================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
--OR--
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
Commission File Number: 0-16207
ALL AMERICAN SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2814714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16115 NORTHWEST 52ND AVENUE, MIAMI, FLORIDA 33014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 621-8282
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
As of May 8, 2000, 3,996,131 shares (including 32,141 shares held by a
wholly-owned subsidiary of the Registrant) of the common stock of All American
Semiconductor, Inc. were outstanding.
================================================================================
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
FORM 10-Q - INDEX
PART ITEM PAGE
NO. NO. DESCRIPTION NO.
- --------------------------------------------------------------------------------
I FINANCIAL INFORMATION:
1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 2000
(Unaudited) and December 31, 1999.......................... 1
Consolidated Condensed Statements of Income for the Quarters
Ended March 31, 2000 and 1999 (Unaudited).................. 2
Consolidated Condensed Statements of Cash Flows for the
Quarters Ended March 31, 2000 and 1999 (Unaudited)......... 3
Notes to Consolidated Condensed Financial Statements
(Unaudited)................................................ 4
Independent Accountants' Review Report....................... 5
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 5
3. Quantitative and Qualitative Disclosures about Market Risk... 8
II OTHER INFORMATION:
2. Changes in Securities and Use of Proceeds.................... 8
6. Exhibits and Reports on Form 8-K............................. 9
SIGNATURES................................................... 9
i
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 2000 1999
- ---------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash ...................................................... $ 355,000 $ 173,000
Accounts receivable, less allowances for doubtful
accounts of $2,208,000 and $1,987,000 ................... 63,106,000 53,202,000
Inventories ............................................... 81,364,000 85,260,000
Other current assets ...................................... 3,888,000 4,637,000
------------- -------------
Total current assets .................................... 148,713,000 143,272,000
Property, plant and equipment - net ......................... 4,415,000 4,482,000
Deposits and other assets ................................... 2,941,000 2,741,000
Excess of cost over fair value of net assets acquired - net . 992,000 1,006,000
------------- -------------
$ 157,061,000 $ 151,501,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt ......................... $ 261,000 $ 273,000
Accounts payable and accrued expenses ..................... 54,267,000 51,584,000
Income taxes payable ...................................... 125,000 --
Other current liabilities ................................. 264,000 198,000
------------- -------------
Total current liabilities ............................... 54,917,000 52,055,000
Long-term debt:
Notes payable ............................................. 65,698,000 64,298,000
Subordinated debt ......................................... 6,075,000 6,089,000
Other long-term debt ...................................... 1,207,000 1,207,000
------------- -------------
127,897,000 123,649,000
------------- -------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued ................................. -- --
Common stock, $.01 par value, 40,000,000 shares authorized,
3,996,131 and 3,973,431 shares issued and outstanding ... 40,000 40,000
Capital in excess of par value ............................ 25,881,000 25,751,000
Retained earnings ......................................... 4,178,000 2,968,000
Treasury stock, at cost, 183,246 and 174,646 shares ....... (935,000) (907,000)
------------- -------------
29,164,000 27,852,000
------------- -------------
$ 157,061,000 $ 151,501,000
============= =============
</TABLE>
See notes to consolidated condensed financial statements
1
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
QUARTERS ENDED MARCH 31 2000 1999
- -------------------------------------------------------------------------------
NET SALES .................................... $ 107,273,000 $ 70,649,000
Cost of sales ................................ (85,832,000) (57,010,000)
------------- -------------
Gross profit ................................. 21,441,000 13,639,000
Selling, general and administrative expenses . (17,659,000) (12,203,000)
------------- -------------
INCOME FROM OPERATIONS ....................... 3,782,000 1,436,000
Interest expense ............................. (1,657,000) (1,096,000)
------------- -------------
INCOME BEFORE INCOME TAXES ................... 2,125,000 340,000
Income tax provision ......................... (915,000) (146,000)
------------- -------------
NET INCOME ................................... $ 1,210,000 $ 194,000
============= =============
Earnings per share:
Basic ..................................... $.32 $.05
==== ====
Diluted ................................... $.30 $.05
==== ====
See notes to consolidated condensed financial statements
2
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
QUARTERS ENDED MARCH 31 2000 1999
- -------------------------------------------------------------------------------
Cash Flows Used For Operating Activities ......... $ (732,000) $(5,144,000)
----------- -----------
Cash Flows From Investing Activities:
Acquisition of property and equipment ............ (254,000) (144,000)
Increase in other assets ......................... (306,000) (118,000)
----------- -----------
Cash flows used for investing activities ..... (560,000) (262,000)
----------- -----------
Cash Flows From Financing Activities:
Net borrowings under line of credit agreement .... 1,441,000 5,335,000
Repayments of notes payable ...................... (69,000) (79,000)
Purchase of treasury shares ...................... (28,000) --
Net proceeds from issuance of equity securities .. 130,000 --
----------- -----------
Cash flows provided by financing activities .. 1,474,000 5,256,000
----------- -----------
Increase (decrease) in cash ...................... 182,000 (150,000)
Cash, beginning of period ........................ 173,000 473,000
----------- -----------
Cash, end of period .............................. $ 355,000 $ 323,000
=========== ===========
Supplemental Cash Flow Information:
Interest paid .................................... $ 633,000 $ 830,000
=========== ===========
Income taxes paid ................................ $ 11,000 $ 237,000
=========== ===========
See notes to consolidated condensed financial statements
3
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited Consolidated Condensed
Financial Statements, which have been reviewed by our independent accountants,
include all adjustments (consisting of normal recurring accruals or adjustments
only) necessary to present fairly the financial position at March 31, 2000, and
the results of operations and the cash flows for all periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be obtained for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1999) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, including the
consolidated financial statements and notes thereto which should be read in
conjunction with these financial statements.
All references to shares of common stock, stock options and exercise prices per
share and per share amounts have been restated to reflect the effect of a
one-for-five reverse stock split which became effective in 1999.
EARNINGS PER SHARE
The following average shares were used for the computation of basic and diluted
earnings per share:
QUARTERS ENDED MARCH 31 2000 1999
- -------------------------------------------------------------------------------
Basic......................................... 3,801,969 3,937,371
Diluted....................................... 3,995,056 3,937,371
2. LONG-TERM DEBT
Outstanding borrowings at March 31, 2000 under the Company's $100 million line
of credit facility aggregated $65,415,000.
3. OPTIONS
During the quarter ended March 31, 2000, the Company granted an aggregate of
1,200 stock options to four individuals pursuant to the Employees', Officers',
Directors' Stock Option Plan, as previously amended and restated (the "Stock
Option Plan"). These options have an exercise price of $3.93 per share (fair
market value at date of grant) and vest over a five-year period and are
exercisable over a six-year period. During the quarter ended March 31, 2000,
22,700 stock options were exercised at exercise prices ranging from $4.49 to
$10.63 per share and 16,000 stock options were canceled at exercise prices
ranging from $3.27 to $7.20 per share.
4. STOCK REPURCHASE PROGRAM
During the quarter ended March 31, 2000, the Company repurchased 8,600 shares of
its common stock at an average price of $3.18 per share. The aggregate cost of
repurchased shares is included in treasury stock on the Consolidated Condensed
Balance Sheet.
4
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
================================================================================
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
We have reviewed the accompanying consolidated condensed balance sheet of All
American Semiconductor, Inc. and subsidiaries as of March 31, 2000 and the
related consolidated condensed statements of income and cash flows for the
three-month period ended March 31, 2000. These consolidated condensed financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
/s/ LAZAR LEVINE & FELIX LLP
- ----------------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
May 5, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
All American Semiconductor, Inc. and its subsidiaries (the "Company") is a
national distributor of electronic components manufactured by others. The
Company distributes a full range of semiconductors (active components),
including transistors, diodes, memory devices and other integrated circuits, as
well as passive components, such as capacitors, resistors, inductors and
electromechanical products, including cable, switches, connectors, filters and
sockets. These products are sold primarily to original equipment manufacturers
("OEMs") in a diverse and growing range of industries, including manufacturers
of computers and computer-related products; networking, satellite, wireless and
other communications products; Internet infrastructure and appliances; consumer
goods; robotics and industrial equipment; defense and aerospace equipment; and
medical instrumentation. The Company also sells products to contract electronics
manufacturers who manufacture products for companies in all electronics industry
segments. The Company also designs and has manufactured certain board level
products including memory modules and flat panel display driver boards, both of
which are sold to OEMs.
RESULTS OF OPERATIONS
Net sales for the first quarter of 2000 reached a new record at $107.3 million,
an increase of 51.8% from net sales of $70.6 million for the same period of
1999. The substantial increase in sales resulted from improved conditions in the
industry as well as from increased sales in most territories and contributions
from two new sales offices which were opened during the second quarter of 1999.
Gross profit increased to $21.4 million for the first quarter of 2000 up over
57% from $13.6 million for the 1999 period. This significant increase was
primarily attributable to the increase in net sales. Gross profit margins as a
percentage of net sales were 20.0% for the first three months of 2000 compared
to 19.3% for the same period of 1999. The slight improvement in gross profit
margins reflects a tightening of supply for certain products. Although gross
profit margins have improved slightly, the Company continues to
5
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
================================================================================
experience lower margins relating to the development of long-term strategic
relationships with accounts which have required aggressive pricing programs.
Management is unsure whether gross profit margins will continue to improve or
possibly decline.
Selling, general and administrative expenses ("SG&A") was $17.7 million for the
first quarter of 2000 compared to $12.2 million for the first quarter of 1999.
The increase in SG&A was primarily a result of an increase in the Company's
infrastructure to support the changing needs and additional requirements of its
customers and increased variable expenses associated with the increases in sales
and gross profit. Furthermore, in an effort to continue to drive expansion and
internal growth, the Company has increased and enhanced its management team and
expanded its sales force in almost every location since early 1999. Due to these
factors, the Company expects that SG&A will continue to increase in future
periods.
SG&A as a percentage of net sales improved to 16.5% for the quarter ended March
31, 2000, from 17.3% for the same period of 1999. The improvement in SG&A as a
percentage of sales reflects the significant increase in net sales which more
than offset the increase in SG&A.
Income from operations increased over 160% to $3.8 million for the first quarter
of 2000 from $1.4 million for the first quarter of 1999. The substantial
increase in income from operations was due to the increase in net sales, which
more than offset the increase in SG&A.
Interest expense was $1.7 million for the first quarter of 2000 compared to $1.1
million for the 1999 period. The increase in interest expense resulted from an
increase in average borrowings during the first quarter of 2000 to support the
growth in sales and the expanded infrastructure. Interest expense for the
quarter ended March 31, 2000 also reflects an increase in the Company's
borrowing rate.
Net income increased over 520% and reached a new record of $1.2 million, or $.30
per share (diluted), for the quarter ended March 31, 2000, compared to $194,000,
or $.05 per share (diluted), for the same period of 1999. The dramatic increase
in net income reflects the increase in gross profit which was partially offset
by the increase in SG&A and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 2000 increased to $93.8 million from working
capital of $91.2 million at December 31, 1999. The current ratio was 2.71:1 at
March 31, 2000 compared to 2.75:1 at December 31, 1999. The increase in working
capital was primarily due to an increase in accounts receivable. This increase
more than offset the decrease in inventories and an increase in accounts
payable. Accounts receivable levels at March 31, 2000 were $63.1 million, up
from accounts receivable of $53.2 million at December 31, 1999. The increase in
accounts receivable reflects the record level of sales achieved during the first
quarter of 2000 compared to the latter part of 1999. Inventory levels were $81.4
million at March 31, 2000, down from $85.3 million at December 31, 1999. The
decrease in inventories reflects the impact from extended lead times for the
delivery of certain product. Management believes that inventory levels may
increase in the future to support sales. Accounts payable and accrued expenses
was $54.3 million at March 31, 2000 compared to $51.6 million at December 31,
1999.
On May 24, 1999, the Company announced that the Company's Board of Directors
authorized the repurchase of up to $2 million in purchase price of the Company's
common stock. The Company intends to make such stock repurchases using available
cash flow from operations and/or available borrowings under its credit facility.
Any shares of common stock repurchased will be available for reissuance in
connection with the Stock Option Plan or for other corporate purposes. As of
March 31, 2000, the Company repurchased 147,186 shares of its common stock at an
average price of $3.29 per share.
6
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
================================================================================
At March 31, 2000, outstanding borrowings under the Company's line of credit
facility aggregated $65.4 million.
The Company expects that its cash flows from operations and additional
borrowings available under its credit facility will be sufficient to meet its
current financial requirements over the next twelve months.
YEAR 2000 ISSUE
The Company has evaluated its business information technology (IT) systems as
well as its non-IT systems and has surveyed its major vendors. The Company
currently believes that its internal systems are in compliance with Year 2000
requirements. To date, none of our systems have experienced material
difficulties from the transition to Year 2000. Based upon the survey of the
Company's major suppliers and the lack of material issues to date, the Company
currently believes that Year 2000 issues of its suppliers should not have a
material adverse effect on the Company's business, operations or financial
condition. Nevertheless, to the extent the Company's vendors (particularly its
major vendors) experience Year 2000 difficulties in the future, the Company may
face delays in obtaining or even be unable to obtain certain products and
services and therefore may be unable to make shipments to customers resulting in
a material adverse effect on the Company's business, operations and financial
condition. The Company did not survey its customers and on a limited basis
surveyed certain other third parties with which it has a business relationship.
As there have been no material issues to date, no assessment has been made of
any future potential impact by customers' non-compliance (such as the ability of
customers to electronically interface with the Company), although no assurance
can be given that such non-compliance will not surface in the future resulting
in a material adverse effect on the Company's business, operations and financial
condition. The Company did not undertake an analysis of (nor, given the lack of
material issues to date, does it intend to analyze) the effect of a worst-case
Year 2000 scenario on the Company's business, operations or financial condition
and, accordingly, the materiality of such effect (if any) is uncertain and the
Company does not have a contingency plan and, given the lack of material issues
to date, does not intend to create one.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs relating to the Company's future
performance and operating results, its bookings, products, services, markets and
industry, and/or future events relating to or effecting the Company and its
business and operations (including, without limitation, general technology
growth). If and when used in this Form 10-Q, the words "believes," "estimates,"
"plans," "expects," "intends," "anticipates," "could," "may," and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements. The actual performance, results or
achievements of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties. Factors
that could adversely affect the Company's future results, performance or
achievements include, without limitation, the amount and timing of shipments of
previously booked customer orders, the effectiveness of the Company's business
and marketing strategies, timing of delivery of products from suppliers, price
increases from suppliers that cannot be passed on to the Company's customers at
the same rate, the product mix sold by the Company, the Company's development of
new customers, existing customer demand as well as the level of demand for
products of its customers, the ability of the Company to open new sales offices
in a timely and cost-effective manner and to expand its product offerings and
continue to enhance its service capabilities and the timing and cost thereof,
utilization by the Company of any excess capacity, availability of products from
and the establishment and maintenance of relationships with suppliers, price
erosion in and price competition for products sold by the Company, management of
7
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
================================================================================
growth and expenses, the ability of the Company to generate the expected return
from its addition of people, addition of sales offices and the increase of its
infrastructure, the Company's ability to collect accounts receivable, price
decreases on inventory that is not price protected, gross profit margins,
including decreasing margins in the future resulting from the Company being
required to have aggressive pricing programs, increased competition from third
party logistics companies, e-brokers and other forms of e-commerce companies
through the use of the Internet as well as from its traditional competitors,
availability and terms of financing to fund capital needs, the continued
enhancement of telecommunication, computer and information systems, any adverse
impact in the future on the Company, its vendors or customers or other third
parties with which the Company has a business relationship arising from Year
2000 issues, the continued and anticipated growth of the electronics industry
and electronic components distribution industry, as well as general technology
growth, the impact on certain of the Company's suppliers and customers of
economic or financial turbulence in off-shore economies and/or financial
markets, change in government tariffs or duties, currency fluctuations, a change
in interest rates, the state of the general economy, and the other risks and
factors detailed in this Form 10-Q and in the Company's other filings with the
Securities and Exchange Commission and in its press releases. These risks and
uncertainties are beyond the ability of the Company to control. In many cases,
the Company cannot predict the risks and uncertainties that could cause actual
results to differ materially from those indicated by the forward-looking
statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's Credit Facility bears interest based on interest rates tied to the
prime or LIBOR rate, either of which may fluctuate over time based on economic
conditions. As a result, the Company is subject to market risk for changes in
interest rates and could be subjected to increased or decreased interest
payments if market interest rates fluctuate. If market interest rates increase,
the impact may have a material adverse effect on the Company's financial
results.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) SALES OF UNREGISTERED SECURITIES
The Company has not issued or sold any unregistered securities during
the quarter ended March 31, 2000, although, pursuant to the Company's
Stock Option Plan, the Company granted stock options to four
individuals during the quarter ended March 31, 2000, to purchase 1,200
shares of the Company's common stock at an exercise price of $3.93 per
share. The stock options vest over a five-year period and are
exercisable over a six-year period. All of the stock options were
granted by the Company in reliance upon the exemption from
registration available under Section 4(2) of the Securities Act of
1933, as amended. See Note 3 to Notes to Consolidated Condensed
Financial Statements (Unaudited).
8
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
================================================================================
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Third Amendment to Employment Agreement effective as of
January 1, 2000 and dated as of April 27, 2000, between the
Company and Paul Goldberg.
10.2 Second Amendment to Employment Agreement effective as of
January 1, 2000 and dated as of April 27, 2000, between the
Company and Bruce M. Goldberg.
10.3 Employment Agreement effective as of January 1, 2000 and dated
as of April 27, 2000, between the Company and Howard L.
Flanders.
10.4 Employment Agreement effective as of January 1, 2000 and dated
as of April 27, 2000, between the Company and Rick Gordon.
11.1 Statement Re: Computation of Per Share Earnings (Unaudited).
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 2000.
------------------------
SIGNATURES
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.
ALL AMERICAN SEMICONDUCTOR, INC.
--------------------------------------------
(Registrant)
Date: May 12, 2000 /s/ PAUL GOLDBERG
--------------------------------------------
Paul Goldberg, Chairman of the Board
(Duly Authorized Officer)
Date: May 12, 2000 /s/ HOWARD L. FLANDERS
--------------------------------------------
Howard L. Flanders, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
9
Exhibit 10.1
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This THIRD AMENDMENT (this "Amendment"), is made and entered into on April
27, 2000, but is effective as of the 1st day of January, 2000, to the Employment
Agreement made and entered into on May 24, 1995, as amended by an amendment
dated December 31, 1996 and an amendment entered into on August 21, 1998 (such
Employment Agreement as amended is hereinafter referred to as the "Agreement"),
by and between ALL AMERICAN SEMICONDUCTOR, INC., a Delaware corporation (the
"Company"), and PAUL GOLDBERG (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and Employee mutually desire and each of them is
willing, in accordance with the terms and conditions specifically restated,
added, deleted or otherwise set forth below, to amend the Agreement; it being
understood by the Company and Employee that all terms and conditions of the
Agreement not otherwise specifically modified by this Amendment shall remain
effective and continue operating in full force throughout the entire term of the
Agreement.
NOW, THEREFORE, for and in consideration of the covenants and agreements
hereinafter set forth, the parties hereto mutually agree as follows:
1. TERM OF EMPLOYMENT. Section 1 of the Agreement is hereby amended,
restated and replaced in its entirety as follows in order to extend the term of
Employee's employment under the Agreement by five (5) years:
"1. TERM OF EMPLOYMENT. The Company agrees to employ Employee, and
Employee agrees to be so employed, for a term of employment commencing on the
Effective Date and continuing until December 31, 2005, subject, however, to the
terms and conditions of this Agreement concerning earlier termination by each of
the parties. The term of this Agreement shall automatically renew each year for
an additional one (1) year term unless the Company or Employee notifies the
other of its or his intention not to renew this Agreement no later than sixty
(60) days prior to the expiration of the then-current term."
<PAGE>
2. Section 3(a) of the Agreement is hereby amended, restated and
replaced in its entirety as follows:
"Effective January 1, 2000, the Company agrees to pay to Employee, as
base salary, for 2000 calendar year, gross annual salary at a rate equal to
$291,166.64 per annum. For each calendar year during the term of this Agreement
commencing January 2000, Employee's gross annual salary shall be increased by
the greater of (i) 4% of the prior year's gross annual salary and (ii) the
amount of the percentage increase in the Consumer Price Index for the most
currently available twelve (12) month period over the preceding twelve (12)
month period multiplied by the prior year's gross annual salary. The base salary
shall be payable on the same basis (including appropriate payroll withholding)
as the Company, from time to time, generally pays its employees. Employee shall,
in addition to base salary, receive, in respect of each calendar year (or
partial calendar year) during which this Agreement is in effect, an annual cash
bonus (the "Cash Bonus") equal to 3% of the pre-tax net income of the Company
before non-recurring and extraordinary charges ("pre-tax net income") for such
calendar year in excess of $1 million. The maximum amount of the Cash Bonus for
any year shall be limited to two times Employee's base salary for such year
(e.g., the Cash Bonus in respect of the 2000 calendar year shall not exceed
$582,333.28 regardless of 2000 pre-tax net income). The Cash Bonus shall be paid
to Employee on a quarterly basis as follows: The Cash Bonus payment for the
first calendar quarter (the "First Quarterly Bonus Payment") shall be equal to
3% of the excess, if any, that pre-tax net income of the Company for the first
calendar quarter exceeds $250,000. The Cash Bonus payment for the second
calendar quarter (the "Second Quarterly Bonus Payment") shall be equal to (i) 3%
of the excess, if any, that pre-tax net income of the Company for the first two
calendar quarters exceeds $500,000 less (ii) the First Quarterly Bonus Payment.
The Cash Bonus payment for the third calendar quarter (the "Third Quarterly
Bonus Payment") shall be equal to (i) 3% of the excess, if any, that pre-tax net
income of the Company for the first three calendar quarters exceeds $750,000
less (ii) the aggregate of the First Quarterly Bonus Payment and the Second
Quarterly Bonus Payment. The Cash Bonus payment for the fourth calendar quarter
(the "Fourth Quarterly Bonus Payment") shall be equal to (i) 3% of the excess,
if any, that pre-tax net income of the Company for the calendar year exceeds
$1,000,000 (the "Annual Bonus Amount") less (ii) the aggregate of the First
Quarterly Bonus Payment, the Second Quarterly Bonus Payment and the Third
Quarterly Bonus Payment (collectively, the "Three Quarterly Bonus Payments"). In
the event that the aggregate Three Quarterly Bonus Payments paid to the Employee
exceeds the Annual Bonus Amount, such excess amount shall be repaid to the
Company within thirty days of such determination. Each of the Three Quarterly
Bonus Payments shall be paid within thirty (30) days following completion of the
unaudited financial statements for such quarter. The Fourth Quarterly Bonus
Payment shall be paid to Employee within thirty (30) days following completion
of each annual audit of the Company. Each payment of Cash Bonus (including each
of the Three Quarterly Bonus Payments) shall be calculated in accordance with
generally accepted accounting principles, consistently applied, without taking
any Cash Bonus of Employee, or any similar bonus based on the earnings or
performance of the Company paid to any other executive officer of the Company,
into account as an expense. It is anticipated by the Company that none of the
grant, vesting or exercise of any options granted and/or contemplated to be
granted, or of any warrants or similar rights issued by the Company from time to
time, will constitute or result in an expense or charge against the Company's
income. However, if such turns out not to be the case, no such expense or charge
shall be taken into account when computing pre-tax net income for purposes of
determining the Cash Bonus. If being computed for a partial calendar quarter,
the Cash Bonus shall be appropriately and equitably prorated. Consumer Price
Index as used herein shall mean the Consumer Price Index shown on the U.S. City
Average for all urban consumers, unadjusted, all items, as promulgated by the
Bureau of Labor Statistics of the U.S. Department of Labor. In the event that
the Consumer Price Index referred to herein ceases to incorporate a significant
number of the items as currently set forth therein, or if a substantial change
is made in the method of establishing said Consumer Price Index, then the
Consumer Price Index shall be adjusted to the figure that would have resulted
had no change occurred in the manner of computing the Consumer Price Index. In
the event that the Consumer Price Index (or successor or substitute index) is
not available, then the Company may use
2
<PAGE>
another governmental or nonpartisan publication evaluating the information
theretofore used in determining the Consumer Price Index in lieu of said
Consumer Price Index. "
3. The following new Section 3(i) is added after the end of Section
3(h):
"(i) Employee has been granted certain incentive stock options to
acquire shares of common stock of the Company ("Stock Options") and in the
future may be granted additional Stock Options. Each of the agreements pursuant
to which any Stock Options have been or will be granted by the company are
hereby amended to provide that, unless Employee has been terminated pursuant to
Section 5(a), as such section may be amended from time-to-time, or pursuant to
any comparable for cause provision under any successor employment agreement,
Employee shall have not less than ninety (90) days after termination of
Employee's employment to exercise his Stock Options."
4. CAPITALIZED TERMS. All capitalized terms used herein, which are not
defined herein, shall have the respective meanings ascribed to them in the
Agreement.
5. EFFECT. Except as otherwise specifically modified by this Amendment,
all terms, conditions and provisions of the Agreement shall remain effective and
continue operating in full force and without change.
IN WITNESS WHEREOF, Employee has hereunto set his hand and the Company has
caused this Amendment to be executed by its duly authorized officer effective as
of the day and year first above written.
ALL AMERICAN SEMICONDUCTOR, INC.
By: /s/ BRUCE M. GOLDBERG
-------------------------------------
Bruce M. Goldberg,
Chief Executive Officer and President
EMPLOYEE:
/s/ PAUL GOLDBERG
-------------------------------------
Paul Goldberg
3
Exhibit 10.2
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This SECOND AMENDMENT (this "Amendment"), is made and entered into on
April 27, 2000, but it is effective as of the 1st day of January, 2000, except
to the extent specific provisions herein provide for a different effective date,
to the Employment Agreement made and entered into on May 24, 1995, as amended by
a first amendment entered into on August 21, 1998 (such Employment Agreement as
amended is hereinafter referred to as the "Agreement"), by and between ALL
AMERICAN SEMICONDUCTOR, INC., a Delaware corporation (the "Company"), and BRUCE
M. GOLDBERG (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and Employee mutually desire and each of them is
willing, in accordance with the terms and conditions specifically restated,
added, deleted or otherwise set forth below, to amend the Agreement; it being
understood by the Company and Employee that all terms and conditions of the
Agreement not otherwise specifically modified by this Amendment shall remain
effective and continue operating in full force throughout the entire term of the
Agreement; and
WHEREAS, effective August 1998, the Company's board of directors and
compensation committee approved certain payments and reimbursements to Employee
which relate to Employee's housing and relocation expenses and tax gross-up
adjustments, which provisions are incorporated into the Agreement.
NOW, THEREFORE, for and in consideration of the covenants and agreements
hereinafter set forth, the parties hereto mutually agree as follows:
1. TERM OF EMPLOYMENT. Section 1 of the Agreement is hereby amended,
restated and replaced in its entirety as follows in order to extend the term of
Employee's employment under the Agreement by five (5) years:
"1. TERM OF EMPLOYMENT. The Company agrees to employ Employee, and
Employee agrees to be so employed, for an initial term of employment commencing
on the Effective Date and continuing until December 31, 2005, subject, however,
to the terms and conditions of this
<PAGE>
Agreement concerning earlier termination by each of the parties. The term of
this Agreement shall automatically renew each year for an additional one (1)
year term unless the Company (by a resolution passed by a majority of the Board
of Directors of the Company) or Employee notifies the other of its or his
intention not to renew this Agreement no later than sixty (60) days prior to the
expiration of the then-current term."
2. Section 3(a) of the Agreement is hereby amended, restated and
replaced in its entirety as follows:
"Effective retroactively to January 1, 1999, the Company agrees to pay
to Employee, as base salary, for 1999 calendar year, gross annual salary at a
rate equal to $391,723 per annum. For each calendar year during the term of this
Agreement commencing January 1999, Employee's gross annual salary shall be
increased by the greater of (i) 4% of the prior year's gross annual salary and
(ii) the amount of the percentage increase in the Consumer Price Index for the
most currently available twelve (12) month period over the preceding twelve (12)
month period multiplied by the prior year's gross annual salary. The base salary
shall be payable on the same basis (including appropriate payroll withholding)
as the Company, from time to time, generally pays its employees. Employee shall,
in addition to base salary, receive, in respect of each calendar year (or
partial calendar year) during which this Agreement is in effect, an annual cash
bonus (the "Cash Bonus") equal to (1) with respect to calendar year 1999, 4% of
the pre-tax net income of the Company before non-recurring and extraordinary
charges ("pre-tax net income") for such calendar year in excess of $1 million,
and (2) with respect to calendar year 2000 and each subsequent year during the
Term hereof, 5% of pre-tax net income of the Company for such calendar year in
excess of $1 million. The maximum amount of the Cash Bonus for any year shall be
limited to two times Employee's base salary for such year (e.g., the Cash Bonus
in respect of the 1999 calendar year shall not exceed $783,446, regardless of
2000 pre-tax net income). Commencing with the 2000 calendar year, the Cash Bonus
shall be paid to Employee on a quarterly basis as follows: The Cash Bonus
payment for the first calendar quarter (the "First Quarterly Bonus Payment")
shall be equal to 5% of the excess, if any, that pre-tax net income of the
Company for the first calendar quarter exceeds $250,000. The Cash Bonus payment
for the second calendar quarter (the "Second Quarterly Bonus Payment") shall be
equal to (i) 5% of the excess, if any, that pre-tax net income of the Company
for the first two calendar quarters exceeds $500,000 less (ii) the First
Quarterly Bonus Payment. The Cash Bonus payment for the third calendar quarter
(the "Third Quarterly Bonus Payment") shall be equal to (i) 5% of the excess, if
any, that pre-tax net income of the Company for the first three calendar
quarters exceeds $750,000 less (ii) the aggregate of the First Quarterly Bonus
Payment and the Second Quarterly Bonus Payment. The Cash Bonus payment for the
fourth calendar quarter (the "Fourth Quarterly Bonus Payment") shall be equal to
(i) 5% of the excess, if any, that pre-tax net income of the Company for the
calendar year exceeds $1,000,000 (the "Annual Bonus Amount") less (ii) the
aggregate of the First Quarterly Bonus Payment, the Second Quarterly Bonus
Payment and the Third Quarterly Bonus Payment (collectively, the "Three
Quarterly Bonus Payments"). In the event that the aggregate Three Quarterly
Bonus Payments paid to the Employee exceeds the Annual Bonus Amount, such excess
amount shall be repaid to the Company within thirty days of such determination.
Each of the Three Quarterly Bonus Payments shall be paid within thirty (30) days
following completion of the unaudited financial statements for such quarter. The
Fourth Quarterly Bonus Payment, and for calendar year 1999 the entire Cash
Bonus, shall be paid within thirty (30) days following completion of each annual
audit of the Company.
2
<PAGE>
Each payment of Cash Bonus (including each of the Three Quarterly Bonus
Payments) shall be calculated in accordance with generally accepted accounting
principles, consistently applied, without taking any Cash Bonus of Employee, or
any similar bonus based on the earnings or performance of the Company paid to
any other executive officer of the Company, into account as an expense. It is
anticipated by the Company that none of the grant, vesting or exercise of any
options granted and/or contemplated to be granted, or of any warrants or similar
rights issued by the Company from time to time, will constitute or result in an
expense or charge against the Company's income. However, if such turns out not
to be the case, no such expense or charge shall be taken into account when
computing pre-tax net income for purposes of determining the Cash Bonus. If
being computed for a partial calendar quarter, the Cash Bonus shall be
appropriately and equitably prorated. Consumer Price Index as used herein shall
mean the Consumer Price Index shown on the U.S. City Average for all urban
consumers, unadjusted, all items, as promulgated by the Bureau of Labor
Statistics of the U.S. Department of Labor. In the event that the Consumer Price
Index referred to herein ceases to incorporate a significant number of the items
as currently set forth therein, or if a substantial change is made in the method
of establishing said Consumer Price Index, then the Consumer Price Index shall
be adjusted to the figure that would have resulted had no change occurred in the
manner of computing the Consumer Price Index. In the event that the Consumer
Price Index (or successor or substitute index) is not available, then the
Company may use another governmental or nonpartisan publication evaluating the
information theretofore used in determining the Consumer Price Index in lieu of
said Consumer Price Index."
3. The following new Section 3(i) is added after the end of Section
3(h):
"(i) Employee has been granted certain incentive stock options to
acquire shares of common stock of the Company ("Stock Options") and in the
future may be granted additional Stock Options. Each of the agreements pursuant
to which any Stock Options have been or will be granted by the company are
hereby amended to provide that, unless Employee has been terminated pursuant to
Section 5(a), as such section may be amended from time-to-time, or pursuant to
any comparable for cause provision under any successor employment agreement,
Employee shall have not less than ninety (90) days after termination of
Employee's employment to exercise his Stock Options."
4. The following provision is added to the end of Section 5(b):
"In the event Employee has the right to receive the compensation and
benefits described in this Section 5(b) that include the use of a Company-leased
vehicle pursuant to Section 3(c), Employee may elect, by notice to the Company
within thirty (30) days after such termination, to cause the Company to continue
to lease such vehicle until the expiration of the then-current lease term
(rather than the Company paying to Employee the amount of such lease payments);
provided, however, that such election by Employee shall only be available if the
Company can continue to insure the leased vehicle for Employee's use after
Employee's termination under its then-existing insurance policy (or under a
comparable policy available to the Company). In the event that the term of such
lease ends subsequent to the termination date of Employee's compensation and
benefits payments pursuant to this Section 5(b), Employee shall pay (or
reimburse the Company) for all lease payments due after the date such Company
payments end."
3
<PAGE>
5. CAPITALIZED TERMS. All capitalized terms used herein, which are not
defined herein, shall have the respective meanings ascribed to them in the
Agreement.
6. EFFECT. Except as otherwise specifically modified by this Amendment,
all terms, conditions and provisions of the Agreement shall remain effective and
continue operating in full force and without change.
IN WITNESS WHEREOF, Employee has hereunto set his hand and the Company has
caused this Amendment to be executed by its duly authorized officer effective as
of the day and year first above written.
ALL AMERICAN SEMICONDUCTOR, INC.
By: /s/ PAUL GOLDBERG
------------------------------------
Paul Goldberg, Chairman of the Board
EMPLOYEE:
/s/ BRUCE M. GOLDBERG
------------------------------------
Bruce M. Goldberg
4
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on April
27, 2000, but is effective as of the 1st day of January, 2000 (the "Effective
Date"), by and between All American Semiconductor, Inc., a Delaware corporation
(the "Company"), and Howard L. Flanders ("Employee").
WHEREAS, the Company is engaged in the distribution of electronic
components and its principal office is located at 16115 N.W. 52nd Avenue, Miami,
Florida 33014;
WHEREAS, Employee has experience and expertise that is useful to the
Company; and
WHEREAS, the Company desires to continue the employment of Employee on the
terms and conditions set forth herein and Employee desires to continue to work
for the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the promises
hereinafter contained, the sufficiency of which is hereby acknowledged, the
parties covenant and agree as follows:
1. TERM OF EMPLOYMENT. The Company agrees to employ Employee, and
Employee agrees to be so employed, for a term of four (4) years. Accordingly,
the initial term of this employment shall, subject to the terms and conditions
of this Agreement concerning earlier termination by each of the parties,
commence as of the Effective Date and continue until December 31, 2003. The term
of this Agreement shall automatically renew each year for an additional one (1)
year term unless the Company or Employee notifies the other of its or his
intention not to renew this Agreement no later than sixty (60) days prior to the
expiration of the then-current term.
2. DUTIES. Employee accepts employment with the Company to serve as
Executive Vice President and Chief Financial Officer of the Company and agrees
to perform such services as are commensurate with his offices. Employee shall
work full-time for the Company. The Company may not (a) require Employee to
perform duties which are not commensurate with such offices or which materially
differ from Employee's duties as they presently exist or (b) after a Change in
Control (defined below), change the location of the Company's offices where
Employee is based to anywhere other than in the Florida counties of Dade,
Broward or Palm Beach. Any attempt by the Company to do either item (a) or (b)
of this Section shall constitute a total breach of this Agreement, whereupon
Employee shall be entitled to terminate his employment hereunder and to treat
such termination as a termination of employment by the Company pursuant to
Section 5(b) of this Agreement.
1
<PAGE>
3. COMPENSATION. Employee shall be entitled to the following, all of
which shall be deemed compensation, as that term is used in this Agreement
(provided, however, that the use of the term "compensation" in this Agreement is
not intended to have any effect whatever with respect to determining Employee's
taxable income):
(a) The Company agrees to pay to Employee, as base salary, for 2000
calendar year, gross annual salary at a rate equal to $215,000 per annum. For
each calendar year during the term of this Agreement after 2000, Employee's
gross annual salary shall be increased by the greater of (A) 5% of the prior
year's gross annual salary and (B) the amount of the percentage increase in the
Consumer Price Index for the most currently available twelve (12) month period
over the preceding twelve (12) month period multiplied by the prior year's gross
annual salary. The base salary shall be payable on the same basis (including
appropriate payroll withholding) as the Company, from time to time, generally
pays its employees. Employee shall, in addition to base salary, receive, in
respect of each calendar year (or partial calendar year) during which this
Agreement is in effect, an annual cash bonus (the "Cash Bonus") equal to the sum
of two percent (2%) of the pre-tax net income of the Company before
non-recurring and extraordinary charges ("pre-tax net income") for such calendar
year in excess of $1 million. The maximum amount of the Cash Bonus for any year
shall be limited to the amount of Employee's base salary for such year (the Cash
Bonus in respect of the 2000 calendar year shall not exceed $215,000). The Cash
Bonus shall be paid to Employee on a quarterly basis as follows: The Cash Bonus
payment for the first calendar quarter (the "First Quarterly Bonus Payment")
shall be equal to 2% of the excess, if any, that pre-tax net income of the
Company for the first calendar quarter exceeds $250,000. The Cash Bonus payment
for the second calendar quarter (the "Second Quarterly Bonus Payment") shall be
equal to (i) 2% of the excess, if any, that pre-tax net income of the Company
for the first two calendar quarters exceeds $500,000 less (ii) the First
Quarterly Bonus Payment. The Cash Bonus payment for the third calendar quarter
(the "Third Quarterly Bonus Payment") shall be equal to (i) 2% of the excess, if
any, that pre-tax net income of the Company for the first three calendar
quarters exceeds $750,000 less (ii) the aggregate of the First Quarterly Bonus
Payment and the Second Quarterly Bonus Payment. The Cash Bonus payment for the
fourth calendar quarter (the "Fourth Quarterly Bonus Payment") shall be equal to
(i) 2% of the excess, if any, that pre-tax net income of the Company for the
calendar year exceeds $1,000,000 (the "Annual Bonus Amount") less (ii) the
aggregate of the First Quarterly Bonus Payment, the Second Quarterly Bonus
Payment and the Third Quarterly Bonus Payment (collectively, the "Three
Quarterly Bonus Payments"). In the event that the aggregate Three Quarterly
Bonus Payments paid to the Employee exceeds the Annual Bonus Amount, such excess
amount shall be repaid to the Company within thirty days of such determination.
Each of the Three Quarterly Bonus Payments shall be paid within thirty (30) days
following completion of the unaudited financial statements for such quarter. The
Fourth Quarterly Bonus Payment shall be paid to Employee within thirty (30) days
following completion of each annual audit of the Company. Each payment of Cash
Bonus (including each of the Three Quarterly Bonus Payments) shall be calculated
in accordance with generally accepted accounting principles, consistently
applied, without taking any Cash Bonus of Employee, or any similar bonus based
on the earnings or performance of the Company paid to any other executive
officer of the Company, into account as an expense. It is anticipated by the
Company that none of the grant, vesting or exercise of any options granted
and/or contemplated to be granted, or of any warrants or similar rights issued
by the Company from time to time, will constitute or result in an expense or
charge against the Company's income. However, if such turns out not to be the
case, no such expense or charge shall be taken into account when computing
pre-tax net income for purposes of determining the Cash Bonus. If being computed
for a partial calendar quarter, the Cash Bonus shall be appropriately and
equitably prorated; provided, however, that the applicable quarterly pre-tax
income threshold provided herein shall not be prorated (i.e., reduced) with
respect to a partial calendar quarter. Consumer Price Index as used herein shall
mean the Consumer Price Index shown on the U.S. City Average for all urban
consumers, unadjusted, all items, as promulgated by the Bureau of Labor
Statistics of the U.S. Department of Labor. In the event that the Consumer Price
Index referred to herein ceases to incorporate a significant number of the items
as currently set forth therein, or if a substantial change is made in the method
of establishing said Consumer Price Index, then the Consumer Price Index shall
be adjusted to the figure that would have resulted had no change occurred in the
manner of computing the Consumer Price Index. In the event that the Consumer
Price Index (or successor or substitute index) is not available, then the
Company may use another governmental or nonpartisan publication evaluating the
information theretofore used in determining the Consumer Price Index in lieu of
said Consumer Price Index.
2
<PAGE>
(b) Employee shall be entitled to participate in any and all
employee benefit plans and programs offered by the Company from time to time to
other employees, including, without limitation, medical insurance, dental
insurance, pension and/or profit sharing plans, 401(k) plans, stock option plans
and cafeteria plans. Additionally, Employee shall be entitled to four (4) weeks
paid vacation per calendar year.
(c) The Company will provide to Employee, without cost to Employee,
full-time use of a Company owned or leased automobile of a make and model
reasonably chosen by Employee, not to exceed a cost of $700 per month, which
shall be increased to $850 per month commencing January 1, 2000 (for lease
payments if the automobile is leased, for financing payments if the automobile
is owned by the Company and financed, or for depreciation if the automobile is
owned by the Company and has not been financed, as the case may be). The Company
shall further pay all other expenses related thereto, including, but not limited
to, all costs of fuel, maintenance, repairs and comprehensive automobile
insurance, including liability insurance of no less than $1 million.
(d) Employee is the owner of a life insurance policy on the life of
Employee, providing for a death benefit of $1,000,000, with the beneficiary
thereof designated and to be designated at the sole and unquestionable
discretion of Employee (the "$1 Million Policy"). The Company shall pay the
premiums due thereon as provided for, and subject to all terms and conditions
of, that certain Life Insurance Agreement dated effective as of January 1, 1993
between the Company and Employee, as supplemented by that certain Supplemental
Letter Agreement between the Company and Employee (collectively, the "Life
Insurance Agreement"). With respect to the $1 Million Policy, in lieu of the
Company paying the entire annual premium on the policy, the Company may elect to
require Employee to pay an amount equal to the P. S. 58 cost for such insurance
coverage (or the net premium due, if less). Any balance shall be paid by the
Company (and payment solely of such balance, if any, shall be deemed an advance
by the Company to Employee under the Life Insurance Agreement). In the event
Employee is required to pay such P.S. 58 amount, the Company shall give Employee
an additional bonus each year sufficient to enable Employee to pay such P.S. 58
amount and any additional tax liability resulting from such P.S. 58 amount being
included in Employee's income for federal and state income tax purposes, and any
additional tax liability on those amounts, so that Employee receives, on an
after-tax basis, an amount equal to such P.S. 58 amount.
(e) Employee has been granted certain incentive stock options to
acquire shares of common stock of the Company ("Stock Options") and in the
future may be granted additional Stock Options. Each of the agreements pursuant
to which any Stock Options have been or will be granted by the Company are
hereby amended to provide that, unless Employee has been terminated pursuant to
Section 5(a), as such section may be amended from time-to-time, or pursuant to
any comparable for cause provision under any successor employment agreement,
Employee shall have not less than ninety (90) days after termination of
Employee's employment to exercise his Stock Options.
3
<PAGE>
(f) The Company shall continue to make payments in respect of, as
directed by Employee, the Company's deferred compensation plan presently offered
to, and enjoyed by, Employee, for as long as such plan is kept in effect
generally.
(g) The following provisions shall apply in the event of a Change in
Control (as defined below).
(i) In the event of a Change in Control occurring at any time
while Employee is employed hereunder, Employee shall have the option in his sole
discretion to terminate his employment under this Agreement, by giving written
notice thereof to the Company within 180 days following the date of the Change
in Control; provided, however, that no compensation described in this Section
3(g)(i) shall be payable to Employee unless Employee shall have performed his
duties and responsibilities hereunder and remained an employee of the Company
(or its successor) for the 180-day period after such Change in Control, unless
Employee is terminated by the Company without cause or as a result of his
permanent disability or Employee dies prior to the expiration of such 180-day
period. If a Change in Control occurs, and (x) within the 180-day period prior
to the date of the Change in Control, or at any time on or during the 180-day
period following the date of the Change in Control, Employee's employment is or
has been terminated by the Company pursuant to Section 5(b), or (y) Employee
elects to terminate his employment under this Section and during such 180-day
period Employee (i) remains employed and performs his duties as aforesaid, (ii)
is terminated by the Company as a result of his permanent disability or (iii)
dies, then Employee shall receive all compensation described in Sections 3 (a),
(b), (c) and (f) which would be due through the end of the term of this
Agreement (including all extensions) or which would be due to Employee if
employment under this Agreement continued for two (2) years after the
termination of Employee's employment, whichever is greater, and shall receive
the amount of all unpaid insurance premiums payable for the Maximum Period (as
defined in the Life Insurance Agreement).
(ii) In the event Employee becomes entitled to the compensation
described in subsection (g)(i), Employee may elect, by giving written notice to
Employer at any time during the 180-day period following the date of the Change
in Control, or during the 30-day period following the date of termination of his
employment, whichever is later, to receive a lump-sum payment equal to
Employee's aggregate compensation described in Sections 3(a), 3(b), 3(c) and
3(f) which would be due through the end of the term of this Agreement (including
all extensions) or which would be due to Employee if his employment hereunder
continued for two years following the date of Employee's termination of
employment, whichever is greater, and the unpaid premiums for the Maximum Period
under the Life Insurance Agreement.
(iii) In calculating any such lump-sum payment hereunder: (A)
the Cash Bonus payable for each of the remaining years it is to be paid shall be
deemed to be, in respect of each such year, the largest annual cash bonus paid
under this Agreement or its predecessor, (B) such lump-sum payment shall include
credit for all unused vacation time and any other similar items or incentives
earned as of the date that employment terminated, and (C) all non-cash benefits
and benefit programs and plans will be given a cash value sufficient to permit
the equivalent non-cash benefits and programs to be obtained by Employee after
the Change in Control during the applicable
4
<PAGE>
period described in Subsection (ii) above, unless any such non-cash benefit or
program is otherwise to be continued for and made available by the Company to
Employee at no cost or contribution by Employee for such period after the Change
in Control, and adequate assurances by the Company of such continuation
reasonably satisfactory to Employee are also provided to Employee. The lump-sum
payment shall not be discounted to present value. Any lump-sum payment elected
by Employee shall be paid to Employee no later than (a) thirty (30) days
following the date of his election to receive it; provided, however, that if
Employee elects to terminate his employment under Section 3(g)(i) and commences
to remain employed by and perform his duties for the Company (or any successor)
during such 180-day period, Employee shall receive such lump-sum payment elected
by Employee within ten (10) days after the earliest of (i) the end of such
180-day period, provided Employee remains employed and performs his duties
during such period, (ii) the date Employee is terminated by the Company as a
result of his permanent disability, (iii) the date of Employee's death and (iv)
the date of Employee's termination by the Company without cause.
(iv) For purposes of this Agreement, a Change in Control shall
be deemed to occur only if and when (A) Paul Goldberg, Bruce Goldberg and their
respective spouses and lineal descendants (and trusts for the benefit of any of
them) directly and indirectly beneficially own, in the aggregate, less than 10%,
on a fully-diluted basis, of the issued and outstanding capital stock of the
Company, AND (B) neither Paul Goldberg nor Bruce Goldberg is the Chairman of the
Board, Chief Executive Officer or President of the Company (as long as either of
them holds one of such positions, no Change in Control shall be deemed to have
occurred).
(v) Upon a Change in Control, all options granted by the
Company to Employee to acquire shares of capital stock of the Company shall
automatically vest, and all existing stock option agreements between the Company
and Employee are hereby amended to provide for such automatic vesting. In
addition, upon a Change in Control, Employee shall automatically vest in and
acquire unencumbered ownership of the cash surrender value of the $1 Million
Policy, as provided for in the Life Insurance Agreement.
(vi) The Company shall not be entitled to assert or take any
credit against, or otherwise assert or make any reduction to, any payment to
Employee required under this Subsection (g) for any reason whatever.
4. EXPENSES OF EMPLOYEE.
(a) General Expenses. The Company shall pay or reimburse Employee
for reasonable expenses incurred by Employee in connection with the business of
the Company.
(b) Excise Tax Reimbursement and Tax Gross-up.
(i) The Company shall promptly pay or reimburse Employee
(collectively, the "Excise Tax Payments") for any federal income tax liability
imposed pursuant to Section 4999 or Section 280G (or any successor provisions)
of the Internal Revenue Code of 1986, as amended, and any similar federal, state
or local tax that may be imposed in lieu thereof or in addition thereto
(collectively, "Excise Tax"), in connection with the receipt of any payments or
other
5
<PAGE>
consideration by or for the benefit of Employee with respect to this Agreement
(including any increases thereto pursuant to the Gross-Up Formula, as defined
below), including any imputed income to Employee relating to the acceleration of
any Company benefits including vesting of stock options to purchase common stock
of the Company. In addition, each Excise Tax Payment, to the extent such payment
constitutes income to Employee subject to income and/or unemployment taxes,
shall be increased to and include the amount computed under the Gross-Up
Formula, as defined and provided below (each, as increased, a "Grossed-Up Excise
Tax Payment"; collectively, the "Grossed-Up Excise Tax Payments"). Each
Grossed-Up Excise Tax Payment shall be in the amount computed under the
following formula (the "Gross-Up Formula"): Divide the gross taxable amount of
each Excise Tax Payment (or other compensation payment subject to tax gross up
pursuant to this Agreement) by a number equal to one minus the sum of (i) the
highest combined marginal U.S. federal, state and local individual income tax,
social security tax and unemployment tax rate (or such other combined tax rate
that is similar to or replaces such combined tax rate) applicable to Employee
(taking into account the deductibility of any such federal, state and local
taxes) that is in effect at the time each such Excise Tax Payment (or other
compensation payment subject to tax gross up pursuant to this Agreement) is made
and (ii) the Excise Tax rate applicable to Employee that is in effect at the
time each such Excise Tax Payment (or other compensation payment subject to tax
gross up pursuant to this Agreement) is made. For example, if a $100 Excise Tax
Payment is subject to the Gross-Up Formula, and the highest combined marginal
tax rate applicable to Employee at such time is 45% and the Excise Tax rate is
20%, the Excise Tax Payment shall be increased under the Gross-Up Formula to,
and the Grossed-Up Excise Tax Payment shall be, $285.71. In addition, any
interest or penalties imposed against Employee by any federal, state or local
taxing authority as a result of any misclassification by the Company, not
predicated upon Employee's direction or description, and reclassification as
taxable income of any amounts received by Employee under this Agreement shall be
paid or reimbursed by the Company and increased by the Gross-Up Formula (as
increased, the "Grossed-Up Penalties and Interest").
(ii) In the event that Employee's employment is terminated and
at any time prior to the receipt by Employee of any Company U.S. Form W-2,
including any amendments thereto ("Form W-2"), with respect to any payments or
other amounts under this Agreement, the Company undergoes a change (i) in the
ownership or effective control of the Company or (ii) in the ownership of a
substantial portion of the assets of the Company, as clauses (i) and (ii) are
interpreted under Section 280G of the Code and the Treasury Regulations
thereunder (such event, a "Potential Excise Tax Situation"), then the Company,
with the advice of its accountants and/or attorneys, shall determine whether any
amounts paid or imputed to Employee under this Agreement are subject to Excise
Taxes. Such determination by the Company with respect to whether any amounts
received during the year constitute a "parachute payment" as defined under
Section 280G of the Code (a "Parachute Payment") subject to Excise Taxes shall
be reflected on Employee's U.S. Form W-2 with respect to such year. If the
Company determines that Excise Taxes are payable, then, unless the Company has
withheld the proper Excise Taxes from Employee's payments, the Company shall
provide Employee with the Grossed-Up Excise Tax Payment, no later than ten days
after the issuance of Employee's Form W-2 (the "Excise Tax Due Date") with
respect to the amounts paid under the Agreement (which Form W-2 shall be issued
in a timely manner on or before January 31st following the year of payment of
the amounts subject to the Excise Tax). If the Company has withheld the proper
Excise Taxes from the amounts paid to Employee, then the Company shall pay
6
<PAGE>
Employee, on the date Employee receives such payments from which the Excise Tax
has been deducted, the difference between the Grossed-Up Excise Tax Payment and
the Excise Tax withheld. If a Potential Excise Tax Situation arises and the
Company determines that no payments received in connection with this Agreement
are subject to Excise Taxes by Employee, then the Company shall do all of the
following set forth in clauses (A) through (D) below:
(A) on or before the date of issuance of Employee's Form
W-2, at the Company's sole expense, a nationally-recognized CPA firm or law firm
reasonably acceptable to Employee shall render a written opinion to Employee,
reasonably acceptable to Employee in both substance and form, that there is
substantial authority for concluding that (i) no payments received in connection
with this Agreement including those reflected in the Form W-2 constitute a
Parachute Payment and (ii) no Excise Taxes are due by Employee with respect to
any payments received in connection with this Agreement include in any amounts
reflected in the Form W-2;
(B) on or before the date of issuance of Employee's Form
W-2, Employer shall procure and deliver to Employee an irrevocable standby
letter of credit for the benefit of Employee (the "Letter of Credit"), in form
and content and issued by a financial institution all reasonably acceptable to
Employee, for an amount equal to the aggregate of (i) the full amount of the
Grossed-Up Excise Tax Payment, and (ii) an amount equal to a reasonable estimate
of the amount of any Grossed-Up Penalties and Interest that would be due if
Employee ultimately were to be liable for the Excise Taxes. The amount of the
Letter of Credit shall be adjusted from time to time for any material changes
(more than ten percent) in the estimates of the Grossed-Up Excise Tax Payment
and/or the Grossed-Up Penalties and Interest). The Letter of Credit shall be
payable to Employee upon demand in the event that the Company shall not have
paid Employee all amounts due under this Section 1(b) within three business days
after the earliest to occur of subclauses (1) and (2) below of this clause (B),
if either is applicable. The Letter of Credit shall remain outstanding until the
earliest of (1) the Company's agreement that the Excise Taxes are payable
(requiring immediate payment by the Company to Employee of the Grossed-Up Excise
Tax Payment and the Grossed-Up Penalties and Interest, and upon receipt thereof
Employee shall immediately deliver the Letter of Credit to the Company), (2) a
final, non-appealable determination by a court of competent jurisdiction that
the Excise Taxes are payable (requiring immediate payment by the Company of the
Grossed-Up Excise Tax Payment and the Grossed-Up Penalties and Interest, and
upon receipt thereof Employee shall immediately deliver the Letter of Credit to
the Company), (3) a final, non-appealable determination by a court of competent
jurisdiction that the Excise Taxes are not payable (requiring Employee to
immediately deliver the Letter of Credit to the Company), and (4) the expiration
of the longest statute of limitations applicable to Employee with respect to the
payment of the Excise Taxes, as such statute may be extended by Employee
(requiring Employee to immediately deliver the Letter of Credit to the Company).
In the event that the Company and Employee dispute the amount for which the
Letter of Credit shall be obtained or adjusted pursuant to clause (B) above, the
Company shall procure a Letter of Credit for the greatest amount not in dispute,
the amount in dispute shall be determined through litigation, if the parties
cannot otherwise agree, and the amount of the Letter of Credit shall be adjusted
accordingly thereafter. In the event that Employee draws down the Letter of
Credit under the conditions provided above, the Company shall immediately pay to
Employee any deficiency in the proceeds of the Letter of Credit compared with
the final amount
7
<PAGE>
to be received as Grossed Up Excise Tax Payments and Grossed-Up Penalties and
Interest, and Employee shall immediately reimburse the Company for any excess
proceeds from the Letter of Credit compared with such final amounts;
(C) the Company shall indemnify, and hold harmless
Employee from and against any and all liability, damage, loss, costs, expense,
penalties, interest, claims or demands (including attorneys' fees through all
appeals if for any reason the Company fails to defend Employee pursuant to
clause (D) below), other than consequential damages, arising out of or in any
manner connected with Employee's failure to pay the Excise Taxes, and such
amount of indemnification shall not be limited in amount; and
(D) the Company shall, at its sole cost and expense,
defend Employee before all applicable governmental agencies and, if the Company
or the government determines to appeal such decision, through any and all
appeals. Notwithstanding the foregoing, in the event that at any time, including
after the receipt of Form W-2 by Employee, any governmental agency asserts that
any Excise Taxes are payable by Employee with respect to any amounts received by
Employee in connection with this Agreement, then the Company shall pay to
Employee a Grossed-Up Excise Tax Payment and any Grossed-Up Penalties and
Interest required, each based on all Excise Taxes asserted by the government,
within thirty days after written notice thereof by Employee to the Company
(including a copy of any governmental notice with respect thereto), unless, not
later than the end of such thirty-day period, the Company shall have met the
conditions set forth in clauses (A) and (B) above of this Section 1(b) and has
agreed to the conditions set forth in clauses (C) and (D) above.
5. TERMINATION BY THE COMPANY.
(a) Except as set forth in subparagraph (b) of this Section, the
Company shall have no right to terminate Employee's employment unless and until
the occurrence of any of the following:
(i) Employee is convicted (by formal plea of guilty or a jury
verdict) of embezzlement or other felonious theft of money or property from the
Company; or
(ii) Employee's refusal, after thirty (30) days written notice,
to cure a material default of any of the provisions of this Agreement unless
said material default is caused by physical or mental infirmity or disability
which renders Employee incapable of performing the customary duties for which
Employee is being employed. In order to be effective said notice must clearly
specify the material default and must notify Employee of the Company's intention
to terminate this Agreement in the event the described material default is not
cured within said thirty (30) days.
(b) The Company shall have the right to terminate Employee's
employment with the Company at any time without cause, provided that the Company
continues to pay Employee all of the compensation set forth in Sections 3(a),
(b), (c) and (f) of this Agreement, as if this Agreement had been continued in
accordance with its terms, to the later of (i) the expiration date of the term
of
8
<PAGE>
this Agreement (including any extensions) and (ii) the second anniversary of the
effective date of termination of employment, all subject to, if applicable, the
relevant provisions of Section 3(g). Notwithstanding any of the foregoing to the
contrary, such severance obligations shall be excused for the remainder of the
severance period at such time, if any, if Employee accepts new employment
providing for gross annual salary at least equal to the gross annual salary in
effect hereunder at termination of employment, and, to the extent any such new
employment is for a lower gross annual salary, from and after such time, for the
remainder of such severance period, the Company's severance obligations shall be
reduced by the amount of all compensation and benefits received by Employee
under his new employment. In the event Employee has the right to receive the
compensation and benefits described in this Section 5(b) that include the use of
a Company-leased vehicle pursuant to Section 3(c), Employee may elect, by notice
to the Company within thirty (30) days after such termination, to cause the
Company to continue to lease such vehicle until the expiration of the
then-current lease term (rather than the Company paying to Employee the amount
of such lease payments); provided, however, that such election by Employee shall
only be available if the Company can continue to insure the leased vehicle for
Employee's use after Employee's termination under its then-existing insurance
policy (or under a comparable policy available to the Company). In the event
that the term of such lease ends subsequent to the termination date of
Employee's compensation and benefits payments pursuant to this Section 5(b),
Employee shall pay (or reimburse the Company) for all lease payments due after
the date such Company payments end. Subject to the provisions of Section 3(g),
if applicable, Employee shall be entitled to no other or further compensation in
respect of a termination by the Company pursuant to this Section 5(b).
(c) In the event Employee becomes permanently incapable of
performing the customary duties for which Employee is being employed due to a
physical or mental infirmity or disability, the Company shall not terminate
Employee (other than under Section 5 (a), if applicable, or Section 5(b)), and
the Company shall continue to pay Employee all compensation due under Section
3(a), (b), (c), (d) and (f) of this Agreement for two (2) years after the
effective date of said infirmity or disability (as defined below). At the end of
such two-year period, Employee's employment shall be deemed terminated, subject
to the Company's continuing payment requirements during the Maximum Period under
the Life Insurance Agreement. All of the foregoing is subject, if applicable, to
the relevant provisions of Section 3(g). Subject to the provisions of Section
3(g), if applicable, Employee shall be entitled to no other or further
compensation in respect of termination of employment pursuant to this Section
5(c). The effective date of Employee's permanent infirmity or disability shall
be the 30th day following receipt by Employee from the Company of written notice
stating the Company's determination that Employee has such infirmity or
disability, provided that Employee has not disputed such determination in
writing within such 30-day period, and, if Employee has so disputed such
determination, the date by which two medical doctors or psychiatrists (as
applicable) selected by the Company, but reasonably acceptable to Employee, have
examined Employee and concluded (as set forth in a letter delivered to the
Company) that he has a permanent infirmity or disability which renders him
incapable of performing his customary duties.
9
<PAGE>
6. COVENANT NOT TO COMPETE.
(a) NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(i) CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by the Company of the Company's policy to maintain as
secret and confidential all information relating to (A) the financial condition,
businesses and interests of the Company and its Affiliates (as hereinafter
defined), (B) the systems, know-how and records, reports, products, services,
costs, asset values, customer lists, inventions, computer software programs,
marketing and sales techniques and/or programs, methods, methodologies, manuals,
lists and other trade secrets heretofore or hereafter acquired, sold, developed,
maintained and/or used by the Company and its Affiliates and (C) the nature and
terms of the Company's and its Affiliates' relationships with their respective
customers, suppliers, lenders, underwriters, vendors, consultants, independent
contractors, attorneys, accountants and employees (all such information being
hereinafter collectively referred to as "Confidential Information"). Employee
further acknowledges that such Confidential Information is of great value to the
Company and/or its Affiliates and, as a result of Employee's employment by the
Company, Employee will be making use of, acquiring and/or adding to such
Confidential Information. Therefore, Employee understands that it is reasonably
necessary to protect the Company's and its Affiliates' goodwill and business
interests that Employee agree and, accordingly, Employee does hereby agree, that
Employee will not directly or indirectly at any time hereafter divulge or
disclose for any purpose whatsoever to any persons, firms, corporations or other
entities other than the Company or its Affiliates (hereinafter referred to
collectively as "Third Parties"), or use or cause or authorize any Third Parties
to use, any such Confidential Information, except as otherwise required by law
or to the extent that the information or materials become publicly known other
than through the actions or inactions of such Employee. The term "Affiliate", as
used in this Agreement with respect to the Company, shall mean and include any
and all subsidiaries, parent or sister corporations, and any person or entity
controlling, controlled by or under common control of the Company.
(ii) COMPANY MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (A) Employee will at no time retain or remove
from the premises of the Company or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, reports, lists, materials or documents
of any kind or description for any purpose unconnected with the strict
performance of Employee's duties with the Company and (B) upon the cessation or
termination of Employee's employment with the Company for any reason, Employee
shall forthwith deliver or cause to be delivered up to the Company any and all
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, reports, lists, materials and other
documents and materials in Employee's possession or under Employee's control
relating to any Confidential Information or any other material or thing which is
otherwise the property of the Company or its Affiliates. The terms of this
paragraph are in addition to, and not in lieu of, any common law, statutory or
other contractual obligations that Employee may have relating to such
Confidential Information.
10
<PAGE>
(b) NONSOLICITATION AND COVENANT-NOT-TO-COMPETE
(i) INTANGIBLE BUSINESS ASSETS. Employee acknowledges that:
(A) The Company has made significant investment in the
development, maintenance and preservation of its Confidential Information and
its trade secrets, marketing methodology, relationship with its various
customers and vendors, both past, current and prospective, in the development
and maintenance of its distributorship rights, in the hiring, training and
development of its employees and in the development, maintenance and
preservation of its goodwill, including that associated with its name, trade
dress and various trade marks (collectively "Intangible Business Assets").
(B) The Company has a legitimate business interest in
maintaining and protecting the value of these Intangible Business Assets and in
preventing the unauthorized use or misappropriation of any one of the same.
(C) The use of any of these Intangible Business Assets
other than in furtherance of the business interests of the Company would provide
the unauthorized user with an unfair competitive advantage and would be
detrimental to the Company.
(ii) PRODUCTS AND SERVICES. In view of (A) the above
acknowledgments by Employee, (B) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, the Company's other
employees and the Company's customers and suppliers), (C) the Intangible
Business Assets to be utilized by or for Employee, (D) the know-how acquired and
to be acquired by Employee, and (E) the substantial compensation paid and
payable to Employee under and pursuant to this Agreement, and as a material
inducement to the Company to enter into this Agreement and to employ or continue
to employ Employee and to pay to Employee the substantial compensation Employee
will be receiving, Employee covenants and agrees that, for as long as Employee
is employed by the Company and for a period of two (2) years thereafter,
Employee shall not, directly or indirectly, become employed by, consult with,
assist any person or entity in competing or be associated with, in any capacity
whatsoever (including, as greater than a 5% owner or shareholder, employee,
officer, director, agent or independent contractor) any enterprise competitive
with the business of the Company or its Affiliates located anywhere within the
continental United States which provides any of the products sold, marketed, or
distributed by the Company or its Affiliates, or provides services comparable to
that provided by the Company or its Affiliates, to customers located in any
county or city in which the Company has provided goods or services to customers
during the two year period prior to Employee ceasing to be an employee of the
Company (the "Geographical Territory"). Employee acknowledges that the business
of the Company and its Affiliates is North American in scope, that one can
effectively compete with such business in the Geographical Territory from
anywhere in the continental United States, and that, therefore, such
geographical area of restriction is reasonable in the circumstances to protect
the Company's legitimate business interests.
11
<PAGE>
(iii) WORK FORCE, CUSTOMERS AND SUPPLIERS. The Company has made
and will continue to make a significant investment in developing and training a
competent work force and developing its supplier and customer base. Accordingly,
Employee acknowledges that the scope of the abilities of, and compensation paid
to, such employees, and the support and strategic value of its supplier base,
are all valuable and Confidential Information and/or Intangible Business Assets.
Further, Employee acknowledges that the Company's continued viability and
success is in large part contingent upon maintaining a stable, trained and
competent work force. During the course of his employment with the Company, and
for a period of two (2) years thereafter, regardless of the reason for
termination thereof, Employee will not directly or indirectly solicit, entice,
encourage, or cause, any employee of the Company or any of its Affiliates to
leave the employ of the Company or any of its Affiliates (as the case may be),
nor will Employee, directly hire, or cause or assist another person or entity to
hire, any such employee or any person, other than Employee's then current
administrative assistant, who was an employee of the Company or any of its
Affiliates within one year prior to Employee ceasing to be an employee of the
Company. Furthermore, during said two (2) year period after cessation of
employment, Employee shall not (A) submit a quotation for, or offer to sell or
sell, any product or service competitive with the Company or any of its
Affiliates to any customer of the Company or any of its Affiliates or any person
or entity who was a customer of the Company or any of its Affiliates within two
(2) years prior to Employee ceasing to be an employee of the Company, or solicit
the business of any customer of the Company or any of its Affiliates, or (B)
obtain for resale from any major supplier of the Company or any of its
Affiliates any products of the type that the Company or any of its Affiliates
purchases, or has purchased within one-year prior to Employee ceasing to be an
employee of the Company, for resale. A major supplier of the Company or its
Affiliates is one whose products account for one-half (1/2%) percent or more of
the sales of the Company and its Affiliates viewed as a group.
(iv) APPLICATION. The foregoing restrictions shall apply in all
circumstances of termination of Employee's employment; provided, however, that
(A) if Employee's employment is terminated pursuant to Section 5(b) of this
Agreement, such restrictions are conditioned upon the Company complying in all
material respects with its severance obligations under and to the extent
required by Section 5(b), and (B) upon the expiration of the term of employment
(including all extensions), such restrictions are conditioned upon the Company
paying to Employee during the two-year period following such expiration the
gross annual salary in effect during the last year of employment; provided,
however, that the Company may, at any time after such expiration of the term of
employment hereunder, in its sole discretion, cease paying any such gross annual
salary to Employee in exchange for Employee being released from the restrictions
set forth in Section 6(b)(ii) (but not Section 6(b) (iii) which shall continue
to apply) effective as of the date of such cessation of salary payments. In
addition, such obligation to pay gross annual salary for two years shall,
without affecting the validity of the restrictive covenants herein contained, be
excused at such time, if any, as Employee accepts new employment providing for a
gross annual salary at least equal to the gross annual salary in effect
hereunder at termination of employment, and, to the extent any such new
employment is for a lower gross annual salary, from and after such time, for the
remainder of the two-year period, the Company's obligation shall be reduced by
the amount of the new gross annual salary.
12
<PAGE>
(c) THE COMPANY'S REMEDIES FOR BREACH Employee covenants and agrees
that, if Employee shall violate or breach any of Employee's covenants provided
for in Sections 6(a) or (b) of this Agreement, the Company and/or its Affiliates
shall be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations and benefits which Employee has realized and realizes
as a result of, growing out of or in connection with any such violation or
breach. In addition, in the event of a breach or violation or threatened or
imminent breach or violation of any provisions of Sections 6(a) or (b) of this
Agreement, the Company and/or its Affiliates shall be entitled to a temporary
and permanent injunction or any other appropriate decree of specific performance
or equitable relief from a court of competent jurisdiction in order to prevent,
prohibit or restrain any such breach or violation or threatened or imminent
breach or violation by Employee, by Employee's partners, agents, associates,
affiliates, representatives, servants, employers or employees and/or by any
other Third Parties. The Company shall be entitled to such injunctive or other
equitable relief in addition to any damages which are suffered, together with
reasonable attorneys' and paralegals' fees and costs and other costs incurred in
connection with any such breach or violation or threatened breach or violation,
whether or not suit is brought, and at both trial and at all appellate levels.
It is understood that resort by the Company and/or its Affiliates to such
injunctive or other equitable relief shall not be deemed to waive or to limit in
any respect any other rights or remedies which the Company or its Affiliates may
have with respect to such breach or violation. The Company's Affiliates may
enforce these provisions directly in their own names and right.
(d) REASONABLENESS OF RESTRICTIONS
(i) REASONABLENESS. Employee acknowledges that any breach or
violation of Sections 6(a) or (b) of this Agreement will cause irreparable
injury and damage and incalculable harm to the Company and its Affiliates and
that it would be very difficult or impossible to measure all of the damages
resulting from any such breach or violation. Employee further acknowledges that
Employee has carefully read and considered the provisions of Sections 6(a), (b)
and (c) of this Agreement and, having done so, agrees that the restrictions and
remedies set forth in such Sections (including, but not limited to, the time
period, geographical areas and types of restrictions imposed) are fair and
reasonable and are reasonably required for the protection of the business, trade
secrets, interests and goodwill of the Company and its Affiliates.
(ii) SEVERABILITY. Employee understands and intends that each
provision and restriction agreed to by Employee in Sections 6(a), (b) and (c) of
this Agreement shall be construed as separate and divisible from every other
provision and restriction. In the event that any one of the provisions of, or
restrictions in, Sections 6(a), (b) and/or (c) of this Agreement shall be held
to be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, the remaining provisions thereof and restrictions therein shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable provisions or restrictions had not been included. In the event
that any such provision relating to time period, geographical area and/or type
of restriction shall be declared by a court of competent jurisdiction to exceed
the maximum or permissible time period, geographical area or type of restriction
such court deems reasonable and
13
<PAGE>
enforceable, said time period, geographical area and/or type of restriction
shall be deemed to become and shall thereafter be the maximum time period,
geographical area and/or type of restriction which such court deems reasonable
and enforceable.
7. NOTICES. Whenever any notice, payment, or other communication is
required to be given or delivered pursuant to this Agreement, such notice shall
be given in writing, and shall be delivered in person or by certified mail,
return receipt requested, and shall be sufficiently given if received, delivered
personally or if mailed, addressed as follows: If to the Company, to All
American Semiconductor, Inc., 16115 N.W. 52nd Avenue, Miami, Florida 33014,
Attention: Chairman of the Board and President; and if to Employee, to his
residence with a copy to his office at the Company, or such other address as
either party hereto may by written notice designate to the other party in
accordance with this Section. Notices delivered personally or by courier shall
be deemed given as of actual receipt; mailed notices shall be deemed given as of
four (4) days after mailing.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Florida.
9. LEGAL PROCEEDINGS. Any and all legal proceedings between the parties
hereto arising from this Agreement shall be commenced only in Miami-Dade County,
Florida. Both parties agree to jurisdiction and venue in the courts of
Miami-Dade County, Florida.
10. ATTORNEYS' FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys, fees, costs and necessary
disbursements in addition to any other relief to which it or he may be entitled,
before and at trial, whether or not trial on the merits occurs, and at all
tribunal levels.
11. SEVERABILITY. If any provision of this Agreement shall be held void,
voidable, invalid, or unenforceable, the remainder of this Agreement shall
nevertheless remain in full force and effect. If any provision is held void,
voidable, invalid or unenforceable with respect to. particular circumstances, it
shall nevertheless remain in full. force and effect with respect to all other
circumstances.
12. HEADINGS. Titles or headings of paragraphs contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or prescribe the scope of this Agreement or the
intent of any provision.
13. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous oral and written
understandings and agreements between the parties. The provisions of this
Agreement may not be waived, modified or amended except by a writing signed by
the party sought to be bound. Waiver by either of the parties of a breach by the
other of the parties
14
<PAGE>
of any of the terms of this Agreement shall not be deemed a waiver of future
non-compliance herewith. An attempted modification that fails to comply with
this Section shall not operate as a waiver.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
15. SURVIVABILITY. No termination of Employee's employment or any
purported termination of this Agreement shall terminate any obligation of the
Company or Employee which, by its terms, applies to a stated period following
termination of employment. Specifically, but without limiting the generality of
the foregoing, no such termination shall relieve Employee of any of his
obligations under Section 6, or shall relieve the Company of any of its
obligations under Sections 3 and 5.
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the day and year first above written.
COMPANY:
ALL AMERICAN SEMICONDUCTOR, INC.,
a Delaware corporation
By: /s/ BRUCE M. GOLDBERG
----------------------------
Bruce M. Goldberg, President
EMPLOYEE:
By: /s/ HOWARD L. FLANDERS
----------------------------
Howard L. Flanders
15
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on April
27, 2000, but is effective as of the 1st day of January, 2000 (the "Effective
Date"), by and between All American Semiconductor, Inc., a Delaware corporation
(the "Company"), and Rick Gordon ("Employee").
WHEREAS, the Company is engaged in the distribution of electronic
components and its principal office is located at 16115 N.W. 52nd Avenue, Miami,
Florida 33014;
WHEREAS, Employee has experience and expertise that is useful to the
Company; and
WHEREAS, the Company desires to continue the employment of Employee on the
terms and conditions set forth herein and Employee desires to continue to work
for the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the promises
hereinafter contained, the sufficiency of which is hereby acknowledged, the
parties covenant and agree as follows:
1. TERM OF EMPLOYMENT. The Company agrees to employ Employee, and
Employee agrees to be so employed, for a term of four (4) years. Accordingly,
the initial term of this employment shall, subject to the terms and conditions
of this Agreement concerning earlier termination by each of the parties,
commence as of the Effective Date and continue until December 31, 2003. The term
of this Agreement shall automatically renew each year for an additional one (1)
year term unless the Company or Employee notifies the other of its or his
intention not to renew this Agreement no later than sixty (60) days prior to the
expiration of the then-current term.
2. DUTIES. Employee accepts employment with the Company to serve as
Senior Vice President of Sales of the Company and agrees to perform such
services as are commensurate with his office. Employee shall work full-time for
the Company. The Company may not (a) require Employee to perform duties which
are not commensurate with such office or which materially differ from Employee's
duties as they presently exist or (b) after a Change in Control (defined below),
change the location of the Company's offices where Employee is based to anywhere
outside of a 100 mile radius from the location of Employee's principal residence
as it exists on the Effective Date. Any attempt by the Company to do either item
(a) or (b) of this Section shall constitute a total breach of this Agreement,
whereupon Employee shall be entitled to terminate his employment hereunder and
to treat such termination as a termination of employment by the Company pursuant
to Section 5(b) of this Agreement.
<PAGE>
3. COMPENSATION. Employee shall be entitled to the following, all of
which shall be deemed compensation, as that term is used in this Agreement
(provided, however, that the use of the term "compensation" in this Agreement is
not intended to have any effect whatever with respect to determining Employee's
taxable income):
(a) The Company agrees to pay to Employee, as base salary, for 2000
calendar year, gross annual salary at a rate equal to $218,000 per annum. For
each calendar year during the term of this Agreement after 2000, Employee's
gross annual salary shall be increased by the greater of (A) 5% of the prior
year's gross annual salary and (B) the amount of the percentage increase in the
Consumer Price Index for the most currently available twelve (12) month period
over the preceding twelve (12) month period multiplied by the prior year's gross
annual salary. The base salary shall be payable on the same basis (including
appropriate payroll withholding) as the Company, from time to time, generally
pays its employees. Employee shall, in addition to base salary, receive, in
respect of each calendar year (or partial calendar year) during which this
Agreement is in effect, an annual cash bonus (the "Cash Bonus") equal to the sum
of two percent (2%) of the pre-tax net income of the Company before
non-recurring and extraordinary charges ("pre-tax net income") for such calendar
year in excess of $1 million. The maximum amount of the Cash Bonus for any year
shall be limited to the amount of Employee's base salary for such year (the Cash
Bonus in respect of the 2000 calendar year shall not exceed $218,000). The Cash
Bonus shall be paid to Employee on a quarterly basis as follows: The Cash Bonus
payment for the first calendar quarter (the "First Quarterly Bonus Payment")
shall be equal to 2% of the excess, if any, that pre-tax net income of the
Company for the first calendar quarter exceeds $250,000. The Cash Bonus payment
for the second calendar quarter (the "Second Quarterly Bonus Payment") shall be
equal to (i) 2% of the excess, if any, that pre-tax net income of the Company
for the first two calendar quarters exceeds $500,000 less (ii) the First
Quarterly Bonus Payment. The Cash Bonus payment for the third calendar quarter
(the "Third Quarterly Bonus Payment") shall be equal to (i) 2% of the excess, if
any, that pre-tax net income of the Company for the first three calendar
quarters exceeds $750,000 less (ii) the aggregate of the First Quarterly Bonus
Payment and the Second Quarterly Bonus Payment. The Cash Bonus payment for the
fourth calendar quarter (the "Fourth Quarterly Bonus Payment") shall be equal to
(i) 2% of the excess, if any, that pre-tax net income of the Company for the
calendar year exceeds $1,000,000 (the "Annual Bonus Amount") less (ii) the
aggregate of the First Quarterly Bonus Payment, the Second Quarterly Bonus
Payment and the Third Quarterly Bonus Payment (collectively, the "Three
Quarterly Bonus Payments"). In the event that the aggregate Three Quarterly
Bonus Payments paid to the Employee exceeds the Annual Bonus Amount, such excess
amount shall be repaid to the Company within thirty days of such determination.
Each of the Three Quarterly Bonus Payments shall be paid within thirty (30) days
following completion of the unaudited financial statements for such quarter. The
Fourth Quarterly Bonus Payment shall be paid to Employee within thirty (30) days
following completion of each annual audit of the Company. Each payment of Cash
Bonus (including each of the Three Quarterly Bonus Payments) shall be calculated
in accordance with generally accepted accounting principles, consistently
applied, without taking any Cash Bonus of Employee, or any similar bonus based
on the earnings or performance of the Company paid to any other executive
officer of the Company, into account as an expense. It is anticipated by the
Company that none of the grant, vesting or exercise of any options granted
and/or contemplated to be granted, or of any warrants or similar rights issued
by the Company from time to time, will constitute or result in an expense or
charge against the Company's income. However, if such turns out not to be the
case, no such expense or charge shall be taken into account when computing
pre-tax net income for purposes of determining the Cash Bonus. If being computed
for a partial calendar quarter, the Cash Bonus shall be appropriately and
equitably prorated; provided, however, that the applicable quarterly pre-tax
income threshold provided herein shall not be prorated (i.e., reduced) with
respect to a partial calendar quarter. Consumer Price Index as used herein shall
mean the Consumer Price Index shown on the U.S. City Average for all urban
consumers, unadjusted, all items, as promulgated by the Bureau of Labor
Statistics of the U.S. Department of Labor. In the event that the Consumer Price
Index referred to herein ceases to incorporate a significant number of the items
as currently set forth therein, or if a substantial change is made in the method
of establishing said Consumer Price Index, then the Consumer Price Index shall
be adjusted to the figure that would have resulted had no change occurred in the
manner of computing the Consumer Price Index. In the event that the Consumer
Price Index (or successor or substitute index) is not available, then the
Company may use another governmental or nonpartisan publication evaluating the
information theretofore used in determining the Consumer Price Index in lieu of
said Consumer Price Index.
2
<PAGE>
(b) Employee shall be entitled to participate in any and all
employee benefit plans and programs offered by the Company from time to time to
other employees, including, without limitation, medical insurance, dental
insurance, pension and/or profit sharing plans, 401(k) plans, stock option plans
and cafeteria plans. Additionally, Employee shall be entitled to four (4) weeks
paid vacation per calendar year.
(c) The Company will provide to Employee, without cost to Employee,
full-time use of a Company owned or leased automobile of a make and model
reasonably chosen by Employee, not to exceed a cost of $700 per month, which
shall be increased to $850 per month commencing January 1, 2000 (for lease
payments if the automobile is leased, for financing payments if the automobile
is owned by the Company and financed, or for depreciation if the automobile is
owned by the Company and has not been financed, as the case may be). The Company
shall further pay all other expenses related thereto, including, but not limited
to, all costs of fuel, maintenance, repairs and comprehensive automobile
insurance, including liability insurance of no less than $1 million.
(d) Employee is the owner of a life insurance policy on the life of
Employee, providing for a death benefit of $1,000,000, with the beneficiary
thereof designated and to be designated at the sole and unquestionable
discretion of Employee (the "$1 Million Policy"). The Company shall pay the
premiums due thereon as provided for, and subject to all terms and conditions
of, that certain Life Insurance Agreement dated effective as of January 1, 1993
between the Company and Employee, as supplemented by that certain Supplemental
Letter Agreement between the Company and Employee (collectively, the "Life
Insurance Agreement"). With respect to the $1 Million Policy, in lieu of the
Company paying the entire annual premium on the policy, the Company may elect to
require Employee to pay an amount equal to the P. S. 58 cost for such insurance
coverage (or the net premium due, if less). Any balance shall be paid by the
Company (and payment solely of such balance, if any, shall be deemed an advance
by the Company to Employee under the Life Insurance Agreement). In the event
Employee is required to pay such P.S. 58 amount, the Company shall give Employee
an additional bonus each year sufficient to enable Employee to pay such P.S. 58
amount and any additional tax liability resulting from such P.S. 58 amount being
included in Employee's income for federal and state income tax purposes, and any
additional tax liability on those amounts, so that Employee receives, on an
after-tax basis, an amount equal to such P.S. 58 amount.
(e) Employee has been granted certain incentive stock options to
acquire shares of common stock of the Company ("Stock Options") and in the
future may be granted additional Stock Options. Each of the agreements pursuant
to which any Stock Options have been or will be granted by the Company are
hereby amended to provide that, unless Employee has been terminated pursuant to
Section 5(a), as such section may be amended from time-to-time, or pursuant to
any comparable for cause provision under any successor employment agreement,
Employee shall have not less than ninety (90) days after termination of
Employee's employment to exercise his Stock Options.
3
<PAGE>
(f) The Company shall continue to make payments in respect of, as
directed by Employee, the Company's deferred compensation plan presently offered
to, and enjoyed by, Employee, for as long as such plan is kept in effect
generally.
(g) The following provisions shall apply in the event of a Change in
Control (as defined below).
(i) In the event of a Change in Control occurring at any time
while Employee is employed hereunder, Employee shall have the option in his sole
discretion to terminate his employment under this Agreement, by giving written
notice thereof to the Company within 180 days following the date of the Change
in Control; provided, however, that no compensation described in this Section
3(g)(i) shall be payable to Employee unless Employee shall have performed his
duties and responsibilities hereunder and remained an employee of the Company
(or its successor) for the 180-day period after such Change in Control, unless
Employee is terminated by the Company without cause or as a result of his
permanent disability or Employee dies prior to the expiration of such 180-day
period. If a Change in Control occurs, and (x) within the 180-day period prior
to the date of the Change in Control, or at any time on or during the 180-day
period following the date of the Change in Control, Employee's employment is or
has been terminated by the Company pursuant to Section 5(b), or (y) Employee
elects to terminate his employment under this Section and during such 180-day
period Employee (i) remains employed and performs his duties as aforesaid, (ii)
is terminated by the Company as a result of his permanent disability or (iii)
dies, then Employee shall receive all compensation described in Sections 3 (a),
(b), (c) and (f) which would be due through the end of the term of this
Agreement (including all extensions) or which would be due to Employee if
employment under this Agreement continued for two (2) years after the
termination of Employee's employment, whichever is greater, and shall receive
the amount of all unpaid insurance premiums payable for the Maximum Period (as
defined in the Life Insurance Agreement).
(ii) In the event Employee becomes entitled to the compensation
described in subsection (g)(i), Employee may elect, by giving written notice to
Employer at any time during the 180-day period following the date of the Change
in Control, or during the 30-day period following the date of termination of his
employment, whichever is later, to receive a lump-sum payment equal to
Employee's aggregate compensation described in Sections 3(a), 3(b), 3(c) and
3(f) which would be due through the end of the term of this Agreement (including
all extensions) or which would be due to Employee if his employment hereunder
continued for two years following the date of Employee's termination of
employment, whichever is greater, and the unpaid premiums for the Maximum Period
under the Life Insurance Agreement.
(iii) In calculating any such lump-sum payment hereunder: (A)
the Cash Bonus payable for each of the remaining years it is to be paid shall be
deemed to be, in respect of each such year, the largest annual cash bonus paid
under this Agreement or its predecessor, (B) such lump-sum payment shall include
credit for all unused vacation time and any other similar items or incentives
earned as of the date that employment terminated, and (C) all non-cash benefits
and benefit programs and plans will be given a cash value sufficient to permit
the equivalent non-cash benefits and programs to be obtained by Employee after
the Change in Control during the applicable
4
<PAGE>
period described in Subsection (ii) above, unless any such non-cash benefit or
program is otherwise to be continued for and made available by the Company to
Employee at no cost or contribution by Employee for such period after the Change
in Control, and adequate assurances by the Company of such continuation
reasonably satisfactory to Employee are also provided to Employee. The lump-sum
payment shall not be discounted to present value. Any lump-sum payment elected
by Employee shall be paid to Employee no later than (a) thirty (30) days
following the date of his election to receive it; provided, however, that if
Employee elects to terminate his employment under Section 3(g)(i) and commences
to remain employed by and perform his duties for the Company (or any successor)
during such 180-day period, Employee shall receive such lump-sum payment elected
by Employee within ten (10) days after the earliest of (i) the end of such
180-day period, provided Employee remains employed and performs his duties
during such period, (ii) the date Employee is terminated by the Company as a
result of his permanent disability, (iii) the date of Employee's death and (iv)
the date of Employee's termination by the Company without cause.
(iv) For purposes of this Agreement, a Change in Control shall
be deemed to occur only if and when (A) Paul Goldberg, Bruce Goldberg and their
respective spouses and lineal descendants (and trusts for the benefit of any of
them) directly and indirectly beneficially own, in the aggregate, less than 10%,
on a fully-diluted basis, of the issued and outstanding capital stock of the
Company, AND (B) neither Paul Goldberg nor Bruce Goldberg is the Chairman of the
Board, Chief Executive Officer or President of the Company (as long as either of
them holds one of such positions, no Change in Control shall be deemed to have
occurred).
(v) Upon a Change in Control, all options granted by the
Company to Employee to acquire shares of capital stock of the Company shall
automatically vest, and all existing stock option agreements between the Company
and Employee are hereby amended to provide for such automatic vesting. In
addition, upon a Change in Control, Employee shall automatically vest in and
acquire unencumbered ownership of the cash surrender value of the $1 Million
Policy, as provided for in the Life Insurance Agreement.
(vi) The Company shall not be entitled to assert or take any
credit against, or otherwise assert or make any reduction to, any payment to
Employee required under this Subsection (g) for any reason whatever.
4. EXPENSES OF EMPLOYEE.
(a) General Expenses. The Company shall pay or reimburse Employee
for reasonable expenses incurred by Employee in connection with the business of
the Company.
(b) Excise Tax Reimbursement and Tax Gross-up.
(i) The Company shall promptly pay or reimburse Employee
(collectively, the "Excise Tax Payments") for any federal income tax liability
imposed pursuant to Section 4999 or Section 280G (or any successor provisions)
of the Internal Revenue Code of 1986, as amended, and any similar federal, state
or local tax that may be imposed in lieu thereof or in addition thereto
(collectively, "Excise Tax"), in connection with the receipt of any payments or
other
5
<PAGE>
consideration by or for the benefit of Employee with respect to this Agreement
(including any increases thereto pursuant to the Gross-Up Formula, as defined
below), including any imputed income to Employee relating to the acceleration of
any Company benefits including vesting of stock options to purchase common stock
of the Company. In addition, each Excise Tax Payment, to the extent such payment
constitutes income to Employee subject to income and/or unemployment taxes,
shall be increased to and include the amount computed under the Gross-Up
Formula, as defined and provided below (each, as increased, a "Grossed-Up Excise
Tax Payment"; collectively, the "Grossed-Up Excise Tax Payments"). Each
Grossed-Up Excise Tax Payment shall be in the amount computed under the
following formula (the "Gross-Up Formula"): Divide the gross taxable amount of
each Excise Tax Payment (or other compensation payment subject to tax gross up
pursuant to this Agreement) by a number equal to one minus the sum of (i) the
highest combined marginal U.S. federal, state and local individual income tax,
social security tax and unemployment tax rate (or such other combined tax rate
that is similar to or replaces such combined tax rate) applicable to Employee
(taking into account the deductibility of any such federal, state and local
taxes) that is in effect at the time each such Excise Tax Payment (or other
compensation payment subject to tax gross up pursuant to this Agreement) is made
and (ii) the Excise Tax rate applicable to Employee that is in effect at the
time each such Excise Tax Payment (or other compensation payment subject to tax
gross up pursuant to this Agreement) is made. For example, if a $100 Excise Tax
Payment is subject to the Gross-Up Formula, and the highest combined marginal
tax rate applicable to Employee at such time is 45% and the Excise Tax rate is
20%, the Excise Tax Payment shall be increased under the Gross-Up Formula to,
and the Grossed-Up Excise Tax Payment shall be, $285.71. In addition, any
interest or penalties imposed against Employee by any federal, state or local
taxing authority as a result of any misclassification by the Company, not
predicated upon Employee's direction or description, and reclassification as
taxable income of any amounts received by Employee under this Agreement shall be
paid or reimbursed by the Company and increased by the Gross-Up Formula (as
increased, the "Grossed-Up Penalties and Interest").
(ii) In the event that Employee's employment is terminated and
at any time prior to the receipt by Employee of any Company U.S. Form W-2,
including any amendments thereto ("Form W-2"), with respect to any payments or
other amounts under this Agreement, the Company undergoes a change (i) in the
ownership or effective control of the Company or (ii) in the ownership of a
substantial portion of the assets of the Company, as clauses (i) and (ii) are
interpreted under Section 280G of the Code and the Treasury Regulations
thereunder (such event, a "Potential Excise Tax Situation"), then the Company,
with the advice of its accountants and/or attorneys, shall determine whether any
amounts paid or imputed to Employee under this Agreement are subject to Excise
Taxes. Such determination by the Company with respect to whether any amounts
received during the year constitute a "parachute payment" as defined under
Section 280G of the Code (a "Parachute Payment") subject to Excise Taxes shall
be reflected on Employee's U.S. Form W-2 with respect to such year. If the
Company determines that Excise Taxes are payable, then, unless the Company has
withheld the proper Excise Taxes from Employee's payments, the Company shall
provide Employee with the Grossed-Up Excise Tax Payment, no later than ten days
after the issuance of Employee's Form W-2 (the "Excise Tax Due Date") with
respect to the amounts paid under the Agreement (which Form W-2 shall be issued
in a timely manner on or before January 31st following the year of payment of
the amounts subject to the Excise Tax). If the Company has withheld the proper
Excise Taxes from the amounts paid to Employee, then the Company shall pay
6
<PAGE>
Employee, on the date Employee receives such payments from which the Excise Tax
has been deducted, the difference between the Grossed-Up Excise Tax Payment and
the Excise Tax withheld. If a Potential Excise Tax Situation arises and the
Company determines that no payments received in connection with this Agreement
are subject to Excise Taxes by Employee, then the Company shall do all of the
following set forth in clauses (A) through (D) below:
(A) on or before the date of issuance of Employee's Form
W-2, at the Company's sole expense, a nationally-recognized CPA firm or law firm
reasonably acceptable to Employee shall render a written opinion to Employee,
reasonably acceptable to Employee in both substance and form, that there is
substantial authority for concluding that (i) no payments received in connection
with this Agreement including those reflected in the Form W-2 constitute a
Parachute Payment and (ii) no Excise Taxes are due by Employee with respect to
any payments received in connection with this Agreement include in any amounts
reflected in the Form W-2;
(B) on or before the date of issuance of Employee's Form
W-2, Employer shall procure and deliver to Employee an irrevocable standby
letter of credit for the benefit of Employee (the "Letter of Credit"), in form
and content and issued by a financial institution all reasonably acceptable to
Employee, for an amount equal to the aggregate of (i) the full amount of the
Grossed-Up Excise Tax Payment, and (ii) an amount equal to a reasonable estimate
of the amount of any Grossed-Up Penalties and Interest that would be due if
Employee ultimately were to be liable for the Excise Taxes. The amount of the
Letter of Credit shall be adjusted from time to time for any material changes
(more than ten percent) in the estimates of the Grossed-Up Excise Tax Payment
and/or the Grossed-Up Penalties and Interest). The Letter of Credit shall be
payable to Employee upon demand in the event that the Company shall not have
paid Employee all amounts due under this Section 1(b) within three business days
after the earliest to occur of subclauses (1) and (2) below of this clause (B),
if either is applicable. The Letter of Credit shall remain outstanding until the
earliest of (1) the Company's agreement that the Excise Taxes are payable
(requiring immediate payment by the Company to Employee of the Grossed-Up Excise
Tax Payment and the Grossed-Up Penalties and Interest, and upon receipt thereof
Employee shall immediately deliver the Letter of Credit to the Company), (2) a
final, non-appealable determination by a court of competent jurisdiction that
the Excise Taxes are payable (requiring immediate payment by the Company of the
Grossed-Up Excise Tax Payment and the Grossed-Up Penalties and Interest, and
upon receipt thereof Employee shall immediately deliver the Letter of Credit to
the Company), (3) a final, non-appealable determination by a court of competent
jurisdiction that the Excise Taxes are not payable (requiring Employee to
immediately deliver the Letter of Credit to the Company), and (4) the expiration
of the longest statute of limitations applicable to Employee with respect to the
payment of the Excise Taxes, as such statute may be extended by Employee
(requiring Employee to immediately deliver the Letter of Credit to the Company).
In the event that the Company and Employee dispute the amount for which the
Letter of Credit shall be obtained or adjusted pursuant to clause (B) above, the
Company shall procure a Letter of Credit for the greatest amount not in dispute,
the amount in dispute shall be determined through litigation, if the parties
cannot otherwise agree, and the amount of the Letter of Credit shall be adjusted
accordingly thereafter. In the event that Employee draws down the Letter of
Credit under the conditions provided above, the Company shall immediately pay to
Employee any deficiency in the proceeds of the Letter of Credit compared with
the final amount
7
<PAGE>
to be received as Grossed Up Excise Tax Payments and Grossed-Up Penalties and
Interest, and Employee shall immediately reimburse the Company for any excess
proceeds from the Letter of Credit compared with such final amounts;
(C) the Company shall indemnify, and hold harmless
Employee from and against any and all liability, damage, loss, costs, expense,
penalties, interest, claims or demands (including attorneys' fees through all
appeals if for any reason the Company fails to defend Employee pursuant to
clause (D) below), other than consequential damages, arising out of or in any
manner connected with Employee's failure to pay the Excise Taxes, and such
amount of indemnification shall not be limited in amount; and
(D) the Company shall, at its sole cost and expense,
defend Employee before all applicable governmental agencies and, if the Company
or the government determines to appeal such decision, through any and all
appeals. Notwithstanding the foregoing, in the event that at any time, including
after the receipt of Form W-2 by Employee, any governmental agency asserts that
any Excise Taxes are payable by Employee with respect to any amounts received by
Employee in connection with this Agreement, then the Company shall pay to
Employee a Grossed-Up Excise Tax Payment and any Grossed-Up Penalties and
Interest required, each based on all Excise Taxes asserted by the government,
within thirty days after written notice thereof by Employee to the Company
(including a copy of any governmental notice with respect thereto), unless, not
later than the end of such thirty-day period, the Company shall have met the
conditions set forth in clauses (A) and (B) above of this Section 1(b) and has
agreed to the conditions set forth in clauses (C) and (D) above.
5. TERMINATION BY THE COMPANY.
(a) Except as set forth in subparagraph (b) of this Section, the
Company shall have no right to terminate Employee's employment unless and until
the occurrence of any of the following:
(i) Employee is convicted (by formal plea of guilty or a jury
verdict) of embezzlement or other felonious theft of money or property from the
Company; or
(ii) Employee's refusal, after thirty (30) days written notice,
to cure a material default of any of the provisions of this Agreement unless
said material default is caused by physical or mental infirmity or disability
which renders Employee incapable of performing the customary duties for which
Employee is being employed. In order to be effective said notice must clearly
specify the material default and must notify Employee of the Company's intention
to terminate this Agreement in the event the described material default is not
cured within said thirty (30) days.
(b) The Company shall have the right to terminate Employee's
employment with the Company at any time without cause, provided that the Company
continues to pay Employee all of the compensation set forth in Sections 3(a),
(b), (c) and (f) of this Agreement, as if this Agreement had been continued in
accordance with its terms, to the later of (i) the expiration date of the term
of
8
<PAGE>
this Agreement (including any extensions) and (ii) the second anniversary of the
effective date of termination of employment, all subject to, if applicable, the
relevant provisions of Section 3(g). Notwithstanding any of the foregoing to the
contrary, such severance obligations shall be excused for the remainder of the
severance period at such time, if any, if Employee accepts new employment
providing for gross annual salary at least equal to the gross annual salary in
effect hereunder at termination of employment, and, to the extent any such new
employment is for a lower gross annual salary, from and after such time, for the
remainder of such severance period, the Company's severance obligations shall be
reduced by the amount of all compensation and benefits received by Employee
under his new employment. In the event Employee has the right to receive the
compensation and benefits described in this Section 5(b) that include the use of
a Company-leased vehicle pursuant to Section 3(c), Employee may elect, by notice
to the Company within thirty (30) days after such termination, to cause the
Company to continue to lease such vehicle until the expiration of the
then-current lease term (rather than the Company paying to Employee the amount
of such lease payments); provided, however, that such election by Employee shall
only be available if the Company can continue to insure the leased vehicle for
Employee's use after Employee's termination under its then-existing insurance
policy (or under a comparable policy available to the Company). In the event
that the term of such lease ends subsequent to the termination date of
Employee's compensation and benefits payments pursuant to this Section 5(b),
Employee shall pay (or reimburse the Company) for all lease payments due after
the date such Company payments end. Subject to the provisions of Section 3(g),
if applicable, Employee shall be entitled to no other or further compensation in
respect of a termination by the Company pursuant to this Section 5(b).
(c) In the event Employee becomes permanently incapable of
performing the customary duties for which Employee is being employed due to a
physical or mental infirmity or disability, the Company shall not terminate
Employee (other than under Section 5 (a), if applicable, or Section 5(b)), and
the Company shall continue to pay Employee all compensation due under Section
3(a), (b), (c), (d) and (f) of this Agreement for two (2) years after the
effective date of said infirmity or disability (as defined below). At the end of
such two-year period, Employee's employment shall be deemed terminated, subject
to the Company's continuing payment requirements during the Maximum Period under
the Life Insurance Agreement. All of the foregoing is subject, if applicable, to
the relevant provisions of Section 3(g). Subject to the provisions of Section
3(g), if applicable, Employee shall be entitled to no other or further
compensation in respect of termination of employment pursuant to this Section
5(c). The effective date of Employee's permanent infirmity or disability shall
be the 30th day following receipt by Employee from the Company of written notice
stating the Company's determination that Employee has such infirmity or
disability, provided that Employee has not disputed such determination in
writing within such 30-day period, and, if Employee has so disputed such
determination, the date by which two medical doctors or psychiatrists (as
applicable) selected by the Company, but reasonably acceptable to Employee, have
examined Employee and concluded (as set forth in a letter delivered to the
Company) that he has a permanent infirmity or disability which renders him
incapable of performing his customary duties.
9
<PAGE>
6. COVENANT NOT TO COMPETE.
(a) NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(i) CONFIDENTIAL INFORMATION. Employee acknowledges that
Employee has been informed by the Company of the Company's policy to maintain as
secret and confidential all information relating to (A) the financial condition,
businesses and interests of the Company and its Affiliates (as hereinafter
defined), (B) the systems, know-how and records, reports, products, services,
costs, asset values, customer lists, inventions, computer software programs,
marketing and sales techniques and/or programs, methods, methodologies, manuals,
lists and other trade secrets heretofore or hereafter acquired, sold, developed,
maintained and/or used by the Company and its Affiliates and (C) the nature and
terms of the Company's and its Affiliates' relationships with their respective
customers, suppliers, lenders, underwriters, vendors, consultants, independent
contractors, attorneys, accountants and employees (all such information being
hereinafter collectively referred to as "Confidential Information"). Employee
further acknowledges that such Confidential Information is of great value to the
Company and/or its Affiliates and, as a result of Employee's employment by the
Company, Employee will be making use of, acquiring and/or adding to such
Confidential Information. Therefore, Employee understands that it is reasonably
necessary to protect the Company's and its Affiliates' goodwill and business
interests that Employee agree and, accordingly, Employee does hereby agree, that
Employee will not directly or indirectly at any time hereafter divulge or
disclose for any purpose whatsoever to any persons, firms, corporations or other
entities other than the Company or its Affiliates (hereinafter referred to
collectively as "Third Parties"), or use or cause or authorize any Third Parties
to use, any such Confidential Information, except as otherwise required by law
or to the extent that the information or materials become publicly known other
than through the actions or inactions of such Employee. The term "Affiliate", as
used in this Agreement with respect to the Company, shall mean and include any
and all subsidiaries, parent or sister corporations, and any person or entity
controlling, controlled by or under common control of the Company.
(ii) COMPANY MATERIALS. In accordance with the foregoing,
Employee furthermore agrees that (A) Employee will at no time retain or remove
from the premises of the Company or its Affiliates any products, prototypes,
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, reports, lists, materials or documents
of any kind or description for any purpose unconnected with the strict
performance of Employee's duties with the Company and (B) upon the cessation or
termination of Employee's employment with the Company for any reason, Employee
shall forthwith deliver or cause to be delivered up to the Company any and all
drawings, notebooks, software programs or discs or similar containers of
software, manuals, data, books, records, reports, lists, materials and other
documents and materials in Employee's possession or under Employee's control
relating to any Confidential Information or any other material or thing which is
otherwise the property of the Company or its Affiliates. The terms of this
paragraph are in addition to, and not in lieu of, any common law, statutory or
other contractual obligations that Employee may have relating to such
Confidential Information.
10
<PAGE>
(b) NONSOLICITATION AND COVENANT-NOT-TO-COMPETE
(i) INTANGIBLE BUSINESS ASSETS. Employee acknowledges that:
(A) The Company has made significant investment in the
development, maintenance and preservation of its Confidential Information and
its trade secrets, marketing methodology, relationship with its various
customers and vendors, both past, current and prospective, in the development
and maintenance of its distributorship rights, in the hiring, training and
development of its employees and in the development, maintenance and
preservation of its goodwill, including that associated with its name, trade
dress and various trade marks (collectively "Intangible Business Assets").
(B) The Company has a legitimate business interest in
maintaining and protecting the value of these Intangible Business Assets and in
preventing the unauthorized use or misappropriation of any one of the same.
(C) The use of any of these Intangible Business Assets
other than in furtherance of the business interests of the Company would provide
the unauthorized user with an unfair competitive advantage and would be
detrimental to the Company.
(ii) PRODUCTS AND SERVICES. In view of (A) the above
acknowledgments by Employee, (B) the Confidential Information known to and to be
obtained by or disclosed to Employee (including, without limitation, Employee's
knowledge of, and familiarity and relationships with, the Company's other
employees and the Company's customers and suppliers), (C) the Intangible
Business Assets to be utilized by or for Employee, (D) the know-how acquired and
to be acquired by Employee, and (E) the substantial compensation paid and
payable to Employee under and pursuant to this Agreement, and as a material
inducement to the Company to enter into this Agreement and to employ or continue
to employ Employee and to pay to Employee the substantial compensation Employee
will be receiving, Employee covenants and agrees that, for as long as Employee
is employed by the Company and for a period of two (2) years thereafter,
Employee shall not, directly or indirectly, become employed by, consult with,
assist any person or entity in competing or be associated with, in any capacity
whatsoever (including, as greater than a 5% owner or shareholder, employee,
officer, director, agent or independent contractor) any enterprise competitive
with the business of the Company or its Affiliates located anywhere within the
continental United States which provides any of the products sold, marketed, or
distributed by the Company or its Affiliates, or provides services comparable to
that provided by the Company or its Affiliates, to customers located in any
county or city in which the Company has provided goods or services to customers
during the two year period prior to Employee ceasing to be an employee of the
Company (the "Geographical Territory"). Employee acknowledges that the business
of the Company and its Affiliates is North American in scope, that one can
effectively compete with such business in the Geographical Territory from
anywhere in the continental United States, and that, therefore, such
geographical area of restriction is reasonable in the circumstances to protect
the Company's legitimate business interests.
11
<PAGE>
(iii) WORK FORCE, CUSTOMERS AND SUPPLIERS. The Company has made
and will continue to make a significant investment in developing and training a
competent work force and developing its supplier and customer base. Accordingly,
Employee acknowledges that the scope of the abilities of, and compensation paid
to, such employees, and the support and strategic value of its supplier base,
are all valuable and Confidential Information and/or Intangible Business Assets.
Further, Employee acknowledges that the Company's continued viability and
success is in large part contingent upon maintaining a stable, trained and
competent work force. During the course of his employment with the Company, and
for a period of two (2) years thereafter, regardless of the reason for
termination thereof, Employee will not directly or indirectly solicit, entice,
encourage, or cause, any employee of the Company or any of its Affiliates to
leave the employ of the Company or any of its Affiliates (as the case may be),
nor will Employee, directly hire, or cause or assist another person or entity to
hire, any such employee or any person, other than Employee's then current
administrative assistant, who was an employee of the Company or any of its
Affiliates within one year prior to Employee ceasing to be an employee of the
Company. Furthermore, during said two (2) year period after cessation of
employment, Employee shall not (A) submit a quotation for, or offer to sell or
sell, any product or service competitive with the Company or any of its
Affiliates to any customer of the Company or any of its Affiliates or any person
or entity who was a customer of the Company or any of its Affiliates within two
(2) years prior to Employee ceasing to be an employee of the Company, or solicit
the business of any customer of the Company or any of its Affiliates, or (B)
obtain for resale from any major supplier of the Company or any of its
Affiliates any products of the type that the Company or any of its Affiliates
purchases, or has purchased within one-year prior to Employee ceasing to be an
employee of the Company, for resale. A major supplier of the Company or its
Affiliates is one whose products account for one-half (1/2%) percent or more of
the sales of the Company and its Affiliates viewed as a group.
(iv) APPLICATION. The foregoing restrictions shall apply in all
circumstances of termination of Employee's employment; provided, however, that
(A) if Employee's employment is terminated pursuant to Section 5(b) of this
Agreement, such restrictions are conditioned upon the Company complying in all
material respects with its severance obligations under and to the extent
required by Section 5(b), and (B) upon the expiration of the term of employment
(including all extensions), such restrictions are conditioned upon the Company
paying to Employee during the two-year period following such expiration the
gross annual salary in effect during the last year of employment; provided,
however, that the Company may, at any time after such expiration of the term of
employment hereunder, in its sole discretion, cease paying any such gross annual
salary to Employee in exchange for Employee being released from the restrictions
set forth in Section 6(b)(ii) (but not Section 6(b) (iii) which shall continue
to apply) effective as of the date of such cessation of salary payments. In
addition, such obligation to pay gross annual salary for two years shall,
without affecting the validity of the restrictive covenants herein contained, be
excused at such time, if any, as Employee accepts new employment providing for a
gross annual salary at least equal to the gross annual salary in effect
hereunder at termination of employment, and, to the extent any such new
employment is for a lower gross annual salary, from and after such time, for the
remainder of the two-year period, the Company's obligation shall be reduced by
the amount of the new gross annual salary.
12
<PAGE>
(c) THE COMPANY'S REMEDIES FOR BREACH Employee covenants and agrees
that, if Employee shall violate or breach any of Employee's covenants provided
for in Sections 6(a) or (b) of this Agreement, the Company and/or its Affiliates
shall be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations and benefits which Employee has realized and realizes
as a result of, growing out of or in connection with any such violation or
breach. In addition, in the event of a breach or violation or threatened or
imminent breach or violation of any provisions of Sections 6(a) or (b) of this
Agreement, the Company and/or its Affiliates shall be entitled to a temporary
and permanent injunction or any other appropriate decree of specific performance
or equitable relief from a court of competent jurisdiction in order to prevent,
prohibit or restrain any such breach or violation or threatened or imminent
breach or violation by Employee, by Employee's partners, agents, associates,
affiliates, representatives, servants, employers or employees and/or by any
other Third Parties. The Company shall be entitled to such injunctive or other
equitable relief in addition to any damages which are suffered, together with
reasonable attorneys' and paralegals' fees and costs and other costs incurred in
connection with any such breach or violation or threatened breach or violation,
whether or not suit is brought, and at both trial and at all appellate levels.
It is understood that resort by the Company and/or its Affiliates to such
injunctive or other equitable relief shall not be deemed to waive or to limit in
any respect any other rights or remedies which the Company or its Affiliates may
have with respect to such breach or violation. The Company's Affiliates may
enforce these provisions directly in their own names and right.
(d) REASONABLENESS OF RESTRICTIONS
(i) REASONABLENESS. Employee acknowledges that any breach or
violation of Sections 6(a) or (b) of this Agreement will cause irreparable
injury and damage and incalculable harm to the Company and its Affiliates and
that it would be very difficult or impossible to measure all of the damages
resulting from any such breach or violation. Employee further acknowledges that
Employee has carefully read and considered the provisions of Sections 6(a), (b)
and (c) of this Agreement and, having done so, agrees that the restrictions and
remedies set forth in such Sections (including, but not limited to, the time
period, geographical areas and types of restrictions imposed) are fair and
reasonable and are reasonably required for the protection of the business, trade
secrets, interests and goodwill of the Company and its Affiliates.
(ii) SEVERABILITY. Employee understands and intends that each
provision and restriction agreed to by Employee in Sections 6(a), (b) and (c) of
this Agreement shall be construed as separate and divisible from every other
provision and restriction. In the event that any one of the provisions of, or
restrictions in, Sections 6(a), (b) and/or (c) of this Agreement shall be held
to be invalid or unenforceable, and is not reformed by a court of competent
jurisdiction, the remaining provisions thereof and restrictions therein shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable provisions or restrictions had not been included. In the event
that any such provision relating to time period, geographical area and/or type
of restriction shall be declared by a court of competent jurisdiction to exceed
the maximum or permissible time period, geographical area or type of restriction
such court deems reasonable and
13
<PAGE>
enforceable, said time period, geographical area and/or type of restriction
shall be deemed to become and shall thereafter be the maximum time period,
geographical area and/or type of restriction which such court deems reasonable
and enforceable.
7. NOTICES. Whenever any notice, payment, or other communication is
required to be given or delivered pursuant to this Agreement, such notice shall
be given in writing, and shall be delivered in person or by certified mail,
return receipt requested, and shall be sufficiently given if received, delivered
personally or if mailed, addressed as follows: If to the Company, to All
American Semiconductor, Inc., 16115 N.W. 52nd Avenue, Miami, Florida 33014,
Attention: Chairman of the Board and President; and if to Employee, to his
residence with a copy to his office at the Company, or such other address as
either party hereto may by written notice designate to the other party in
accordance with this Section. Notices delivered personally or by courier shall
be deemed given as of actual receipt; mailed notices shall be deemed given as of
four (4) days after mailing.
8. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Florida.
9. LEGAL PROCEEDINGS. Any and all legal proceedings between the parties
hereto arising from this Agreement shall be commenced only in Miami-Dade County,
Florida. Both parties agree to jurisdiction and venue in the courts of
Miami-Dade County, Florida.
10. ATTORNEYS' FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys, fees, costs and necessary
disbursements in addition to any other relief to which it or he may be entitled,
before and at trial, whether or not trial on the merits occurs, and at all
tribunal levels.
11. SEVERABILITY. If any provision of this Agreement shall be held void,
voidable, invalid, or unenforceable, the remainder of this Agreement shall
nevertheless remain in full force and effect. If any provision is held void,
voidable, invalid or unenforceable with respect to. particular circumstances, it
shall nevertheless remain in full. force and effect with respect to all other
circumstances.
12. HEADINGS. Titles or headings of paragraphs contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or prescribe the scope of this Agreement or the
intent of any provision.
13. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous oral and written
understandings and agreements between the parties. The provisions of this
Agreement may not be waived, modified or amended except by a writing signed by
the party sought to be bound. Waiver by either of the parties of a breach by the
other of the parties of any of the terms of this Agreement shall not be deemed a
waiver of future non-compliance herewith. An attempted modification that fails
to comply with this Section shall not operate as a waiver.
14
<PAGE>
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
15. SURVIVABILITY. No termination of Employee's employment or any
purported termination of this Agreement shall terminate any obligation of the
Company or Employee which, by its terms, applies to a stated period following
termination of employment. Specifically, but without limiting the generality of
the foregoing, no such termination shall relieve Employee of any of his
obligations under Section 6, or shall relieve the Company of any of its
obligations under Sections 3 and 5.
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the day and year first above written.
COMPANY:
ALL AMERICAN SEMICONDUCTOR, INC.,
a Delaware corporation
By: /s/ BRUCE M. GOLDBERG
----------------------------
Bruce M. Goldberg, President
EMPLOYEE:
By: /s/ RICK GORDON
----------------------------
Rick Gordon
15
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
QUARTERS ENDED MARCH 31 2000 1999
- --------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Net Income ..................................... $ 1,210,000 $ 194,000
============ ============
Weighted Average Shares Outstanding ............ 3,801,969 3,937,371
============ ============
Basic Earnings Per Share ....................... $ .32 $ .05
===== =====
DILUTED EARNINGS PER SHARE:
Net Income ..................................... $ 1,210,000 $ 194,000
============ ============
Weighted Average and Dilutive Shares:
Weighted average shares outstanding .......... 3,801,969 3,937,371
Dilutive shares .............................. 193,087 --
------------ ------------
3,995,056 3,937,371
============ ============
Diluted Earnings Per Share ..................... $ .30 $ .05
===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the Registrant's
consolidated condensed financial statements as of and for the three months
ended March 31, 2000, and is qualified in its entirety by reference to such
consolidated financial statements.
</LEGEND>
<CIK> 0000818074
<NAME> ALL AMERICAN SEMICONDUCTOR, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 355
<SECURITIES> 0
<RECEIVABLES> 65,314
<ALLOWANCES> 2,208
<INVENTORY> 81,364
<CURRENT-ASSETS> 148,713
<PP&E> 11,478
<DEPRECIATION> 7,063
<TOTAL-ASSETS> 157,061
<CURRENT-LIABILITIES> 54,917
<BONDS> 72,980
0
0
<COMMON> 40
<OTHER-SE> 29,124
<TOTAL-LIABILITY-AND-EQUITY> 157,061
<SALES> 107,273
<TOTAL-REVENUES> 107,273
<CGS> 85,832
<TOTAL-COSTS> 85,832
<OTHER-EXPENSES> 17,274
<LOSS-PROVISION> 385
<INTEREST-EXPENSE> 1,657
<INCOME-PRETAX> 2,125
<INCOME-TAX> 915
<INCOME-CONTINUING> 1,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,210
<EPS-BASIC> .32
<EPS-DILUTED> .30
</TABLE>
