Item
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
On
November 3, 2020, TSR, Inc. (the “Company”) entered into an Employment Agreement with its Chief Executive Officer,
Thomas C. Salerno (the “CEO Employment Agreement”) and an Amended and Restated Employment Agreement with its Chief
Financial Officer, John Sharkey (the “CFO Employment Agreement”, collectively with the CEO Employment Agreement, the
“Employment Agreements”), both effective as of November 2, 2020. The CFO Employment Agreement superseded the Amended
and Restated Employment Agreement dated May 24, 2019 between the Company and Mr. Sharkey in its entirety.
Employment
Term and Position. The term of employment of each of Messrs. Salerno and Sharkey will be three years from November 2, 2020
to November 2, 2023, and any continued employment will be on an “at-will” basis. During their respective terms of
employment, Mr. Salerno will serve as Chief Executive Officer of the Company and Mr. Sharkey will serve as Chief Financial
Officer of the Company.
Base
Salary, Annual Bonus Equity Compensation and Other Benefits. Pursuant to their Employment Agreements, Messrs. Salerno and
Sharkey are entitled to annual base salaries of $350,000 and $310,000, respectively, as may be adjusted by the Company’s
Board of Directors (the “Board”). In addition, Messrs. Salerno and Sharkey will be eligible to receive annual cash
bonuses up to 35% and 25% of their respective base salaries, respectively, based on the Company’s financial information
and established by the Board, upon the condition that Messrs. Salerno and Sharkey are active employees on the last day of the
related fiscal year (“Fiscal Year”) and there are no publicly reportable audit findings for the Fiscal Year. Any annual
bonus will be paid in two installments, i.e., 50% of the estimated annual bonus will be advanced within 30 days of the end of
the Fiscal Year and the balance equal to the final annual bonus determined by the Board minus the estimate advanced after the
filing of the Company’s 10-K for the Fiscal Year. Messrs. Salerno and Sharkey will also be eligible to receive equity awards
under the Company’s equity incentive plan, certain benefits including vacation, group medical health, group insurance and
similar benefits, a monthly car allowance of $1,800 and $800, respectively, and reimbursement of approved business expenses.
Termination
Entitlement and Severance. In the event that the Company terminates Mr. Salerno or Mr. Sharkey’s employment (a) for
“Cause” (as defined in their Employment Agreements) or (b) upon Mr. Salerno or Mr. Sharkey’s death or disability
or, (c) if Mr. Salerno or Mr. Sharkey terminates his employment for any reason other than due to material breach by the Company
as described in scenario (y) below, then the Company’s sole obligations to Mr. Salerno or Mr. Sharkey shall be: (i) the
payment of any accrued but unpaid base salary, (ii) the payment of any approved but not reimbursed business expenses and (iii)
compliance with the Company’s benefits plans (collectively, the “Termination Entitlement”). If Mr. Salerno or
Mr. Sharkey is terminated for “Cause” or resigns for any reason prior to the date the annual bonus is paid out in
its entirety, he shall forfeit any and all annual bonus including returning any advanced bonus portion paid.
In
the event that (x) the Company terminates Mr. Salerno or Mr. Sharkey’s employment for reasons other than the above-enumerated
reasons and in Mr. Sharkey’s case, if he is forced to relocate more than 25 miles from his current residence and he resigns
due to this reason, both subject to the Company or its affiliate’s offer of comparable employment meeting certain conditions
or, (y) Mr. Salerno or Mr. Sharkey provides notice to the Company of its material breach of its obligations under his Employment
Agreement and the Company fails to cure such breach within the required period of time, in addition to the Termination Entitlement,
Mr. Salerno or Mr. Sharkey will be entitled to a severance payment consisting of (i) one year of base salary, (ii) one year of
car allowance and (iii) 50% of the annual bonus awarded in the fiscal year prior to the employee’s termination if his employment
is terminated without Cause (collectively, the “Severance Payment”) as well as a health benefit comprising continued
participation in the Company’s group health plan for one year for Mr. Salerno and until March 31, 2025 for Mr. Sharkey,
respectively, subject to certain conditions provided in their respective Employment Agreements (the “Health Benefit”).
If,
prior to the expiration of their respective term of employment and within 12 months following a Change in Control (as defined
in their Employment Agreements), Mr. Salerno or Mr. Sharkey is subject to termination other than for Cause, then the Company will
pay “Change in Control Severance Benefits” consisting of (i) a payment equivalent to one year of base salary (as in
effect immediately prior to the Change in Control, or the date of the termination of the employee’s employment, whichever
is greater), (ii) 100% of the employee’s annual bonus as paid in the previous year, (iii) taxable cash payments for COBRA
coverage for 18 months and (iv) acceleration of vesting of 100% of the employee’s unvested equity award compensation.
Pursuant
to the Employment Agreements, the Company’s obligation to pay any Severance Payment, Health Benefit, Change in Control Severance
Benefits (collectively, “Severance Payments”) or any related benefits to which Mr. Salerno or Mr. Sharkey is not automatically
entitled under the law will be subject to the employee’s execution of an effective release of claims in favor of the Company,
its affiliates and their related persons, in a form to be provided by the Company. In addition, in the event that Mr. Salerno
or Mr. Sharkey breaches the restrictive covenants under his Employment Agreement, any remaining Severance Payments due to him
will be forfeited.
Restrictive
Covenants. Pursuant to their respective Employment Agreements, Messrs. Salerno and Sharkey are subject to certain restrictive
covenants including (i) protection of confidential information, (ii) non-disparagement, (iii) non-solicitation of employees for
a period of 24 months after the termination of employment, (iv) noncompetition for a period of 12 months after the termination
of employment and (v) non-solicitation of the Company’s clients for a period of 24 months after the termination of employment.
The
description of the CEO Employment Agreement and the CFO Employment Agreement are qualified in their entirety by reference to the
complete text of the agreements, which have been filed with this Current Report on Form 8-K as Exhibit 10.1 and Exhibit 10.2,
respectively, and are incorporated herein by reference.