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Jaco Electronics 10-K 2009
jaco10kaamendment322409.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
Amendment No. 3
[ X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended June 30, 2008
 
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 incorporation or organization)
(I.R.S. Employer Identification No.)
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:
 
 
Common Stock, $0.10 per share
 
 
(Title of Class)
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes __     No  X >
 
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes __     No  X 
 
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.  [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company.  See definition of “accelerated filer”, “large accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨                                                        Accelerated filer ¨    Non-accelerated filer o    Smaller reporting company ý
                                                                               (Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes:               No:   X  
 
 
DOCUMENTS INCORPORATED BY REFERENCE.
 
None
 


 
 

 


 
EXPLANATORY NOTE TO AMENDMENT NO. 3
 
We are filing this Amendment (the “Amendment”) to our Annual Report on Form 10-K/A for the year ended June 30, 2008 (the “2008 Form 10-K/A”), as filed with the Securities and Exchange Commission, or the SEC, on October 28, 2008, to include the certifications of the Chief Executive Officer and the Principal Financial and Accounting Officer as Exhibits 31.1 and 31.2, which inadvertently were excluded from 2008 Form 10K/A. This Form 10-K/A is solely limited to including the certifications. Since this Amendment does not reflect events occurring after the filing of the 2008 Form 10-K/A or modify or update those disclosures affected by subsequent events, all information other than the language of the certifications is unchanged. Accordingly, the 2008 Form 10-K/A is amended and restated in its entirety as set forth below:


EXPLANATORY NOTE
 
The registrant filed an Annual Report on Form 10-K for the year ended June 30, 2008 (“Fiscal 2008”) (the “Form 10-K”) on September 29, 2008, pursuant to which it incorporated by reference into Part III thereof portions of its definitive Proxy Statement for its 2008 Annual Meeting of Shareholders to be subsequently filed with the Securities and Exchange Commission (the “Proxy Statement”). The registrant has determined to amend the Form 10-K to include such Part III information in this Amendment No. 1 on Form 10-K/A (the “Form 10-K/A”), rather than incorporating it into the Form 10-K by reference to the Proxy Statement. Accordingly, Part III of the Form 10-K is hereby amended and restated in its entirety as set forth below.
                Also included in this Form 10-K/A are (a) the signature page, (b) the certifications required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, which have been re-executed and re-filed as of the date of this Form 10-K/A as Exhibits 31.1 and 31.2 respectively, and (c) the exhibit index set forth in Part IV, Item 15(b) of the Form 10-K, which has been amended and restated in its entirety as set forth below to include the additional certifications.
                No attempt has been made in this Form 10-K/A to modify or update the other disclosures presented in the Form 10-K. This Form 10-K/A does not reflect events occurring after the filing of the Form 10-K or modify or update those disclosures, including the exhibits to the Form 10-K, affected by subsequent events. Information not affected by the amendments described above is unchanged and has not been included herein. Accordingly, this Form 10-K/A should be read in conjunction with the Form 10-K and our other filings made with the Securities and Exchange Commission.

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                                                        
69
Chairman of the Board, CEO, President and Treasurer
     
Joseph F. Oliveri                                                        
59
Vice Chairman of the Board and Executive Vice President
     
Charles B. Girsky                                                        
74
Executive Vice President and Director
     
Jeffrey D. Gash                                                        
56
Executive Vice President,
Finance, CFO and Secretary
     
Gary Giordano                                                        
51
Executive Vice President
     
Don Ackley
55
Director
     
Marvin Meirs
66
Director
     
Robert J. Waldman
73
Director
 
___________________
 
 

 
1

 

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 and CFO 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.
 
Don Ackley has served as a Director since February 2007. He is currently CEO of Nanotrope, Inc., a company focused on nanotechnology development founded in 2004. Prior to founding Nanotrope, he was President and CEO of VSK Photonics, an early-stage start-up developing high-speed electronics and photonics for fiber-optic networks. He has also held positions in Hewlett-Packard, RCA, Siemens and Motorola, as well as at a number of other start-ups at various stages of development, including some of the earliest fiberoptics ventures, Lytel and Epitaxx.

Marvin Meirs has served as a director since December 2006. From 1978 until his retirement in 1999, he served as Vice President of Engineering at Frequency and, from 1998 until 2004, he also was a director of Frequency.  From 1966 to 1978, Mr. Meirs served in various other senior engineering capacities with Frequency.  Prior thereto, Mr. Meirs served as a senior engineer with Polarad Electronics, and as a development engineer with Servo Corporation of America.
 
Robert J. Waldman has served as a Director since February 2004. Since September 2002, he has served as 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.
 

2


Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of the Common Stock to file with 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, 2008, 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, Don Ackley and Marvin Meirs.

Our Board of Directors has determined that Robert J. Waldman, the Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 401(h) of SEC Regulation S-K and each member of the audit committee is independent as defined under applicable rules of the SEC and The Nasdaq Stock Market (“Nasdaq”).

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 upon request of Ms. Suzanne Baginski at the registrant’s principal address and is posted on our website at jacoelectronics.com. Any waiver or amendment to the code will be promptly disclosed on our website and as otherwise required by rule or regulation.
 


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Item 11.  Executive Compensation.

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis should be read in conjunction with the information presented in the compensation tables, the footnotes to those tables and the related disclosures appearing elsewhere in this proxy statement.

Introduction

The Compensation Committee of the Board of Directors of the Company (the “Committee”) is currently composed of three directors, each of whom is independent as defined in applicable rules of Nasdaq.  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 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. The Committee believes that the Executives are best motivated through a combination of stock option awards and cash incentives.

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. 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.

4

 
 
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.  As described below under “Executive Compensation – Employment Agreements,” a number of the Executives, including all of the Named Executive Officers, other than Mr. Giordano, have entered into employment agreements with the Company that provide for fixed amounts of base salary.  Mr. Giordano’s salary is recommended by the Chief Executive Officer and reviewed and approved by the Committee. Effective October 2001, the Named Executive Officers agreed to a 10% reduction in base salary, of which all 10% reduction has been restored.  In addition, the Committee, in its discretion, may award cash incentive bonuses.

The employment agreements also provide the opportunity to earn cash bonuses based upon the Company’s profitability as described below under “Executive Compensation- Employment Agreements.”  For Fiscal 2008 and the year ended June 30, 2007 (“Fiscal 2007”), Messrs. Joel Girsky, Charles Girsky and Jeff Gash did not receive cash bonuses, and Mr. Joseph Oliveri received a performance based bonus, as determined in accordance with the terms of their respective employment agreements. Mr. Giordano was paid a performance based bonus based on sales determined at the discretion of the Committee. No discretionary bonuses were paid to any other executive officer.

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.  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.  During Fiscal 2008 and 2007, options were granted to each of Messrs. Gash, Oliveri and Giordano as described in the Grants or Plan-Based Awards table.

Compensation of the Chief Executive Officer

As described below 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 is entitled to receive a base salary of $375,000 per fiscal year.  Mr. Girsky’s base salary was established based upon his level of responsibilities and years of experience.  As previously discussed, Mr. Girsky agreed to a 10% reduction in base salary effective October 2001, of which all 10% reduction was restored as of December 2006.

Mr. Girsky is entitled to 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 potential cash compensation is specifically linked to the Company’s profitability.  Because the Company did not report income from continuing operations in Fiscal 2008 and 2007 in accordance with the terms of his employment agreement, Mr. Girsky was not paid a bonus for Fiscal 2008 or 2007.  Pursuant to this employment agreement, Mr. Girsky receives $50,000 per year in deferred compensation.

 
 
5

 
 
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 interest of the Company.

Other Benefits

The Company has established a 401(k) plan for its employees pursuant to which the Company makes contributions equal to 25% of the employee’s contribution to the plan, up to the first 4% of their salary.  In addition, the employment agreements for each of the Company’s executive officers provides for participation in health, disability and other insurance plans.

Compensation Committee Report

In accordance with its written charter adopted by the board of directors, the compensation committee oversees the Company’s compensation and employee benefit plans.  The compensation committee reviewed and discussed the executive compensation discussion and analysis for the year ended June 30, 2008 with the Company’s management.  Based on discussions with management, the compensation committee recommended to the board of directors that the compensation discussion and analysis be included in this proxy statement.

COMPENSATION COMMITTEE
Don Ackley
Marvin Meirs
Robert J. Waldman


6

 
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 Fiscal 2008 and 2007 by its Chief Executive Officer, Chief Financial Officer and each of the Company’s other three most highly-compensated executive officers during Fiscal 2008 and 2007(the “Named Executive Officers”):
 

 
 
SUMMARY COMPENSATION TABLE
 
 
Name and
Principal Position
Fiscal Year
Salary ($)
 
 
 
Stock Awards ($) (1)
Non-Equity Incentive Plan Compensation ($)
All Other
Compensation
($) (2)
Restricted Stock
Awards ($) (3)
 
 
 
 
Total Compensation
               
Joel H. Girsky
2008
375,000
--
--
66,094
--
441,094
Chairman of the Board, CEO,
2007
334,688
--
--
65,162
--
399,850
President, and Treasurer
             
               
Joseph F. Oliveri
2008
300,000
6,458
63,372
5,709
--
375,539
Vice Chairman and
2007
288,751
6,458
98,328
5,472
--
399,009
Executive Vice President
             
               
Charles B. Girsky
2008
250,000
--
--
6,782
--
256,782
Executive Vice President
2007
233,125
--
--
7,422
--
240,547
               
               
Jeffrey D. Gash
2008
195,000
25,682
--
4,908
--
225,590
Executive Vice President,
2007
189,000
13,633
--
4,435
--
207,068
Finance, CFO and Secretary
             
               
Gary Giordano
2008
200,000
13,997
12,870
5,173
--
232,040
Executive Vice President
2007
192,500
6,816
17,983
4,910
--
222,209
               
               
 
  (1)
Includes the amounts recognized as expense by the Company with respect to stock awards in Fiscal 2008 and 2007 in accordance with FAS 123(R). Assumptions used in the calculation of these amounts are included in Note B (15) of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K, for the year ended June 30, 2008.

       (2)
 Includes 401(k) plan matching contributions, premiums paid on group term life insurance, auto reimbursements, 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 2008 and 2007 for the Named Executive Officers were as follows: Mr. Joel Girsky – $1,587 and $1,813, Mr. Oliveri – $0 and $0, Mr. Charles Girsky – $1,567 and $1,749, Mr. Gash – $1,972 and $1,911 and Mr. Giordano – $2,155 and $2,130.  Premiums paid on group term life insurance for Fiscal 2008 and 2007 for the Named Executive Officers were as follows: Mr. Joel Girsky – $1,527 and $1,219, Mr. Oliveri – $774 and $774, Mr. Charles Girsky – $1,236 and $1,236, Mr. Gash – $774 and $414 and Mr. Giordano – $414 and $270.  Auto reimbursements for Fiscal 2008 and 2007 for the Named Executive Officers were as follows: Mr. Joel Girsky – $12,980 and $12,130, Mr. Oliveri – $4,935 and $4,698, Mr. Charles Girsky – $3,979 and $4,437, Mr. Gash – $2,162 and $2,110 and Mr. Giordano – $2,604 and $2,510.  $50,000 in deferred compensation was accrued in both Fiscal 2008 and 2007 in connection with Mr. Joel Girsky’s employment agreement with the Company.
 
 
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       (3) 
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. Gash and 3,750 shares of Common Stock to Mr. Giordano, as adjusted to give effect to a 3-for-2 stock split of the Common Stock effective on July 24, 2000. The plan was approved by the Company’s shareholders on December 9, 1997.  The awards vested in one-quarter increments annually.  Accordingly, as of June 30, 2008, all of the aforementioned awards were vested.  The value of the aggregate restricted stock holdings of these individuals at June 30, 2008 was as follows: $62,000 for Mr. Joel Girsky, $62,000 for Mr. Charles Girsky, $24,800 for Mr. Gash and $6,200 for Mr. Giordano.  These figures are based upon the fair market value per share of the Company’s Common Stock at June 30, 2008, minus the purchase price of such awards.  The closing sale price for the Company’s Common Stock as of June 30, 2008 on the Nasdaq National Market was $1.13.
 
 
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 the other Named Executive Officers) voluntarily agreed to a 10% salary reduction, of which all 10% has been restored.  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 at the discretion of the compensation committee.  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.
 
 
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The death benefit of $1.5 million provided for in Mr. Girsky’s prior employment agreement with the Company 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 for each year of employment beginning July 1, 1984, which becomes payable in a lump sum at the cessation of his employment, with or without cause.  In the event of a change in control of the Company, Mr. Girsky is entitled to 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, of which all 10% has been restored.  The employment agreement has been automatically extended for an additional one-year period.  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 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 so 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 $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, of which all 10% has been restored.  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 at the discretion of the compensation committee.  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.  
 
 
9

 
The death benefit of $1.0 million provided for in Mr. Girsky’s prior employment agreement with the Company 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 is entitled to 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 an additional one-year period.  Pursuant to the agreement Mr. Gash is entitled to a base salary of $160,000 for each fiscal year, subject to increases as approved by the Compensation Committee. Effective October 2001, he (and the other Named Executive Officers) voluntarily agreed to a 10% salary reduction, of which all 10% has been restored. Beginning Fiscal 2007, the compensation committee approved a base salary of $195,000.  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 is entitled to 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 is entitled to receive up to 200% of the average of his base salary plus cash bonus for the
 
 
 
10

 
 
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.
 
Nonqualified Deferred Compensation
 
The following table summarizes contributions and deferrals of compensation during Fiscal 2008 under each contribution or other plan that is not tax-qualified with respect to each executive named in the Summary Compensation Table:
 

 
 
Name
Executive Contributions in 2008 ($)
Registrant Contributions    in 2008 ($)
Aggregate Earnings     in 2008 ($)
Aggregate Withdrawals/ Distributions ($)
Aggregate Balance at June 30, 2008 ($)
Joel Girsky
--
50,000
--
--
1,200,000
(1)  
As described under “Executive Compensation – Employment Agreements”, Mr. Girsky is entitled to deferred compensation of $50,000 for each year of employment beginning July 1, 1984.
 
Grants of Plan-Based Awards in 2008
 
Plan-based awards to executive officers named in the Summary Compensation Table during Fiscal 2008 were as follows:
 
GRANTS OF PLAN-BASED AWARDS
 
 
 
 
Name
 
 
 
Grant Date
 
 
 
Actual Payout Under Non-Equity Incentive Plan Awards (1) ($)
 
 
All other Option Awards: Number of Securities Underlying Options (2) (#)
 
 
 
Exercise or Base Price of Option Awards ($)
Joel H.Girsky
 
--
--
 
Joseph F. Oliveri
 
63,372
   
Charles B. Girsky
 
--
--
 
Jeffrey D. Gash
 
October 1, 2007
--
 
10,000
 
1.90
Gary Giordano
 
October 1, 2007
12,870
 
10,000
 
1.90
 
 
 
 
 
 

 
11

 

(1)
These amounts reflect the cash portion of the annual bonus, which was earned and paid in Fiscal 2008. These amounts are also set forth in the Summary Compensation Table.

 
(2)
Stock options include non-qualified options that were granted in conjunction with the 2000 Stock Option Plan. These stock options vest in 25% increments over four years and expire ten years for the date of grant.
 

 
 
Outstanding Equity Awards a Fiscal Year-End
 
The following table summarizes the outstanding equity awards to the executive officers named in the Summary Compensation Table as of June 30, 2008:
 
 
Option Awards
     
Stock Awards
 
 
 
 
Name
 
 
 
Number of Securities underlying Unexercised Options (#) Exercisable
Number of Securities underlying Unexercised Options (#) Unexercisable
 
 
Option Exercise Price ($)
 
 
 
Option Expiration Date
 
Number of Shares of Restricted Stock – Vested
  Market Value of Shares of Restricted Stock – Vested ($)
Joel H. Girsky
50,000
25,000
 
8.00
2.35
December 11, 2010
October 31, 2012
37,500
42,375
Joseph F. Oliveri
15,000
25,000
4,500
 
             13,500 (1)
8.00
2.35
3.49
December 11, 2010
October 31, 2012
November 19, 2016
   
Charles B. Girsky
25,000
25,000
 
8.00
2.35
December 11, 2010
October 31, 2012
37,500
42,375
Jeffrey D. Gash
15,000
25,000
      9,500 (1)
 
    
     28,500 (1)
     10,000 (2)
8.00
2.35
3.49
1.90
December 11, 2010
October 31, 2012
November 19, 2016
October 1, 2017
15,000
16,950
Gary Giordano
15,000
25,000
       4,750 (1)
 
     14,250 (1)
10,000 (2)
8.00
2.35
3.49
1.90
December 11, 2010
October 31, 2012
November 19, 2016
October 1, 2017
3,750
4,238
 


 
(1) These options were granted on November 19, 2006 and vest in 25% increments over four years beginning on November 19, 2007.
   
 
 
12

 
 
 
(2) These options were granted on October 1, 2007 and vest in 25% increments over four years beginning on October 1, 2008.
 

Option Exercises and Stock Vested

There were no stock options exercised or vesting of options or restricted stock during Fiscal 2008 for any or the executive officers named in the Summary Compensation Table.

Potential Payments Upon Termination and Change in Control

 
The following table summarizes payments, as defined in their respective employment agreements, made upon termination assuming a termination event (notice) or change of control had occurred on June 29, 2008:
 
Name
 Event
 Salary ($)
    Bonus ($)
Deferred Compensation ($)
Joel H. Girsky
Termination without cause (1)
1,125,000
--
1,350,000
 
Termination for cause
--
--
1,200,000
 
Death
375,000
--
1,200,000
 
Disability
687,500
--
1,200,000
 
Change in control
986,415
--
1,200,000
Joseph F. Oliveri
Termination without cause (1)
300,000
87,134 (2)
--
 
Termination for cause
--
11,525
--
 
Death
--
11,525
--
 
Disability
50,000
11,525
--
 
Change in control
--
11,525
--
Charles B. Girsky
Termination without cause (1)
250,000
--
--
 
Termination for cause
--
--
--
 
Death
250,000
--
--
 
Disability
125,000
--
--
 
Change in control
573,544
--
--
Jeffrey D. Gash
Termination without cause (1)
585,000
--
--
 
Termination for cause
--
--
--
 
Death
750,000
--
--
 
Disability
97,500
--
--
 
Change in control
348,231
--
--
Gary Giordano
Termination without cause
--
--
--
 
Termination for cause
--
--
--
 
Death
750,000
--
--
 
Disability
--
--
--
 
Change in control (3)
394,110
--
--
 

 
 

 
13

 

 
  (1) 
Assumes notice of termination of applicable employment agreement was provided on June 30, 2008.

  (2)
Bonus amount due would be fourth quarter bonus for Fiscal 2008. For purposes of this table, the same bonus amount was assumed for Fiscal 2009.
 
  (3)
Assumes a change in control event and the termination of Mr. Giordano’s employment.

Director Compensation

            Members of our Board of Directors who are not officers or employees of the Company received an annual fee of $15,000 per year for their service on our Board of Directors. In addition the chairman of the audit committee receives an annual fee of $5,000.  Directors are also reimbursed for reasonable expenses incurred in connection with attending Board and committee meetings.

The following table sets forth the compensation paid to the Company’s directors for Fiscal 2008:


 
Name
Fees earned or paid in cash ($)
Stock Awards ($) (1)
 Total ($)
Don Ackley
15,000
5,953
20,953
Marvin Meirs
15,000
5,953
20,953
Neil Rappaport (2)
15,000
1,922
16,922
Robert Waldman
20,000
1,922
21,922

(1)  
Includes the amounts recognized as expense by the Company with respect to stock awards in Fiscal 2008 in accordance with FAS 123(R). Assumptions used in the calculation of these amounts are included in Note B (17) of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K, for the year ended June 30, 2008.

 (2)   Resigned effective July 7, 2008.

 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
During Fiscal 2008, the Compensation Committee of the Board of Directors consisted of Messrs. Ackley, Meirs, Waldman and Rappaport.  Effective July 7, 2008 Mr. Rappaport resigned as a Director of the Company. No member of this committee was at any time during Fiscal 2008
 
 
 
14

 
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 2008.

 
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 24, 2008 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.

 
Name and Address of
Beneficial Owner (1)
Amount and Nature
of
Beneficial Ownership
 
Percent of Class
 Beneficially Owned (2)
Joel H. Girsky
1,031,240 (3)
16.2%
     
Joseph F. Oliveri
44,500 (4)
**
     
Charles B. Girsky
481,961 (5)
7.6%
     
Don Ackley
2,500 (6)
**
     
Marvin Meirs
15,200 (6)
**
     
Jeffrey D. Gash
81,798 (7)
1.3%
     
Gary Giordano
48,500 (8)
 **
     
Robert J. Waldman
11,125 (9)
**
     
Ronald Ordway
1868 Tucker Industrial Rd.
Tucker GA, 30084
1,294,118 (10)
20.6%
     
Dimensional Fund Advisors
1299 Ocean Avenue
11th Floor
Santa Monica, CA  90401
395,947 (11)
6.3%
     
Luis Antonio Hernandez
3069 Misty Harbour
Las Vegas, NV 89117
596,526 (12)
9.5%
     
All directors and executive officers as a group (8 persons)
1,716,824 (13)
26.1%

 
15

 
 

_______________________________
 
**
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 6,294,332 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) 320,761 shares of Common Stock owned by the Girsky Family Trust, of which Mr. Charles Girsky is a co-trustee, with shared voting and dispositive power over such shares,  (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 2,500 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company’s 2000 Stock Option Plan.
 
(7)
Includes (i) 49,500 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.
 
(8)
Includes 44,750 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company’s 2000 Stock Option Plan.
 
(9)
Includes 8,125 shares of Common Stock acquirable pursuant to options presently exercisable and granted under the Company’s 2000 Stock Option Plan.
 
(10)
This information is based upon an amendment to Schedule 13G dated October 3, 2008, filed with the Securities and Exchange Commission (the “SEC”) and information made available to the Company.
 
(11)
These securities are held in investment advisory accounts of Dimensional Fund Advisors, Inc. This information is based upon an amendment to Schedule 13G dated December 31,  2007, filed with the Securities and Exchange Commission (the “SEC”) and information made available to the Company.
(12)
The information is based upon a Schedule 13G filed with the SEC dated February 28, 2006, and information made available to the Company.
 
(13)
Includes 285,000 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.
 
 
16

 

 
 
Item 13.  Certain Relationships and Related Transactions.

During Fiscal 2008, the Company paid approximately $705,000 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. During the fiscal years ended June 30, 2008 and 2007, the Company recorded sales of $105,557 and  $267,367, respectively, from a customer, Frequency Electronics, Inc. (“Frequency”).  Mr. Joel Girsky serves on the Board of Directors of Frequency and Mr. Meirs previously served as Vice President of Engineering and on the Board of Directors of Frequency.  See “Management” above.  Such sales transactions with Frequency are in the normal course of business.  Amounts included in accounts receivable from Frequency at June 30, 2008 and 2007 aggregate $4,924 and $15,832, respectively.

The son of Mr. Joel Girsky, Leslie Girsky, is employed by the Company as a regional vice-president of sales. His compensation for Fiscal 2008 was approximately $208,000.

Item 14.  Principal Accountant Fees and Services.
 
Grant Thornton LLP audited the Company’s financial statements annually from the fiscal year ended June 30, 1984 through the fiscal year ended June 30, 2007. Effective January 2, 2008 the Company dismissed Grant Thornton LLP and retained Eisner LLP to review the consolidated financial statements included in the Company’s 10-Q for quarters ended December 31, 2007 and March 31, 2008 and for the audit of its annual consolidated financial statements for fiscal year 2008.
 
Grant Thornton’s reports on the Company’s financial statements for the past two years did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. The Audit Committee of the Company’s Board of Directors recommended and approved the decision to change independent accountants. During the Company’s two most recent fiscal years and the subsequent interim period preceding the dismissal of Grant Thornton, there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. During the Company’s two most recent fiscal years and the subsequent interim period preceding the dismissal of Grant Thornton, there have been no reportable events as set forth in paragraphs (a)(1)(v)(A) through (D) of Item 304 of Regulation S-K.

 
17

 
 
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 Fiscal 2007 and the review of the consolidated financial statements included in the Company’s Forms 10-Q for fiscal years 2008 and 2007 were $240,489 and $323,431, respectively.

The aggregate fees billed and estimated fees unbilled by Eisner LLP for professional services for the audit of the Company’s annual consolidated financial statements for Fiscal 2008 and the review of the consolidated financial statements included in the Company’s Forms 10-Q for Fiscal 2008 was $170,000.

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 Fiscal 2008 and 2007 were $15,976 and $2,720, respectively.

The aggregate fees billed by Eisner LLP for professional services related to the audit of the Company’s annual consolidated financial statements for Fiscal 2008 was $1,611.

Tax Fees
 
The aggregate fees billed by Grant Thornton LLP for tax services for the fiscal years 2008 and 2007 were $58,246 and $48,794, respectively.  These services consisted primarily of tax planning and assistance with the preparation of returns.

The aggregate estimated fees unbilled by Eisner LLP for tax services for the Fiscal 2008 was $55,000.

All Other Fees
 
There were no fees billed by Grant Thornton LLP or Eisner LLP for other services for the fiscal years 2008 and 2007.

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 independent registered public accounting firm 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
 
 
 
 
18

or the expansion of a current service provided by the Company’s independent registered public accounting firm 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 independent registered public accounting firm and related fees for audit, audit-related and permitted non-audit services.
 
PART IV
 
Item 15.
Exhibits and Financial Statement Schedules.
 
(a)
(3)
See Exhibit Index on page 21 of this report for a list of the exhibits furnished as part of this report.

 

 
19

 


 

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:  February 24, 2009
JACO ELECTRONICS, INC.


By:           /s/ Joel H. Girsky
 
Joel H. Girsky, Chairman, CEO, President and Treasurer (Principal Executive
 
Officer)

 
By:
/s/ Jeffrey D. Gash
 
 
Jeffrey D. Gash, Executive Vice President -
 
Finance, CFO and Secretary(Principal Financial and Accounting
                                                                                                                 Officer)
 
 
 
20

 
 
 
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.
 

 
21



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