-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J59cANi4W9krKPIYY0sBHp2P2e4Hik+7h845snAFjUoMWQIdUl+I5zyvYfWYHd1g IxBd6MsliRS94YhsFW/4Sw== 0000052971-05-000019.txt : 20051027 0000052971-05-000019.hdr.sgml : 20051027 20051027143010 ACCESSION NUMBER: 0000052971-05-000019 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACO ELECTRONICS INC CENTRAL INDEX KEY: 0000052971 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 111978958 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 002-34664 FILM NUMBER: 051159715 BUSINESS ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 6312735500 MAIL ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-K/A 1 jaco10ka2005.txt JACO ELECTRONICS, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment No. 1 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-5896 ---------------- JACO ELECTRONICS, INC. (Exact name of registrant as specified in its charter) New York 11-1978958 -------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 145 Oser Avenue, Hauppauge, New York 11788 ------------------------------------ --------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (631) 273-5500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.10 per share (Title of Class) 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. Yes: X No: ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes: No: X ------ ------ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: No: X ------ ------ The aggregate market value of voting stock held by non-affiliates of the registrant as of December 31, 2004 was $ 19,198,400 (based on the last reported sale price on the Nasdaq National Market on that date). The number of shares of the registrant's common stock outstanding as of September 20, 2005 was 6,267,832 shares (excluding 659,900 treasury shares). DOCUMENTS INCORPORATED BY REFERENCE: None. EXPLANATORY NOTE This Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended June 30, 2005 filed on September 28, 2005 (the "Form 10-K") is being filed to amend and restate only the following items of the Form 10-K: Part III, Items 10, 11, 12, 13 and 14. Other than these items, none of the information contained in the Form 10-K has been revised or amended. PART III Item 10. Directors and Executive Officers of the Registrant. The current directors and executive officers of the Company, their ages, their positions and terms of office with the Company are set forth below. Name Age Position Joel H. Girsky................................ 66 Chairman of the Board, President and Treasurer Joseph F. Oliveri............................. 56 Vice Chairman of the Board and Executive Vice President Charles B. Girsky............................. 71 Executive Vice President and Director Jeffrey D. Gash............................... 53 Executive Vice President, Finance and Secretary Gary Giordano................................. 48 Executive Vice President Stephen A. Cohen.............................. 68 Director Edward M. Frankel............................. 67 Director Joseph F. Hickey, Jr.......................... 47 Director Neil Rappaport................................ 59 Director Robert J. Waldman............................. 70 Director - ---------------
Joel H. Girsky has served as Chairman of the Board, President and Treasurer of the Company since 1983, and has been a Director and executive officer of the Company since it was founded in 1961. He also is a director of Frequency Electronics, Inc. of Uniondale, New York, a manufacturer of highly sophisticated synchronized time clocks. Mr. Girsky and Charles B. Girsky are brothers. Joseph F. Oliveri has served as Vice Chairman of the Board of Directors and an Executive Vice President of the Company since June 2000. From March 1983 to June 2000, he served as President and Chief Executive Officer of Interface Electronics Corp., a distributor of electronic components ("Interface"). The Company acquired Interface in June 2000. Charles B. Girsky has served as Executive Vice President of the Company since 1988 and as a Director since 1996. He was a founder, Director and President of the Company from 1961 through 1983 and then rejoined the Company as an executive officer in August 1985. Mr. Girsky and Joel H. Girsky are brothers. Jeffrey D. Gash has served as an Executive Vice President, Finance of the Company since October 2000. He served as Vice President of Finance from January 1989 to September 2000, and as Controller of the Company for more than five years prior thereto. In September 1999, he became Secretary of the Company. He has also served in similar capacities with the Company's subsidiaries. Gary Giordano has served as Executive Vice President of the Company since June 2000. From February 1992 to June 2000, he served as Vice President of Sales and Marketing. Stephen A. Cohen has served as a Director since 1970. Since August 1989, he has practiced law as a member of Morrison Cohen, LLP, the Company's outside general counsel. Edward M. Frankel has served as a Director since May 1984. Since December 1999, he has been Chairman of the Board of Vitaquest International, Inc., a manufacturer and distributor of vitamins and health and beauty products. For more than five years prior thereto, he served as President of Vitaquest and its predecessor entities. Joseph F. Hickey, Jr. has served as a Director since May 1997. Since January 2003, he has been a retirement consultant for Cleary Gull Inc., a Milwaukee-based financial services firm. He is also currently a managing director at Hopewell Ventures, L.P., a venture capital firm. From February 1991 to April 2001, he was employed by Tucker Anthony Sutro Capital Markets, a national investment banking firm which merged with RBC Dain Rauscher Corp. in March 2002, where he was a managing director in its investment banking department. Neil Rappaport has served as a Director since February 2004 and is a Venture Partner with Windward Ventures, a venture capital firm. Prior to joining Windward Ventures, Mr. Rappaport was Vice President of Sales for Vitesse Semiconductor Corporation. Previously, Mr. Rappaport was national sales manager with Applied Micro Circuits Corporation. He began his career as a design engineer at Hughes Aircraft Company. Robert J. Waldman has served as a Director since February 2004 and is President of RJW Associates Inc., a financial and tax consulting firm located in Boynton Beach, Florida. Prior thereto, Mr. Waldman served as senior partner of Horowitz, Waldman, Berretta & Maldow, L.L.P., Woodbury, New York, a certified public accounting firm from 1968 to 2002. He is licensed to practice as a certified public accountant in both New York and in Florida, and has over 45 years of experience in public accounting. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules promulgated thereunder require the Company's directors and executive officers, and persons who beneficially own more than ten percent of the Company's Common Stock to file with the Securities and Exchange Commission (the "SEC") initial reports of beneficial ownership on Form 3 and reports of changes in beneficial ownership on Form 4 or Form 5. Executive officers, directors, and ten percent shareholders are required to furnish the Company with copies of such forms. Based solely on a review of such forms furnished to the Company and written representations from certain reporting persons, the Company believes that during its fiscal year ended June 30, 2005 ("Fiscal 2005"), the Company's executive officers, directors and ten percent shareholders complied with all applicable Section 16(a) filing requirements. Audit Committee and Audit Committee Expert The Company has a separately-designated standing Audit Committee of its Board of Directors established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee currently are Robert J. Waldman, who acts as Chairman of the committee, Edward M. Frankel and Joseph F. Hickey, Jr. Our Board of Directors has determined that at least one person serving on the Audit Committee is an "audit committee financial expert" as defined under Item 401(h) of SEC Regulation S-K. Robert J. Waldman, the Chairman of the Audit Committee, is an "audit committee financial expert" and is independent as defined under applicable rules of the SEC and The Nasdaq Stock Market. Code of Ethics We have adopted a code of ethics within the meaning of Item 406(b) of SEC Regulation S-K, called the "Jaco Electronics, Inc. Code of Business Conduct," which applies to our chief executive officer, chief financial officer, controller and all our other officers, directors and employees. This document is available free of charge on our website at jacoelectronics.com. Item 11. Executive Compensation. Summary of Cash and Certain Other Compensation The following table sets forth certain information concerning the compensation paid or accrued by the Company for services rendered to the Company in all capacities for the fiscal years ended June 30, 2005, 2004 and 2003 by its Chief Executive Officer and each of the Company's other four most highly compensated executive officers during Fiscal 2005 (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE Annual Compensation (1) Long Term Compensation ----------------------- ---------------------- Securities Name and Restricted Underlying All Other - ------------------------ Stock Options/ Compensation Principal Position Year Salary($) Bonus($) Awards($)(2) SARs(#) ($)(3) - ------------------ ---- --------- -------- ------------ ------- ------ Joel H. Girsky (4) 2005 337,500 -- -- -- 53,447 Chairman of the Board 2004 337,500 -- -- -- 52,740 President, and Treasurer 2003 337,500 -- -- 25,000 60,496 Joseph F. Oliveri 2005 270,000 85,700 -- -- 804 Vice Chairman and 2004 270,000 77,300 -- -- 432 Executive Vice President 2003 270,000 123,200 -- 25,000 414 Charles B. Girsky (4) 2005 225,000 --- --- -- 2,495 Executive Vice President 2004 225,000 -- -- -- 3,519 2003 225,000 25,000 2,344 Jeffrey D. Gash 2005 146,700 15,000 -- -- 2,076 Executive Vice 2004 144,000 -- -- -- 2,187 President, Finance and 2003 144,000 2,700 -- 25,000 2,473 Secretary Gary Giordano 2005 180,000 -- -- -- 1,804 Executive Vice President 2004 180,000 -- -- -- 2,687 2003 180,000 -- -- 25,000 1,095
1. The costs of certain benefits are not included because they did not exceed, in the case of each Named Executive Officer, the lesser of $50,000 or ten percent of the total annual salary and bonus reported in this table. 2. On June 9, 1997, the Board of Directors awarded an aggregate of 97,500 shares of Common Stock under the Company's Restricted Stock Plan to its executive officers as follows: 37,500 shares of Common Stock to Mr. Joel Girsky, 37,500 shares of Common Stock to Mr. Charles Girsky, 15,000 shares of Common Stock to Mr. Jeffrey Gash and 7,500 shares of Common Stock to Mr. Gary Giordano. The plan was approved by the Company's shareholders on December 9, 1997. The awards vested in one-quarter increments annually and have been adjusted to give effect to the 3-for-2 split of the Common Stock effected on July 24, 2000. Accordingly, as of June 30, 2005, all of the aforementioned awards were vested. The value of the aggregate restricted stock holdings of these individuals at June 30, 2005 was as follows: $86,000 for Mr. Joel Girsky, $86,000 for Mr. Charles Girsky, $34,400 for Mr. Jeffrey Gash and $8,600 for Mr. Gary Giordano. These amounts are based upon the fair market value per share of the Company's Common Stock at June 30, 2005, minus the purchase price of such awards. The closing sale price for the Company's Common Stock as of June 30, 2005 on the Nasdaq National Market was $2.96. 3. Includes 401(k) matching contributions, premiums paid on group term life insurance, and, in the case of Mr. Joel Girsky, deferred compensation accrued in connection with his employment agreement with the Company. 401(k) matching contributions for Fiscal 2005 for the Named Executive Officers were as follows: Mr. Joel Girsky - $1,428, Mr. Oliveri - $0, Mr. Charles Girsky - $1,038, Mr. Gash - $1,646 and Mr. Giordano - $1,523. Premiums paid on group term life insurance for Fiscal 2005 for the Named Executives were as follows: Mr. Joel Girsky - $2,019, Mr. Oliveri - $804, Mr. Charles Girsky - $1,457, Mr. Gash - $430 and Mr. Giordano - $281. $50,000 in deferred compensation was accrued in Fiscal 2005 in connection with Mr. Joel Girsky's employment agreement with the Company. 4. Effective July 1, 2005, each of Messrs. Joel Girsky and Charles Girsky voluntarily agreed to an annual base salary reduction of $70,000 and $20,000, respectively, for the fiscal year ending June 30, 2006. Employment Agreements The Company entered into a four-year employment agreement with Mr. Joel Girsky, effective as of July 1, 2001, to serve as the Company's Chairman and President. The employment agreement will automatically be extended for additional one-year periods on each anniversary date, unless notice of non-renewal is given 90 days prior to an anniversary date. In the event that a notice of non-renewal is so delivered by either party, Mr. Girsky's employment agreement shall continue for a period of three years following the anniversary date which follows immediately after the date that such notice is delivered. However, in the event that a notice of non-renewal is delivered by either party at such time as Mr. Girsky is at least 70 years of age, then the employment agreement shall continue for a period of only one year following the anniversary date which follows immediately after the date that such notice is delivered. The employment agreement has been automatically extended for an additional one-year period. Mr. Girsky is entitled to receive a base salary of $375,000 for each fiscal year ending June 30; however, effective October 2001, he (and other Named Executive Officers) voluntarily agreed to a 10% salary reduction, which remains in effect. In addition, he is entitled to receive a cash bonus equal to four percent of the Company's earnings before income taxes for each fiscal year in which such earnings are between $1.0 million and $2.5 million, or six percent of the Company's earnings before income taxes for such fiscal year if such earnings are in excess of $2.5 million, up to a maximum annual cash bonus of $720,000. If the Company's earnings before income taxes are in excess of $12.0 million for any such fiscal year, Mr. Girsky may also receive stock options. Mr. Girsky or his estate, as the case may be, is entitled to receive a payment of $375,000 if he dies or becomes permanently disabled during the term of the employment agreement. The death benefit of $1.5 million provided for in Mr. Girsky's prior employment agreement was funded by life insurance policies maintained by the Company, which policies have been transferred to Mr. Girsky. Mr. Girsky also receives deferred compensation which accrues at the rate of $50,000 per year, and becomes payable in a lump sum at the cessation of his employment, with or without cause, at any time. In the event of a change in control of the Company, Mr. Girsky will receive 299% of the average of his base salary plus cash bonus for the previous five years, to the extent that such payment does not equal or exceed three times Mr. Girsky's base amount, as computed in accordance with Section 280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code"). Additionally, upon a change of control, Mr. Girsky's employment agreement may be assigned by the Company or any such successor or surviving corporation with the prior written consent of Mr. Girsky. Commencing upon the termination of Mr. Girsky's employment with the Company, and ending on the later to occur of Mr. Girsky's death or his spouse's death, the Company will permit Mr. Girsky and his spouse, to the extent eligible, to participate in the health and medical benefit program provided by the Company to senior executive officers. The Company entered into a three-year employment agreement with Joseph F. Oliveri, effective as of June 6, 2000, as amended as of July 1, 2001. The employment agreement will automatically be extended for additional one-year periods on each anniversary date, unless notice is given 90 days prior to an anniversary date. Mr. Oliveri is entitled to receive a base salary at an annual rate of $300,000 however, effective October 2001, he (and the other Named Executive Officers) voluntarily agreed to a 10% salary reduction, which remains in effect. The employment agreement has been automatically extended for three successive one-year periods. In addition, he is entitled to receive a cash bonus equal to two percent of gross profit from certain customers for each twelve-month period beginning June 1, 2000. The Company entered into a four-year employment agreement with Charles Girsky, effective as of July 1, 2001, to serve as the Company's Executive Vice President. The employment agreement will automatically be extended for additional one-year periods on each anniversary date, unless notice by either party is given 90 days prior to an anniversary date. In the event that a notice of non-renewal is so delivered by either party, Mr. Girsky's employment agreement shall continue for a period of three years following the anniversary date which follows immediately after the date that such notice is delivered. However, in the event that a notice of non-renewal is delivered at such time as Mr. Girsky is at least 70 years of age, then the employment agreement shall continue for a period of only one year following the anniversary date which follows immediately after the date that such notice is delivered. The employment agreement has been automatically extended for an additional one-year period. Mr. Girsky is entitled to receive a base salary of $250,000 for each fiscal year ending June 30; however, effective October 2001, he (and the other Named Executive Officers) voluntarily agreed to a 10% salary reduction, which remains in effect. In addition, he is entitled to receive a cash bonus equal to two percent of the Company's earnings before income taxes for each fiscal year in which such earnings are between $1.0 million and $2.5 million, or three percent of the Company's earnings before income taxes for such fiscal year if such earnings are in excess of $2.5 million, up to a maximum annual cash bonus of $360,000. If the Company's earnings before income taxes are in excess of $12.0 million for any such fiscal year, Mr. Girsky may also receive stock options. Mr. Girsky or his estate, as the case may be, is entitled to receive a payment of $250,000 if he dies during the term of the employment agreement. The death benefit of $1.0 million provided for in Mr. Girsky's prior employment agreement was funded by a life insurance policy maintained by the Company, which policy has been transferred to Mr. Girsky. In the event of a change in control of the Company, Mr. Girsky will receive 250% of the average of his base salary plus cash bonus for the previous five years, to the extent that such payment does not equal or exceed three times Mr. Girsky's base amount, as computed in accordance with Section 280G(d)(4) of the Code. Additionally, upon a change of control, Mr. Girsky's employment agreement may be assigned by the Company or any such successor or surviving corporation with the prior written consent of Mr. Girsky. Commencing upon the termination of Mr. Girsky's employment with Jaco, and ending on the later to occur of Mr. Girsky's death or his spouse's death, the Company will permit Mr. Girsky and his spouse, to the extent eligible, to participate in the health and medical benefit program provided by the Company to senior executive officers. The Company entered into a four-year employment agreement with Jeffrey Gash, effective as of July 1, 1998, as amended as of July 1, 2001, to serve as the Company's Executive Vice President of Finance. The employment agreement will automatically be extended for additional one-year periods on each anniversary date, unless notice is given 90 days prior to an anniversary date. In the event that a notice of non-renewal is delivered by either party, Mr. Gash's employment agreement shall continue for a period of three years following the anniversary date which follows immediately after the date that such notice is delivered. The employment agreement has been automatically extended for three successive one-year periods. Pursuant to the agreement, as amended, Mr. Gash is entitled to receive a base salary of $160,000 for each fiscal year ending June 30; however, effective October 2001, he (and the other Named Executive Officers) voluntarily agreed to a 10% salary reduction, which remains in effect. In addition, he is entitled to receive a cash bonus as determined by the Board of Directors and the President. Mr. Gash or his estate, as the case may be, is entitled to receive a payment of $750,000 if he dies during the term of the employment agreement. The death benefit is currently being funded by a life insurance policy maintained by the Company. In the event of Mr. Gash's cessation of employment with the Company, upon his request, the Company is obligated to transfer such policy to Mr. Gash. Thereafter, the Company would have no further liability for the payment of such benefit or the premiums on such policy. In the event of a change in control of the Company, Mr. Gash will receive 200% of the average of his base salary plus cash bonus for the previous five years, to the extent that such payment does not equal or exceed three times Mr. Gash's base amount, as computed in accordance with Section 280G(d)(4) of the Code. Additionally, upon a change of control, Mr. Gash's employment agreement may be assigned by the Company or any such successor or surviving corporation with the prior written consent of Mr. Gash. The Company entered into an agreement with Gary Giordano dated as of July 20, 1998, which provides a lump sum payment to him in the event of a change in control of the Company. If Mr. Giordano's employment with the Company or a successor or surviving corporation is terminated other than for cause (e.g., commission by Mr. Giordano of an act constituting common law fraud or a felony), for a period of up to two years after the change in control event, he will receive up to 200% of the average of his base salary plus cash bonus for the previous three years based upon a formula. The payment will be made to Mr. Giordano to the extent such payment does not exceed Mr. Giordano's base amount as computed in accordance with Section 280G(d)(4) of the Code. The agreement also requires Mr. Giordano to refrain from disclosing proprietary or confidential information regarding the Company. The agreement does not obligate the Company to retain the services of Mr. Giordano. Option Grants There were no stock options granted during Fiscal Year 2005 to any of the Named Executive Officers. Option Exercises and Fiscal Year-End Option Values The following table provides information concerning stock options exercised during Fiscal 2005 and the number of unexercised options held by the Named Executive Officers as of June 30, 2005. Also reported are the values for unexercised, "in the money" options, which represent the positive spread between the respective exercise prices of such options and the fair market value of the Common Stock as of June 30, 2005. AGGREGATE OPTIONS/SAR EXERCISES IN FISCAL 2005 AND FISCAL YEAR-END OPTION/SAR VALUES Number of Securities Underlying Unexercised Value of Unexercised Shares Options/SARs at FY-End In-the-Money Options/SARs at Acquired Value (#) FY-End($)(1) On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ------------ --------- ----------- ----------- ----------- ------------- Name (#) ($) ---- --- --- Joel H. Girsky -- -- 75,000 -- 15,300 -- Joseph F. Oliveri -- -- 40,000 -- 15,300 -- Charles B. Girsky 15,000 46,800 50,000 -- 15,300 -- Jeffrey D. Gash 15,000 46,800 40,000 -- 15,300 -- Gary Giordano -- -- 40,000 -- 15,300 --
(1) Based on the fair market value per share of the Common Stock at year end, minus the exercise or base price on "in-the-money" options. The closing sale price for the Company's Common Stock as of June 30, 2005 on the Nasdaq National Market was $2.96 per share. Director Compensation Members of our Board of Directors who are not officers or employees of the Company receive an annual fee of $10,000 for their service on our Board of Directors. Directors are also reimbursed for reasonable expenses incurred in connection with attending Board and committee meetings. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Introduction The Compensation Committee of the Board of Directors of the Company (the "Committee") is composed of three directors, each of whom is independent as defined in applicable rules of the Nasdaq Stock Market, Inc. The Committee is responsible for reviewing and recommending to the Company's Board of Directors the Company's compensation policies for the remuneration of the Company's Chief Executive Officer and all of its other executive officers (collectively, "Executives"), including salaries, bonuses and grants of awards under, and administration of the Company's stock incentive plans. In determining the cash and non-cash compensation of Executives, the Committee annually evaluates both individual and corporate performance from both a short-term and long-term perspective. Philosophy The Company's compensation program for Executives (the "Program") seeks to encourage the achievement of business objectives of the Company and superior corporate performance by the Executives. The Program is designed to enable the Company to attract, reward and retain highly qualified executives and to foster a performance-oriented environment wherein management's long-term focus is on maximizing shareholder value through the use of equity-based incentives. The Program calls for consideration of the nature of each Executive's work and responsibilities, his or her leadership and technical skills, unusual accomplishments or achievements on the Company's behalf, years of service, the Executive's total compensation package (cash and non-cash compensation) and the Company's financial condition generally. The Committee does not assign weights to these factors nor necessarily consider any one more important than the others. Components of Executive Compensation Historically, the Company's executive-level employees have received cash-based and equity-based compensation. The Company attempts to pay its executive officers competitively in order that it may retain the most capable people in the industry. Compensation levels for the Executives are derived from market comparisons with similarly-sized distribution companies, including those engaged in the electronic components distribution industry with which the Company competes for executive talent. The Committee believes that the Company's most direct competitors for this purpose are not necessarily all of the companies that would be included in a peer group established to compare shareholder returns. Therefore, the compensation peer group is not the same as the peer group index set forth in the Company's Stock Performance Graph included elsewhere in this report. Based on information currently available to the Committee, including publicly available compensation information relating to direct competitors of the Company, the Committee believes that cash compensation levels for the Executives, including the Chief Executive Officer, are, on average, at or below the median of base salary levels for executive officers of similar companies. Cash-Based Compensation: Base salary represents the primary cash component of an Executive's compensation, and is determined by evaluating the responsibilities associated with an Executive's position at the Company and his or her overall level of experience. In addition, the Committee, in its discretion, may award cash incentive bonuses. The Committee believes that the Executives are best motivated through a combination of stock option awards and cash incentives. As described above under "Executive Compensation -- Employment Agreements," a number of the Executives, including four of five Named Executive Officers, have entered into employment agreements with the Company that provide for fixed amounts of base salary and in some cases, cash bonuses based upon the Company's profitability. For Fiscal 2005, Messrs. Joel Girsky, Charles Girsky and Gary Giordano did not receive cash bonuses, and Messrs. Joseph Oliveri and Jeffrey Gash did receive cash bonuses, as determined in accordance with the terms of their respective employment agreements. Equity-Based Compensation: Equity-based compensation principally has been in the form of stock options, granted pursuant to the Company's 2000 Stock Option Plan and 1993 Non-Qualified Plan and awards of shares of Common Stock under the Company's Restricted Stock Plan. The Committee believes that stock options represent an important component of a well-balanced compensation program. Because stock option awards provide value only in the event of share price appreciation, stock options enhance management's focus on maximizing long-term shareholder value, and thus provide a direct relationship between an Executive's compensation and the shareholders' interests. No specific formula is used to determine option awards for an Executive. Rather, individual award levels are based upon the subjective evaluation by the Committee of each Executive's overall past and expected future contributions to the success of the Company. Additionally, the Committee believes that awards under the Restricted Stock Plan will enhance the alignment of an Executive's interest with that of the shareholders because the Executive may be able to realize greater value with increased stock performance. Compensation of the Chief Executive Officer As described above under "Executive Compensation -- Employment Agreements," the Company has entered into an employment agreement with Joel H. Girsky, our Chairman of the Board and President, pursuant to which Mr. Joel Girsky receives a base salary of $375,000 per fiscal year and an annual incentive cash bonus based on a percentage of the Company's earnings before income taxes, up to a maximum bonus of $720,000 in any fiscal year. Through this incentive bonus arrangement, a substantial portion of Mr. Joel Girsky's cash compensation is specifically linked to the Company's profitability. Because the Company reported a loss from continuing operations in Fiscal 2005, Mr. Girsky was not paid a bonus for Fiscal 2005. In general, the philosophy, factors and criteria of the Committee generally applicable to the Company's senior management are applicable to the Chief Executive Officer. Tax Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code imposes limitations on the federal income tax deductibility of compensation paid to the Company's chief executive officer and to each of the other four most highly compensated executive officers of the Company. Under these limitations, the Company may deduct such compensation only to the extent that during any fiscal year the compensation does not exceed $1,000,000 or meets certain specified conditions (such as certain performance-based compensation that has been approved by the Company's shareholders). Based on the Company's current compensation plans and policies and the Section 162(m) rules, the Company and the Committee believe that, for the near future, there is not a significant risk that the Company will lose any significant tax deduction for executive compensation. The Company's compensation plans and policies will be modified to ensure full deductibility of executive compensation if the Company and the Committee determine that such an action is in the best interests of the Company. COMPENSATION COMMITTEE Edward M. Frankel Joseph F. Hickey, Jr., Chairman Neil Rappaport COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During Fiscal 2005, the Compensation Committee of the Board of Directors consisted of Messrs. Frankel, Hickey and Rappaport. No member of this committee was at any time during Fiscal 2005 or at any other time an officer or employee of the Company, and no member had any relationship with the Company requiring disclosure under SEC rules. No executive officer of the Company has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Company's Board of Directors or the Compensation Committee during Fiscal 2005. COMPARATIVE STOCK PERFORMANCE GRAPH The following is a graph comparing the annual percentage change in the cumulative total shareholder return of the Company's Common Stock with the cumulative total returns of the published Dow Jones US Equity Market Index and Dow Jones US Support Services Index for the Company's last five (5) fiscal years: [GRAPH] 2000 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- ---- Jaco Electronics, Inc. 100.00 41.86 32.05 32.80 41.45 20.18 Dow Jones US Equity Market 100.00 84.89 69.54 70.32 84.65 90.84 Dow Jones US Support Services 100.00 83.53 79.17 71.92 89.77 88.08 - ---------------------
Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate future filings made by the Company under those statutes, none of the preceding Compensation Committee Report on Executive Compensation or the Company Stock Performance Graph will be incorporated by reference into any of those prior filings, nor will any of such reports or graph be incorporated by reference into any future filings made by the Company under those statutes. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth the number and percentage of shares of Common Stock owned as of October 27, 2005 by (i) each director of the Company, (ii) all persons who, to the knowledge of the Company, are the beneficial owners of more than 5% of the outstanding shares of Common Stock, (iii) each of the Company's executive officers, and (iv) all of the Company's directors and executive officers, as a group. Each person named in this table has sole investment power and sole voting power with respect to the shares of Common Stock set forth opposite such person's name, except as otherwise indicated. Aggregate Number of Name and Address of Shares Beneficially Percentage of Shares Beneficial Owner(1) Owned Beneficially Owned(2) - ------------------- ----- ---------------------- Joel H. Girsky 993,540 (3) 15.7% Joseph F. Oliveri 40,000 (4) ** Charles B. Girsky 482,461 (5) 7.6% Stephen A. Cohen 59,683 (6) ** Edward M. Frankel 41,250 (7) ** Joseph F. Hickey, Jr. 57,750 (8) ** Jeffrey D. Gash 72,298 (9) 1.1% Gary Giordano 43,750 (10) ** Robert Waldman 10,500 (11) ** Neil Rappaport 7,500 (12) ** Dimensional Fund Advisors 388,465 (13) 6.2% 1299 Ocean Avenue 11th Floor Santa Monica, CA 90401 Royce & Associates, LLC 604,150 (14) 9.6% 1414 Avenue of the Americas New York, NY 10019 All directors and executive officers as a group (10 persons) 1,808,732 (15) 27.3% - --------------------------------- ** Less than one percent. (1) Unless otherwise indicated, the address of each person listed is c/o Jaco Electronics, Inc., 145 Oser Avenue, Hauppauge, New York, 11788. (2) Assumes a base of 6,267,832 shares of Common Stock outstanding, before any consideration is given to outstanding options. (3) Includes (i) 75,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan, and (ii) 37,500 shares of Common Stock awarded under the Company's Restricted Stock Plan. (4) Includes 40,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan. (5) Includes (i) 319,311 shares of Common Stock owned by the Girsky Family Trust, (ii) 50,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan, and (iii) 37,500 shares of Common Stock awarded under the Company's Restricted Stock Plan. (6) Includes (i) 30,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan, and (ii) 22,500 shares of Common Stock held as nominee for the law firm of Morrison Cohen, LLP, of which Mr. Cohen is a partner. Mr. Cohen disclaims beneficial ownership of such 22,500 shares except to the extent of his pecuniary interest therein by virtue of his partnership interest in Morrison Cohen, LLP. (7) Includes 30,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan. (8) Includes 30,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan. (9) Includes (i) 40,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan, and (ii) 15,000 shares of Common Stock awarded under the Company's Restricted Stock Plan. (10) Includes (i) 40,000 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan, and (ii) 3,750 shares of Common Stock awarded under the Company's Restricted Stock Plan. (11) Includes 7,500 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan. (12) Includes 7,500 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company's 2000 Stock Option Plan. (13) These securities are held in investment advisory accounts of Dimensional Fund Advisors, Inc. This information is based upon an amendment to Schedule 13G filed with the SEC dated February 9, 2005, and information made available to the Company. (14) The information is based upon an amendment to Schedule 13G filed with the SEC dated January 31, 2005, and information made available to the Company. (15) Includes 350,000 shares of Common Stock acquirable pursuant to options presently exercisable and 93,750 shares of Common Stock awarded under the Company's Restricted Stock Plan. Equity Compensation Plan Disclosure The following table summarizes equity compensation plans approved by security holders and equity compensation plans that were not approved by security holders as of June 30, 2005: (c) (a) (b) Number of Securities Number of Securities Weighted-Average Remaining Available for To be Issued Upon Exercise Price of Future Issuance Under Equity Exercise of Outstanding Outstanding Compensation Plans (Excluding Options, Warrants and Options, Securities Plan Category Rights Warrants and Rights Reflected in Column(a) - ------------------------------- ------------------------- ---------------------- ------------------------------- Equity compensation plans (stock option ) approved by stockholders 532,000 $4.97 653,500 ------------------------- ---------------------- ------------------------------- Total 532,000 $4.97 653,500 ========================= ====================== ===============================
Item 13. Certain Relationships and Related Transactions. During Fiscal 2005, the Company paid approximately $615,000 of rental expenses in connection with the Company's main headquarters, Flat Panel Display integration and centralized inventory distribution facility located in Hauppauge, New York, which was paid to Bemar Realty Company, the owner of such premises. Bemar is a partnership consisting of Messrs. Joel Girsky and Charles Girsky, both of whom are executive officers, directors and principal shareholders of the Company. The lease on the property, which is net of all expenses, including taxes, utilities, insurance, maintenance and repairs, was renewed in December 2003 and expires on December 31, 2013. The Company believes the current rental rate for this facility is at its fair market value. As of June 30, 2005, Bemar advanced the Company $125,000 to fund the construction of a new LCD Integration Center which amount the Company has accrued as a liability. During the fiscal years ended June 30, 2005, 2004 and 2003, the Company recorded sales of $1,065,391, $5,515,450 and $1,910,201, respectively, from a customer, Frequency Electronics, Inc. ("Frequency"). Mr. Joel Girsky serves on the Board of Directors of Frequency. Such sales transactions with Frequency are in the normal course of business. Amounts included in accounts receivable from Frequency at June 30, 2005 and 2004 aggregate $206 and $188,720, respectively. Stephen A. Cohen, a director of the Company, is a partner of the law firm of Morrison Cohen, LLP, which rendered legal services to the Company during Fiscal 2005 for which the Company was billed aggregate fees that did not exceed 5% of such law firm's annual gross revenues. The son-in-law of Mr. Joel Girsky, our Chairman and President, is Douglas Spelfogel, who is a partner of the law firm of Nixon Peabody LLP, which rendered legal services to the Company during Fiscal 2005 for which the Company was billed aggregate fees that did not exceed 5% of such law firm's annual gross revenues. Item 14. Principal Accountant Fees and Services. Grant Thornton LLP has audited the Company's financial statements annually since the fiscal year ended June 30, 1984. Audit Fees The aggregate fees billed by Grant Thornton LLP for professional services for the audit of the Company's annual consolidated financial statements for the fiscal years 2005 and 2004 and the review of the consolidated financial statements included in the Company's Forms 10-Q for fiscal years 2005 and 2004 were $289,341 and $396,170, respectively. Audit-Related Fees The aggregate fees billed by Grant Thornton LLP for professional services related to the audit of the Company's annual consolidated financial statements for the fiscal years 2005 and 2004 were $20,027 and $42,344, respectively. These services consisted primarily of (i) services rendered in connection with acquisitions and divestitures by the Company, (ii) assistance with regulatory filings and (iii) consultations on the effects of various accounting issues and changes in professional standards. Tax Fees The aggregate fees billed by Grant Thornton LLP for tax services for the fiscal years 2005 and 2004 were $136,687 and $63,917, respectively. These services consisted primarily of tax planning and assistance with the preparation of returns. All Other Fees There were no fees billed by Grant Thornton LLP for other services for the fiscal years 2005 and 2004. Audit Committee Pre-Approval Policies and Procedures The Audit Committee of the Company's Board of Directors pre-approves on an annual basis the audit, audit-related, tax and other non-audit services to be rendered by the Company's accountants based on historical information and anticipated requirements for the following fiscal year. The Audit Committee pre-approves specific types or categories of engagements constituting audit, audit-related, tax and other non-audit services as well as the range of fee amounts corresponding to each such engagement. To the extent that the Company's management believes that a new service or the expansion of a current service provided by the Company's accountants is necessary or desirable, such new or expanded services are presented to the Audit Committee for its review and approval prior to the Company's engagement of its accountants to render such services. The Company's Chief Financial Officer reports regularly to the Audit Committee on the services rendered by the Company's accountants and related fees for audit, audit-related and permitted non-audit services. For Fiscal 2005, the Audit Committee has determined that the non-audit services performed by Grant Thornton LLP are compatible with maintaining the independence of Grant Thornton LLP. . PART IV Item 15. Exhibits and Financial Statement Schedules. (a) (3) See Exhibit Index on page 20 of this report for a list of the exhibits furnished as part of this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: October 27, 2005 JACO ELECTRONICS, INC. By: /s/ Joel H. Girsky ---------------------------------------- Joel H. Girsky, Chairman, President and Treasurer (Principal Executive Officer) By: /s/ Jeffrey D. Gash ----------------------------------------- Jeffrey D. Gash, Executive Vice President - Finance and Secretary (Principal Financial and Accounting Officer) Exhibit No. Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. EX-31.1 2 ex311girsky10ka05.txt JOEL GIRSKY CERTIFICATION Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer I, Joel H. Girsky, certify that: 1. I have reviewed this Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K for the fiscal year ended June 30, 2005 of Jaco Electronics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 27, 2005 /s/ Joel H. Girsky ---------------------------------------- Joel H. Girsky Chairman, President and Treasurer (Principal Executive Officer) EX-31.2 3 ex312jgash10ka05.txt JEFF GASH CERTIFICATION Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer I, Jeffrey D. Gash, certify that: 1. I have reviewed this Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K for the fiscal year ended June 30, 2005 of Jaco Electronics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 27, 2005 /s/ Jeffrey D. Gash Jeffrey D. Gash --------------- Executive Vice President, Finance and Secretary (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----