Item
1.01 Entry into a Material Definitive Agreement.
On
April 14, 2017, TSR, Inc. (the “Company”) and Christopher Hughes, Senior Vice President of the Company and President
of the Company’s wholly-owned subsidiary, TSR Consulting Services, Inc., entered into an Employment Agreement, dated April
14, 2017 and effective as of May 1, 2017. The current Employment Agreement between the Company and Mr. Hughes, dated as of March
1, 2012, was originally scheduled to expire on February 28, 2017, and was extended to March 31, 2017, and further extended to
April 30, 2017.
The
Employment Agreement will be effective May 1, 2017 and has a term of five years and one month, and is scheduled to expire on May
31, 2022. The Employment Agreement provides for an annual base salary of $350,000, which the Company’s Compensation Committee
will review on an annual basis, and which the Company’s Board of Directors may increase in the Board’s discretion.
Mr. Hughes is eligible to receive an annual cash bonus in the discretion of the Compensation Committee, which may be based upon
standards established by the Chairman of the Company and approved by the Compensation Committee. Mr. Hughes is entitled to receive
advance payments of the bonus on a quarterly basis based on the amount of the bonus that would have been earned through the end
of each quarter according to such standards. Such advance payments of the bonus are subject to recapture by the Company in the
event that the amount paid as the advance exceeds the amount that Mr. Hughes was actually entitled to receive. Mr. Hughes is entitled
to participate in any pension, profit-sharing, retirement, hospitalization, insurance, medical services or other employee benefit
plan generally available to the Company’s executives, to the extent that he is eligible to participate under the terms and
conditions of such plans.
The
Company has the right to immediately terminate Mr. Hughes’ employment for “Cause” (as defined in the Employment
Agreement), in which event Mr. Hughes shall be entitled to receive his base salary for the month in which the termination is effective.
The
Company has the right to terminate Mr. Hughes’ employment upon fifteen days written notice in the event Mr. Hughes is unable
to perform his duties on account of illness, accident or other physical or mental incapacity for a period of six consecutive months
or an aggregate of 180 days in any period of twelve consecutive months, in which event Mr. Hughes shall be entitled to receive
his base salary and reimbursement of approved expenses for the month in which termination is effective.
The
Company may terminate Mr. Hughes’ employment for any other reason upon thirty days written notice, in which event Mr. Hughes
shall be entitled to receive (a) severance from the Company in an amount equal to (i) two times his base salary plus (ii) two
times his bonus for the then-current fiscal year, or if that amount cannot be determined, two times the amount of the bonus paid
to him in the prior fiscal year, and (b) continued group health insurance benefits until the earlier of the second anniversary
of termination or such time as Mr. Hughes is eligible for comparable coverage under the group health insurance plans of another
employer; provided that Mr. Hughes executes and delivers a release of all claims against the Company.
In
the event that Mr. Hughes’ employment is terminated without Cause during the six-month period prior to, or within one year
after, a “Change in Control” (as defined in the Employment Agreement) of the Company, or if Mr. Hughes resigns from
his employment for “Good Reason” within one year after a Change in Control of the Company, then Mr. Hughes shall be
entitled to receive (a) his base salary through the date of termination or resignation plus his bonus pro-rated through such date,
(b) an amount equal to two times his base salary plus two times his bonus for the then-current fiscal year, or if that amount
cannot be determined, two times the bonus paid to him in the prior fiscal year, provided that Mr. Hughes executes and delivers
a release of all claims against the Company, and (c) continued group health insurance benefits until the earlier of the second
anniversary of termination or such time as Mr. Hughes is eligible for comparable coverage under the group health insurance plans
of another employer. “Good Reason” means either (i) a material breach by the Company of the Employment Agreement,
(ii) a material diminution in Mr. Hughes’ authority, duties or responsibilities, (iii) a relocation by the Company of Mr.
Hughes’ principal place of business for the performance of his duties to a location that is anywhere outside of a 100 mile
radius of the Borough of Manhattan.
The
Employment Agreement incorporates the terms and provisions of that certain Maintenance of Confidence and Non-Compete Agreement
between the Company and Mr. Hughes dated as of March 1, 2012.
A
copy of the Employment Agreement is attached as
Exhibit 10.1
.