EMPLOYMENT AGREEMENT




                  EMPLOYMENT  AGREEMENT,  made  effective  as of the  1st day of
July, 1998 (the "Effective Date"), by and between Jaco Electronics,  Inc., a New
York corporation  having offices at 145 Oser Avenue,  Hauppauge,  New York 11788
("Jaco"),  and Jeffrey D. Gash,  residing at 12 Carpenter Lane,  Hauppauge,  New
York 11788 ("Gash").

                  WHEREAS, Gash is the Vice President of Finance of Jaco;
                  WHEREAS,  Gash has been  employed from and after July 1, 1998,
pursuant to an oral  agreement of employment  consistent  with the terms hereof;
and
                  WHEREAS,  Jaco desires to have the continued services of Gash,
and Gash desires to continue to be employed by Jaco, on the terms and conditions
hereinafter set forth.
                  NOW,  THEREFORE,  in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:

1.                Term of Employment; Duties.
                  1.1 Jaco hereby  employs Gash as Vice  President of Finance of
Jaco,  and Gash hereby agrees to serve Jaco in such capacity and to perform such
duties  consistent  therewith as Jaco's Board of Directors and/or President from
time to time shall  determine for a period  commencing on the Effective Date and
ending on the fourth  (4th)  anniversary  of the  Effective  Date (the  "Initial
Term"), provided, however, the term of this Employment Agreement shall be


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automatically  extended after each anniversary date of the Effective Date for an
additional  one year period  following the Initial  Term,  unless either Jaco or
Gash shall  provide a notice of  non-renewal  to the other party (the "Notice of
Non-Renewal"),  which notice shall be in writing and shall be delivered not less
than 90 days  prior  to an  anniversary  date  after  the  Effective  Date  (the
"Employment  Period"). In the event that a Notice of Non-Renewal is delivered by
either party, this Employment Agreement shall continue for a period of three (3)
years following the anniversary  date which follows  immediately  after the date
that a valid  and  effective  Notice  of  Non-Renewal  is  delivered.  By way of
example,  if the Notice of Non-Renewal is delivered after the second anniversary
date  and not  less  than 90 days  prior to the  third  anniversary  date of the
Effective  Date,  this  Employment  Agreement  shall  continue  until  the sixth
anniversary date of the Effective Date.

2.                Compensation.
                  2.1 For all services  rendered  pursuant to the terms  hereof,
Gash shall receive a base salary of $125,000 for each of the 12 month periods (a
"Contract  Year")  ending June 30,  1999,  and each June 30,  thereafter  ("Base
Salary"),  which Base Salary may be reviewed by the Board of  Directors  and the
President  for each of the Contract  Years after the fiscal year ending June 30,
1998,  to determine  whether the Base Salary  should be  increased  for any such
year. The Base Salary shall be paid to Gash in equal periodic  installments  not
less frequently than monthly. In addition and not in lieu thereof, Gash shall be
entitled to receive  such fringe  benefits  and to  participate  in such benefit
plans and  programs as are  generally  made  available  by Jaco to other  senior
executive employees, including, but not limited to, health insurance.


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                  2.2 Gash may receive a cash bonus (the "Cash  Bonus") for each
Contract  Year  as  shall  be  determined  by the  Board  of  Directors  and the
President.  The Cash  Bonus,  if any,  shall be payable  every year on or before
November 1 for the preceding fiscal year.
                  2.3 Upon Gash's death,  his legal  representative(s)  shall be
paid the sum of  $750,000  (the "Death  Benefit")  within  fifteen  (15) days of
Jaco's  receipt  of the  proceeds  of the  insurance  on Gash's  life  purchased
pursuant to the provisions of Section 2.4 below. If, for any reason, at the time
of Gash's death, Jaco does not have in force an insurance policy on Gash's life,
then, notwithstanding anything in this Employment Agreement to the contrary, the
Death Benefit shall be due and payable within fifteen (15) days of Gash's death.
                  2.4 Jaco shall use its best  efforts to purchase  insurance on
the  life  of  Gash,   as  well  as  annuities  or  other   endowment   policies
(collectively,  "Policies"), in sufficient amounts fully to fund its obligations
to Gash under Section 2.3 above. All such policies shall be and shall remain the
property of Jaco.  Gash shall cooperate fully with Jaco to enable Jaco to obtain
such policies.
                  2.5 The  obligations  of Jaco to Gash  hereunder  are  general
unsecured  obligations of Jaco to Gash, and Gash shall have no security interest
or other  interest of any nature  whatsoever  in the  Policies  or the  proceeds
thereof  (except as provided in Section  2.6 below),  or in any other  assets of
Jaco.  Jaco, in its absolute  discretion,  may establish any reserves or special
accounts  or  segregate  assets to fund such  obligations.  Gash shall not sell,
transfer, assign, pledge, encumber,  hypothecate or otherwise alienate any right
or entitlement of his hereunder.  No such purported sale, transfer,  assignment,
pledge,  encumbrance,  hypothecation or other alienation shall have any force or
effect or in any way be binding upon or be enforceable  against Jaco.  Except as
otherwise  provided  by law,  no such right or  entitlement  shall be subject to
attachment or garnishment.


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                  2.6 If, at any time,  Gash  ceases to be an  employee  of Jaco
other than on account of death,  Jaco,  at Gash's  option,  shall  transfer  and
assign to Gash all its right,  title and interest in the Policies and Jaco shall
cause the  premiums  on the  Policies  to be fully paid up to the date of Gash's
termination.  Gash shall refund to Jaco the pro rata portion  (determined by the
straight-line  method) of premiums on the Policies, if any, paid by Jaco for any
period beyond the termination  date. Upon such termination of Gash's  employment
and upon complete  assignment of all of the Policies to Gash, Jaco shall have no
further  liability  to Gash for  payment  of  premiums  under  the  Policies  or
otherwise in respect of its obligations under Sections 2.3 and 2.4 hereof.

3. Services to be Provided.
                  3.1      Gash shall devote his best efforts and substantially 
all of his time to the business of Jaco.
                  3.2  Gash  shall   perform   all  duties,   obligations,   and
responsibilities  assigned to him by the Board of Directors and/or the President
and ordinarily performed by a person employed as a senior executive officer, and
shall devote his full  attention to the  performance  of the duties  assigned to
him.
                  3.3 If duly  elected,  Gash shall  serve as an officer  and/or
director  of any of Jaco's  subsidiaries,  whether  now  existing  or  hereafter
established  or  acquired,  and he shall  perform such duties as are assigned to
him, from time to time,  by the Board of Directors  and/or the President of Jaco
or any of its subsidiaries.



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4.                Termination of Employment.
                  4.1 During the  Employment  Period,  Gash's  employment may be
terminated  by the Board of  Directors of Jaco on the  occurrence  of any one or
more of the following events:
                           (a)      The death of Gash;
                           (b)      Subject to the provisions of Section 4.2 
below, the disability of Gash; or
                           (c)      For "Cause",which shall mean (i) the willful
failure by Gash substantially  to perform his duties hereunder for reasons other
than death or disability; (ii) the willful engaging by Gash in misconduct
materially injurious to Jaco; or (iii) the commission by Gash of an act 
constituting common law fraud or a felony.
                  4.2 If Gash  becomes  mentally or  physically  disabled  for a
period  of six (6)  consecutive  months  so that he is not able to  perform  his
duties substantially as contemplated herein  ("Disability"),  Jaco's obligations
to pay the Cash Base  Salary and the Cash Bonus  shall  cease from and after the
last day of such six (6) month period and shall not be resumed  unless and until
Gash shall have  returned to his duties on a full time basis for a period of two
(2) consecutive months.  During such two (2) month period, Gash shall be paid at
the rates of Base Salary and Cash Bonus  which  would then have been  prevailing
hereunder had he not become so disabled. If Gash's Disability becomes permanent,
Jaco,  at its  option,  may  terminate  Gash's  employment  with  Jaco  and  its
obligation  hereunder  to pay  the  Base  Salary  and  the  Cash  Bonus.  Gash's
Disability  shall be deemed to have become  permanent  when,  as a result of the
injury or sickness,  Gash becomes wholly and  continuously  disabled and is thus
prevented from performing the material and substantial  duties of his employment
as set forth in Section 1.1 above and while under the care of a physician.


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5.  Reimbursement  of Expenses.  Jaco shall  reimburse  Gash for all  reasonable
expenses  incurred in  connection  with the  promotion  of the business of Jaco,
including  expenses for travel,  entertainment  and similar expenses incurred by
Gash on Jaco's  behalf.  No such  reimbursement  shall be made  except  upon the
presentation  by Gash of an itemized  account of such expenses or other evidence
thereof for which  reimbursement  then is being sought,  all in form  reasonably
satisfactory to Jaco.

6. Indemnity.  Jaco, to the maximum extent it may provide  indemnification to an
officer or director  under  applicable  law,  shall  indemnify Gash and hold him
harmless  from any and all  liability  arising  out of any act or failure to act
undertaken by him in good faith while  performing  services for Jaco,  and shall
use its best efforts to obtain  coverage for him under any insurance  policy now
in force or hereafter  obtained during the Employment  Period covering  officers
and  directors of Jaco  against  claims made against them or any of them for any
act or failure to act in such capacities. Jaco shall pay all expenses, including
reasonable  attorneys'  fees,  actually  or  necessarily  incurred  by  Gash  in
connection  with the defense of any action,  suit, or proceeding  arising out of
any such claim and in connection with any appeal arising therefrom.

7. Disclosure of Information.  All memoranda, notes, records, or other documents
made or  compiled  by Gash or made  available  to him  during  the course of his
employment  with Jaco  concerning the business of Jaco shall be Jaco's  property
and shall be delivered to Jaco by Gash on the termination of Gash's  employment.
Unless  authorized by Jaco,  Gash shall not use for himself or others or divulge
to others, any proprietary or confidential information of Jaco obtained by him


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as a  result  of his  employment.  For  purposes  of this  Section  7,  the term
"proprietary or confidential  information"  shall mean all information which (i)
is known only to Gash or to Gash and employees, former employees, consultants of
Jaco,  or others in a  confidential  relationship  with  Jaco,  (ii)  relates to
specific matters such as trade secrets,  customers,  potential customers, vendor
lists, pricing and credit techniques, research and development activities, books
and  records,  and  commission  schedules,  as they may exist from time to time,
which  Gash may have  acquired  or  obtained  by  virtue of work  heretofore  or
hereafter performed for or on behalf of Jaco or which he may acquire or may have
acquired  knowledge  of during the  performance  of such work,  and (iii) is not
readily  available to others. In the event of a breach or a threatened breach by
Gash of the  provisions  of  this  Section  7,  Jaco  shall  be  entitled  to an
injunction  restraining  Gash  from  disclosing,   in  whole  or  in  part,  the
aforementioned   proprietary  or  confidential  information  of  Jaco,  or  from
rendering any services to any person, firm, corporation,  association,  or other
entity to whom or to which such  proprietary  or  confidential  information,  in
whole or in part, has been  disclosed or is threatened to be disclosed.  Nothing
contained  herein shall be construed as prohibiting Jaco from pursuing any other
remedies available to Jaco for such breach or threatened  breach,  including the
recovery of damages from Gash.

8.                Restrictive Covenants.
                  8.1  Gash  hereby   acknowledges  and  recognizes  the  highly
competitive nature of Jaco's business and, accordingly,  in consideration of the
premises  contained  herein,  agrees  that  during  the  Employment  Period  and
thereafter  until the Designated Date (as hereinafter  defined) he will not: (i)
directly  or  indirectly  engage in any  Competitive  Activity  (as  hereinafter
defined),  whether such engagement shall be as an officer,  director,  employee,
consultant, agent, lender,


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stockholder,  or other  participant;  or (ii)  assist  others in engaging in any
Competitive  Activity.  The term  "Competitive  Activity"  shall  mean and shall
include soliciting,  raiding, enticing, or inducing,  individually or in concert
with  others,  (i) any person or entity to be a customer for the same or similar
services for which that person or entity  engaged Jaco, if such person or entity
(A) was a  customer  of  Jaco's  during  the  Employment  Period  or at any time
thereafter  prior to the  Designated  Date, or (B) was solicited by Jaco to be a
customer  during the one-year period prior to the termination of this Employment
Agreement;  (ii) any  manufacturer or supplier whose products are distributed by
Jaco  at  the  time  this  Employment  Agreement  is  terminated  to  act  as  a
manufacturer  or supplier for any other party of the same or similar  goods that
it  supplies  to Jaco;  or (iii)  any  employee  of Jaco to leave  Jaco or to do
business with any enterprise or business which competes with Jaco.
                  8.2      As used in this Section 8, the "Designated Date"
shall mean any of the following dates:
                           (a)      in the event Gash willfully terminates his
employment with Jaco in violation of this Employment Agreement prior to the 
expiration of the Employment Period,  the term "Designated Date" shall mean the
first anniversary of the date of such termination;
                           (b)      in the event Jaco terminates the employment
of Gash under this Employment  Agreement for Cause, the term "Designated Date" 
shall mean the first anniversary of the date of such termination; or
                           (c)      in the event Jaco terminates the employment
of Gash without cause, the term "Designated Date" shall mean the date of such
termination.


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                  8.3 It is the  desire  and  intent  of the  parties  that  the
provisions of this Section 8 shall be enforced to the fullest extent permissible
under  the  laws and  public  policies  applied  in each  jurisdiction  in which
enforcement is sought.  Accordingly, if any provision of this Section 8 shall be
adjudicated  to be  invalid  or  unenforceable  in any such  jurisdiction,  such
provision  of this  Section 8 shall be deemed  amended to delete  therefrom  the
portion thus adjudicated to be invalid or unenforceable,  such deletion to apply
only with respect to the  operation  of such  provision of this Section 8 in the
particular  jurisdiction in which such adjudication is made. In addition, if the
scope of any  restriction  contained in this Section 8 is  adjudicated to be too
broad to permit enforcement thereof to its fullest extent, then such restriction
shall be  enforced  to the  maximum  extent  permitted  by law,  and Gash hereby
consents and agrees that such scope may be judicially  modified  accordingly  in
any proceeding brought to enforce such restriction.
                  8.4 In the event of a breach or  threatened  breach by Gash of
the  provisions  of this  Section 8, Jaco  shall be  entitled  to an  injunction
restraining him from such breach. Nothing contained herein shall be construed as
prohibiting  Jaco from  pursuing  any other  remedies  available  to it for such
breach or threatened breach or any other breach of this Employment Agreement.

9.                Consolidation; Merger; Change of Control.
                  9.1 In the event of any  consolidation  or merger of Jaco into
or with another  corporation  during the Employment  Period, and Jaco is not the
surviving  entity, or the sale of all or substantially all of the assets of Jaco
to another  corporation during the Employment Period, or in the event that fifty
(50%)  percent or more of the voting  common stock of Jaco shall be owned by one
or more  individuals  or  entities,  who are  acting in concert or as part of an
affiliated group (other than


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a group one of the members of which is Gash) at any time  during the  Employment
Period,  (the occurrence of any of the foregoing,  a "Change of Control"),  then
(i) Jaco shall pay or cause to be paid to Gash a certified or cashier's check in
an amount  equal to two  hundred  percent  (200%) of the  average of Gash's Base
Salary plus Cash Bonus for the previous five (5) years; and (ii) this Employment
Agreement may be assigned by Jaco or any such successor or surviving corporation
on sixty  (60) days  prior  written  notice  to Gash;  provided,  however,  such
assignment  shall not cause Gash's  principal place of employment to be moved to
any space located more than forty-five (45) miles from Gash's principal place of
employment prior to a Change of Control without his prior written consent.
                  9.2  Notwithstanding  the provisions of Section 9.1 above, any
such payments  shall be made only in an amount which,  when taken  together with
the present value of all other  payments to Gash that are contingent on a Change
in  Control of Jaco,  computed  in  accordance  with the  provisions  of Section
280G(d)(4) of the Internal Revenue Code of 1986 (the "Code"),  does not equal or
exceed three times Gash's "Base  Amount",  as computed in  accordance  with Code
Section 280G(b)(3).

10. Notices.  Any notices required or permitted to be given under the provisions
of this Employment Agreement shall be in writing and delivered personally,  sent
by  recognized  overnight  courier or mailed by  certified or  registered  mail,
return receipt  requested,  postage  prepaid to the persons and at the addresses
first set forth  above,  or to such other  person at such  other  address as any
party may  request by notice in writing  to the other  party to this  Employment
Agreement. Notices


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which are hand delivered or delivered by recognized  overnight  courier shall be
effective on delivery.  Notices which are mailed shall be effective on the third
day after mailing.

11.  Construction,  This  Employment  Agreement shall be construed in accordance
with,  and be  governed  by,  the laws of the  State  of New York for  contracts
entered into and to be performed in New York.

12.  Successors and Assigns.  This Employment  Agreement shall be binding on the
successors and assigns of Jaco and shall inure to the benefit and be enforceable
by and against its successors and assigns. This Employment Agreement is personal
in nature and may not be  assigned  or  transferred  by Gash  without  the prior
written consent of Jaco.

13.  Entire   Agreement.   This   Employment   Agreement   contains  the  entire
understanding  and agreement  between the parties relating to the subject matter
hereof,  and neither this Employment  Agreement nor any provision  hereof may be
waived, modified,  amended,  changed,  discharged,  or terminated,  except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge, or termination is sought.

14. Counterparts.  This Employment  Agreement may be executed  simultaneously in
counterparts,  each of  which  shall be  deemed  an  original,  and all of which
counterparts shall together constitute a single agreement.



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15.  Illegality.  In case any one or more of the  provisions of this  Employment
Agreement  shall be invalid,  illegal,  or  unenforceable  in any  respect,  the
validity, the legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

16.               Captions.  The captions of the sections hereof are for 
convenience only and shall not control or affect the meaning or construction of
any of the terms or provisions of this Employment
Agreement.



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                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first above written.

                                    JACO ELECTRONICS, INC.


                                   By:    JOEL H. GIRSKY
                                          President
                                              
                                                                      
                                          JEFFREY D. GASH








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