EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made effective as of the 1st day of
July, 1997 (the "Effective Date"), by and between Jaco Electronics, Inc., a New
York corporation having offices at 145 Oser Avenue, Hauppauge, New York 11788
("Jaco"), and Joel H. Girsky, residing at 29 Winter Lane, Dix Hills, New York
11746 ("Girsky").
WHEREAS, Girsky is Chairman of the Board of Directors
("Chairman"), President,and Treasurer of Jaco;
WHEREAS, Girsky's last written employment agreement with Jaco
expired on June 30, 1997; and
WHEREAS, Girsky has been employed from and after July 1, 1997,
pursuant to an oral agreement of employment consistent with the terms hereof;
and
WHEREAS, Jaco desires to have the continued services of
Girsky, and Girsky desires to continue to be employed by Jaco, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. Term of Employment; Duties.
1.1 Jaco hereby employs Girsky as Chairman and President of
Jaco, and Girsky hereby agrees to serve Jaco in such capacities and to perform
such duties consistent therewith as Jaco's Board of Directors from time to time
shall determine for a period commencing on the
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Effective Date and ending on the fourth (4th) anniversary of the Effective Date
(the "Initial Term"), provided, however, the term of this Employment Agreement
shall be automatically extended after each anniversary date of the Effective
Date for an additional one year period following the Initial Term, unless either
Jaco or Girsky shall provide a notice of non-renewal to the other party (the
"Notice of Non-Renewal"), which notice shall be in writing and shall be
delivered not less than 90 days prior to the third anniversary date after the
Effective Date (the "Employment Period"). In the event that a Notice of
Non-Renewal is delivered by either party, this Employment Agreement shall
continue for a period of three (3) years following the anniversary date which
follows immediately after the date that a valid and effective Notice of
Non-Renewal is delivered. By way of example, if the Notice of Non-Renewal is
delivered after the second anniversary date and not less than 90 days prior to
the third anniversary date of the Effective Date, this Employment Agreement
shall continue until the sixth anniversary date of the Effective Date.
2. Compensation.
2.1 For all services rendered pursuant to the terms hereof,
Girsky shall receive a base salary of $325,000 for each of the 12 month periods
(a "Contract Year") ending June 30, 1998, and each June 30, thereafter ("Base
Salary"), which Base Salary shall be paid to Girsky in equal periodic
installments not less frequently than monthly. In addition and not in lieu
thereof, Girsky shall be entitled to receive such fringe benefits and to
participate in such benefit plans and programs as are generally made available
by Jaco to other senior executive employees, including, but not limited to,
health insurance.
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2.2 Girsky shall receive a cash bonus (the "Cash Bonus") for
each Contract Year equal to (i) four percent (4%) of Jaco's annual earnings
before income taxes for the corresponding fiscal year if such earnings before
income taxes are in excess of $1,000,000, and not more than $2,500,000 or (ii)
six percent (6%) of Jaco's earnings before income taxes for the corresponding
fiscal year if such earnings before income taxes are in excess of $2,500,000 up
to a maximum annual Cash Bonus of $720,000. If Jaco's earnings before income
taxes are in excess of $12,000,000 for any such fiscal year, in addition to the
Cash Bonus of $720,000, Girsky shall receive such number of common stock options
of Jaco as shall be negotiated between Girsky and Jaco at such time (the "Option
Bonus" and, together with the Cash Bonus, the "Performance Bonus"). As used
herein, the term "earnings before income taxes" shall mean the income of Jaco
before extraordinary items and before payment of income taxes as shown on Jaco's
consolidated financial statements prepared in accordance with generally accepted
accounting principles. The Performance Bonus shall be payable every year on
November 1 for the preceding fiscal year.
2.3 In addition to the Base Salary and Performance Bonus and
not in lieu thereof, in accordance with Section 2.4 hereof, Girsky shall receive
as additional compensation the product of $50,000, multiplied by the number of
years which shall have passed since July 1, 1984 and until the end of the last
day on which Girsky shall be employed hereunder ("Deferred Compensation"). Jaco
may, but shall not be obligated to, set aside funds with which to pay the
Deferred Compensation, it being understood and agreed that such funds are and
shall be the sole and exclusive property of Jaco, free from any lien or claim of
Girsky. Should Girsky so request, Jaco, in its sole and absolute discretion,
may, but shall not be obligated to, invest such funds in one or more nationally
recognized, institutionally managed mutual funds which invest in publicly traded
equity
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or debt securities. Should Girsky make any such request and should Jaco make any
such investment in accordance with such request, the Deferred Compensation shall
be increased by an amount equal to any after tax gain or after tax income
realized therefrom or reduced by an amount equal to any loss realized therefrom,
as the case may be. For purposes of calculating after tax gain, income or loss
for purposes of this Section 2.3, it shall be assumed that Jaco is taxable on
its income at the highest applicable marginal rates.
2.4 The Deferred Compensation shall become payable to Girsky
in its entirety not later than January 15th of the year next following the later
to occur of the following events:
(a) Girsky's attainment of age 60; or
(b) Girsky's cessation of employment hereunder
for any reason; provided, however, if Girsky continues to be employed by
Jaco after the expiration of this Employment Agreement in a substantially
similar executive position to that provided for hereunder, the Deferred
Compensation shall not become payable to him until cessation of such
employment, whether or not such employment is pursuant to a written agreement.
2.5 (a) Upon Girsky's death, his legal representative(s) shall
be paid the sum of $1,500,000 (the "Death Benefit") within fifteen (15) days of
Jaco's receipt of the proceeds of the insurance on Girsky's life purchased
pursuant to the provisions of Section 2.6 below. If, for any reason, at the time
of Girsky's death, Jaco does not have in force an insurance policy on Girsky's
life, then, notwithstanding anything in this Employment Agreement to the
contrary, the Death Benefit shall be due and payable within fifteen (15) days of
Girsky's death.
(b) Upon Girsky's retirement on account of
permanent disability (as that term is defined in Section 4.2 below) during the
term hereof, he shall be paid the sum of $500,000
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(the "Disability Benefit") in twelve (12) equal monthly installments, commencing
with the month in which Jaco receives the proceeds of the annuity or other
endowment policy purchased for Girsky's benefit pursuant to the provisions of
Section 2.6 below. If, for any reason, at the time of Girsky's retirement on
account of permanent disability, Jaco does not have in force an annuity or other
endowment policy for the benefit of Girsky, then, notwithstanding anything in
this Employment Agreement to the contrary, Jaco shall commence monthly payments
of the Disability Benefit in the month next succeeding the month of Girsky's
retirement on account of permanent disability.
2.6 Jaco shall use its best efforts to purchase insurance on
the life of Girsky, and insurance against Girsky becoming disabled, as well as
annuities or other endowment policies (collectively, "Policies"), in sufficient
amounts fully to fund its obligations to Girsky under Section 2.5 above. All
such policies shall be and shall remain the property of Jaco. Girsky shall
cooperate fully with Jaco to enable Jaco to obtain such policies.
2.7 The obligations of Jaco to Girsky hereunder are general
unsecured obligations of Jaco to Girsky, and Girsky shall have no security
interest or other interest of any nature whatsoever in the Policies or the
proceeds thereof (except as provided in Section 2.8 below), or in any other
assets of Jaco. Jaco, in its absolute discretion, may establish any reserves or
special accounts or segregate assets to fund such obligations. Girsky shall not
sell, transfer, assign, pledge, encumber, hypothecate or otherwise alienate any
right or entitlement of his hereunder. No such purported sale, transfer,
assignment, pledge, encumbrance, hypothecation or other alienation shall have
any force or effect or in any way be binding upon or be enforceable against
Jaco. Except as otherwise provided by law, no such right or entitlement shall be
subject to attachment or garnishment.
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2.8 If, at any time, Girsky ceases to be an employee of Jaco
other than on account of death or retirement on account of permanent disability,
Jaco, at Girsky's option, shall transfer and assign to Girsky all its right,
title and interest in the Policies and Jaco shall cause the premiums on the
Policies to be fully paid up to the date of Girsky's termination. Girsky shall
refund to Jaco the pro rata portion (determined by the straight-line method) of
premiums on the Policies, if any, paid by Jaco for any period beyond the
termination date. Upon such termination of Girsky's employment and upon complete
assignment of all of the Policies to Girsky, Jaco shall have no further
liability to Girsky for payment of premiums under the Policies or otherwise in
respect of its obligations under Sections 2.5 and 2.6 hereof.
3. Services to be Provided.
3.1 Girsky shall devote his best efforts and substantially all
of his working time to the business of Jaco.
3.2 Girsky shall perform all duties, obligations, and
responsibilities assigned to him by the Board of Directors and ordinarily
performed by a person employed as a senior executive officer, and shall devote
his full attention to the performance of the duties assigned to him.
3.3 If duly elected, Girsky shall also serve as a director of
Jaco and as an officer and/or director of any of its subsidiaries, whether now
existing or hereafter established or acquired, and he shall perform such duties
as are assigned to him, from time to time, by the Board of Directors of Jaco or
any of its subsidiaries.
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4. Termination of Employment.
4.1 During the Employment Period, Girsky's employment may be
terminated by the Board of Directors of Jaco on the occurrence of any one or
more of the following events:
(a) The death of Girsky;
(b) Subject to the provisions of Section 4.2
below, the disability of Girsky; or
(c) For "Cause", which shall mean (i) the
willful failure by Girsky substantially to perform his duties hereunder for
reasons other than death or disability; (ii) the willful engaging by Girsky
in misconduct materially injurious to Jaco; or (iii) the commission by
Girsky of an act constituting common law fraud or a felony.
4.2 If Girsky becomes mentally or physically disabled for a
period of six (6) consecutive months so that he is not able to perform his
duties substantially as contemplated herein ("Disability"), Jaco's obligations
to pay the Base Salary and the Performance Bonus shall cease from and after the
last day of such six (6) month period and shall not be resumed unless and until
Girsky shall have returned to his duties on a full time basis for a period of
two (2) consecutive months. During such two (2) month period, Girsky shall be
paid at the rates of Base Salary and Performance Bonus which would then have
been prevailing hereunder had he not become so disabled. If Girsky's Disability
becomes permanent, Jaco, at its option, may terminate Girsky's employment with
Jaco and its obligation hereunder to pay the Base Salary and the Performance
Bonus. Girsky's Disability shall be deemed to have become permanent when, as a
result of the injury or sickness, Girsky becomes wholly and continuously
disabled and is thus prevented from performing the material and substantial
duties of his employment as set forth in Section 1.1 above and while under the
care of
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a physician.
5. Reimbursement of Expenses. Jaco shall reimburse Girsky for all reasonable
expenses incurred in connection with the promotion of the business of Jaco,
including expenses for travel, entertainment and similar expenses incurred by
Girsky on Jaco's behalf. No such reimbursement shall be made except upon the
presentation by Girsky of an itemized account of such expenses or other evidence
thereof for which reimbursement then is being sought, all in form reasonably
satisfactory to Jaco.
6. Indemnity. Jaco, to the maximum extent it may provide indemnification to an
officer or director under applicable law, shall indemnify Girsky and hold him
harmless from any and all liability arising out of any act or failure to act
undertaken by him in good faith while performing services for Jaco, and shall
use its best efforts to obtain coverage for him under any insurance policy now
in force or hereafter obtained during the Employment Period covering officers
and directors of Jaco against claims made against them or any of them for any
act or failure to act in such capacities. Jaco shall pay all expenses, including
reasonable attorneys' fees, actually or necessarily incurred by Girsky in
connection with the defense of any action, suit, or proceeding arising out of
any such claim and in connection with any appeal arising therefrom.
7. Disclosure of Information. All memoranda, notes, records, or other documents
made or compiled by Girsky or made available to him during the course of his
employment with
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Jaco concerning the business of Jaco shall be Jaco's property and shall be
delivered to Jaco by Girsky on the termination of Girsky's employment. Unless
authorized by Jaco, Girsky shall not use for himself or others or divulge to
others, any proprietary or confidential information of Jaco obtained by him as a
result of his employment. For purposes of this Section 7, the term "proprietary
or confidential information" shall mean all information which (i) is known only
to Girsky or to Girsky and employees, former employees, consultants of Jaco, or
others in a confidential relationship with Jaco, (ii) relates to specific
matters such as trade secrets, customers, potential customers, vendor lists,
pricing and credit techniques, research and development activities, books and
records, and commission schedules, as they may exist from time to time, which
Girsky may have acquired or obtained by virtue of work heretofore or hereafter
performed for or on behalf of Jaco or which he may acquire or may have acquired
knowledge of during the performance of such work, and (iii) is not readily
available to others. In the event of a breach or a threatened breach by Girsky
of the provisions of this Section 7, Jaco shall be entitled to an injunction
restraining Girsky from disclosing, in whole or in part, the aforementioned
proprietary or confidential information of Jaco, or from rendering any services
to any person, firm, corporation, association, or other entity to whom or to
which such proprietary or confidential information, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing contained herein shall
be construed as prohibiting Jaco from pursuing any other remedies available to
Jaco for such breach or threatened breach, including the recovery of damages
from Girsky.
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8. Restrictive Covenants.
8.1 Girsky hereby acknowledges and recognizes the highly
competitive nature of Jaco's business and, accordingly, in consideration of the
premises contained herein, agrees that during the Employment Period and
thereafter until the Designated Date (as hereinafter defined) he will not: (i)
directly or indirectly engage in any Competitive Activity (as hereinafter
defined), whether such engagement shall be as an officer, director, employee,
consultant, agent, lender, stockholder, or other participant; or (ii) assist
others in engaging in any Competitive Activity. The term "Competitive Activity"
shall mean and shall include soliciting, raiding, enticing, or inducing,
individually or in concert with others, (i) any person or entity to be a
customer for the same or similar services for which that person or entity
engaged Jaco, if such person or entity (a) was a customer of Jaco's during the
Employment Period or at any time thereafter prior to the Designated Date, or (b)
was solicited by Jaco to be a customer during the one-year period prior to the
termination of this Employment Agreement; (ii) any manufacturer or supplier
whose products are distributed by Jaco at the time this Employment Agreement is
terminated to act as a manufacturer or supplier for any other party of the same
or similar goods that it supplies to Jaco; or (iii) any employee of Jaco to
leave Jaco or to do business with any enterprise or business which competes with
Jaco.
8.2 As used in this Section 8, the "Designated Date"
shall mean any of the following dates:
(a) in the event Girsky willfully terminates his
employment with Jaco in violation of this Employment Agreement prior to the
expiration of the Employment Period, the term "Designated Date" shall mean the
first anniversary of the date of such termination;
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(b) in the event Jaco terminates the employment
of Girsky under this Employment Agreement for Cause, the term "Designated Date"
shall mean the first anniversary of the date of such termination; or
(c) in the event Jaco terminates the employment
of Girsky without cause, the term "Designated Date" shall mean the date of such
termination.
8.3 It is the desire and intent of the parties that the
provisions of this Section 8 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Section 8 shall be
adjudicated to be invalid or unenforceable in any such jurisdiction, such
provision of this Section 8 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision of this Section 8 in the
particular jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 8 is adjudicated to be too
broad to permit enforcement thereof to its fullest extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Girsky hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.
8.4 In the event of a breach or threatened breach by Girsky of
the provisions of this Section 8, Jaco shall be entitled to an injunction
restraining him from such breach. Nothing contained herein shall be construed as
prohibiting Jaco from pursuing any other remedies available to it for such
breach or threatened breach or any other breach of this Employment Agreement.
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9. Consolidation; Merger; Change of Control.
9.1 In the event of any consolidation or merger of Jaco into
or with another corporation during the Employment Period, and Jaco is not the
surviving entity, or the sale of all or substantially all of the assets of Jaco
to another corporation during the Employment Period, or in the event that fifty
(50%) percent or more of the voting common stock of Jaco shall be owned by one
or more individuals or entities, who are acting in concert or as part of an
affiliated group (other than a group one of the members of which is Girsky) at
any time during the Employment Period, (the occurrence of any of the foregoing,
a "Change of Control"), then (i) Jaco shall pay or cause to be paid to Girsky a
certified or cashier's check in an amount equal to two hundred and ninety-nine
percent (299%) of the average of Girsky's Base Salary plus Cash Bonus for the
previous five (5) years; and (ii) this Employment Agreement may be assigned by
Jaco or any such successor or surviving corporation on sixty (60) days prior
written notice to Girsky; provided, however, such assignment shall not cause
Girsky's principal place of employment to be moved to any space located more
than forty-five (45) miles from Girsky's principal place of employment prior to
a Change of Control without his prior written consent.
9.2 Notwithstanding the provisions of Section 9.1
above, any such payments shall be made only in an amount which, when taken
together with the present value of all other payments to Girsky that are
contingent on a Change in Control of Jaco, computed in accordance with the
provisions of Section 280G(d)(4) of the Internal Revenue Code of 1986
(the "Code"), does not equal or exceed three times Girsky's "Base Amount",
as computed in accordance with Code Section 280G(b)(3).
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10. Notices. Any notices required or permitted to be given under the provisions
of this Employment Agreement shall be in writing and delivered personally, sent
by recognized overnight courier or mailed by certified or registered mail,
return receipt requested, postage prepaid to the persons and at the addresses
first set forth above, or to such other person at such other address as any
party may request by notice in writing to the other party to this Employment
Agreement. Notices which are hand delivered or delivered by recognized overnight
courier shall be effective on delivery. Notices which are mailed shall be
effective on the third day after mailing.
11. Construction, This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
12. Successors and Assigns. This Employment Agreement shall be binding on the
successors and assigns of Jaco and shall inure to the benefit and be enforceable
by and against its successors and assigns. This Employment Agreement is personal
in nature and may not be assigned or transferred by Girsky without the prior
written consent of Jaco.
13. Entire Agreement. This Employment Agreement contains the entire
understanding and agreement between the parties relating to the subject matter
hereof, and neither this Employment Agreement nor any provision hereof may be
waived, modified, amended, changed, discharged, or terminated, except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge, or termination is sought.
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14. Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and all of which
counterparts shall together constitute a single agreement.
15. Illegality. In case any one or more of the provisions of this Employment
Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, the legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16. Captions. The captions of the sections hereof are for convenience only and
shall not control or affect the meaning or construction of any of the terms or
provisions of this Employment Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
JACO ELECTRONICS, INC.
By: HERBERT ENTENBERG
Vice President
JOEL H. GIRSKY
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