made available by Jaco to other senior
executive employees, including, but not limited to, health insurance.
2
<PAGE>
2.2 Gash may receive a cash bonus (the "Cash Bonus") for each
Contract Year as shall be determined by the Board of Directors and the
President. The Cash Bonus, if any, shall be payable every year on or before
November 1 for the preceding fiscal year.
2.3 Upon Gash's death, his legal representative(s) shall be
paid the sum of $750,000 (the "Death Benefit") within fifteen (15) days of
Jaco's receipt of the proceeds of the insurance on Gash's life purchased
pursuant to the provisions of Section 2.4 below. If, for any reason, at the time
of Gash's death, Jaco does not have in force an insurance policy on Gash's life,
then, notwithstanding anything in this Employment Agreement to the contrary, the
Death Benefit shall be due and payable within fifteen (15) days of Gash's death.
2.4 Jaco shall use its best efforts to purchase insurance on
the life of Gash, as well as annuities or other endowment policies
(collectively, "Policies"), in sufficient amounts fully to fund its obligations
to Gash under Section 2.3 above. All such policies shall be and shall remain the
property of Jaco. Gash shall cooperate fully with Jaco to enable Jaco to obtain
such policies.
2.5 The obligations of Jaco to Gash hereunder are general
unsecured obligations of Jaco to Gash, and Gash shall have no security interest
or other interest of any nature whatsoever in the Policies or the proceeds
thereof (except as provided in Section 2.6 below), or in any other assets of
Jaco. Jaco, in its absolute discretion, may establish any reserves or special
accounts or segregate assets to fund such obligations. Gash shall not sell,
transfer, assign, pledge, encumber, hypothecate or otherwise alienate any right
or entitlement of his hereunder. No such purported sale, transfer, assignment,
pledge, encumbrance, hypothecation or other alienation shall have any force or
effect or in any way be binding upon or be enforceable against Jaco. Except as
otherwise provided by law, no such right or entitlement shall be subject to
attachment or garnishment.
3
<PAGE>
2.6 If, at any time, Gash ceases to be an employee of Jaco
other than on account of death, Jaco, at Gash's option, shall transfer and
assign to Gash all its right, title and interest in the Policies and Jaco shall
cause the premiums on the Policies to be fully paid up to the date of Gash's
termination. Gash shall refund to Jaco the pro rata portion (determined by the
straight-line method) of premiums on the Policies, if any, paid by Jaco for any
period beyond the termination date. Upon such termination of Gash's employment
and upon complete assignment of all of the Policies to Gash, Jaco shall have no
further liability to Gash for payment of premiums under the Policies or
otherwise in respect of its obligations under Sections 2.3 and 2.4 hereof.
3. Services to be Provided.
3.1 Gash shall devote his best efforts and substantially
all of his time to the business of Jaco.
3.2 Gash shall perform all duties, obligations, and
responsibilities assigned to him by the Board of Directors and/or the President
and ordinarily performed by a person employed as a senior executive officer, and
shall devote his full attention to the performance of the duties assigned to
him.
3.3 If duly elected, Gash shall serve as an officer and/or
director of any of Jaco's subsidiaries, whether now existing or hereafter
established or acquired, and he shall perform such duties as are assigned to
him, from time to time, by the Board of Directors and/or the President of Jaco
or any of its subsidiaries.
4
<PAGE>
4. Termination of Employment.
4.1 During the Employment Period, Gash's employment may be
terminated by the Board of Directors of Jaco on the occurrence of any one or
more of the following events:
(a) The death of Gash;
(b) Subject to the provisions of Section 4.2
below, the disability of Gash; or
(c) For "Cause",which shall mean (i) the willful
failure by Gash substantially to perform his duties hereunder for reasons other
than death or disability; (ii) the willful engaging by Gash in misconduct
materially injurious to Jaco; or (iii) the commission by Gash of an act
constituting common law fraud or a felony.
4.2 If Gash becomes mentally or physically disabled for a
period of six (6) consecutive months so that he is not able to perform his
duties substantially as contemplated herein ("Disability"), Jaco's obligations
to pay the Cash Base Salary and the Cash Bonus shall cease from and after the
last day of such six (6) month period and shall not be resumed unless and until
Gash shall have returned to his duties on a full time basis for a period of two
(2) consecutive months. During such two (2) month period, Gash shall be paid at
the rates of Base Salary and Cash Bonus which would then have been prevailing
hereunder had he not become so disabled. If Gash's Disability becomes permanent,
Jaco, at its option, may terminate Gash's employment with Jaco and its
obligation hereunder to pay the Base Salary and the Cash Bonus. Gash's
Disability shall be deemed to have become permanent when, as a result of the
injury or sickness, Gash becomes wholly and continuously disabled and is thus
prevented from performing the material and substantial duties of his employment
as set forth in Section 1.1 above and while under the care of a physician.
5
<PAGE>
5. Reimbursement of Expenses. Jaco shall reimburse Gash for all reasonable
expenses incurred in connection with the promotion of the business of Jaco,
including expenses for travel, entertainment and similar expenses incurred by
Gash on Jaco's behalf. No such reimbursement shall be made except upon the
presentation by Gash of an itemized account of such expenses or other evidence
thereof for which reimbursement then is being sought, all in form reasonably
satisfactory to Jaco.
6. Indemnity. Jaco, to the maximum extent it may provide indemnification to an
officer or director under applicable law, shall indemnify Gash and hold him
harmless from any and all liability arising out of any act or failure to act
undertaken by him in good faith while performing services for Jaco, and shall
use its best efforts to obtain coverage for him under any insurance policy now
in force or hereafter obtained during the Employment Period covering officers
and directors of Jaco against claims made against them or any of them for any
act or failure to act in such capacities. Jaco shall pay all expenses, including
reasonable attorneys' fees, actually or necessarily incurred by Gash in
connection with the defense of any action, suit, or proceeding arising out of
any such claim and in connection with any appeal arising therefrom.
7. Disclosure of Information. All memoranda, notes, records, or other documents
made or compiled by Gash or made available to him during the course of his
employment with Jaco concerning the business of Jaco shall be Jaco's property
and shall be delivered to Jaco by Gash on the termination of Gash's employment.
Unless authorized by Jaco, Gash shall not use for himself or others or divulge
to others, any proprietary or confidential information of Jaco obtained by him
6
<PAGE>
as a result of his employment. For purposes of this Section 7, the term
"proprietary or confidential information" shall mean all information which (i)
is known only to Gash or to Gash and employees, former employees, consultants of
Jaco, or others in a confidential relationship with Jaco, (ii) relates to
specific matters such as trade secrets, customers, potential customers, vendor
lists, pricing and credit techniques, research and development activities, books
and records, and commission schedules, as they may exist from time to time,
which Gash may have acquired or obtained by virtue of work heretofore or
hereafter performed for or on behalf of Jaco or which he may acquire or may have
acquired knowledge of during the performance of such work, and (iii) is not
readily available to others. In the event of a breach or a threatened breach by
Gash of the provisions of this Section 7, Jaco shall be entitled to an
injunction restraining Gash from disclosing, in whole or in part, the
aforementioned proprietary or confidential information of Jaco, or from
rendering any services to any person, firm, corporation, association, or other
entity to whom or to which such proprietary or confidential information, in
whole or in part, has been disclosed or is threatened to be disclosed. Nothing
contained herein shall be construed as prohibiting Jaco from pursuing any other
remedies available to Jaco for such breach or threatened breach, including the
recovery of damages from Gash.
8. Restrictive Covenants.
8.1 Gash hereby acknowledges and recognizes the highly
competitive nature of Jaco's business and, accordingly, in consideration of the
premises contained herein, agrees that during the Employment Period and
thereafter until the Designated Date (as hereinafter defined) he will not: (i)
directly or indirectly engage in any Competitive Activity (as hereinafter
defined), whether such engagement shall be as an officer, director, employee,
consultant, agent, lender,
7
<PAGE>
stockholder, or other participant; or (ii) assist others in engaging in any
Competitive Activity. The term "Competitive Activity" shall mean and shall
include soliciting, raiding, enticing, or inducing, individually or in concert
with others, (i) any person or entity to be a customer for the same or similar
services for which that person or entity engaged Jaco, if such person or entity
(A) was a customer of Jaco's during the Employment Period or at any time
thereafter prior to the Designated Date, or (B) was solicited by Jaco to be a
customer during the one-year period prior to the termination of this Employment
Agreement; (ii) any manufacturer or supplier whose products are distributed by
Jaco at the time this Employment Agreement is terminated to act as a
manufacturer or supplier for any other party of the same or similar goods that
it supplies to Jaco; or (iii) any employee of Jaco to leave Jaco or to do
business with any enterprise or business which competes with Jaco.
8.2 As used in this Section 8, the "Designated Date"
shall mean any of the following dates:
(a) in the event Gash willfully terminates his
employment with Jaco in violation of this Employment Agreement prior to the
expiration of the Employment Period, the term "Designated Date" shall mean the
first anniversary of the date of such termination;
(b) in the event Jaco terminates the employment
of Gash under this Employment Agreement for Cause, the term "Designated Date"
shall mean the first anniversary of the date of such termination; or
(c) in the event Jaco terminates the employment
of Gash without cause, the term "Designated Date" shall mean the date of such
termination.
8
<PAGE>
8.3 It is the desire and intent of the parties that the
provisions of this Section 8 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Section 8 shall be
adjudicated to be invalid or unenforceable in any such jurisdiction, such
provision of this Section 8 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision of this Section 8 in the
particular jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 8 is adjudicated to be too
broad to permit enforcement thereof to its fullest extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Gash hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.
8.4 In the event of a breach or threatened breach by Gash of
the provisions of this Section 8, Jaco shall be entitled to an injunction
restraining him from such breach. Nothing contained herein shall be construed as
prohibiting Jaco from pursuing any other remedies available to it for such
breach or threatened breach or any other breach of this Employment Agreement.
9. Consolidation; Merger; Change of Control.
9.1 In the event of any consolidation or merger of Jaco into
or with another corporation during the Employment Period, and Jaco is not the
surviving entity, or the sale of all or substantially all of the assets of Jaco
to another corporation during the Employment Period, or in the event that fifty
(50%) percent or more of the voting common stock of Jaco shall be owned by one
or more individuals or entities, who are acting in concert or as part of an
affiliated group (other than
9
<PAGE>
a group one of the members of which is Gash) at any time during the Employment
Period, (the occurrence of any of the foregoing, a "Change of Control"), then
(i) Jaco shall pay or cause to be paid to Gash a certified or cashier's check in
an amount equal to two hundred percent (200%) of the average of Gash's Base
Salary plus Cash Bonus for the previous five (5) years; and (ii) this Employment
Agreement may be assigned by Jaco or any such successor or surviving corporation
on sixty (60) days prior written notice to Gash; provided, however, such
assignment shall not cause Gash's principal place of employment to be moved to
any space located more than forty-five (45) miles from Gash's principal place of
employment prior to a Change of Control without his prior written consent.
9.2 Notwithstanding the provisions of Section 9.1 above, any
such payments shall be made only in an amount which, when taken together with
the present value of all other payments to Gash that are contingent on a Change
in Control of Jaco, computed in accordance with the provisions of Section
280G(d)(4) of the Internal Revenue Code of 1986 (the "Code"), does not equal or
exceed three times Gash's "Base Amount", as computed in accordance with Code
Section 280G(b)(3).
10. Notices. Any notices required or permitted to be given under the provisions
of this Employment Agreement shall be in writing and delivered personally, sent
by recognized overnight courier or mailed by certified or registered mail,
return receipt requested, postage prepaid to the persons and at the addresses
first set forth above, or to such other person at such other address as any
party may request by notice in writing to the other party to this Employment
Agreement. Notices
10
<PAGE>
which are hand delivered or delivered by recognized overnight courier shall be
effective on delivery. Notices which are mailed shall be effective on the third
day after mailing.
11. Construction, This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
12. Successors and Assigns. This Employment Agreement shall be binding on the
successors and assigns of Jaco and shall inure to the benefit and be enforceable
by and against its successors and assigns. This Employment Agreement is personal
in nature and may not be assigned or transferred by Gash without the prior
written consent of Jaco.
13. Entire Agreement. This Employment Agreement contains the entire
understanding and agreement between the parties relating to the subject matter
hereof, and neither this Employment Agreement nor any provision hereof may be
waived, modified, amended, changed, discharged, or terminated, except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge, or termination is sought.
14. Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and all of which
counterparts shall together constitute a single agreement.
11
<PAGE>
15. Illegality. In case any one or more of the provisions of this Employment
Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, the legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16. Captions. The captions of the sections hereof are for
convenience only and shall not control or affect the meaning or construction of
any of the terms or provisions of this Employment
Agreement.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
JACO ELECTRONICS, INC.
By: JOEL H. GIRSKY
President
JEFFREY D. GASH
13
<PAGE>
July 1, 1998
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, NY 11788
NEXUS CUSTOM ELECTRONICS, INC.
Prospect Street
Brandon, VT 05733
Gentleman:
Reference is made to the Second Restated and Amended Loan and Security
Agreement between Jaco Electronics, Inc. and Nexus Custom Electronics, Inc. as
Debtor, and BNY Financial Corporation (f./k/a The Bank of New York Commercial
Corporation), as Lender, and each other Lender a party hereto, dated September
13, 1995, as amended and supplemented (the "Loan Agreement").
It is hereby agreed that, effective as of July 1, 1998, the first
sentence of Paragraph 5(A) of the Loan Agreement shall be amended by deleting
the word "Until" at the beginning thereof and substituting the words "Upon the
request of the Agent on behalf of the Secured Parties and until" in its place
and stead.
Except as hereinabove specifically set forth, the Loan Agreement shall
remain unmodified and in full force and effect in accordance with its terms.
If you are in agreement with the foregoing, please so indicate by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
BNY FINANCIAL CORPORATION f/k/a THE
BANK OF NEW YORK COMMERCIAL CORPORATION,
as Agent and Lender
By: Frank Imperato
Title: Vice President
FLEET BANK, N.A.,
NATWEST BANK N.A., as Lender
By: Alice Adleberg
Title: Vice President
AGREED:
JACO ELECTRONICS, INC.
By: Jeffrey D. Gash
Title: Vice President/Finance
NEXUS CUSTOM ELECTRONICS, INC.
By: Jeffrey D. Gash
Title: Vice President/Finance
September 21, 1998
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, NY 11788
NEXUS CUSTOM ELECTRONICS, INC.
Prospect Street
Brandon, VT 05733
Gentleman:
Reference is made to (a) the Second Restated and Amended Loan and
Security Agreement between Jaco Electronics, Inc. and Nexus Custom Electronics,
Inc. as Debtor, and our predecessor-in-interest, The Bank of New York Commercial
Corporation, as Lender, and each other Lender a party thereto, dated September
13, 1995, as amended and supplemented (the "Loan Agreement") and (b) the letter
agreement and amendment dated as of April 10, 1996 among the parties to the Loan
Agreement (the "Letter Agreement").
It is hereby agreed that, effective as of September 21, 1998, clause (b)(ii) of
the Letter Agreement shall be amended to read in its entirety a follows:
"(ii)any such repurchase occurs before September 14, 2000 at the very
latest; and "
Except as hereinabove specifically set forth, the Loan Agreement and Letter
Agreement shall remain unmodified and in full force and effect in accordance
with their terms.
If you are in agreement with the foregoing, please so indicate by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
BNY FINANCIAL CORPORATION f/k/a THE
BANK OF NEW YORK COMMERCIAL CORPORATION,
as Agent and Lender
By: Frank Imperato
Title: Vice President
FLEET BANK, N.A.,
NATWEST BANK N.A., as Lender
By: Alice Adleberg
Title: Vice President
AGREED:
JACO ELECTRONICS, INC.
By: Jeffrey D. Gash
Title: Vice President/Finance
NEXUS CUSTOM ELECTRONICS, INC.
By: Jeffrey D. Gash
Title: Vice President/Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the unaudited condensed consolidated balance
sheet as of September 30, 1998 and the unaudited condensed
consolidated statement of earnings for the three months
ended September 30, 1998 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,519,542
<SECURITIES> 687,060
<RECEIVABLES> 22,593,701
<ALLOWANCES> 1,261,770
<INVENTORY> 35,756,451
<CURRENT-ASSETS> 61,955,934
<PP&E> 10,548,263
<DEPRECIATION> 3,445,586
<TOTAL-ASSETS> 74,719,833
<CURRENT-LIABILITIES> 18,746,147
<BONDS> 20,374,295
0
0
<COMMON> 406,572
<OTHER-SE> 35,192,819
<TOTAL-LIABILITY-AND-EQUITY> 74,719,833
<SALES> 33,256,456
<TOTAL-REVENUES> 33,256,456
<CGS> 26,554,068
<TOTAL-COSTS> 26,554,068
<OTHER-EXPENSES> 6,795,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313,442
<INCOME-PRETAX> (406,106)
<INCOME-TAX> (164,000)
<INCOME-CONTINUING> (242,106)
<DISCONTINUED> 0
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</TABLE>
