UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the
Commission only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional
Materials |
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Soliciting Material Pursuant to §
240.14a-11(c) or § 240.14a-12 |
TSR, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined): ___________________ |
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Proposed maximum aggregate value of transaction:
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Total fee paid: ___________________ |
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Fee paid previously with preliminary
materials. |
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Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: ___________________ |
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Form, Schedule or Registration No.: ___________________ |
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Filing Party: ___________________ |
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Date Filed: ___________________ |
TSR, Inc.
400 OSER AVENUE, SUITE 150
HAUPPAUGE, NY 11788
Dear Stockholders,
The fiscal year ending May 31, 2020 has been a year of dramatic
change for TSR, Inc. (“TSR” or the “Company”).
In late 2019, TSR settled a long running proxy contest with a group
of the Company’s largest stockholders ending a period of costly
litigation. As a result of the settlement, a new board of
directors was put in place. The new board went to immediate
work focusing on profitably growing the business and achieving
adequate returns on stockholders’ capital.
In February of 2020, the board appointed Thomas Salerno as acting
CEO and in March of 2020, the Covid-19 epidemic brought uncertainty
to our lives and to the economy. Thomas arrived in the C-Suite for
a trial by fire.
Despite this gale of a headwind, in the fiscal quarter ending May
31, 2020, the Company reported operating earnings for the first
time in seven quarters. While squeezing out a small operating
profit may seem like small reason to cheer, after so many quarters
in the desert, we hope stockholders can applaud the team’s effort.
We are excited about the prospects for the Company when the world
returns to normal.
With profitable growth as an objective, in September of 2020, the
Company announced its first acquisition in nearly twenty years when
TSR purchased Geneva Consulting Group, Inc. (“Geneva”). Geneva
brings a group of dedicated professionals and a list of valuable
customers which we believe will help diversify our business and
expand the scope of our services. We will report to you our
progress integrating Geneva throughout the next year.
We understand that the staffing business is a competitive business.
Our primary assets are our employees and our customers. We are
working to provide a dynamic and healthy workplace for the former,
and the best programmers and IT professionals for the later. Our
current strategic plan is to organically grow the Company, but if
we can find further acquisitions at a reasonable price, the board
will carefully consider them.
Our annual stockholder meeting will be held on November 19, 2020 at
11:00 a.m., Eastern Time, and we invite you to participate. The
following items will be on the agenda:
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To elect one Class II Director for
a term to expire at the 2023 annual stockholder meeting; |
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To approve an amendment to the
Company’s Certificate of Incorporation to de-classify the board of
directors; |
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To approve the adoption of our 2020
Equity Incentive Plan; |
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4. |
To ratify the appointment of
CohnReznick LLP as the independent registered public accountants of
the Company for the fiscal year ending May 31, 2021; |
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To hold a non-binding advisory vote
on the compensation program for the Company’s named executive
officers as disclosed in the proxy statement; |
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To hold a non-binding advisory
vote on whether a non-binding advisory vote on the compensation
program for the Company’s named executive officers should be held
every one, two, or three years; |
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To hold a non-binding advisory
vote on the termination of
the Company’s stockholder rights plan no later than August
29, 2021; and |
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To transact other business that may
properly come before the annual meeting, including any adjournment
or postponement thereof. |
Our board of directors has fixed the close of business on October
20, 2020 as the record date for determining those stockholders
entitled to receive notice of and vote at the annual meeting and
any adjournments or postponements thereof.
The board and management team are committed to a new era of growth
for TSR. In every decision, we are accountable to you, the
stockholders.
I look forward to discussing our plans and progress at the meeting
and in the years to come. Meanwhile, I encourage you to take care
of yourself and your community during this pandemic.
Bradley Tirpak
Chairman of the Board
Hauppauge, New York
October 26, 2020
TSR, Inc.
400 OSER AVENUE, SUITE 150
HAUPPAUGE, NY 11788
NOTICE OF COMBINED 2019 & 2020 ANNUAL MEETING OF
STOCKHOLDERS
to be held on November 19, 2020
NOTICE IS HEREBY GIVEN that the combined 2019 and 2020 Annual
Meeting of Stockholders (the “Annual Meeting”) of TSR, Inc. (“TSR”
or the “Company”), a Delaware corporation, will be held on November
19, 2020 at 11:00 a.m., local time. As a result of the public
health and travel risks and concerns due to COVID-19, the
Annual Meeting will be a virtual meeting of stockholders, which
means that you will be able to participate in the Annual Meeting,
vote and submit your questions during the Annual Meeting via live
webcast by
visiting https://www.cstproxy.com/tsrconsulting/2020.
You will not be able to attend the Annual Meeting
in person. Please read carefully the sections in the proxy
statement on attending via webcast and voting at the Annual Meeting
to ensure that you comply with these requirements.
The purposes of the meeting are:
1. To elect one Class II Director for a term to expire at the
2023 annual stockholder meeting;
2. To vote on a proposal to approve an amendment to the
Company’s Certificate of Incorporation to de-classify the board of
directors (the “Board”);
3. To vote on a proposal to approve the adoption of our 2020
Equity Incentive Plan;
4. To ratify the appointment of CohnReznick LLP as the
independent registered public accountants of the Company for the
fiscal year ending May 31, 2021;
5. To hold a non-binding advisory vote on the compensation
program for the Company’s named executive officers as disclosed in
the proxy statement;
6. To hold a non-binding advisory vote on whether a
non-binding advisory vote on the compensation program for the
Company’s named executive officers should be held every one, two,
or three years;
7. To hold a non-binding advisory vote on the termination of
the Company’s stockholder rights plan no later than August 29,
2021; and
8. To transact other business that may properly come before
the Annual Meeting, including any adjournment or postponement
thereof.
These matters are more fully described in the proxy statement. The
Board recommends that you vote “FOR” the nominated director, “FOR”
the proposal to amend the Company’s Certificate of Incorporation to
de-classify the Board, “FOR” the proposal to adopt the 2020 Equity
Incentive Plan, “FOR” for the ratification of the Company’s
independent registered public accounting firm, “FOR” the approval
of the compensation program for the Company’s named executive
officers and “FOR” a frequency of EVERY ONE YEAR regarding how
frequently the Company should seek an advisory vote on the
compensation program for its named executive officers. The Board
makes no recommendation on the advisory vote to terminate the
Company’s stockholder rights plan no later than August 29, 2021.
The Board knows of no other matters at this time that may be
properly brought before the meeting.
Stockholders of record at the close of business on October 20, 2020
will be entitled to vote at the Annual Meeting or any adjournments
thereof. A list of stockholders entitled to vote at the Annual
Meeting will be available at the virtual Annual Meeting and during
the ten-day period prior to the date of the Annual Meeting, at the
Company’s principal executive offices for inspection by
stockholders during ordinary business hours for any purpose germane
to the Annual Meeting.
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By Order of the Board of Directors, |
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John G. Sharkey, Secretary |
Hauppauge, New York
October 26, 2020
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING VIA WEBCAST,
PLEASE ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING BY VOTING IN ONE OF THE FOLLOWING WAYS:
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VIA THE INTERNET – GO TO THE WEBSITE DESIGNATED ON THE
ENCLOSED PROXY CARD. |
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BY TELEPHONE – CALL THE TELEPHONE NUMBER DESIGNATED ON
THE ENCLOSED PROXY CARD. |
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BY MAIL – COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO
POSTAGE IS NEEDED IF THE PROXY CARD IS MAILED WITHIN THE UNITED
STATES. |
YOUR PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
TABLE OF CONTENTS
TSR, Inc.
400 Oser Avenue, Suite 150
Hauppauge, NY 11788
COMBINED 2019 & 2020 ANNUAL MEETING OF STOCKHOLDERS
to be held on November 19, 2020
PROXY STATEMENT
This solicitation of proxies is being made by the Board of
Directors (the “Board”) of TSR, Inc. (“TSR” or the “Company”) for
use at the combined 2019 and 2020 Annual Meeting of the
Stockholders of the Company (the “Annual Meeting”) on November 19,
2020 at 11:00 a.m., Eastern Time, or at any postponement or
adjournment thereof. As a result of the public health and travel
risks and concerns due to COVID-19, the Annual Meeting will be a
virtual meeting via live webcast on the Internet. You will be able
to attend the meeting, vote and submit your questions during the
meeting by visiting
https://www.cstproxy.com/tsrconsulting/2020 and
entering your control number included on the proxy card you
receive. You will not be able to attend the meeting in
person. The Board and officers and employees of the Company will
solicit proxies by mail, telephone and personal contact for no
additional compensation.
This Proxy Statement (“Proxy Statement”), the enclosed form of
proxy and the Company’s Annual Report for the fiscal year ended May
31, 2020 shall be mailed on or about October 28, 2020 to holders of
record of shares of the Company’s common stock, par value $0.01 per
share (“Common Stock”), as of October 20, 2020, using the full set
delivery option pursuant to Rule 14a-16(n) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Only
Stockholders of record at the close of business on October 20, 2020
are entitled to vote at the Annual Meeting. On October 20, 2020,
there were 1,962,062 shares of Common Stock issued and
outstanding.
Important Notice Regarding the Internet Availability of Proxy
Materials
for the Stockholders Meeting to be held on November 19, 2020
This Proxy Statement, a copy of the form of proxy and the Company’s
Annual Report for the fiscal year ended May 31, 2020 are also
available on the Investor Relations page of our website at
www.tsrconsulting.com.
QUESTIONS & ANSWERS
ABOUT THIS PROXY SOLICITATION
The following are some of the questions that you may have about
this Proxy Statement and the answers to those questions. The
information in this section does not provide all of the information
that may be important to you with respect to this Proxy Statement.
Therefore, we encourage you to read the entire Proxy Statement,
which was first distributed beginning on or about October 28, 2020,
for more information about these topics.
Why am I receiving these materials?
TSR has made these materials available to you in connection with
the Company’s solicitation of proxies for use at the Annual Meeting
to be held via webcast, on November 19, 2020 at 11:00 a.m., Eastern
Time, or at any postponement or adjournment thereof. The Company,
on behalf of the Board, is soliciting your proxy to vote your
shares at the Annual Meeting. We solicit proxies to give
stockholders of record an opportunity to vote on matters that will
be presented at the Annual Meeting. You are invited to attend the
Annual Meeting via webcast and are requested to vote on the
proposals described in this Proxy Statement.
Why Is the Company Holding a Virtual Annual Meeting and How Do I
Participate?
Due to the public health impact of COVID-19 and to support the
health and well-being of our stockholders, this Annual Meeting will
be held in a virtual meeting format only. We have designed our
virtual format to enhance, rather than constrain, stockholder
access, participation and communication. Stockholders will have
multiple opportunities to submit questions to the Company for the
Annual Meeting. Stockholders who wish to submit a question in
advance may do so beginning on November 16, 2020 by pre-registering
and then selecting the chat box link. Stockholders also may submit
questions live during the meeting. Questions pertinent to the
Annual Meeting matters may be recognized and answered during the
meeting in our discretion, subject to time constraints. We reserve
the right to edit or reject questions that are inappropriate for
Annual Meeting matters.
Any stockholder can listen to and participate in the Annual Meeting
live via the Internet at
https://www.cstproxy.com/tsrconsulting/2020. The
webcast will start at 11:00 a.m., Eastern Time, on November 19,
2020. Stockholders may vote and submit questions while connected to
the Annual Meeting on the Internet.
Instructions on how to connect and participate in the Annual
Meeting, including how to demonstrate proof of ownership of our
Common Stock, are posted at
https://www.cstproxy.com/tsrconsulting/2020. If
you do not have your 12-digit control number that is printed in the
box on your proxy card, you will only be able to listen to the
Annual Meeting.
If you do not have Internet capabilities, you can attend the Annual
Meeting via a listen-only format by dialing 1 888-965-8995
(toll-free) within the U.S. and Canada, or 1 415-655-0243 (standard
rates apply) outside of the U.S. and Canada, and entering the pin
number (36211775#) when prompted. You will not be able to vote or
submit questions through the listen-only format.
What is being voted on at the Annual Meeting?
The Company is aware of seven (7) matters that stockholders may
vote on at the Annual Meeting. These matters are listed on the
Company’s proxy card. The seven matters listed on the Company’s
proxy card are as follows:
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The election to the Board of one (1) Class II nominee (Proposal
No. 1); |
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The approval of an amendment to the Company’s Certificate of
Incorporation to de-classify the Board (Proposal No. 2); |
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3. |
The approval of the adoption of our 2020 Equity Incentive Plan
(Proposal No. 3); |
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The ratification of the appointment of CohnReznick LLP as the
Company’s independent registered public accounting firm for the
fiscal year ending May 31, 2021 (Proposal No. 4); |
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A non-binding advisory vote on the
compensation program for the Company’s named executive officers as
disclosed herein (Proposal No. 5); |
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A non-binding advisory vote on
whether a non-binding advisory vote on the compensation program for
the Company’s named executive officers should be held every one,
two, or three years (Proposal No. 6); |
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A non-binding
advisory vote on the
termination of the Company’s stockholder rights plan no later
than August 29, 2021 (Proposal No. 7). |
How does the Board of TSR recommend that I vote?
At the Annual Meeting, the Board of TSR recommends that you vote
your shares:
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“FOR” the election of the Class II nominee (Proposal No.
1); |
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“FOR” the approval of an amendment
to the Company’s Certificate of Incorporation to de-classify the
Board (Proposal No. 2); |
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3. |
“FOR” the approval of the adoption
of our 2020 Equity Incentive Plan (Proposal No. 3); |
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4. |
“FOR” the ratification of the
appointment of CohnReznick LLP as the Company’s independent
registered public accounting firm for the fiscal year ending May
31, 2021 (Proposal No. 4); |
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5. |
“FOR” the approval of the compensation program for our named
executive officers as described herein (Proposal No. 5); and |
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“FOR” a frequency of EVERY ONE YEAR regarding how frequently we
should seek an advisory vote on the compensation program for our
named executive officers (Proposal No. 6); |
The Board makes no
recommendation on the proposal to terminate the stockholder rights
plan no later than August 29, 2021 (Proposal No. 7).
Who is entitled to vote at the Annual Meeting?
Stockholders of record of shares of Common Stock, at the close of
business on October 20, 2020 (the “Record Date”) are entitled to
vote at the Annual Meeting or any postponement or adjournment
thereof. Each share of Common Stock is entitled to one vote on each
matter to be voted on. As of the record date, there were 1,962,062
shares of Common Stock issued and outstanding. There are no other
voting securities of the Company outstanding.
What is the difference between a stockholder of record and a
beneficial owner of shares held in street name?
Stockholder of Record. If your shares are registered
directly in your name with the Company’s transfer agent,
Continental Stock Transfer & Trust Company, you are considered
the stockholder of record with respect to those shares, and the
notice for the Annual Meeting (“Notice”) was sent directly to you
by the Company.
Beneficial Owner of Shares Held in Street Name. If your
shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the
“beneficial owner” of shares held in “street name,” and a Notice
was forwarded to you by that organization. As a beneficial owner,
you have the right to instruct your broker, bank, trustee, or
nominee how to vote your shares. Your broker is required to vote
your shares in accordance with your instructions. If you do not
give instructions to your broker, your broker will not be able to
vote your shares on any proposals other than Proposal No. 4. It is
very important to instruct your broker how to vote your shares by
following their voting instructions.
How do I vote?
Stockholder of Record. If you are a stockholder of record
you can vote in any one of four ways:
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Via the Internet Prior to the
Meeting. You may vote by proxy via the Internet prior to the
Annual Meeting by following the instructions provided on the
enclosed proxy card. |
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By Telephone. You may vote
by proxy by calling the toll-free number found on the enclosed
proxy card. |
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By Mail. You may vote by
proxy by filling out the proxy card and returning it in the
envelope provided. |
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At the Meeting. If you
attend the virtual Annual Meeting, you may vote during the meeting
by visiting https://www.cstproxy.com/tsrconsulting/2020,
entering your control number included on the proxy card you
receive. |
Beneficial Owner of Shares Held in Street Name. If your
shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the
“beneficial owner” of shares held in “street name” and you can vote
in any one of two ways:
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Broker Instructions. A
Notice was forwarded to you by a brokerage firm, bank,
broker-dealer, or other similar organization. As a beneficial
owner, you have the right to instruct your broker, bank, trustee,
or nominee how to vote your shares. Your broker is required to vote
your shares in accordance with your instructions. If you do not
give instructions to your broker, your broker will not be able to
vote your shares for Proposal No. 1, Proposal No. 2, Proposal No.
3, Proposal No. 5, Proposal No. 6 or Proposal No. 7. It is very
important to instruct your broker how to vote your shares by
following their voting instructions. |
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At the Meeting. If you are a
beneficial owner of shares held in street name and wish to vote at
the Annual Meeting, you must obtain a “legal proxy” from the
organization that holds your shares. A legal proxy is a written
document that will authorize you to vote your shares held in street
name at the Annual Meeting. Please contact the organization that
holds your shares for instructions regarding obtaining a legal
proxy. Once you have received your legal proxy, you will need to
contact Continental Stock Transfer & Trust Company to have a
control number generated. Please allow up to 72 hours for
processing your request for a control number. To vote during the
Annual Meeting, please visit
https://www.cstproxy.com/tsrconsulting/2020 and enter your control
number you receive. |
How many votes are required to approve each proposal?
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Proposal No. 1 - Election to
the Company’s Board of one (1) Class II nominee named in this Proxy
Statement. Candidates for election as members of the Board who
receive the highest number of votes, up to the number of directors
to be chosen, shall stand elected; an absolute majority of the
votes cast is not a prerequisite to the election of any candidate
to the Board, nor is it a prerequisite to election for a candidate
to receive more affirmative votes than authority withheld votes. A
proxy that withholds authority with respect to the election of any
or all nominees will be counted for purposes of determining whether
there is a quorum, but, with respect to any specific nominee, will
not be considered to have been voted for such nominee. Broker
non-votes, if any, will have no effect. |
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Proposal No. 2 – Approval of
an amendment to the Company’s Certificate of Incorporation to
de-classify the Board. Under our Certificate of Incorporation, as
amended, approval of this proposal requires the affirmative vote of
the holders of not less than two-thirds of the stock having voting
power and entitled to vote. Abstentions and broker non-votes
will have the same effect as votes “against” this proposal. |
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3. |
Proposal No. 3 – Approval of
the adoption of our 2020 Equity Incentive Plan. Adoption of this
proposal requires the affirmative vote of the holders of a majority
of the stock having voting power present in person or represented
by proxy at the Annual Meeting and entitled to vote. Abstentions
will be counted as represented and entitled to vote and will have
the effect of a negative vote on the proposal. Broker non-votes, if
any, will have no effect. |
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Proposal No. 4 –
Ratification of the appointment of CohnReznick LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending May 31, 2021. Adoption of this proposal requires the
affirmative vote of the holders of a majority of the stock having
voting power present in person or represented by proxy at the
Annual Meeting and entitled to vote. Abstentions will be counted as
represented and entitled to vote and will have the effect of a
negative vote on the proposal. |
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5. |
Proposal No. 5 – A
non-binding advisory vote on the compensation program for the
Company’s named executive officers as disclosed in the proxy
statement. The Company will consider the affirmative vote of the
holders of a majority of the stock having voting power present in
person or represented by proxy at the Annual Meeting and entitled
to vote as approval of the compensation of the Company’s named
executive officers. Abstentions will be counted as represented and
entitled to vote and will have the effect of a negative vote on the
proposal. Broker non-votes, if any, will have no effect. As an
advisory vote, this proposal is not binding. However, our Board and
Compensation Committee will consider the outcome of the vote when
making future compensation decisions for the Company’s named
executive officers. |
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6. |
Proposal No. 6 -
A non-binding advisory
vote on whether a non-binding advisory vote on the compensation
program for the Company’s named executive officers should be held
every one, two, or three years. The Company will consider the
option receiving the highest number of affirmative votes by the
holders of the stock having voting power present in person or
represented by proxy at the Annual Meeting and entitled to vote to
be the preferred frequency; an absolute majority of the votes cast
is not a prerequisite to the determination of the preferred
frequency. Abstentions will be counted as represented and entitled
to vote and will not be considered to have been voted for any
frequency option. Broker non-votes, if any, will have no effect. As
an advisory vote, this proposal is not binding. However, our Board
and Compensation Committee will consider the choice that receives
the most votes in making future decisions regarding the frequency
of future votes on the compensation program for the Company’s named
executive officers. |
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7. |
Proposal No. 7 - A
non-binding advisory vote on the termination of the Company’s
stockholder rights plan no later than August 29, 2021 (“Expiration
Date”). The Company will consider the affirmative vote of the
holders of a majority of the stock having voting power present in
person or represented by proxy at the Annual Meeting and entitled
to vote as approval of the termination of the stockholder rights
plan no later than its Expiration Date. Abstentions will be counted
as represented and entitled to vote and will have the effect of a
negative vote on the proposal. Broker non-votes, if any, will have
no effect. As an advisory vote, this proposal is not binding.
However, our Board will consider the outcome of the vote when
making future decisions regarding whether to terminate the
stockholder rights plan on or prior to its Expiration Date. |
What is the deadline for submitting proxies?
Proxies can be submitted until the polls are closed at the Annual
Meeting. If you are voting via the Internet prior to the meeting or
by telephone, you must submit your proxy by 11:59 p.m., Eastern
Time, the day prior to the Annual Meeting. However, to be sure that
the Company receives your proxy in time to utilize it, please
provide your proxy as early as possible.
May I change or revoke my vote after I return my proxy
card?
If you give us your proxy, you may change or revoke it at any time
before the Annual Meeting. You may change or revoke your proxy in
any one of the following ways:
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if you received a proxy card, by
signing a new proxy card with a date later than your previously
delivered proxy and submitting it as instructed above; |
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by re-voting by the Internet or
telephone as instructed above; |
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by notifying the Corporate
Secretary of TSR in writing before the Annual Meeting that you have
revoked your proxy; or |
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by attending the
Annual Meeting virtually. Attending the meeting virtually will not
in and of itself revoke a previously submitted proxy. You must
specifically request at the meeting that it be revoked. |
Your most current vote, whether by the Internet or proxy card is
the one that will be counted.
How many shares are required to be present to hold the Annual
Meeting?
A quorum is necessary to hold a valid meeting of stockholders. The
presence, in person or by proxy, of a majority of the issued and
outstanding shares of Common Stock entitled to vote as of the
Record Date constitutes a quorum at the Annual Meeting. Abstentions
will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum with respect to
any matter, but will not be counted as votes in favor of such
matter. If a broker holding stock in “street name” indicates on the
proxy card that it does not have discretionary authority as to
certain shares to vote on a matter, those shares will not be
considered as present and entitled to vote with respect to that
matter.
What happens if I do not give specific voting
instructions?
If you are a stockholder of record and submit your signed and dated
proxy card but do not make specific choices with respect to the
proposals, your proxy will follow the Board’s recommendations and
your shares will be voted:
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“FOR” the election of the Class II
nominee (Proposal No. 1); |
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“FOR” the approval of an amendment
to the Company’s Certificate of Incorporation to de-classify the
Board (Proposal No. 2); |
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“FOR” the approval of the adoption
of our 2020 Equity Incentive Plan (Proposal No. 3); |
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● |
“FOR” the ratification of the
appointment of CohnReznick LLP as the Company’s independent
registered public accounting firm for the fiscal year ending May
31, 2021 (Proposal No. 4); |
|
● |
“FOR” the approval of the compensation program for the
Company’s named executive officers as described herein (Proposal
No. 5); and |
|
● |
“FOR” a frequency of EVERY ONE YEAR regarding how frequently we
should seek an advisory vote on the compensation program for the
Company’s named executive officers (Proposal No. 6); |
|
● |
In accordance with the best
judgment of the individuals named as proxies on the proxy card on
any other matters properly brought before the Annual Meeting
including any adjournment or postponement thereof. |
As the Board has made no recommendation on the vote to terminate
the Company’s stockholder rights plan no later than August 29, 2021
(Proposal No. 7), your shares will not be voted on Proposal No. 7
if you do not specify a vote.
If you are a beneficial owner of shares held in street name and do
not provide the organization that holds your shares with specific
voting instructions then, under applicable rules, the organization
that holds your shares may generally vote on “routine” matters but
cannot vote on “non-routine” matters. If the organization that
holds your shares does not receive instructions from you on how to
vote your shares on a non-routine matter, that organization will
inform the inspector of election that it does not have the
authority to vote on that matter with respect to your shares. This
is generally referred to as a “broker non-vote.”
Which ballot measures are considered “routine” or
“non-routine”?
The election of directors (Proposal No. 1), the approval of an
amendment to the Company’s Certificate of Incorporation to
de-classify the Board (Proposal No. 2), the approval of the
adoption of the 2020 Equity Incentive Plan (Proposal No. 3), the
approval of the compensation program for the Company’s named
executive officers (Proposal No. 5), the approval of the frequency
with which the Company will conduct a non-binding advisory vote on
the compensation program for its named executive officers (Proposal
No. 6) and the approval of the termination of the Company’s
stockholder rights plan no later than August 29, 2021 (Proposal No.
7) are considered non-routine matters under applicable rules. A
broker cannot vote without instructions on non-routine matters, and
therefore broker non-votes may exist in connection with these
proposals. Broker non-votes will have no effect on these proposals
except that they will be deemed as votes “against” Proposal No.
2.
The proposal to ratify the appointment of CohnReznick LLP as the
Company’s independent registered public accounting firm for the
fiscal year ending May 31, 2021 (Proposal No. 4) is considered a
routine matter under applicable rules. A broker may generally vote
on routine matters, and therefore no broker non-votes are expected
to exist in connection with Proposal No. 4.
Who will count the vote?
All votes will be tabulated by the inspector of election appointed
for the Annual Meeting. The inspector of election will separately
tabulate (i) the affirmative votes, authority withheld and broker
non-votes with regard to the election of directors under Proposal
No. 1; (ii) the affirmative votes, negative votes, abstentions and
broker non-votes with regard to the approval of an amendment to the
Company’s Certificate of Incorporation to declassify the Board
under Proposal No. 2, the approval of the adoption of our 2020
Equity Incentive Plan under Proposal No. 3, the approval of the
compensation program for the Company’s named executive officers
under Proposal No. 5 and the approval of the termination of the
Company’s stockholder rights plan no later than August 29, 2021
under Proposal No. 7; (iii) the affirmative votes, negative votes,
and abstentions with regard to the vote to approve the ratification
of the appointment of CohnReznick LLP as the Company’s independent
registered public accountants for the fiscal year ending May 31,
2021 under Proposal No. 4; and (iv) the affirmative votes for ONE
YEAR, TWO YEARS or THREE YEARS, abstentions and broker non-votes
with regard to the approval of frequency with which the Company
will conduct a non-binding advisory vote on the compensation
program for its named executive officers under Proposal No. 6.
When will the voting results be disclosed?
The Company will publish voting results in a current report on Form
8-K that we will file with the Securities and Exchange Commission
(“SEC”) within four business days following the Annual Meeting. If
on the date of this filing the inspector of election for the Annual
Meeting has not certified the voting results as final, the Company
will announce that the results are not final and publish the final
results in a subsequent amended Form 8-K filing within four
business days after the final voting results are known.
Whom should I contact if I have any questions regarding this
proxy solicitation?
Generally, stockholders who have questions or concerns and wish to
communicate with the Board should follow the instructions contained
under the section of this Proxy Statement entitled “Stockholder
Communications with Directors.”
If you have questions or require assistance in voting your
shares, you should call John G. Sharkey, TSR’s corporate secretary,
at (631) 231-0333.
PROPOSAL 1 - ELECTION OF
DIRECTORS
At the Annual Meeting, one (1) Class II Director will be elected
for a three year term expiring at the Company’s 2023 annual
stockholder meeting or until his successor has been elected and
qualified.
If the nominee listed below is unavailable for election at the date
of the Annual Meeting, the shares represented by the proxy will be
voted for such nominee as the person or persons designated to vote
shall, in their judgment, designate. Management at this time has no
reason to believe that the nominee will not be available or will
not serve if elected.
Set forth below is certain information with respect to the director
nominated by the Company.
Name of Director and Nominee for Election |
|
Age |
|
Nominee
for Class
of Director |
|
Nominee
for Term
Expiring |
Robert Fitzgerald |
|
56 |
|
Class II |
|
2023 |
Mr. Robert Fitzgerald was appointed as a Class II director
of the Company by the Board on December 30, 2019. Mr. Fitzgerald is
a seasoned business executive with over 25 years of experience
helping companies grow. From 1999 through 2008, he served as the
CEO of YDI/Proxim Wireless, an early pioneer of the wireless
networking equipment industry. From 2009 through 2010, he served as
a consultant and later the President of Ubiquiti Networks, now
Ubiquiti, Inc. (NYSE: UI), a world leading provider of wireless and
non-wireless networking equipment. He currently serves as the CEO
of QAR Industries, Inc., an investment company that holds interests
in a portfolio of public and private companies, including Antenna
Products Corporation and SeeView Securities, Inc. Mr. Fitzgerald
earned a Bachelor of Arts in Economics and Juris Doctorate from the
University of California, Los Angeles.
The Company believes that Mr. Fitzgerald’s extensive experience in
and knowledge of the information technology industry and career
serving in management-level positions for public and private
companies make him a valuable member of the Board.
The Board unanimously recommends a vote FOR the election of Mr.
Fitzgerald as a Class II Director to serve until our 2023 annual
stockholder meeting.
Directors and Executive
Officers of the Company
Set forth below are the names, ages and positions and offices held
with the Company of each director and executive officer of the
Company. Directors are currently classified as either Class I,
Class II or Class III directors, with each class serving for a term
of three (3) years. The term of Class I directors is set to expire
at the 2021 annual stockholder meeting. The term of Class II
directors is set to expire at the 2023 stockholder meeting, and the
term of Class III directors is set to expire at the 2022
stockholder meeting. There is currently no Class III director on
the Board. Executive officers serve until such time as their
successor is duly elected and qualifies.
Name |
|
Age |
|
Position |
|
Year First Officer or Director |
Bradley M.
Tirpak(1)(2)(3)(4) |
|
51 |
|
Chairman of the Board and
Class I Director |
|
2019 |
Thomas Salerno |
|
52 |
|
Chief Executive Officer, President and
Treasurer |
|
2020 |
John G.
Sharkey |
|
61 |
|
Senior Vice President, Chief Financial
Officer and Secretary |
|
1990 |
H. Timothy
Eriksen(1)(2)(3)(4)(5)(7) |
|
51 |
|
Class I Director |
|
2019 |
Robert Fitzgerald(1)(2)(3)(4)(6) |
|
56 |
|
Class II Director |
|
2019 |
|
(1) |
Member of the
Compensation Committee of the Board. |
|
(2) |
Member of the
Audit Committee of the Board. |
|
(3) |
Member of the
Nominating Committee of the Board. |
|
(4) |
Member of the
Special Committee of the Board. |
|
(5) |
Mr. Eriksen is the Chairman of the
Audit Committee of the Board and the Chairman of the Nominating
Committee of the Board. |
|
(6) |
Mr. Fitzgerald is the Chairman of the Compensation Committee of
the Board and the Chairman of the Special Committee of the
Board. |
|
(7) |
Lead independent director. |
There are no family relationships between any of the Company’s
executive officers and directors. None of the Company’s directors
currently serves, or has served during the past five years, as a
director of any company with a class of securities registered
pursuant to Section 12 of the Exchange Act or subject to the
requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company
Act of 1940. There is no arrangement between any director or
director nominee and any other person pursuant to which he was or
is to be selected as a director or director nominee except that Mr.
Eriksen and Mr. Tirpak were nominated by Zeff Capital, L.P. as
Class I directors at the Company’s 2018 annual stockholder meeting
held on October 22, 2019 in accordance with the terms and
conditions of that certain settlement and release agreement, dated
August 30, 2019, between the Company and certain investor parties,
including Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel
Zeff, QAR Industries, Inc. and Robert Fitzgerald, and Fintech
Consulting, LLC and Tajuddin Haslani (the “Settlement Agreement”).
The terms of the Settlement Agreement are more fully described in
the Company’s Current Report on Form 8-K filed with the SEC on
September 3, 2019. Mr. Eriksen and Mr. Tirpak were subsequently
elected as directors at the annual stockholder meeting on October
22, 2019.
Biographical
Information
Mr. Bradley M. Tirpak was elected as a Class I director
of the Company at the 2018 annual stockholder meeting on October
22, 2019. He was appointed as the Chairman of the Board on December
30, 2019. Mr. Tirpak is a professional investor with more than 25
years of investing experience. Since September 2016, he has served
as a portfolio manager and Managing Director at Palm Active
Partners, LLC, a private investment company. From October 2008 to
August 2016, Mr. Tirpak served as Managing Member of Locke
Partners, LLC, a private investment company. He also previously
served as a portfolio manager at Credit Suisse First Boston, Caxton
Associates, Sigma Capital Management and Chilton Investment
Company. Mr. Tirpak served as a director at Applied Minerals,
Inc., a publicly traded specialty materials company, from April
2015 to March 2017, as a director at Flowgroup plc, an energy
supply and services business in the United Kingdom, from June 2017
to October 2018 and as a director at Birner Dental Management
Services, Inc., a dental service organization, from December 2017
to January 2019. Since December of 2014, Mr. Tirpak has served as a
director of Full House Resorts, Inc., a publicly traded gaming
company, and since October of 2019 as a director of Liberated
Syndication Inc., a publicly traded provider of podcast and
webhosting services, and since April of 2020 as a director of
Barnwell Industries Inc., a publicly traded company engaged in real
estate development and oil and gas exploration. Mr. Tirpak also
currently serves as trustee of The HALO Trust, the world’s largest
humanitarian mine clearance organization focused on clearing the
debris of war currently operating in over 25 countries. Mr. Tirpak
earned a B.S.M.E. from Tufts University and an M.B.A. from
Georgetown University.
The Company believes that Mr. Tirpak is a valuable member of the
Board due to his knowledge and experience in investing, capital
allocation and corporate governance, as well as his experience
serving on the boards of publicly traded companies.
Mr. H. Timothy Eriksen was elected as a Class I
director of the Company at the 2018 annual stockholder meeting on
October 22, 2019. He was appointed by the Board as the Chairman of
the Audit Committee of the Board on December 30, 2019. Mr. Eriksen
founded Eriksen Capital Management, a Lynden,
Washington-based investment advisory firm (“ECM”), in 2005.
Mr. Eriksen is the President of ECM. Mr. Eriksen is the
Chief Executive Officer and Chief Financial Officer of, and since
July 2015 has been a director of, Solitron Devices, Inc.
(“Solitron”). Solitron designs, develops, manufactures and markets
solid-state semiconductor components and related devices
primarily for the military and aerospace markets. Since April 2018,
Mr. Eriksen has been a director of Novation Companies, Inc.
(“Novation”). Novation owns Healthcare Staffing, Inc., which, among
other activities, provides outsourced healthcare staffing and
related services. Prior to founding ECM, Mr. Eriksen worked
for Walker’s Manual, Inc., a publisher of books and newsletters on
micro-cap stocks, unlisted stocks and community banks. Earlier
in his career, Mr. Eriksen worked for Kiewit Pacific Co, a
subsidiary of Peter Kiewit Sons, as an administrative engineer on
the Benicia Martinez Bridge project. Mr. Eriksen received a
B.A. from The Master’s University and an M.B.A. from Texas A&M
University.
The Company believes that Mr. Eriksen is a valuable member of the
Board based on his strong business and financial background, and
his experience serving in leadership- and management-level roles
with responsibility for formulating business and operational
strategy.
Mr. Robert Fitzgerald was appointed as a Class II director
of the Company by the Board on December 30, 2019. Mr. Fitzgerald is
a seasoned business executive with over 25 years of experience
helping companies grow. From 1999 through 2008, he served as the
CEO of YDI/Proxim Wireless, an early pioneer of the wireless
networking equipment industry. From 2009 through 2010, he served as
a consultant and later the President of Ubiquiti Networks, now
Ubiquiti, Inc. (NYSE: UI), a world leading provider of wireless and
non-wireless networking equipment. He currently serves as the CEO
of QAR Industries, Inc., an investment company that holds interests
in a portfolio of public and private companies, including Antenna
Products Corporation and SeeView Securities, Inc. Mr. Fitzgerald
earned a Bachelor of Arts in Economics and Juris Doctorate from the
University of California, Los Angeles.
The Company believes that Mr. Fitzgerald’s extensive experience in
and knowledge of the information technology (“IT”) industry and
career serving in management-level positions for public and private
companies make him a valuable member of the Board.
Thomas Salerno was appointed President, Chief Executive
Officer and Treasurer of the Company effective as of March 23,
2020. Since 2011, Mr. Salerno had served as the Managing Director
of TSR Consulting Services, Inc., the Company’s IT consulting
services subsidiary and largest business unit. Mr. Salerno has over
20 years of experience in the technology consulting industry. Prior
to joining the Company, Mr. Salerno spent eight years at Open
Systems Technology as Associate Director, two years as Vice
President of Sales and Recruiting for Versatech Consulting, and
three years as an Account Representative for Robert Half
Technologies. Mr. Salerno holds a Bachelor’s Degree from Johnson
and Wales University.
Mr. John G. Sharkey was appointed Senior Vice President,
Chief Financial Officer and Secretary of the Company effective June
1, 2019. He had served as the Vice President, Finance, Controller
and Secretary of the Company since 1990. Mr. Sharkey received a
Master’s Degree in Finance from Adelphi University and received his
Certified Public Accountant certification from the State of New
York. From 1987 until joining the Company in October 1990, Mr.
Sharkey was Controller of a publicly-held electronics manufacturer.
From 1984 to 1987, he served as Deputy Auditor of a commercial
bank, having responsibility over the internal audit department.
Prior to 1984, Mr. Sharkey was employed by KPMG LLP as a senior
accountant.
Corporate Governance and
Board Matters
The Company maintains the following committees of the Board: the
Audit Committee, the Compensation Committee, the Nominating
Committee, and the Special Committee. Each of these committees is
separately described below.
The Board of Directors currently consists of Bradley M. Tirpak
(Chairman), H. Timothy Eriksen and Robert Fitzgerald. Ira D. Cohen
and Raymond A. Roel served as directors during the fiscal year
ended May 31, 2020 (the “2020 fiscal year”) until October 22, 2019
when they were not re-elected at the 2018 annual stockholder
meeting on such date. Christopher Hughes, William J. Kelly, Brian
J. Mangan, Joseph Pennacchio and Eric M. Stein also served as
directors during the 2020 fiscal year until December 30, 2019 when
they resigned on such date. Bradley M. Tirpak, H. Timothy Eriksen,
Robert Fitzgerald, Ira D. Cohen, William J. Kelly, Brian J. Mangan,
Eric M. Stein and Raymond A. Roel qualify as “independent
directors” under NASDAQ rules.
The Board also has determined that the current Chair and members of
the Audit Committee, H. Timothy Eriksen, Bradley M. Tirpak and
Robert Fitzgerald as well as the former Chair and member of the
Audit Committee, Brian J. Mangan and Ira D. Cohen, all meet the
requirements of an “audit committee financial expert” as such term
is defined in applicable regulations of the SEC.
During the fiscal year ended May 31, 2020, the Board held 21
meetings and acted by unanimous written consent on 5 occasions; the
Audit Committee held 4 meetings; the Compensation Committee held 2
meetings; and the Nominating Committee held 2 meetings. During the
2020 fiscal year, no director attended fewer than 75% of the
aggregate of the total number of meetings of the Board and the
total number of meetings of all committees of the Board of which
such director was a member. The Company does not have a formal
policy regarding attendance of directors at the Annual Meeting of
Stockholders, but the Company encourages all directors to attend.
All of the directors who served in office on the date of the 2018
annual meeting of stockholders attended the 2018 annual stockholder
meeting.
The Audit Committee
The Audit Committee’s current members are H. Timothy Eriksen
(Chairman), Bradley M. Tirpak and Robert Fitzgerald. Each of the
members of the Audit Committee is an independent director under the
rules of the NASDAQ Capital Market. The Audit Committee’s primary
functions are to assist the Board in monitoring the integrity of
the Company’s financial statements and systems of internal control.
The Audit Committee has direct responsibility for the appointment,
independence and performance of the Company’s independent auditors.
The Audit Committee is responsible for pre-approving any
engagements of the Company’s independent auditors. The Audit
Committee operates under a written charter approved by the Board on
September 16, 2004, and amended as of October 10, 2008. A copy of
the Audit Committee Charter is available on the Investor Relations
page of the Company’s website at www.tsrconsulting.com.
The Compensation
Committee
The Compensation Committee’s current members are Robert Fitzgerald
(Chairman), H. Timothy Eriksen and Bradley M. Tirpak. Each of the
members of the Compensation Committee is an independent director
under the rules of the NASDAQ Capital Market. The Compensation
Committee assesses the structure of the Company’s management team
and the overall performance of the Company. It evaluates the
performance of the Company’s executive officers on an annual basis
and makes recommendations to the Board regarding salary increases
and other compensation to executive officers. The Board has
adopted a written charter for the Compensation Committee, a copy of
which is available on the Investor Relations page of the Company’s
website at www.tsrconsulting.com. Under its charter, the
Compensation Committee has authority to retain and approve the fees
of independent compensation consultants or other advisors.
According to the charter of the Compensation Committee, the
Compensation Committee may form subcommittees for any purpose that
the Compensation Committee deems appropriate and may delegate to
such subcommittees such power and authority as the Compensation
Committee deems appropriate; provided, however, that no
subcommittee shall consist of fewer than two members; and provided
further that the Compensation Committee shall not delegate to a
subcommittee any power or authority required by any law, regulation
or listing standard to be exercised by the Compensation Committee
as a whole.
The Nominating
Committee
The Nominating Committee’s current members are H. Timothy Eriksen
(Chairman), Bradley M. Tirpak and Robert Fitzgerald. Each of the
members of the Nominating Committee is an independent director
under the rules of the NASDAQ Capital Market. A copy of the
Nominating Committee Charter is available on the Investor Relations
page of the Company’s website at www.tsrconsulting.com. The
Nominating Committee determines the criteria for nominating new
directors and recommends to the Board candidates for nomination to
the Board. The Nominating Committee’s process to identify and
evaluate candidates for nomination to the Board includes
consideration of candidates for nomination to the Board recommended
by stockholders. Such stockholder recommendations must be delivered
to the Corporate Secretary of the Company, together with the
information required to be filed in a proxy statement with the
Securities and Exchange Commission regarding director nominees and
each such nominee must consent to serve as a director if elected,
no later than the deadline for submission of stockholder proposals
as set forth in our Bylaws and under the section of this Proxy
Statement entitled “Stockholder Nominations.” In considering and
evaluating such stockholder proposals that have been properly
submitted, the Nominating Committee will apply substantially the
same criteria that the Nominating Committee believes must be met by
a nominee recommended by the Nominating Committee as described
below.
In addition, certain identification and disclosure rules apply to
director candidate proposals submitted to the Nominating Committee
by any single stockholder or group of stockholders that has
beneficially owned more than five percent of the Common Stock for
at least one year (a “Qualified Stockholder Proposal”). If the
Nominating Committee receives a Qualified Stockholder Proposal that
satisfies the necessary notice, information and consent provision
referenced above, the Proxy Statement will identify the candidate
and the stockholder (or stockholder group) that recommended the
candidate and disclose whether the Nominating Committee chose to
nominate the candidate. However, no such identification or
disclosure will be made without the written consent of both the
stockholder (or stockholder group) and the candidate to be so
identified.
In evaluating director nominees, the Nominating Committee currently
considers the following factors:
|
● |
the Company’s needs with respect to
the particular talents and experience of our directors; |
|
● |
the knowledge, skills and
experience of nominees, including experience in business or
finance, in light of prevailing business conditions and the
knowledge, skills and experience already possessed by other members
of the Board; |
|
● |
familiarity with the Company’s
business and businesses similar or analogous to that of the
Company; |
|
● |
experience with accounting rules
and practices and corporate governance principles; and |
|
● |
such other factors as the
Nominating Committee deems are in the best interests of the Company
and the best interests of the Company’s stockholders. |
Qualified candidates for membership on the Board will be considered
without a particular focus on the diversity of the Board’s
membership, and without regard to race, color, creed, religion,
national origin, age, gender, sexual orientation or disability.
The Nominating Committee identifies nominees by first evaluating
the current members of the Board willing to continue in service. If
any member of the Board does not wish to continue in service or if
the Nominating Committee or the Board decides not to re-nominate a
member for re-election, the Nominating Committee identifies the
desired skills and experience of a new nominee, and discusses with
the Board suggestions as to individuals who meet the criteria.
Special Committee
The Special Committee’s current members are Robert Fitzgerald
(Chairman), H. Timothy Eriksen and Bradley M. Tirpak. Each of the
members of the Special Committee is an independent director under
the rules of the NASDAQ Capital Market.
The Board established the Special Committee by resolution on July
9, 2018, as amended, to review the request submitted by Joseph
F. Hughes and Winifred Hughes that the Board pursue a sale of the
Company. Joseph F. Hughes is the former Chairman and Chief
Executive Officer of the Company. At the time of submitting such
request to the Board, Joseph F. Hughes and Winifred Hughes
beneficially owned approximately 42% of the Company’s outstanding
Common Stock. In the context of the Special Committee’s review of
the request by Joseph F. Hughes and Winifred Hughes, the Board
charged the Special Committee to consider and evaluate strategic
alternatives (“Strategic Alternatives”) available to the Company,
including (a) potential opportunities for a sale of the Company by
way of merger, consolidation, sale of equity securities (including
the Company’s outstanding Common Stock), sale of all or
substantially all of the Company’s assets, or other strategic
transactions; (b) recapitalization of the Company; (c) the
sale or exchange of the shares of Common Stock held by Mr. Hughes
and Mrs. Hughes in a transaction involving the Company; or (d)
remaining independent and continuing to execute the Company’s
business plans on a standalone basis or pursuing opportunities to
grow through acquisitions, and to review, consider and evaluate,
for purposes of advising the full Board, whether any of the
potential Strategic Alternatives is in the best interests of the
Company’s stockholders. The Special Committee is empowered to hire,
at the Company’s expense, legal, financial and public relations
advisors to assist the Special Committee in the performance of its
duties. The Special Committee does not have a formal written
charter, but is governed in accordance with the authority delegated
to it by the Board by resolution as described above.
On December 7, 2018, the Company issued a press release providing
an update on the strategic alternatives process being conducted by
the Special Committee. After careful consideration, and based upon
the unanimous recommendation of the Special Committee, the Board
decided that it is in the best interests of the Company and its
stockholders to pursue one or more strategic acquisitions. In
reaching its unanimous decision to recommend to the Board that the
Company pursue an acquisition strategy, the Special Committee
reviewed and considered the analysis and recommendations of CoView
Capital (“CoView”), its then financial adviser, including a report
by CoView identifying potential acquisition candidates. The Special
Committee believes that acquiring a business that is a good
strategic fit will expand the Company’s customer base and improve
profitability, and would be in the best interests of the Company
and its stockholders. The Special Committee has been authorized,
with assistance from its legal and financial advisors, to begin
approaching certain potential acquisition candidates, evaluating
the merits of and negotiating acquisition target proposals and
agreements, and taking other actions necessary to facilitate the
consummation of such a transaction. In carrying out its functions,
the Special Committee recommended, and the Company completed, the
acquisition of all of the outstanding stock of Geneva Consulting
Group, Inc., a New York corporation (“Geneva”) and provider of
temporary and permanent information technology personnel based in
Port Washington, New York on September 1, 2020. While the Special
Committee has shifted its focus to evaluating opportunities of
strategic acquisitions, there is no assurance that this decision
will result in any additional acquisitions being announced or
consummated in the future or the timing of any such activity.
Board Leadership Structure
and Risk Oversight
The Board does not currently have a policy on whether the same
person should serve as both the Chief Executive Officer and
Chairman of the Board. Periodically, our Board assesses these roles
and the board leadership structure to ensure the interests of the
Company and its stockholders are best served.
The Chairman and Chief Executive Officer positions are currently
separately held by Bradley M. Tirpak and Thomas Salerno
respectively. Our lead independent director is H. Timothy Eriksen.
In that role, he will consider input from all directors as to the
preparation of the agendas for meetings of the Board and each
committee of the Board, and will consult, no less frequently than
once each calendar quarter, with the Company’s executive officers
who are responsible for assuring compliance with, and
implementation of, all applicable corporate and securities laws and
make any recommendations for further action as necessary to ensure
such compliance.
As of the date of this Proxy
Statement, we have determined that the leadership structure of our
Board of Directors has permitted our Board to fulfill its duties
effectively and efficiently and is appropriate given the size and
scope of our Company and its financial condition.
The Company believes the role of management is to identify and
manage risks confronting the Company. The Board plays an integral
part in the Company’s risk oversight, particularly in reviewing the
processes used by management to identify and report risk, and also
in monitoring corporate actions so as to minimize inappropriate
levels of risk. The Board as a whole is also responsible for
overseeing strategic and enterprise risk. A discussion of risks
that the Company faces is conducted at regularly scheduled meetings
of the Board and committee meetings.
Meetings of Independent
Directors
Directors who are independent under the NASDAQ Capital Market
listing standards and applicable laws and regulations have not met
in separate committee; rather, the independent directors hold
discussions among them without the presence of management in
conjunction with meetings of the Audit Committee, Compensation
Committee, Nominating Committee and Special Committee, as they deem
necessary. Each of these committees is comprised solely of
independent directors.
Code of Ethics
The Company has adopted a code of ethics that applies to all of its
employees, including the chief executive officer and chief
financial and accounting officer. The code of ethics is available
on the Investor Relations page of the Company’s website at
www.tsrconsulting.com. The Company intends to post on its website
all disclosures that are required by law or NASDAQ Capital Market
listing standards concerning any amendments to, or waivers from,
the Company’s code of ethics. Stockholders may request a free copy
of the code of ethics by writing to Corporate Secretary, TSR, Inc.,
400 Oser Avenue, Suite 150, Hauppauge, NY 11788. Disclosure
regarding any amendments to, or waivers from, provisions of the
code of ethics that apply to the Company’s directors or principal
executive and financial officers will be included in a Current
Report on Form 8-K filed with the SEC within four business days
following the date of the amendment or waiver, unless website
posting of such amendments or waivers is then permitted by the
rules of the NASDAQ Capital Market and the SEC.
Stockholder
Nominations
Under the Company’s Amended and Restated By-laws, as amended, a
stockholder must follow certain procedures to nominate persons for
election as directors or to introduce an item of business at an
annual meeting of stockholders. Among other requirements, these
procedures require any nomination or proposed item of business to
be submitted in writing to the Company’s Corporate Secretary at its
principal executive offices. The Company must receive the notice of
a stockholder’s intention to introduce a nomination or proposed
item of business at an annual meeting no later than 120 days prior
to the anniversary of the date on which the Company released its
proxy statement (the “Anniversary Date”) in connection with the
prior year’s annual meeting to its stockholders; provided, however,
in the event the annual meeting is scheduled to be held on a date
more than 30 days before or after the Anniversary Date, the notice
can be received not later than the close of business on the later
of the 75th day prior to the scheduled meeting date or
the 15th day following the day on which the public
announcement of such annual meeting is first made by the
Company.
Stockholder Communications
with Directors
Generally, stockholders who have questions or concerns should
contact the Company’s Corporate Secretary at (631) 231-0333.
Any stockholder who wishes to address questions regarding the
Company’s business directly with the Board, or any individual
director, should direct his or her questions, in writing, in care
of the Company’s Secretary, at the Company’s offices at 400 Oser
Avenue, Suite 150, Hauppauge, NY 11788. Any complaint, concern or
reference to a problem or potential problem with the Company’s
accounting, accounting policies, internal control, auditing or
financial matters should be addressed to Accounting Complaints, c/o
Chair of the Audit Committee, TSR, Inc., 400 Oser Avenue, Suite
150, Hauppauge, NY 11788.
Certain Relationships and
Related Party Transactions
Except as described below, the Company was not a participant in any
transaction since the beginning of the fiscal year ended May 31,
2019 (“2019 fiscal year”) in which any related person had a direct
or indirect material interest and in which the amount involved
exceeded the lesser of $120,000 or 1% of the average of the
Company’s total assets at the end of each of the Company’s two
prior fiscal years, and no such transactions are currently
proposed.
Regina Dowd, who served as a director of the Company during 2019
fiscal year until her resignation as a director on August 27, 2018,
was also employed as a sales executive of the Company for which she
was paid compensation in the amount of $149,000 for the 2019 fiscal
year. The Company and Ms. Dowd entered into an employment agreement
dated as of July 1, 2019, pursuant to which the Company employs Ms.
Dowd as an Account Manager for a three-year term expiring on June
30, 2022, and on an at-will basis thereafter, for an annual base
salary of $60,000 and eligibility to earn commissions pursuant to
an incentive compensation/commission plan.
In connection with the settlement of a civil action brought against
the Company in June 2019 by Ms. Dowd and Joseph F. Hughes, the
former Chief Executive Officer and Chairman of the Company,
concerning their right to indemnification by the Company for legal
fees incurred by them in connection with certain lawsuits
previously disclosed by the Company in its reports filed with the
SEC that affect the Company, Ms. Dowd (in her capacity as a former
director of the Company) and Mr. Joseph Hughes (in his capacity as
the former Chairman, President and Chief Executive Officer of the
Company), the Company agreed to pay approximately $385,000 in legal
fees incurred by them.
On August, 30, 2019, the Company entered into the Settlement
Agreement with certain investors including Zeff Capital, L.P., Zeff
Holding Company, LLC and Daniel Zeff, QAR Industries, Inc. and
Robert Fitzgerald, and Fintech Consulting, LLC and Tajuddin Haslani
(collectively, “Investor Parties”), each of whom has been a
beneficial owner of more than five percent (5%) of the outstanding
shares of Common Stock, with respect to the proxy contest
pertaining to the election of directors at the 2018 annual meeting
of stockholders, which was held on October 22, 2019. Pursuant to
the Settlement Agreement, the parties agreed to forever settle and
resolve any and all disputes between the parties, including without
limitation disputes arising out of or relating to the following
litigations:
(i) The complaint relating to alleged breaches of fiduciary duties
filed on November 1, 2018 by Fintech Consulting LLC against the
Company in the Delaware Court of Chancery, which was previously
dismissed voluntarily;
(ii) The complaint for declaratory and injunctive relief for
violations of the federal securities laws filed on December 21,
2018 by the Company against the Investor Parties in the United
States District Court in the Southern District of New York;
(iii) Cross-claims relating to alleged breaches of fiduciary duties
and for indemnification and contribution filed on July 26, 2019 by
the Company against the Investor Parties in New York Supreme Court,
Queens County; and
(iv) The complaint to compel annual meeting of stockholders filed
on August 7, 2019 by Zeff Capital, L.P. against the Company in the
Delaware Court of Chancery.
No party admitted any liability by entering into the Settlement
Agreement.
Concurrently with the Settlement Agreement, the parties entered
into a share repurchase agreement (the “Repurchase Agreement”)
which provided for the purchase by the Company and Christopher
Hughes, the Company’s former President and Chief Executive Officer,
of the shares of the Company’s Common Stock held by the Investor
Parties (the “Repurchase”). The Settlement Agreement also
contemplated that, if the Repurchase was completed, the Company
would make a settlement payment to the Investor Parties at the
closing of the Repurchase in an amount of approximately $1,500,000
(the “Settlement Payment”). However, the Repurchase and Settlement
Payment were not completed by the deadline of December 30,
2019.
Pursuant to the Settlement Agreement, (1) the Company agreed to
adopt an amendment to the Company’s Amended and Restated By-Laws,
dated April 9, 2015 (the “By-Laws Amendment”), providing that
stockholders of the Company owning at least forty percent (40%) of
the issued and outstanding Common Stock may request a special
meeting of stockholders; (2) the Investor Parties agreed not to
take any action to call or otherwise cause a special meeting of
stockholders to occur prior to December 30, 2019 (unless the
Company had failed to hold the 2018 annual meeting of
stockholders); (3) the Company agreed to amend and restate the
Company’s Rights Agreement, dated August 29, 2018 (the “Amended
Rights Agreement”), to confirm that a Distribution Date (as defined
in the Amended Rights Agreement) shall not occur as a result of any
request by any of the Investor Parties for a special meeting; (4)
the Company agreed that prior to the earlier of (A) the completion
of the Repurchase and the payment of the Settlement Payment and (B)
January 1, 2020, the Board of Directors shall not consist of more
than seven (7) directors.
Pursuant to the terms of the Settlement Agreement, the two nominees
for director made by Zeff Capital, L.P., Bradley M. Tirpak and H.
Timothy Eriksen, were nominated and subsequently elected as
directors at the Company’s 2018 annual meeting of stockholders held
on October 22, 2019.
Pursuant to the terms of the Settlement Agreement, inasmuch as the
Repurchase was not completed and the Settlement Payment was not
made by December 30, 2019, the members of the Board of Directors
(other than the two directors who were nominated by Zeff Capital,
L.P. and elected as directors at the 2018 annual meeting of
stockholders) resigned from the Board effective 5:00 p.m. Eastern
Time on December 30, 2019. Immediately thereafter, the two
remaining directors appointed Robert Fitzgerald to the Board of
Directors.
In addition, the Settlement Agreement provides for mutual releases
between the Company and each of the Investor Parties and certain of
their affiliates. Each of the Investor Parties and certain of their
affiliates also agreed to certain customary standstill provisions,
including without limitation, with regard to certain actions in
connection with the 2018 annual meeting of stockholders,
Extraordinary Transactions (as defined in the Settlement Agreement)
with the Company, and the acquisition of any securities (or
beneficial ownership thereof) of the Company, each of which expired
on December 30, 2019.
The foregoing is not a complete description of the terms of the
Settlement Agreement and the Share Repurchase Agreement. For a
further description of the terms of the Settlement Agreement and
the Share Repurchase Agreement, including copies of the Settlement
Agreement and Share Repurchase Agreement, please see the Company’s
Current Report on Form 8-K filed by the Company with the SEC on
September 3, 2019.
In addition, on April 1, 2020, the Company entered into a binding
term sheet (“Term Sheet”) with Zeff Capital, L.P. (“Zeff”) pursuant
to which it agreed to pay Zeff an amount of $900,000 over a period
of three years in cash or cash and stock in settlement of expenses
incurred by Zeff during its solicitations in 2018 and 2019 in
connection with the annual meetings of the Company, the costs
incurred in connection with the litigation initiated by and against
the Company as well as negotiation, execution and enforcement of
the Settlement Agreement. In exchange for certain mutual releases,
the Term Sheet calls for a cash payment of $300,000 on June 30,
2021, a second cash payment of $300,000 on June 30, 2022 and a
third payment of $300,00 also on June 30, 2022, which can be paid
in cash or common stock at the Company’s option. There is no
interest due on these payments. The agreement also has protections
to defer such payment dates so that the debt covenants with the
Company’s lender are not breached. On August 13, 2020, the Company,
Zeff, Zeff Holding Company, LLC and Daniel Zeff entered into a
settlement agreement to reflect these terms. Any installment
payment which is deferred as permitted above will accrue interest
at the prime rate plus 3.75%, and Zeff shall thereby have the
option to convert such deferred amounts (plus accrued interest if
any) into shares of the Company’s stock. The Company accrued
$818,000, the estimated present value of these payments using an
effective interest rate of 5%, in the quarter ended February 29,
2020, as the events relating to the expense occurred prior to such
date.
Procedures for Approval of
Related Party Transactions
Our Board has adopted a written related party transaction policy to
comply with Section 404 of the Exchange Act, which sets forth the
policies and procedures for the review and approval or ratification
of related party transactions. This policy covers any transaction,
arrangement or relationship, or any series of similar transactions,
arrangements or relationships, in which (i) the Company or any of
its subsidiaries is or will be a participant, (ii) the aggregate
amount involved will or may be expected to exceed the lesser of
$120,000 or one percent of the average of the Company’s total
assets at year-end for the last two completed fiscal years, and
(iii) any related party, including an executive officer, director
or nominee for director of the Company, any stockholder owning more
than 5% of any class of the Company’s voting securities, or an
immediate family member of any such person, has or will have a
direct or indirect material interest. This policy is administrated
by our Audit Committee. According to this policy, in determining
whether or not to recommend the initial approval or ratification of
a related party transaction, the Audit Committee shall consider the
relevant facts and circumstances available including, among other
factors it deems appropriate, whether the interested transaction is
on terms no less favorable than terms generally available to an
unaffiliated third party under the same or similar circumstances
and the extent of the related party’s interest in the
transaction.
DIRECTOR
COMPENSATION
The following table sets forth information concerning the
compensation of the non-officer directors of the Company who served
as directors during the fiscal year ended May 31, 2020. Directors
of the Company who also serve as executive officers of the Company
are not paid any compensation for their service as directors. For
the fiscal year ended May 31, 2020, Christopher Hughes was the only
director of the Company who also served as an executive officer. He
resigned as Chairman and member of the Board on December 30,
2019.
Name |
|
Fees
Earned
Or Paid
In Cash |
|
|
Stock
Awards |
|
|
Option
Awards |
|
|
Non-Equity
Incentive
Plan
Compensation |
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings |
|
|
All
Other
Compensation |
|
|
Total |
|
Bradley M. Tirpak
(1) |
|
$ |
12,500 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
12,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H. Timothy Eriksen
(1) |
|
$ |
12,500 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
12,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Fitzgerald
(2) |
|
$ |
10,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira D. Cohen
(3) |
|
$ |
5,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William J. Kelly
(4) |
|
$ |
6,875 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian J. Mangan
(4) |
|
$ |
11,875 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Pennacchio
(4) |
|
$ |
5,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond A. Roel(3)
|
|
$ |
7,500 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric M. Stein
(4) |
|
$ |
6,875 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,875 |
|
|
(1) |
Elected to serve as a director of
the Company at the annual meeting of stockholders on October 22,
2019. |
|
(2) |
Appointed to serve as a director of
the Company by the Board on December 30, 2019. |
|
(3) |
Was not re-elected as a director of
the Company at the annual meeting of stockholders on October 22,
2019. |
|
(4) |
Resigned from the Board on December
30, 2019. |
For their service, members of the Board who are not officers of the
Company received a pro-rated amount of an annual retainer of
$10,000, payable quarterly, based on period of time they
respectively served during fiscal 2020.
Bradley M. Tirpak received a pro-rated amount of an additional
annual retainer of $10,000 for his service as Chairman of the Board
during fiscal 2020 starting from December 30, 2019.
H. Timothy Eriksen received a pro-rated amount of an additional
annual retainer of $10,000 for his service as Chairman of the Audit
Committee during fiscal 2020 starting from December 30, 2019. Mr.
Eriksen did not receive any additional retainer for his service as
Chairman of the Nominating Committee of the Board or lead
independent director during fiscal 2020 starting from December 30,
2019.
Robert Fitzgerald received a pro-rated amount of an additional
annual retainer of $10,000 for his service as Chairman of the
Compensation Committee during fiscal 2020 starting from December
30, 2019. Mr. Fitzgerald did not receive any additional retainer
for his service as Chairman of the Special Committee of the Board
during fiscal 2020 starting from December 30, 2019.
Raymond A. Roel received $5,000 for his director service and $2,500
for his service as Chairman of the Compensation Committee during
fiscal 2020 ended on October 22, 2019.
Ira D. Cohen received $5,000 for his director service and did not
receive any additional fee for his service as Chairman of the
Special Committee during fiscal 2020 ended on October 22, 2019.
Brian J. Mangan received $5,000 for his director service, $5,000
for his service as Chairman of the Audit Committee during fiscal
2020 ended on December 30, 2019 and $1,875 for his service as
Chairman of the Special Committee during fiscal 2020 from October
22, 2019 to December 30, 2019.
Each of Eric M. Stein and William J. Kelly received $5,000 for
their respective director service and $1,875 for their respective
service as member of the Special Committee during fiscal 2020 ended
on December 30, 2019.
Joseph Pennacchio received $5,000 for his director service during
fiscal 2020 ended on December 30, 2019.
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the annual and
long-term compensation of the Named Executive Officers (as defined
below) for services in all capacities to the Company for the fiscal
years ended May 31, 2020 and 2019. The Named Executive Officers for
the fiscal years ended May 31, 2020 and 2019 are (1) Thomas
Salerno, our President and Chief Executive Officer; (2) John G.
Sharkey, our Senior Vice President and Chief Financial Officer; and
(3) Christopher Hughes, who served as President and Chief Executive
Officer prior to his removal effective February 29, 2020 (the
“Named Executive Officers”).
SUMMARY
COMPENSATION TABLE
Name and Principal Position |
|
Fiscal Year |
|
|
Salary |
|
|
Bonus |
|
|
Stock
Awards |
|
|
Option Awards |
|
|
Non-Equity Incentive Plan Compen-sation |
|
|
Change in Pension Value and Nonqualified Deferred Compensation
Earnings |
|
|
All Other Compensation |
|
|
Total |
|
Thomas Salerno, |
|
|
2020 |
|
|
$ |
317,000 |
(4) |
|
$ |
25,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,000 |
(5) |
|
$ |
345,000 |
|
President and Chief Executive Officer (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John G. Sharkey, |
|
|
2020 |
|
|
$ |
295,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
$6,000 |
(6) |
|
$ |
301,000 |
|
Senior Vice President and Chief Financial Officer (2) |
|
|
2019 |
|
|
$ |
250,000 |
|
|
$ |
75,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
$6,000 |
(6) |
|
$ |
331,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Hughes, |
|
|
2020 |
|
|
$ |
300,000 |
(7) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
$22,000 |
(9) |
|
$ |
322,000 |
|
Former President and Chief Executive Officer (3) |
|
|
2019 |
|
|
$ |
390,000 |
|
|
$ |
100,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
$25,000 |
(8) |
|
$ |
515,000 |
|
|
(1) |
Thomas
Salerno was appointed as President and Chief Executive Officer of
the Company effective March 23, 2020 and served as Acting CEO of
the Company from January 27, 2020 to March 23, 2020 due to a leave
of absence by Mr. Hughes during this time. He has also served as
the Managing Director of TSR Consulting Services, Inc., the
Company’s IT consulting services subsidiary and largest business
unit, in fiscal year 2020. |
|
(2) |
John
G. Sharkey was appointed as Senior Vice President and Chief
Financial Officer effective June 1, 2019. Previously, Mr. Sharkey
served as Vice President, Finance. |
|
(3) |
Christopher
Hughes served as President and Chief Executive Officer of the
Company in the 2019 fiscal year and a portion of the 2020 fiscal
year until he was removed from his officer positions effective
February 29, 2020. |
|
(4) |
Represents
the sum of the pro-rated amount of an annual base salary of
$300,000 for the period from June 1, 2019 to January 26, 2020 and
the pro-rated amount of an annual base salary of $350,000 for the
period beginning on January 27, 2020. |
|
(5) |
Amount
related to Mr. Salerno’s personal use of an automobile provided by
the Company. |
|
(6) |
Amounts
related to Mr. Sharkey’s personal use of an automobile provided by
the Company. |
|
(7) |
Represents
the pro-rated amount of an annual base salary of $400,000 for the
period ended on February 29, 2020. |
|
(8) |
Of
this amount, $3,000 related to Mr. Christopher Hughes’ personal use
of an automobile provided by the Company for the 2019 fiscal year;
and $22,000 was paid to Mr. Christopher Hughes for premiums for
medical insurance benefits for the 2019 fiscal year. |
|
(9) |
Of
this amount, $4,000 related to Mr. Christopher Hughes’ personal use
of an automobile provided by the Company for the period ended on
February 29, 2020; and $18,000 was paid to Mr. Christopher Hughes
for premiums for medical insurance benefits for the period ended on
February 29, 2020. The nature of certain additional expenses
incurred by Mr. Hughes is currently the subject of litigation and
thus, the Company cannot determine at this time what, if any,
amount of such additional expenses may constitute All Other
Compensation. |
Outstanding Equity Awards
at Fiscal Year End
There
were no outstanding equity awards at the end of the fiscal year
ended May 31, 2020.
Employment Agreements and
Arrangements
Employment Agreement with
Thomas Salerno
On
July 11, 2018, TSR Consulting Services, Inc. entered into a written
employment agreement with Thomas Salerno (the “Salerno Employment
Agreement). The Salerno Employment Agreement expires July 10, 2021
(“Expiration Date”) and any continued employment will be on an
“at-will” basis. The Salerno Employment Agreement provided for an
annualized base salary in the amount of $250,000, which has been
increased to $350,000 in connection with Mr. Salerno’s appointment
to the chief executive officer position. In addition to base
salary, the Salerno Employment Agreement provides that Mr. Salerno
will receive a car allowance and will be eligible to receive an
annual cash bonus for each fiscal year in an amount determined by
the company. In connection with Mr. Salerno’s appointment to the
chief executive officer position, the Company also paid him a
sign-on bonus of $25,000.
In
the event that the company terminates Mr. Salerno’s employment
other than (a) for “Cause” (as defined in the Salerno Employment
Agreement), (b) as a result of Mr. Salerno’s death or disability
or, (c) due to the expiration of the term, both (A) prior to the
Expiration Date and (B) upon, within one year following the
consummation of a Change in Control (as defined in the Salerno
Employment Agreement), then in addition to Mr. Salerno’s Accrued
Obligations (as defined in the Salerno Employment Agreement), (i)
the company shall be obligated to pay to Mr. Salerno a severance
payment equal to the sum of (A) one year of his base salary (at the
rate in effect on the termination date) plus (B) one times the
amount of the annual bonus paid to him in the prior fiscal year
(collectively, the “Severance Payment”); (ii) if Mr. Salerno timely
elects to continue and maintain group health plan coverage pursuant
to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), the company will reimburse him for a portion of
the healthcare continuation payments under COBRA actually paid by
him for the coverage period ending on the earlier of (A)
the one year anniversary of his termination date, and (B) the date
he becomes eligible to obtain healthcare coverage from a new
employer (the “COBRA Assistance Period”), which portion will be
equal to (x) the amount of the monthly health care premium payment
under COBRA actually paid by him for COBRA coverage during the
COBRA Assistance Period, less (y) the amount he would have been
required to contribute toward health insurance coverage during the
COBRA Assistance Period if he had remained an active employee of
the company (the “COBRA Assistance”). The company’s obligation to
provide the Severance Payment and COBRA Assistance to Mr. Salerno
shall be contingent upon his executing a general release of all
claims against the Company, its subsidiaries and their respective
officers, directors, shareholders, partners, members, employees,
agents and related parties in a form satisfactory to the
company.
The
Salerno Employment Agreement incorporates the terms and provisions
of a Maintenance of Confidence and Non-Compete Agreement between
the company and Mr. Salerno dated as of June 16, 2011. The
Maintenance of Confidence and Non-Compete Agreement sets forth Mr.
Salerno’s covenants against the disclosure of confidential
information and covenants against the solicitation of customers,
employees and independent contractors (all in accordance with the
terms set forth therein).
Amended and Restated
Employment Agreement with John G. Sharkey
On
May 24, 2019, the Company entered into a written amended and
restated employment agreement with John G. Sharkey (the “Sharkey
Employment Agreement”) that superseded the employment agreement
that the Company and Mr. Sharkey had entered into in June 2015. The
Sharkey Employment Agreement terminates May 31, 2020 and
automatically renews for successive renewal terms of one (1) year
each unless either party gives notice of non-renewal to the other
party at least thirty (30) days prior to the expiration of the
initial term or the then-current renewal term. The Sharkey
Employment Agreement provides for an annualized base salary in the
amount of $285,000 for the period from June 1, 2019 through
December 31, 2019. Beginning January 1, 2020, the annualized base
salary increases to the amount of $310,000. Thereafter, the
Compensation Committee will review Mr. Sharkey’s base salary on an
annual basis and the Board may increase his base salary, in its
sole discretion. In addition to base salary, the Sharkey Employment
Agreement provides that Mr. Sharkey will be eligible to receive an
annual cash bonus for each fiscal year in an amount determined by
the Compensation Committee in its sole discretion and subject to
the approval of the Board, which may be based upon standards that
the Compensation Committee establishes with Mr. Sharkey, subject to
the Board’s approval. The target amount of the annual bonus will
not be less than $85,000, provided that the actual amount of the
annual bonus may be higher or lower than the target amount. The
Sharkey Employment Agreement further provides that the Company pay
Mr. Sharkey an annual bonus in the amount of $75,000 for the fiscal
year ended May 31, 2019, which is the annual bonus that is to be
paid to Mr. Sharkey under the terms of the Mr. Sharkey’s former
employment agreement for the fiscal year ending May 31, 2019 and
which the Company paid in a lump sum. As set forth in the Summary
Compensation Table above, the Company did not pay an annual bonus
to Mr. Sharkey for the fiscal year ended May 31, 2020.
In
the event that (a) the Company terminates Mr. Sharkey’s employment
without “Cause” (as defined in the Sharkey Employment Agreement),
(b) Mr. Sharkey terminates his employment for “Good Reason” (as
defined in the Sharkey Employment Agreement) or (c) Mr. Sharkey’s
employment terminates upon the expiration of the term as a result
of the Company providing a notice of non-renewal of the
then-current term of the Sharkey Employment Agreement, then Mr.
Sharkey will be entitled to receive the following: (i) a severance
payment equal to the sum of (x) 1.5 times Mr. Sharkey’s annual base
salary at the rate in effect on the date of termination, (y) 1.5
times Mr. Sharkey’s annual bonus based on the bonus awarded to him
for the fiscal year prior to the fiscal year in which the date of
termination occurred, and (z) in the case of a termination by the
Company without “Cause” or a termination by Mr. Sharkey for “Good
Reason,” the base salary that Mr. Sharkey would have received if he
had remained employed from the date of termination through the last
day of the initial term or then-current renewal term, which
severance payment will be payable in a single lump sum on the
Company’s first regular pay date following the date on which the
General Release (as defined in the Sharkey Employment Agreement)
becomes effective; (ii) payment of the full bonus for the fiscal
year in which the date of termination occurs (the “Termination Year
Bonus”), which Termination Year Bonus will be based on the bonus
awarded to Mr. Sharkey for the fiscal year prior to the fiscal year
in which the date of termination occurred and will be payable
within thirty (30) days following the date of termination; (iii)
continued medical and dental insurance benefits for Mr. Sharkey and
his family that are at least comparable to the benefits generally
offered to all eligible Company employees until the earlier of (x)
the two-year anniversary of Mr. Sharkey’s employment termination
date, and (y) the date that Mr. Sharkey is eligible for comparable
coverage under the group health insurance plans of another
employer; and (iv) for two (2) years following the date of
termination, the Company will reimburse Mr. Sharkey for the monthly
cost of his car lease, subject to certain parameters described in
the Sharkey Employment Agreement. In addition to the foregoing
benefits, the Company will also pay Mr. Sharkey the Accrued
Obligations (as defined in the Sharkey Employment Agreement). With
the exception of the Accrued Obligations and the Termination Year
Bonus, the Company’s obligation to pay the foregoing benefits is
subject to Mr. Sharkey’s execution and non-revocation of a general
release of claims against the Company, and his continued compliance
with all post-termination covenants.
In
the event that either (a) the Company terminates Mr. Sharkey’s
employment for “Cause,” (b) Mr. Sharkey terminates his employment
without “Good Reason” or (c) Mr. Sharkey’s employment terminates
due to his death, disability or the expiration of the then-current
term of the Sharkey Employment Agreement as a result of Mr. Sharkey
providing a notice of non-renewal, then the Company’s sole
obligations to Mr. Sharkey shall be: (i) the payment of Mr.
Sharkey’s accrued but unpaid base salary and business expenses
incurred by Mr. Sharkey that had not yet been reimbursed; (ii) in
the case of a termination by Mr. Sharkey without “Good Reason” or a
termination due to Mr. Sharkey’s death or disability, a pro-rated
bonus for the fiscal year in which the date of termination occurs
(calculated based on the bonus awarded for the prior fiscal year
and pro-rated based upon the number of days that Mr. Sharkey was
employed in the fiscal year in which the date of termination
occurs) (the “Pro-Rata Bonus”); and (iii) in the case of the
expiration of the then-current term of the Sharkey Employment
Agreement as a result of Mr. Sharkey providing a notice of
non-renewal, his Termination Year Bonus (calculated based on the
bonus awarded for the prior fiscal year). The Company will pay the
Accrued Obligations, the Pro-Rata Bonus and the Termination Year
Bonus in a single lump sum within thirty (30) days following the
date of termination.
The
Sharkey Employment Agreement incorporates the terms and provisions
of a Maintenance of Confidence and Non-Compete Agreement between
the Company and Mr. Sharkey dated as of May 24, 2019. The
Maintenance of Confidence and Non-Compete Agreement sets forth Mr.
Sharkey’s covenants against the disclosure of confidential
information, covenants against the solicitation of customers,
employees and independent contractors and a covenant against
competition (all in accordance with the terms set forth therein)
and supersedes any prior agreements entered into by Mr. Sharkey
pertaining to such covenants.
The
Sharkey Employment Agreement does not provide for any payments in
connection with a change in control of the Company.
Amended and Restated
Employment Agreement with Christopher Hughes
In
April 2017, in anticipation of the expiration of Christopher
Hughes’ prior employment agreement, the Company entered into a
written employment agreement with Mr. Hughes, which was effective
as of May 1, 2017 and which was scheduled to terminate on May 31,
2022 (the “Hughes Employment Agreement”). The Hughes Employment
Agreement provided for an annual base salary of $350,000 and an
annual bonus for fiscal years beginning with the fiscal year ended
May 31, 2018 to be approved by the Compensation Committee in its
discretion, which may be based upon standards that the Compensation
Committee approves at the beginning of each fiscal year commencing
with the fiscal year beginning June 1, 2017, and which standards
may be modified thereafter with the Compensation Committee’s
approval. The Hughes Employment Agreement provided that the Company
shall pay any annual bonus that may become payable within 120 days
of the end of the applicable fiscal year, for the period to which
the bonus relates. In addition, the Hughes Employment Agreement
provided that the Company shall pay Mr. Hughes an advance on his
annual bonus for the current fiscal year within 30 days after the
end of each fiscal quarter (other than the fourth fiscal quarter)
in an amount equal to the bonus which would have been earned
through the end of such fiscal quarter, based on any standards
approved by the Compensation Committee. Each such advance of the
bonus was to be approved by the Compensation Committee unless it is
paid in accordance with a formula approved in advance for such
fiscal year. In the event that following any fiscal quarter or
following completion of the Company’s audited financial statements,
any advance payment of the bonus previously paid with respect to
any fiscal year (or portion thereof) exceeded the amount that Mr.
Hughes is entitled to receive through the end of such fiscal
quarter or fiscal year, Mr. Hughes was required to promptly return
such excess amount to the Company.
On
August 9, 2018, the Company and Christopher Hughes entered into an
Amended and Restated Employment Agreement, dated and effective as
of August 9, 2018 (the “Amended and Restated Hughes Employment
Agreement”), that superseded the Hughes Employment Agreement. The
Amended and Restated Hughes Employment Agreement has a term of
three years, nine months and twenty-two days, and is scheduled to
expire on May 31, 2022. The Amended and Restated Hughes Employment
Agreement provides for an annual base salary of $400,000, which the
Company’s Compensation Committee will review on an annual basis,
and which the Company’s Board 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 Compensation Committee and
approved by the Board. 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. Mr. Hughes is also entitled to executive medical
benefits and a car (leased or owned at the sole discretion of the
Company) in such amounts for the car as determined by the Board,
provided that the executive medical benefits and car may be
discontinued at the end of any fiscal year at the discretion of the
Board.
The
Company has the right to immediately terminate Mr. Hughes’
employment for “Cause” (as defined in the Amended and Restated
Hughes 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) reimbursement of any unpaid approved
expenses, (b) 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 bonus amount cannot be
determined, two times the amount of the bonus paid to him in the
prior fiscal year, (c) continued group health insurance benefits
(including both group health insurance benefits generally offered
to all eligible employees of the Company and supplemental executive
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 and (d) reimbursement for the monthly cost of his
car lease until the second anniversary of the termination of his
employment; provided that, as a condition to his right to receive
the payments and benefits in clauses (b), (c) and (d), Mr. Hughes
executes, delivers and does not revoke a release of all claims
against the Company and its affiliates.
The
Amended and Restated Hughes Employment Agreement incorporates the
terms and provisions of a Maintenance of Confidence and Non-Compete
Agreement between the Company and Mr. Hughes dated as of August 9,
2018. The Maintenance of Confidence and Non-Compete Agreement sets
forth Mr. Hughes’ covenants against the disclosure of confidential
information, covenants against the solicitation of customers,
employees and independent contractors and a covenant against
competition (all in accordance with the terms set forth therein)
and supersedes any prior agreements entered into by Mr. Hughes
pertaining to such covenants.
The
Amended and Restated Hughes Employment Agreement provides that 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 Amended and Restated Hughes
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 such bonus 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, (c) continued group health
insurance benefits (including both group health insurance benefits
generally offered to all eligible employees of the Company and
supplemental executive 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 and (d) reimbursement for the
monthly cost of his car lease until the second anniversary of the
termination of his employment; provided that, as a condition to his
right to receive the payments and benefits in clauses (b), (c) and
(d), Mr. Hughes executes, delivers and does not revoke a release of
all claims against the Company and its affiliates. “Good reason”
means either (i) a material breach by the Company of the Amended
and Restated Hughes Employment Agreement, (ii) a material
diminution in Mr. Hughes’ authority, duties or responsibilities, or
(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
Company terminated Christopher Hughes effective February 29, 2020
for “Cause” as defined in the Amended and Restated Hughes
Employment Agreement. On March 2, 2020, the Company received
a letter from Mr. Hughes, providing notice of his intent to resign
for “Good Reason” as defined in Section 7(c) of the Amended and
Restated Hughes Employment Agreement pursuant to which he claimed
to be entitled to the “Enhanced Severance Amount” under the Amended
and Restated Hughes Employment Agreement. Mr. Hughes filed a
complaint against the Company in the Supreme Court of the State of
New York in March 2020 alleging two causes of action: (1) breach of
his employment contract; and (2) breach of duty of good faith and
fair dealing. He alleges that he was terminated without cause or in
the alternative, that he resigned for good reason and therefore,
pursuant to the Amended and Restated Hughes Employment Agreement.
Mr. Hughes seeks contractual severance pay in the amount of
$1,000,000 and reasonable costs and attorney’s fees. The Company
denies his allegations in their entirety and has filed
counterclaims against him for (1) declaratory relief; (2) breach of
confidence/non-compete agreement; (3) declaratory and injunctive
relief – confidence/non-compete; (4) tortious interference with
current and prospective contractual and economic relations; (5)
breach of fiduciary duty; (6) misappropriation of trade secrets;
(7) declaratory and injunctive relief – unfair competition; and (8)
conversion.
Anti-Hedging
Policy
Our Insider Trading Policy prohibits our directors, officers,
certain employees and their immediate family members or entities
under their control, from engaging in the following transactions
involving the Company’s securities: short sales, options trading,
trading on margin or pledging and hedging, unless approved in
advance by our Chief Financial Officer.
STOCK OWNERSHIP
INFORMATION
Security Ownership of
Certain Beneficial Owners and Management
The
outstanding voting stock of the Company as of October 20, 2020
consisted of 1,962,062 shares of Common Stock. The table below sets
forth the beneficial ownership of the Common Stock of the Company’s
directors, executive officers and persons known to the Company to
be the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock as of October 20,
2020:
|
|
Beneficial
Ownership of
Common
Stock
|
|
Name
of Beneficial Owner – Directors, Officers and
5%
Stockholders
|
|
No. of
Shares (1) |
|
|
|
|
Bradley M. Tirpak (2)(3) |
|
|
- |
|
|
|
- |
|
H. Timothy Eriksen (2)(3) |
|
|
- |
|
|
|
- |
|
Thomas Salerno (2)(7) |
|
|
- |
|
|
|
- |
|
John G. Sharkey
(2)(8) |
|
|
6,750 |
|
|
|
0.3 |
% |
Fintech Consulting LLC (4) |
|
|
376,000 |
|
|
|
19.2 |
% |
Robert Fitzgerald (2)(3)(5) |
|
|
139,200 |
(6) |
|
|
7.1 |
% |
Tajuddin Haslani (4) |
|
|
376,100 |
(12) |
|
|
19.2 |
% |
Philip J. LaBlonde (9) |
|
|
135,000 |
|
|
|
6.9 |
% |
QAR Industries, Inc. (5) |
|
|
139,200 |
|
|
|
7.1 |
% |
Zeff Capital, L.P. (10) |
|
|
437,774 |
|
|
|
22.3 |
% |
Zeff Holding Company, LLC (10) |
|
|
437,774 |
(11) |
|
|
22.3 |
% |
Daniel Zeff (10) |
|
|
437,774 |
(11) |
|
|
22.3 |
% |
Christopher Hughes (13) |
|
|
11,842 |
(14) |
|
|
0.6 |
% |
All Directors and Executive Officers
as a Group (5 persons) |
|
|
145,950 |
|
|
|
7.4 |
% |
|
(1) |
In
accordance with Rule 13d-3 of the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any
shares of the Company’s Common Stock if such person has voting or
investment power with respect to such shares. This includes shares
of Common Stock (a) subject to options exercisable within sixty
(60) days, and (b) (1) owned by a person’s spouse, (2) owned by
other immediate family members who share a household with such
person, or (3) held in trust or held in retirement accounts or
funds for the benefit of the such person, over which shares the
person named in the table may possess voting and/or investment
power. Unless otherwise stated herein, each beneficial owner has
sole voting power and sole investment power. |
|
(2) |
This
executive officer and/or director maintains a mailing address at
400 Oser Avenue, Suite 150, Hauppauge, New York 11788. |
|
(3) |
Such
person currently serves as a director of the Company. |
|
(4) |
Based
on a Schedule 13D filed by Fintech Consulting LLC and Tajuddin
Haslani with the SEC on July 30, 2018. Based on the Schedule 13D,
Tajuddin Haslani is the managing member of Fintech Consulting LLC
and the reporting persons maintain a mailing address at 120 S. Wood
Avenue, Suite 300, Iselin, New Jersey 08830. |
|
(5) |
Based
on an Amendment to Schedule 13D filed by QAR Industries, Inc. and
Robert Fitzgerald with the SEC on September 10, 2019. Robert
Fitzgerald is the President of QAR Industries, Inc. and the
reporting persons maintain a mailing address at 101 SE
25th Avenue, Mineral Wells, Texas 76067. |
|
(6) |
Represents
the same shares owned by QAR Industries, Inc. |
|
(7) |
Mr.
Thomas Salerno served as the Managing Director of TSR Consulting
Services, Inc., the Company’s IT consulting services subsidiary and
largest business unit, since 2011. He was appointed as President
and Chief Executive Officer of the Company effective March 23, 2020
and served as Acting CEO of the Company from January 27, 2020 to
March 23, 2020. |
|
(8) |
John
G. Sharkey served as the Vice President, Finance, Controller and
Secretary of the Company until June 1, 2019. Effective June 1,
2019, Mr. Sharkey was appointed Senior Vice President, Chief
Financial Officer and Secretary of the Company. |
|
(9) |
Based
on a Schedule 13D filed by Philip J. LaBlonde with the SEC on
August 12, 2016. Based on the Schedule 13D, Philip J. LaBlonde
maintains a mailing address at 15120 Honors Circle, Carmel, Indiana
46033. |
|
(10) |
Based
on an Amendment to Schedule 13D filed by Zeff Capital, L.P., Zeff
Holding Company, LLC and Daniel Zeff with the SEC on August 17,
2020. Based on the Amendment to Schedule 13D, Zeff Capital, L.P. is
the owner of the 437,774 shares reported on the Amendment; Zeff
Holding Company, LLC is the general partner of Zeff Capital, L.P.;
Daniel Zeff is the sole manager of Zeff Holding Company, LLC; and
all of the reporting persons maintain a mailing address at 885
Sixth Avenue, New York, New York 10001. |
|
(11) |
Represents
the same shares owned by Zeff Capital, L.P. |
|
(12) |
Includes
376,000 shares owned by Fintech Consulting LLC. |
|
(13) |
Mr.
Christopher Hughes served as President, Chief Executive Officer and
Treasurer of the Company until February 29, 2020. |
|
(14) |
Includes
5,566 shares held of record by Christopher Hughes’ wife, as to
which Mr. Hughes has disclaimed beneficial ownership. |
Change in Control – 2019
and 2020 Fiscal Years
Acquisition of Shares by
Investor Parties
On
June 25, 2018, the Company received a letter from James Hughes, on
behalf of Joseph Hughes and his wife, Winifred Hughes, requesting
that the Board pursue a sale of the Company. James Hughes is the
son of Joseph and Winifred Hughes and the brother of Christopher
Hughes. James Hughes is not an officer, employee or director of the
Company. As of June 25, 2018, Joseph and Winifred Hughes
beneficially owned approximately 41.8% of the outstanding Common
Stock.
On
July 9, 2018, the Board established a Special Committee of the
Board (the “Special Committee”) to review the request submitted by
Joseph and Winifred Hughes that the Board pursue a sale of the
Company and in the context of that review consider and evaluate
other strategic alternatives available to the Company.
On
July 16, 2018, the Special Committee received a letter from James
Hughes informing the Special Committee that he had received an
offer to purchase the shares of Common Stock owned by Joseph and
Winifred Hughes for a price of $6.25 per share. James Hughes also
provided the Special Committee with a copy of the letter received
from Zeff, which Joseph and Winifred Hughes also included as
exhibits to schedule 13D amendments filed with the SEC on July 17,
2018.
On
July 24, 2018, Joseph Hughes and Winifred Hughes each filed an
amendment to Schedule 13D (the “Hughes 13D Amendments”) with the
SEC. Each of the Hughes 13D Amendments disclosed that James Hughes,
acting in his capacity as representative and attorney-in-fact for
the Hughes, had entered into a share purchase agreement on July 20,
2018 (the “Share Purchase Agreement”) with Zeff, QAR Industries,
Inc. (“QAR”) and Fintech Consulting, LLC (“Fintech”) for the sale
of 819,491 shares of Common Stock of the Company, representing
41.8% of the Company’s outstanding Common Stock. The Hughes 13D
Amendments indicated that the transaction closed on July 23,
2018.
On
July 25, 2018, the Company filed a Current Report on Form 8-K with
the SEC disclosing that it believed a change in control of the
Company had occurred as a result of the Hughes’ sale of
approximately 41.8% of the Common Stock as described in the
previous paragraph. The sale by a former controlling stockholder of
a significant stake led the Company to conclude that a change in
control had occurred.
On
July 26, 2018, the Zeff Entities filed a new Schedule 13D the
(“Zeff 13D”) with the SEC disclosing that the Zeff Entities
beneficially owned 382,094 shares of Common Stock, representing
approximately 19.5% of the outstanding Common Stock.
On
July 27, 2018, the Board voted to increase the size of the Board
from five to seven directors. The Board approved the appointment of
Joseph Pennacchio as a Class II director and William Kelly as a
Class III director. This action was undertaken due to a
determination by the Board that an increase in the size of the
Board and the appointment of qualified individuals was necessary
and appropriate to better address the various issues then
confronting the Company and the Board, including the consideration
of strategic alternatives by the Special Committee, and would be in
the best interests of stockholders.
On
July 30, 2018, Fintech (doing business as APTask) and Tajuddin
Haslani (“Haslani,” and together with Fintech, the “Haslani
Entities”) filed a Schedule 13D (the “Haslani 13D”) with the SEC.
The Haslani 13D disclosed that the Haslani Entities beneficially
owned 376,100 shares of Common Stock, representing approximately
19.2% of the outstanding Common Stock.
On
July 30, 2018, QAR and Robert Fitzgerald (collectively, the “QAR
Entities”) filed a Schedule 13D (the “QAR 13D”) with the SEC. The
QAR 13D disclosed that the QAR Entities beneficially owned 139,200
shares of Common Stock, representing approximately 7.1% of the
outstanding Common Stock.
The
13D filings made by the Zeff Entities, the QAR Entities and the
Haslani Entities (collectively, the “Investor Parties”) led the
Company to conclude that the Investor Parties beneficially owned an
aggregate of approximately 45.8% of the Common Stock of the Company
as of July 30, 2018.
On
August 23, 2018, the Zeff Entities filed an amendment to the Zeff
13D disclosing that the Zeff Entities had acquired beneficial
ownership of additional shares of Common Stock, bringing the Zeff
Entities’ total beneficial ownership to 437,774 shares,
representing approximately 22.3% of the outstanding Common Stock of
the Company. Following the amendment filing, the Company understood
that the Investor Parties beneficially owned an aggregate of
approximately 48.6% of the Common Stock of the Company.
On
August 27, 2018, the Board approved an amendment to the Company’s
Amended and Restated Bylaws to provide that special meetings of the
Company’s stockholders may be called by the Company’s President and
shall be called by the President or Secretary at the request in
writing of a majority of the Board. The Company’s Amended and
Restated Bylaws had previously provided that special meetings of
the Company’s stockholders may be called by the Company’s President
and shall be called by the President or Secretary at the request in
writing of a majority of the Board, or at the request in writing of
stockholders owning a majority of the Company’s issued and
outstanding capital stock entitled to vote. The amendment to the
Company’s Amended and Restated Bylaws was effective upon approval
by the Board.
On
August 28, 2018, the QAR Entities filed an amendment to the QAR 13D
disclosing that the QAR Entities had acquired beneficial ownership
of additional shares of Common Stock bringing the QAR Entities’
total beneficial ownership to 143,900 shares, representing
approximately 7.3% of the outstanding Common Stock of the Company.
Following the amendment filing, the Company understood that the
Investor Parties beneficially owned an aggregate of approximately
48.8% of the Common Stock of the Company.
In
addition, the QAR Entities’ August 28, 2018 amendment to the QAR
13D further disclosed that QAR Industries, Inc. sent a letter to
the Board of the Company on August 27, 2018 (the “QAR Letter”). The
QAR Letter posed a series of questions to the Board regarding
recent actions taken by the Board, including the increase in the
size of the Board from five directors to seven directors on July
27, 2018, the appointment of Mr. Pennacchio and Mr. Kelly as
directors of the Company and the amendment of Mr. Christopher
Hughes’ employment agreement on August 9, 2018. The QAR Letter also
made specific references to prior communications between Zeff and
the Company. In response to the QAR Letter, members of the Board
issued two letters to stockholders on September 12, 2018; one
letter from the Chairman of the Board addressing questions related
to the increase in the board size and other corporate governance
matters, and one letter from the Chair of the Compensation
Committee addressing questions related to changes in Mr. Hughes’
employment arrangements.
On
August 29, 2018, the Board approved the adoption of a stockholder
rights agreement (the “Rights Agreement”) and declared a dividend
of one preferred share purchase right for each share of Common
Stock to the stockholders of record on that date. The Rights
Agreement was adopted to protect the Company and its stockholders
from the actions of third parties that the Special Committee and
the Board determine are not in the best interests of the Company
and its stockholders; enable all of the Company’s stockholders to
realize the full potential value of their investment in the
Company; and reduce the likelihood that any person or group gains
control of the Company through open market accumulation or other
tactics. The Company filed a Form 8-A to register the rights
associated with the shareholder rights agreement on March 15,
2019.
On
August 31, 2018, the Board received a letter from Fintech,
expressing similar concerns to those included in the QAR Letter and
also expressing concern with the adoption of the stockholder rights
plan. The Haslani Entities did not amend their 13D to indicate the
letter had been sent to the Board. The letter was disclosed to all
stockholders in a Current Report on Form 8-K filed by the Company
on September 12, 2018. The Form 8-K included as exhibits the
letters to the stockholders of the Company from Christopher Hughes,
then Chairman of the Board, and Raymond Roel, then Chair of the
Compensation Committee, addressing the issues raised in the QAR
Letter and the letter from Fintech.
On
September 19, 2018, Zeff sent a letter to Raymond Roel expressing
additional concerns regarding recent corporate actions.
On
September 27, 2018, the Company filed a Definitive Proxy Statement
on Schedule 14A relating to the 2018 annual stockholder meeting
(“2018 Annual Meeting”) of the Company originally scheduled for
November 28, 2018.
Original Stockholder
Nominations and Proposals
On
October 9, 2018, Zeff delivered to the Company a notice of
nomination of directors and stockholder proposals (the “Zeff
Proposals”). The notice indicated Zeff’s intent to nominate H.
Timothy Eriksen and Bradley M. Tirpak as Class I directors and to
make the following three additional shareholder proposals regarding
certain corporate governance matters: (1) a non-binding stockholder
proposal requesting a declassified Board structure; (2) a by-law
amendment requiring an 80% vote of the Board to increase the size
of the Board; and (3) a stockholder proposal repealing bylaw
amendments made since August 27, 2018. Zeff subsequently filed its
preliminary proxy statement on Schedule 14A on October 10, 2018,
and its definitive proxy statement on November 1, 2018 (the “Zeff
Proxy Statement”). The Board considered these proposals and
recommended that stockholders vote “AGAINST” each of the Zeff
Proposals in the Zeff Proxy Statement.
On
November 6, 2018, the Company announced that the Board had
determined to postpone the Company’s 2018 Annual Meeting (1) in
order to give the Company additional time to review and respond to
the Zeff Proposals, (2) to allow the stockholders to consider
information to be included in this revised proxy statement, (3) in
light of uncertainty caused by ongoing litigations brought against
the Company by Fintech and against the Company and its current and
certain former directors by Susan Paskowitz and (4) in order to
give the Special Committee additional time to consider and evaluate
whether any strategic alternatives are in the best interests of the
Company’s stockholders.
On July 19, 2019, the
Company announced in a Current Report on Form 8-K filed by the
Company with the SEC that it had rescheduled the 2018 Annual
Meeting for September 13, 2019.
Second Stockholder
Nominations and Proposals
On
August 1, 2019, Zeff delivered to the Company a new notice (the
“New Notice”) of nomination of directors and stockholder proposals.
The New Notice again indicated Zeff’s intent to nominate Mr.
Eriksen and Mr. Tirpak as Class I directors.
The
New Notice also indicated Zeff’s intent to make the same three Zeff
Proposals described above with the exception that Proposal No. 5
seeks repeal of bylaw amendments adopted by the Board after April
9, 2015. In addition to the Zeff Proposals, the New Notice also
made one additional stockholder proposal requiring redemption of
the stockholder rights plan approved by the Board on August 29,
2018 (the “New Zeff Proposal”). After careful consideration, the
Board again opposed the Zeff Proposals for the same reasons set
forth above and also opposed the New Zeff Proposal because the
Board believed that maintaining the stockholder rights plan
continues to be in the best interests of the Company and its
stockholders.
On
August 6, 2019, the Company filed with the SEC its Preliminary
Proxy Statement on Schedule 14A relating to the 2018 Annual Meeting
of the Company scheduled for September 13, 2019.
On
August 7, 2019, Zeff filed its Preliminary Proxy Statement on
Schedule 14A (the “New Zeff Proxy Statement”) relating to the 2018
Annual Meeting of the Company scheduled for September 13,
2019.
Litigations and
Settlement Agreement with Investor Parties
In
connection with the Investor Parties’ activities described above,
the Company became involved in various legal proceedings. For a
description of these legal proceedings, please refer to the
disclosure under Item 3. Legal Proceedings on the Company’s
Annual Report on Form 10-K for the fiscal year ended May 31, 2020
filed with the SEC on August 17, 2020.
On
August 30, 2019, the Company entered into a settlement and release
agreement (the “Settlement Agreement”) with the Investor Parties
with respect to the proxy contest pertaining to the election of
directors at the 2018 Annual Meeting. Pursuant to the Settlement
Agreement, the parties agreed to forever settle and resolve any and
all disputes between the parties. No party admitted any liability
by entering into the Settlement Agreement.
Concurrently
with the Settlement Agreement, the parties entered into a share
repurchase agreement (the “Repurchase Agreement”) which provided
for the purchase by the Company and Christopher Hughes, the
Company’s former President and Chief Executive Officer, of the
shares of the Company’s Common Stock held by the Investor Parties
(the “Repurchase”). The Settlement Agreement also contemplated
that, if the Repurchase was completed, the Company would make a
settlement payment to the Investor Parties at the closing of the
Repurchase in an amount of approximately $1,500,000 (the
“Settlement Payment”). However, the Repurchase and Settlement
Payment were not completed by the deadline of December 30,
2019.
Pursuant
to the Settlement Agreement, (1) the Company agreed to adopt an
amendment to the Company’s Amended and Restated By-Laws, dated
April 9, 2015 (the “By-Laws Amendment”), providing that
stockholders of the Company owning at least forty percent (40%) of
the issued and outstanding Common Stock may request a special
meeting of stockholders; (2) the Investor Parties agreed not to
take any action to call or otherwise cause a special meeting of
stockholders to occur prior to December 30, 2019 (unless the
Company had failed to hold the 2018 Annual Meeting); (3) the
Company agreed to amend and restate the Company’s Rights Agreement,
dated August 29, 2018 (the “Amended Rights Agreement”), to confirm
that a Distribution Date (as defined in the Amended Rights
Agreement) shall not occur as a result of any request by any of the
Investor Parties for a special meeting; (4) the Company agreed that
prior to the earlier of (A) the completion of the Repurchase and
the payment of the Settlement Payment and (B) January 1, 2020, the
Board of Directors shall not consist of more than seven (7)
directors.
Pursuant
to the terms of the Settlement Agreement, the two nominees for
director made by Zeff Capital, L.P. were elected as directors at
the Company’s 2018 Annual Meeting held on October 22, 2019. Please
see the Company’s current Report on Form 8-K filed with the SEC on
October 21, 2019 for more information about the background of the
election of directors at the Company’s 2018 Annual
Meeting.
Pursuant
to the terms of the Settlement Agreement, inasmuch as the
Repurchase was not completed and the Settlement Payment was not
made by December 30, 2019, the members of the Board of Directors
(other than the two directors who were nominated by Zeff Capital,
L.P. and elected as directors at the 2018 Annual Meeting) resigned
from the Board effective 5:00 p.m. Eastern Time on December 30,
2019. Immediately thereafter, the two remaining directors appointed
Robert Fitzgerald to the Board of Directors. Please see the
Company’s Current Report on Form 8-K filed with the SEC on December
31, 2019 for more information about the background and the
appointment of Robert Fitzgerald.
In
addition, the Settlement Agreement provides for mutual releases
between the Company and each of the Investor Parties and certain of
their affiliates. Each of the Investor Parties and certain of their
affiliates also agreed to certain customary standstill provisions,
including without limitation, with regard to certain actions in
connection with the 2018 Annual Meeting, Extraordinary Transactions
(as defined in the Settlement Agreement) with the Company, and the
acquisition of any securities (or beneficial ownership thereof) of
the Company, each of which expired on December 30, 2019.
The
foregoing is not a complete description of the terms of the
Settlement Agreement and the Share Repurchase Agreement. For a
further description of the terms of the Settlement Agreement and
the Share Repurchase Agreement, including copies of the Settlement
Agreement and Share Repurchase Agreement, please see the Company’s
Current Report on Form 8-K filed by the Company with the SEC on
September 3, 2019.
Inasmuch
as the Company did not complete the Repurchase and make the
Settlement Payment prior to the December 30, 2019 deadline, the
members of the Board of Directors (other than the two directors who
were elected as directors at the 2018 Annual Meeting) resigned from
the Board effective at 5:00 p.m. Eastern Time on December 30, 2019.
Immediately thereafter, the two remaining directors, Bradley M.
Tirpak and H. Timothy Eriksen, appointed Robert Fitzgerald as a new
director. Each of Messrs. Tirpak, Eriksen and Fitzgerald qualifies
as an “independent director” under the NASDAQ Stock Market Rules.
These three individuals were also appointed to the Audit Committee,
Nominating Committee, Compensation Committee and Special Committee.
The Board appointed Mr. Tirpak as Chairman of the Board to succeed
Christopher Hughes. Mr. Hughes continued to serve as the Chief
Executive Officer, President and Treasurer of the Company until
January 17, 2020 when he was put on leave. He was subsequently
terminated on February 29, 2020. Additionally, the Board appointed
Mr. Eriksen as Lead Independent Director, Chairman of the Audit
Committee and Chairman of the Nominating Committee. The Board also
appointed Mr. Fitzgerald as the Chairman of the Compensation
Committee and Chairman of the Special Committee.
As a
result of the foregoing transactions, as of May 31, 2020, the
Investor Parties have collectively acquired an aggregate of
approximately 48.6% of the Common Stock of the Company. None of the
Company’s current directors have served on the Board prior to
October 22, 2019.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s officers and
directors and persons who beneficially own more than ten percent of
a registered class of the Company’s equity securities to file
reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than ten percent stockholders are
required by regulation of the SEC to furnish the Company with
copies of all Section 16(a) forms they file.
Based
solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no
Forms 5 were required for those persons, the Company believes that
all of its officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable
to them with respect to reports required to be filed by Section
16(a) of the Exchange Act during the fiscal year ended May 31,
2020.
PROPOSAL 2 – APPROVAL OF
AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY THE
BOARD
The
Company’s Certificate of Incorporation, as amended (“Certificate of
Incorporation”) provides for a classified board of directors
divided into three classes of directors serving staggered terms of
three years each. The terms of one class expire at each annual
stockholder meeting. The Company originally adopted a classified
Board to provide stability and continuity of directors and to
encourage a long-term perspective from the Board.
As
part of the Board’s ongoing evaluation of the corporate governance
structures and practices of the Company and in response to feedback
from certain of our stockholders, the Board considered the benefits
and detriments of a classified Board versus a declassified Board
with all directors serving terms of only one year each. While
classified or staggered boards have had a long and prominent
history, in recent years there has been investor concern that
classified boards may have the effect of reducing the
accountability of directors to stockholders. Because directors
serve terms of multiple years, classified boards limit the ability
of stockholders to evaluate and elect all directors on an annual
basis. Election of directors is a primary means for stockholders to
influence corporate governance policies and to hold directors
accountable for implementing those policies. In addition, opponents
of classified boards assert that a classified board discourages
proxy contests in which stockholders have an opportunity to vote
for a competing slate of nominees and, therefore, can potentially
erode stockholder value. As a result, it has become an emerging
governance best practice that all directors be elected on an annual
basis. Annually elected boards are perceived by many investors as
increasing the accountability of directors to stockholders and,
accordingly, increasing stockholder value.
After
carefully weighing these considerations, the Board has determined
that it is in the best interests of the Company and our
stockholders to declassify the Board and on October 12, 2020,
adopted, subject to stockholder approval, an amendment to the
Company’s Certificate of Incorporation to declassify the Board
beginning at the 2021 annual stockholder meeting (“Amendment”). The
general description of the Amendment set forth below is a summary
only and is qualified in its entirety by, and subject to, the full
text of the proposed Amendment, which is attached as Annex A to
this proxy statement.
Under
the proposed Amendment, the annual election of directors will be
phased in gradually to assure a smooth transition. The Amendment to
the Company’s Certificate of Incorporation would not change the
unexpired three-year terms of directors elected prior to the
effectiveness of the Amendment (including any director to be
elected at the Annual Meeting). Rather, the current three-year
terms for each class of directors will continue, and those
directors or their successors will only become eligible for a
one-year election term upon expiration of that term. The three-year
term for our Class I directors previously elected at the 2018
annual stockholder meeting will expire at the 2021 annual
stockholder meeting; and the three-year term for our Class II
director to be elected at the Annual Meeting will expire at the
2023 annual stockholder meeting. There is currently no Class III
director on the Board. Upon the expiration of each Class’s current
three-year term, those directors or the successors thereto will be
elected to the Board for one-year terms. Thus, beginning with the
2021 annual stockholder meeting, those directors nominated for
election will be elected to the Board for a one-year term.
Directors appointed to fill any newly created directorships
resulting from an increase in the number of directors or any
vacancies on the Board would serve until the next annual
stockholder meeting. This phased-in approach will result in the
discontinuation of our classified Board, and all directors being
nominated annually for one-year terms, by the 2023 annual
stockholder meeting.
Pursuant
to the Company’s Certificate of Incorporation, the affirmative vote
of not less than two-thirds of the voting power of the then
outstanding shares of common stock is required to adopt the
proposed Amendment. Accordingly, abstentions and broker non-votes
will have the same effect as votes against the proposal. If the
stockholders approve the proposed Amendment, the Amendment to the
Company’s Certificate of Incorporation will become effective upon
the filing of a Certificate of Amendment to the Company’s
Certificate of Incorporation with the Delaware Secretary of State,
which the Company expects to file promptly after the Annual
Meeting. If the proposed Amendment is not approved, the Board will
remain classified.
The
Board has also approved a conforming amendment to Article III,
Section 2 of the Amended and Restated Bylaws of the Company, as
amended (“Bylaws”), relating to the Company’s current classified
board structure, to implement the declassification of the Board.
The full text of the proposed amendment to the Bylaws is attached
as Annex B to this proxy statement. Stockholders are not being
asked to vote on the proposed amendment to the Bylaws, however,
such amendment will not take effect unless stockholders approve the
proposed declassification amendment to the Company’s Certificate of
Incorporation.
The
Board unanimously recommends a vote FOR an amendment to our
Certificate of Incorporation to declassify the
Board.
PROPOSAL 3 – APPROVAL OF
THE ADOPTION OF THE 2020 EQUITY INCENTIVE PLAN
Background and
Purpose
We
are asking stockholders to approve the TSR, Inc. 2020 Equity
Incentive Plan (the “2020 Plan”). Our Board believes that our
success depends, in large part, on our ability to maintain a
competitive position by attracting, retaining and motivating key
employees with experience and ability. We believe that stock-based
compensation programs are central to this objective and vital to
our future success. On October 12, 2020, subject to stockholder
approval, the Board adopted the 2020 Plan.
Summary of the 2020
Equity Incentive Plan
Certain
provisions of the 2020 Plan are summarized below. A copy of the
Plan is attached to this proxy statement as Appendix A and is
incorporated herein by reference. The following summary of the
material terms of the 2020 Plan does not purport to be a complete
description of the 2020 Plan and is qualified in its entirety by
reference to the complete copy of the 2020 Plan in Appendix C.
Because this summary may not contain all of the information that is
important to you, you should review the Proxy Statement, including
Appendix C, before deciding how to vote.
The
2020 Plan allows for the grant of non-qualified stock options,
incentive stock options, restricted awards, stock appreciation
rights (“SARs”), cash awards, performance share awards and other
equity-based awards to employees, consultants, directors and those
individuals whom the Board (or a committee appointed by the Board
to administer the 2020 Plan (the “Committee”)) determines are
reasonably expected to become employees, consultants and directors
following the date of grant. For purposes of this summary, the term
“Committee” is used throughout when referring to either the Board
or Committee.
The
maximum number of shares of common stock which may be issued,
subject to adjustment as described below, is 200,000 shares of
common stock. No more than 200,000 shares of common stock may be
issued in the aggregate pursuant to the exercise of incentive stock
options. The maximum number of shares of common stock subject to
awards granted during a single Company fiscal year to any director
shall not exceed 50,000 shares of common stock. No participant
shall be granted, in the aggregate during any calendar year, awards
covering more than a total of 50,000 shares of common stock.
No participant shall be granted, in the aggregate during the life
of the 2020 Plan, awards covering more than a total of 100,000
shares of common stock.
If
awards under the 2020 Plan expire or otherwise terminate without
being exercised, the shares not acquired pursuant to such awards
again become available for issuance under the 2020 Plan in
accordance with its terms. However, under the following
circumstances, shares will not again be available for issuance
under the 2020 Plan if such shares are (a) shares tendered in
payment of an option, (b) shares delivered or withheld by the
Company to satisfy any tax withholding obligation, or (c) shares
covered by a stock-settled SAR or other awards that were not issued
upon the settlement of the award.
Administration
The
2020 Plan will be administered by the Committee. The Board will
fill vacancies on and from time to time may remove or add members
to the Committee, and the Committee will be so constituted to
permit awards granted under the 2020 Plan to be exempt from Section
16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”)
and to permit grants of awards under the plan to comply with or any
other statutory rule or regulatory requirements, unless otherwise
determined by the Board.
Subject
to the express provisions of the 2020 Plan, the Committee has
authority to administer and interpret the 2020 Plan, including the
authority to determine who is eligible to participate in the 2020
Plan and to whom and when awards are granted under the 2020 Plan,
to grant awards, to determine the number of shares of common stock
subject to awards and the exercise or purchase price of such shares
under an award, to establish and verify the extent of satisfaction
of any performance criteria applicable to awards, to prescribe and
amend the terms of the agreements evidencing awards made under the
2020 Plan, and to make other determinations deemed necessary or
advisable for the administration of the 2020 Plan. Also, subject to
the requirements of Delaware General Corporation Law and any
limitations under applicable stock exchange rules, the Committee
also has the power to delegate its authority to officers with
respect to awards that do not involve “insiders” within the meaning
of Section 16 of the Exchange Act.
Eligibility
Participants
under the 2020 Plan will consist of such employees, consultants,
directors and those individuals whom the Committee determines are
reasonably expected to become employees, consultants and directors
following the date of grant as selected by the Committee. We
estimate that approximately 12 persons are currently eligible to
participate in the 2020 Plan, which includes 7 employees, 2 named
executive officers and 3 non-employee directors.
General Terms and
Conditions of Awards
Non-qualified Stock
Options
The
Committee may grant non-qualified stock options under the 2020 Plan
which do not meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”) and which will be
subject to terms and conditions established by the Committee. The
option exercise price per share will be determined by the Committee
but will not be less than 100% of the “fair market value” of the
common stock on the date of grant of such option. The term “fair
market value” means either (a) if the common stock is listed on any
established stock exchange, the closing price for the common stock
on the date of grant or (b) in the absence of an established market
for the common stock, the fair market value determined in good
faith by the Committee and such determination shall be conclusive
and binding on all persons. The exercise price of an option may be
paid through various means specified by the Committee, including in
cash or check, by delivering to the Company shares of common stock
or by a reduction in the number of shares issuable pursuant to such
option. Every option which has not been exercised within ten years
of its date of grant will lapse upon the expiration of the ten-year
period, unless it has lapsed at an earlier date as determined by
the Committee.
During
the lifetime of a participant, except as otherwise may be provided
by the Committee in its discretion, options granted to that
participant under the 2020 Plan generally will be nontransferable
and exercisable only by the participant. A participant will have
the right to transfer any options granted to such participant upon
such participant’s death either by the terms of such participant’s
will or under the laws of descent and distribution.
Incentive Stock
Options
The
Committee may grant incentive stock options under the 2020 Plan
which meet the requirements of Section 422 of the Code. Under the
2020 Plan, the aggregate fair market value, determined at the time
the option is granted, of the common stock with respect to which
incentive stock options are exercisable for the first time by any
participant during any calendar year (under the 2020 Plan and any
other incentive stock option plans of the Company) may not exceed
$100,000, or any other limit as may be prescribed by the Code from
time to time. The option exercise price per share will be
determined by the Committee but will not be less than 100% of the
“fair market value” of the common stock on the date of grant of
such option. In the case of a grant of an incentive stock option to
a participant who, at the time such option is granted, owns stock
possessing more than 10% of the combined voting power of all
classes of stock of the Company, the option exercise price per
share under such option will not be less than 110% of the “fair
market value” of the common stock on the date of grant of such
option and such option will expire and no longer be exercisable no
later than five years from the date of grant of such
option.
SARs
The
Committee may grant SARs under the 2020 Plan. Subject to the
express provisions of the 2020 Plan and as discussed in this
paragraph, the Committee has discretion to determine the grant
value, term, methods of exercise, dates of exercise, methods of
settlement and any other terms and conditions of any SAR. The grant
value of each SAR granted under the 2020 Plan will be determined by
the Committee pursuant to the 2020 Plan. Every SAR which has not
been exercised within ten years of its date of grant will lapse
upon the expiration of such ten-year period, unless it has lapsed
at an earlier date as determined by the Committee.
Restricted
Awards
The
Committee may grant restricted stock or restricted stock units
under the 2020 Plan. Restricted stock and restricted stock units
will be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote
a share of restricted stock or the right to receive any dividend or
other right or property with respect thereto), which restrictions
may lapse separately or in combination at such time or times, in
such installments or otherwise as the Committee may deem
appropriate. For example, awards may, at the Committee’s
discretion, be conditioned upon a participant’s completion of a
specified period of service, or upon the achievement of one or more
performance goals established by the Committee, or upon any
combination of service-based and performance-based
conditions.
Any
restricted stock granted under the 2020 Plan shall be issued at the
time such awards are granted and may be evidenced in such manner as
the Committee may deem appropriate. In the case of restricted stock
units, no common stock shall be issued at the time such awards are
granted. Upon the lapse or waiver of restrictions and the
restricted period relating to restricted stock units evidencing the
right to receive common stock, such common stock shall be issued
and delivered to the holder of the restricted stock
units.
Except
as otherwise determined by the Committee, if a director resigns or
is removed or if the employment of an employee holding restricted
stock or restricted stock units terminates during the applicable
restricted period, the restricted stock and/or restricted stock
units held by such director or employee will be forfeited and
reacquired by the Company.
Performance Share
Awards
The
Committee may grant performance share awards under the 2020 Plan.
Each performance share award will be subject to subject to
conditions determined by the Committee, which will have the
discretion to determine: (i) the number of shares of common stock
or stock-denominated units subject to a performance share award
granted to any participant; (ii) the performance period applicable
to any award; (iii) the conditions that must be satisfied for a
participant to earn an award; and (iv) the other terms, conditions
and restrictions of the award.
Cash Awards and Other
Equity-Based Awards
The
Committee may also grant cash awards and other equity-based awards.
The Committee has the discretion to grant such awards either alone
or in tandem with other awards subject to any terms and conditions
set by the Committee.
Transferability
Generally,
no award (other than fully vested and unrestricted shares) and no
right under any such award shall be transferable by a participant
other than by will or by the laws of descent and distribution, and
no award (other than fully vested and unrestricted shares) or right
under any such award may be pledged, alienated, attached or
otherwise encumbered unless otherwise permitted under the 2020
Plan. The Committee may establish procedures to allow a participant
to designate a beneficiary or beneficiaries, to exercise the rights
of the participant and receive any property distributable with
respect to an award in the event of the participant’s
death.
Corporate
Transactions
In
the event of any Change in Control (as defined in the 2020 Plan)
involving the Company, unless provided in the award agreement, all
outstanding options and SARs shall become immediately exercisable
with respect to 100% of the shares subject to such options or SARs,
and/or the restricted period shall expire immediately with respect
to 100% of the outstanding shares of restricted stock awards or
restricted stock units. Further, with respect to performance share
awards and cash awards, in the event of a Change in Control, all
incomplete performance periods shall end and the Committee shall
(i) determine the extent to which performance goals have been met
based on audited or unaudited financial information then available
as it deems relevant and (ii) cause to be paid to the applicable
participant partial or full awards with respect to performance
goals for each such performance period based on the Committee’s
determination of the degree of attainment of performance goals or,
if not determinable, assuming that the applicable target levels of
performance have been attained, or on such other basis determined
by the Committee.
In
addition, in the event of a Change in Control, the Committee may in
its discretion and upon at least 10 days’ advance notice to the
affected persons, cancel any outstanding awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such awards based upon the price per share of common stock
received or to be received by other shareholders of the Company in
the event. In the case of any option or SAR with an exercise price
(or SAR exercise price in the case of a SAR) that equals or exceeds
the price paid for a share of common stock in connection with the
Change in Control, the Committee may cancel the option or SAR
without the payment of consideration therefor.
Amendment and
Termination
The
2020 Plan shall terminate automatically on the ten year anniversary
of the effective date of the 2020 Plan. The effective date is the
date the 2020 Plan is approved by the stockholders. No Award shall
be granted pursuant to the 2020 Plan after such date, but awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the 2020 Plan at any earlier date. The Board
may also amend the 2020 Plan at any time, provided that no
amendment shall be effective unless approved by the stockholders to
the extent stockholder approval is necessary to satisfy applicable
laws.
The
Committee may amend, modify or terminate an outstanding award,
provided, however, that, except as expressly provided in the 2020
Plan, the Committee may not, without the participant’s consent,
amend, modify or terminate an outstanding award unless it
determines that the action would not adversely alter or impair the
terms or conditions of such award. If the Committee modifies the
purchase price or the exercise price of an outstanding award and if
such modification effects a pricing, stockholder approval shall be
required before the reprising is effective.
Clawback and
Recoupment
The
Company may cancel any award or require the participant to
reimburse any previously paid compensation provided under the 2020
Plan or an award agreement in accordance with the Company’s
clawback policy.
Certain Federal Income
Tax Consequences
The
following is a summary of the principal U.S. federal income tax
consequences generally applicable to awards made under the 2020
Plan. The summary does not contain a complete analysis of all the
potential tax consequences relating to awards granted under the
2020 Plan, including state, local or foreign tax consequences. This
summary does not constitute legal or tax advice.
Nonqualified Stock
Options
A
participant will not be deemed to have received taxable income upon
the grant of a nonqualified stock option with an exercise price
equal to the fair market value of the underlying stock on the date
of the grant. Upon the exercise of a nonqualified stock option, a
participant generally will be deemed to have received taxable
ordinary income in an amount equal to the excess of the fair market
value of the common stock received on the date of exercise over the
option price.
Upon
the exercise of a nonqualified stock option, we will ordinarily be
entitled to a deduction for federal income tax purposes in an
amount equal to the amount included in income by the participant as
a result of such exercise. This deduction will be available to us
in the tax year in which the participant recognizes the
income.
The
income arising from a participant who is an employee exercising a
nonqualified stock option will be treated as compensation income
for income and payroll tax withholding purposes, and the Committee
may allow the participant to satisfy the tax withholding obligation
by withholding a portion of the shares that would otherwise be
delivered upon exercise. The basis of shares received upon the
exercise of a nonqualified stock option will be the option exercise
price paid plus the amount recognized by the participant as taxable
income attributable to such shares as a result of the exercise.
Gain or loss recognized by the participant on a subsequent
disposition of any such shares will be capital gain or loss if such
shares constitute a capital asset in the hands of the participant.
A participant’s holding period will commence on the date of
exercise.
Incentive Stock
Options
Participants
will not be deemed to recognize taxable income upon the grant of an
incentive stock option with an exercise price equal to the fair
market value of the underlying stock on the date of the grant. The
exercise of an incentive stock option will not result in taxable
income to the participant if at the time of exercise the
participant has been employed by the Company or its subsidiaries at
all times beginning on the date the incentive stock option was
granted and ending not more than 90 days before the date of
exercise. The difference between the fair market value of the
common stock at the time of exercise and the exercise price will,
however, be an item of tax preference, and may subject a
participant to the alternative minimum tax. Except in the case of a
participant not meeting the holding requirements discussed in the
next paragraph, we will not be entitled to any deduction with
respect to the grant or exercise of the incentive stock option or
the transfer of common stock acquired upon exercise.
If
the participant does not sell the shares acquired on exercise
within two years from the date of grant and one year from the date
of exercise then on the sale of the shares any amount realized in
excess of the exercise price will be taxed as capital gain. If the
amount realized in the sale is less than the exercise price, then
the participant will recognize a capital loss. If these holding
requirements are not met, then the participant will generally
recognize ordinary income at the time the shares are sold in an
amount equal to the lesser of (a) the excess of the fair market
value of the shares on the date of exercise over the exercise
price, or (b) the excess, if any, of the amount realized on the
sale of the shares over the exercise price, and the Company will be
entitled to a corresponding deduction.
If
the participant makes a disqualifying disposition of the common
stock before the expiration of the one or two year holding periods
described above, the participant will be deemed to have received
taxable ordinary income at the time of such disposition to the
extent that the fair market value of the common stock at the time
of exercise, or, if less, the amount realized on such disposition,
exceeds the exercise price. To the extent that the amount realized
on such disposition exceeds the fair market value of the common
stock at the time of exercise, such excess will be taxed as capital
gain if the common stock is otherwise a capital asset in the hands
of the participant. To the extent the participant recognizes
ordinary income on a disqualifying disposition of the common stock,
we may be entitled to a deduction for federal income tax purposes
in an amount equal to the ordinary income recognized by the
participant.
SARs
A
participant will not be deemed to have received taxable income upon
the grant or vesting of a SAR with an exercise price equal to the
fair market value of the underlying stock on the date of the grant.
Upon the exercise of a SAR, a participant generally will be deemed
to have received income, taxable for federal income tax purposes at
ordinary income rates, equal to the fair market value at the time
of exercise of any common stock received plus the amount of any
cash received, and we will ordinarily be entitled to a deduction
for federal income tax purposes equal to the amount of ordinary
income recognized by the participant as a result of such
exercise.
The
income arising from a participant who is an employee exercising a
SAR will be treated as compensation income for withholding tax
purposes and the Committee may allow the participant to satisfy the
tax withholding obligation by withholding a portion of the shares
that would otherwise be delivered upon exercise. The basis of
shares received upon the exercise of a SAR will equal the fair
market value of the shares at the time of exercise. Gain or loss
recognized by the participant on a subsequent disposition of any
such shares will be capital gain or loss if such shares constitute
a capital asset in the hands of the participant.
Restricted Stock and
Performance Shares
The
federal income tax consequences of the issuance of restricted stock
and performance shares will depend upon whether the participant
elects to be taxed at the time of grant of the restricted stock or
performance shares under Section 83(b) of the Code. If no election
is made, the participant will not be deemed to have received
taxable income upon the grant of restricted stock or performance
shares, but rather recognition of income will be postponed until
such time as the restrictions on the shares lapse. At that time,
the participant will be deemed to have received taxable ordinary
income in an amount equal to the fair market value of the stock
when the restrictions lapse. If a Section 83(b) election is made,
the participant will be deemed to have received taxable ordinary
income at the time of the grant of the stock equal to the fair
market value of the shares of stock at that time determined without
regard to any of the restrictions on the shares, and the
participant will not recognize ordinary income on the lapse of the
restrictions.
We
will ordinarily be entitled to a deduction for federal income tax
purposes in the taxable year in which the participant recognizes
any ordinary income as a result of the lapse of restrictions on the
stock or as a result of a Section 83(b) election. The amount of the
deduction will equal the amount of ordinary income recognized by
the participant. In the case of employees, such income will be
treated as compensation income for income and payroll tax
withholding purposes, and the Committee may allow the participant
to satisfy the tax withholding obligation by withholding a portion
of the shares whose restrictions have lapsed. The basis of any
shares received will equal the amount recognized by the participant
as taxable income attributable to such shares as a result of the
lapse of restrictions on the stock or as a result of a Section
83(b) election. Gain or loss recognized by the participant on a
subsequent disposition of any such shares will be capital gain or
loss if such shares constitute a capital asset in the hands of the
participant. For purposes of determining the holding period of any
such shares, there will be included only the period beginning at
the time the restrictions lapse or, if a Section 83(b) election is
made, at the time of grant.
Restricted Stock
Units
A
participant will not be deemed to have received taxable income upon
the grant of restricted stock units. The participant will be deemed
to have received taxable ordinary income at such time as shares are
distributed to the participant. Upon the distribution of shares to
a participant with respect to restricted stock units, we will
ordinarily be entitled to a deduction for federal income tax
purposes in an amount equal to the taxable ordinary income
recognized by the participant. In the case of employees, such
income will be treated as compensation income for income and
payroll tax withholding purposes, and the Committee may allow the
participant to satisfy the tax withholding obligation by
withholding a portion of the shares that would otherwise be
delivered. The basis of the shares of common stock received will
equal the amount of taxable ordinary income recognized by the
participant upon receipt of such shares. Gain or loss recognized by
the participant on a subsequent disposition of any such shares will
be capital gain or loss if such shares constitute a capital asset
in the hands of the participant. A participant’s holding period
will commence on the date the shares are distributed to the
participant.
Section 162(m) and Limits
on the Company’s Deductions
Section
162(m) of the Code denies deductions to publicly held corporations
for compensation paid to certain “covered employees” that exceeds
$1,000,000 for the taxable year.
Section 409A of the
Code
The
Committee intends to administer and interpret the 2020 Plan and all
award agreements in a manner designed to satisfy the requirements
of Section 409A of the Code (“Section 409A”) and to avoid any
adverse tax results thereunder to a holder of an award. Section
409A provides certain requirements for non-qualified deferred
compensation arrangements with respect to an individual’s deferral
and distribution elections and permissible distribution events. If
an award is subject to and fails to satisfy the requirements of
Section 409A, the recipient of that award may recognize ordinary
income on the amounts deferred under the award, to the extent
vested, which may be prior to when the compensation is actually or
constructively received. Also, if an award that is subject to
Section 409A fails to comply with Section 409A’s provisions,
Section 409A imposes an additional 20% tax on compensation
recognized as ordinary income, as well as interest on such deferred
compensation.
Special Rules for
Executive Officers Subject to Section 16 of the Exchange
Act
Special
rules may apply to individuals subject to Section 16 of the
Exchange Act. In particular, unless a special election is made
pursuant to Section 83(b) of the Code, shares received through the
exercise or settlement of an award may be treated as restricted as
to transferability and subject to a substantial risk of forfeiture
for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the
amount of our income tax deduction, will be determined as of the
end of that period.
Forfeiture of
Awards
The
Committee may specify in an award agreement that the participant’s
rights, payments and benefits with respect to an award shall be
subject to reduction, cancellation, forfeiture or recoupment upon
the occurrence of certain events, in addition to applicable vesting
conditions of an award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the award agreement or otherwise applicable to the participant,
a termination of the participant’s continuous service for cause, or
other conduct by the participant that is detrimental to the
business or reputation of the Company.
The
Board unanimously recommends a vote FOR the adoption of the 2020
Equity Incentive Plan.
PROPOSAL 4 – RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
Relationship with
Independent Registered Public Accountants
CohnReznick
LLP has been appointed by the Company’s Audit Committee and Board
as the independent registered public accounting firm for the
Company to audit and report on the Company’s consolidated financial
statements for the fiscal year ending May 31, 2021. CohnReznick LLP
audited and reported on the Company’s consolidated financial
statements for the year ended May 31, 2020. The Company expects
that a representative of CohnReznick LLP will be present at the
Annual Meeting with an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate
questions. The appointment of CohnReznick LLP as the Company’s
independent registered public accounting firm will be ratified if
it receives the affirmative vote of the holders of a majority of
shares of the Company’s Common Stock present at the Annual Meeting,
in person or by proxy. Submission of the appointment of the
independent registered public accounting firm to the stockholders
for ratification will not limit the authority of the Audit
Committee and Board to appoint another accounting firm to serve as
the independent registered public accounting firm if the present
accountants resign or their engagement is otherwise terminated. If
the stockholders do not ratify the appointment of CohnReznick LLP
at the Annual Meeting, the selection of CohnReznick LLP may be
reconsidered by the Audit Committee and Board.
Policy on Audit Committee
Pre-Approval of Services of Independent Registered Public
Accounting Firm
The
Audit Committee is responsible for approving the engagement of the
Company’s independent registered public accounting firm to render
audit or non-audit services prior to the engagement of the
accountants to render such services. In recognition of this
responsibility, the Audit Committee pre-approves all audit and
permissible non-audit services provided by the independent
registered public accounting firm (subject to the de minimus
exception for non-audit services described in Section 10A of the
Exchange Act that are approved by the Audit Committee prior to
completion of the audit) including the following four categories of
services:
Audit
services include audit work performed in the audit of the
annual financial statements, review of quarterly financial
statements, reading of annual, quarterly and current reports, as
well as work that generally only the independent auditor can
reasonably be expected to provide.
Audit-related
services are for assurance and related services that are
traditionally performed by the independent auditor, including the
provision of consents and comfort letters in connection with the
filing of registration statements, due diligence related to mergers
and acquisitions and special procedures required to meet certain
regulatory requirements.
Tax
services consist principally of assistance with tax
compliance and reporting, as well as certain tax planning
consultations.
Other
services are those associated with services not captured
in the other categories. We generally do not request such services
from our independent auditor.
The
Audit Committee generally pre-approves particular services or
categories of services on a case-by-case basis. The independent
registered public accounting firm and management are required to
periodically report to the Audit Committee regarding the extent of
services provided by the independent registered public accounting
firm in accordance with these pre-approvals, and the fees for the
services performed to date.
The
Audit Committee may delegate pre-approval authority to one or more
of its members. Such member(s) shall report to the full Audit
Committee at each scheduled meeting whether such member(s)
pre-approved any audit or non-audit services.
All
of the fees below were pre-approved by the Audit
Committee.
Fees for Independent
Registered Public Accounting Firm
Audit Fees
The
aggregate fees billed by CohnReznick LLP for professional services
related to the audit of the Company’s consolidated financial
statements and the review of the consolidated condensed financial
statements included in the Company’s quarterly reports on Form 10-Q
for the fiscal years ended May 31, 2020 and 2019 were $78,000,
respectively.
Audit
Related Fees
There
were no fees billed by CohnReznick LLP for audit related services
for the fiscal years ended May 31, 2020 or 2019.
Tax
Fees
There
were no fees billed by CohnReznick LLP for tax services during the
fiscal years ended May 31, 2020 or 2019.
All
Other Fees
There
were no fees billed by CohnReznick LLP related to any other
non-audit services for the fiscal years ended May 31, 2020 or
2019.
The
Board unanimously recommends a vote FOR the approval of the
ratification of the appointment of CohnReznick LLP as the Company’s
independent registered public accountants for the fiscal year
ending May 31, 2021.
Audit Committee Report –
2020 Fiscal Year
The
Audit Committee has reviewed and discussed the Company’s audited
consolidated financial statements for the Company’s 2020 fiscal
year with the Company’s management. The Audit Committee has
separately discussed with CohnReznick LLP, the Company’s
independent registered public accounting firm for the 2020 fiscal
year, the matters required to be discussed by Auditing Standard No.
1301, Communications with Audit Committees, as adopted by the
Public Company Accounting Oversight Board.
The
Audit Committee has also received the written disclosures and the
letter from CohnReznick LLP required by applicable requirements of
the Public Company Accounting Oversight Board regarding the
independent registered public accountant’s communications with the
Audit Committee concerning independence, and the Audit Committee
has discussed with CohnReznick LLP the independence of that firm
from the Company.
Based
on the Audit Committee’s review and discussions noted above, the
Audit Committee recommended to the Board that the Company’s audited
consolidated financial statements be included in the Company’s
Annual Report on Form 10-K for the Company’s 2020 fiscal year for
filing with the SEC.
Members
of the Audit Committee
|
H.
Timothy Eriksen, Chairman
|
|
Bradley M. Tirpak |
|
Robert Fitzgerald |
|
|
PROPOSAL 5 – ADVISORY
VOTE ON EXECUTIVE COMPENSATION
Section
14A of the Exchange Act and the rules and regulations promulgated
thereunder provide that, not less frequently than once every three
years, an issuer shall include in its proxy statement for its
annual meeting of stockholders an advisory resolution subject to a
stockholder vote to approve the compensation of the Company’s named
executive officers. Accordingly, you are asked to
approve the compensation of the Company’s named executive officers
as described under the heading “Executive Compensation” in this
proxy statement, including the compensation tables and the related
narrative discussion, by voting in favor of the following advisory
resolution:
“RESOLVED,
that the stockholders of TSR, Inc. approve the compensation of the
Named Executive Officers as discussed and disclosed pursuant to
Item 402 of Regulation S-K, including the compensation tables and
narrative discussion.”
Under
the rules and regulations of the SEC, your vote is advisory and
will not be binding upon the Company or the Board and will not be
construed to overrule any decision by the Company or the Board or
require the Board to take any action. However, the
Compensation Committee and the Board will take the outcome of this
advisory vote into consideration when considering future
compensation arrangements for the Company’s named executive
officers and whether any adjustments or modifications are
warranted.
The
Board unanimously recommends a vote FOR the approval, on a
non-binding advisory basis, of the compensation of our named
executive officers, as described in the “Executive Compensation”
section of this proxy statement.
PROPOSAL 6 – ADVISORY
VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION
Section
14A of the Exchange Act and the rules and regulations promulgated
thereunder provide that, not less frequently than once every six
years, an issuer shall include in its proxy statement for its
annual meeting of stockholders an advisory resolution subject to a
stockholder vote to determine whether a vote to approve an advisory
resolution approving the compensation of its named executive
officers, which is set forth in Proposal No. 5 above, will occur
every year, every two years or every three years.
Accordingly,
you are asked to vote on whether the vote to approve an advisory
resolution approving the compensation of the named executive
officers of the Company will be held every year, every two years or
every three years.
Under
the rules and regulations of the SEC, your vote is advisory and
will not be binding upon the Company or the Board and will not be
construed to overrule any decision by the Company or the Board or
require the Board to take any action. However, the
Company and the Board will take the outcome of this advisory vote
into account when considering the frequency of the advisory vote to
approve the compensation of our named executive
officers.
The Board believes that the advisory vote on compensation for the
Company’s named executive officers should be conducted every year
so that stockholders may annually express their views on the
Company’s compensation principles, policies and
practices.
The
Board unanimously recommends a vote FOR the option of a vote every
one year on the compensation program for our named
executive officers.
PROPOSAL 7 – ADVISORY
VOTE ON THE TERMINATION OF THE STOCKHOLDER RIGHTS PLAN NO LATER
THAN AUGUST 29, 2021
On
August 29, 2018, the Board declared a dividend of one preferred
share purchase right (a “Right”) for each share of Common Stock of
the Company outstanding on August 29, 2018 to the stockholders of
record on that date. In connection with the distribution of the
Rights, the Company entered into a Rights Agreement (the “Rights
Agreement”), dated as of August 29, 2018, between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent.
Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Class A Preferred Stock
Series One, par value $0.01 per share (“Preferred Stock”), of the
Company at a price of $24.78 per one one-hundredth of a share of
Preferred Stock represented by a Right (the “Purchase Price”),
subject to adjustment. In connection with the entry into the
Settlement Agreement, the Company amended and restated the Rights
Agreement on September 3, 2019. For a description of the background
of the adoption and the amendment and restatement of the Rights
Agreement, please refer to the disclosure under the heading “Change
in Control – 2019 and 2020 Fiscal Years” in this proxy statement.
Please also see the Company’s Current Reports on Form 8-K and Form
8-K/A filed with the SEC on August 29, 2020, August 31, 2020 and
September 3, 2020 regarding a more detailed description of the
terms of the Rights Agreement, as amended and restated, and the
Amended and Restated Agreement filed as an exhibit to the Company’s
Current Report on Form 8-K filed with the SEC on September 3,
2020.
As
part of the Board’s ongoing evaluation of the corporate governance
structures and practices of the Company and in response to feedback
from certain of our stockholders, the Board considered the benefits
and detriments of maintaining a stockholder rights plan. While the
stockholder rights plan may help to protect stockholders from
abusive stock accumulation and hostile takeover tactics, the
potential effect of the stockholder rights plan to vastly increase
the cost to a potential bidder of effecting any merger or tender
offer (unless the Board favors the bid) and to force the bidder to
instead negotiate with management may deprive the stockholders of
an opportunity to decide for themselves what represents a fair
price for their holdings. In addition, the power of stockholders to
accept an offer by a potential bidder can provide an important
check and balance on management and the Board in their stewardship
of the stockholders’ interests. After carefully considering these
risks and benefits and in an effort to maximize stockholder value
and encourage stockholder democracy, the Board is holding an
advisory vote for stockholders to decide for themselves whether the
stockholder rights plan improves or undermines stockholder value by
voting on whether to terminate the stockholder rights plan no later
than its current Expiration Date, August 29, 2021.
Pursuant
to the Rights Agreement, as amended and restated, the Rights will expire on the close of
business on the Expiration Date. For so long as the Rights remain
redeemable, the Board may amend the terms of the Rights, including
accelerating the Expiration Date, without the consent of the
holders of the Rights. The Rights are currently redeemable and
therefore, the Board may terminate the stockholder rights
plan at any time by accelerating the Expiration Date or
letting it lapse at its Expiration Date without the consent of any
Right holders.
Your
vote on this proposal is advisory and will not be binding upon the
Company or the Board and will not be construed to overrule any
decision by the Company or the Board or require the Board to take
any action. However, the Company and the Board will take
the outcome of this advisory vote into account when considering the
appropriate approach to the stockholder rights plan moving
forward.
The
Board does not make any recommendation on this vote whether to
terminate the stockholder rights plan no later than August 29,
2021.
OTHER
INFORMATION
Stockholder Proposals for
Next Annual Meeting
Any
proposal by a stockholder of the Company intended to be presented
at the 2021 annual stockholder meeting must be received by the
Company at its principal executive office not later than June 30,
2021, which is 120 days prior to the anniversary of the date on
which the Company released its proxy statement in connection with
the prior year’s annual meeting to its stockholders (the
“Anniversary Date”), for inclusion in the Company’s proxy statement
and form of proxy relating to that meeting. Pursuant to the
Company’s Amended and Restated By-laws, as amended, the Company
must receive the notice of a stockholder’s intention to introduce a
nomination or proposed item of business at an annual meeting no
later than the Anniversary Date; provided, however, in the event
the annual meeting is scheduled to be held on a date more than 30
days before or after the Anniversary Date, the notice can be
received not later than the close of business on the later of the
75th day prior to the scheduled meeting date or the
15th day following the day on which the public
announcement of such annual meeting is first made by the Company.
The Company is releasing its proxy statement for the Annual Meeting
to its stockholders on October 28, 2020. Any such proposal must
also comply with the other requirements of the proxy solicitation
rules of the SEC.
Form 10-K Annual
Report
The
Annual Report for the fiscal year ended May 31, 2020 is enclosed
with this Proxy Statement. IN ADDITION, UPON WRITTEN REQUEST BY ANY
STOCKHOLDER ENTITLED TO VOTE AT THE ANNUAL MEETING, THE COMPANY
WILL FURNISH THAT PERSON, WITHOUT CHARGE, WITH A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MAY 31, 2020,
INCLUDING AMENDMENT NO. 1 ON FORM 10-K/A TO THE COMPANY’S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MAY 31, 2020, WHICH
IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO. IN THE EVENT THAT
EXHIBITS TO SUCH FORM 10-K ARE REQUESTED, A FEE WILL BE CHARGED FOR
REPRODUCTION OF SUCH EXHIBITS. If the person requesting the report
was not a stockholder of record on October 20, 2020, the request
must contain a good faith representation that the person making the
request was a beneficial owner of the Company’s stock at the close
of business on such date. Requests should be addressed to Mr. John
G. Sharkey, Secretary, TSR, Inc., 400 Oser Avenue, Suite 150,
Hauppauge, NY 11788.
Householding
The
Company has adopted a procedure called “householding,” which has
been approved by the SEC. Under this procedure, the Company is
delivering only one copy of the Annual Report and Proxy Statement
to multiple stockholders who share the same mailing address and
have the same last name, unless the Company has received contrary
instructions from an affected stockholder. This procedure reduces
the Company’s printing costs, mailing costs and fees. Stockholders
who participate in householding will continue to receive separate
proxy cards.
The
Company will deliver promptly upon written or oral request a
separate copy of the Annual Report and the Proxy Statement to any
stockholder at a shared address to which a single copy of either of
those documents was delivered. To receive a separate copy of the
Annual Report or Proxy Statement, you may write to Mr. John G.
Sharkey, Secretary, TSR, Inc., 400 Oser Avenue, Suite 150,
Hauppauge, NY 11788, or call (631) 231-0333.
Other Business
Solicitation and Expenses of Solicitation
The
Board does not know of any other matters to be brought before the
Annual Meeting, except those set forth in the notice thereof. If
other business is properly presented for consideration at the
Annual Meeting, it is intended that the proxies will be voted by
the persons named therein in accordance with their judgment on such
matters.
The
cost of preparing this Proxy Statement and all other costs in
connection with this solicitation of proxies for the Annual Meeting
are being borne by the Company. In addition to solicitation by
mail, the Company’s directors, officers, and regular employees,
without additional remuneration, may solicit proxies by telephone,
e-mail, facsimile and personal interviews. Brokers, custodians, and
fiduciaries will be requested to forward proxy soliciting material
to the beneficial owners of Common Stock held in their names, and
the Company will reimburse them for their out-of-pocket expenses
incurred in connection with the distribution of proxy
materials.
Forward-Looking
Statements
Certain
statements in this Proxy Statement which are not historical facts
may constitute “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995, as amended.
Words such as “anticipate,” “believe,” “demonstrate,” “estimate,”
“expect,” “forecast,” “intend,” “likely,” “may,” “plan,” “should,”
and “will,” and similar expressions identify forward-looking
statements. Such forward-looking statements are based upon the
Company’s current plans, estimates and expectations and are not a
representation that such plans, estimates, or expectations will be
achieved. Specifically, forward-looking statements in this document
may include, but are not limited to, the statements concerning any
potential or pending investigation, litigation or transaction and
its potential impact on the Company or its profitability. These and
other forward-looking statements involve known and unknown risks,
uncertainties and other factors that are difficult to predict and
which may cause the actual events to differ materially from the
expectations, intentions, beliefs, plans or predictions of the
future expressed or implied by such forward-looking statements.
These risks, uncertainties and other factors include, among others,
the factors and matters described in the Company’s filings with the
SEC, including, but not limited to, the Company’s most recent Form
10-K, Forms 10-Q and Forms 8-K, which are available at www.sec.gov.
The forward-looking statements included in this Proxy Statement are
made only as of the date of this Proxy Statement and we do not
undertake any obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances, except as
required by law. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
hereof.
Your
cooperation in giving these matters your immediate attention and in
returning your proxies will be appreciated.
|
By
Order of the Board of Directors, |
|
|
|
John G. Sharkey, Secretary |
|
October 26, 2020 |
Appendix
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
OF
TSR,
INC.
[_______]
[__], 2020
TSR,
Inc. (the “Corporation”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, as amended (the “DGCL”), DOES HEREBY CERTIFY as
follows:
FIRST:
That the Certificate of Incorporation of the Corporation, as
amended, is hereby amended as follows:
|
A. |
The
second paragraph under Article Fifth thereof shall read in its
entirety as follows: |
“Terms
of Directors. The number of Directors of the Corporation shall be
fixed by resolution duly adopted from time to time by the Board of
Directors. The Directors shall hold office until their successors
are duly elected and qualified or until their earlier resignation
or removal. Prior to the 2023 annual meeting of stockholders, the
Board of Directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. At the 2021
annual meeting of stockholders, the term of office of the Class I
directors shall expire and successors to the Class I directors
shall be elected for a term expiring at the next annual meeting of
stockholders and at each succeeding annual meeting of stockholders.
At the 2022 annual meeting of stockholders, the term of office of
the Class III directors shall expire and successors to the Class
III directors shall be elected for a term expiring at the next
annual meeting of stockholders and at each succeeding annual
meeting of stockholders. At the 2023 annual meeting of
stockholders, the term of office of the Class II directors shall
expire and successors to the Class II directors shall be elected
for a term expiring at the next annual meeting of stockholders and
at each succeeding annual meeting of stockholders. From and
after the election of directors at the 2023 annual meeting of
stockholders, the Board of Directors shall cease to be classified
and each director elected at the 2023 annual meeting of
stockholders (and at each succeeding annual meeting of
stockholders) shall hold office for a term expiring at the next
annual meeting of stockholders held after such director’s election.
For purposes of this Article Fifth, “2021 annual meeting of
stockholders” shall mean the annual meeting of shareholders held
following the fiscal year ended May 31, 2021; “2022 annual meeting
of stockholders” shall mean the annual meeting of shareholders held
following the fiscal year ended May 31, 2022; and “2023 annual
meeting of stockholders” shall mean the annual meeting of
shareholders held following the fiscal year ended May 31,
2023.”
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B. |
The
third paragraph under Article Fifth thereof shall read in its
entirety as follows: |
“Vacancies.
Any and all vacancies in the Board of Directors, however occurring,
including, without limitation, by reason of an increase in size of
the Board of Directors, or the death, resignation, disqualification
or removal of a Director, shall be filled solely by the affirmative
vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director
appointed in accordance with the preceding sentence shall hold
office until such Director’s successor shall have been duly elected
and qualified or until his or her earlier resignation or removal.
No decrease in the number of Directors shall shorten the term of
any incumbent Director.”
SECOND:
That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Section 242 of the DGCL.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be duly executed on its behalf as of the date first
indicated above.
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TSR, INC. |
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By: |
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Name: |
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Title: |
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Appendix
B
AMENDMENT
NO. 4
TO
AMENDED AND RESTATED BY-LAWS
OF
TSR, INC.
The
Amended and Restated By-laws (as amended by Amendment No. 1,
Amendment No. 2 and Amendment No. 3 to the Amended and Restated
By-laws) (the “By-laws”) of TSR, Inc. are hereby amended as
follows:
1. The
text of Article III, Section 2 of the By-laws, which had been
previously stated as follows:
“Section
2. Vacancies. Any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death,
resignation, disqualification or removal of a Director, shall be
filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even if less than a quorum of
the Board of Directors. Any Director appointed in accordance with
the preceding sentence shall hold office for the remainder of the
full term of the class of Directors in which the new directorship
was created or the vacancy occurred and until such Director’s
successor shall have been duly elected and qualified or until his
or her earlier resignation or removal. When the number of Directors
is increased or decreased, the Board of Directors shall determine
the class or classes to which the increased or decreased number of
Directors shall be apportioned so as to maintain each class as
nearly equal in number as possible; provided, however, that no
decrease in the number of Directors shall shorten the term of any
incumbent Director.”
was
amended to read as follows:
“Section
2. Vacancies. Any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death,
resignation, disqualification or removal of a Director, shall be
filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even if less than a quorum of
the Board of Directors. Any Director appointed in accordance with
the preceding sentence shall hold office until such Director’s
successor shall have been duly elected and qualified or until his
or her earlier resignation or removal. No decrease in the number of
Directors shall shorten the term of any incumbent
Director.”
Approved:
[_______] [__], 2020
Appendix C
TSR, INC.
2020 EQUITY INCENTIVE PLAN
1. Purpose;
Eligibility.
1.1 General Purpose. The name of this plan is the
TSR, Inc. 2020 Equity Incentive Plan (the “Plan”). The
purposes of the Plan are to (a) enable TSR, Inc., a Delaware
corporation (the “Company”), and any Affiliate to attract
and retain the types of Employees, Consultants and Directors who
will contribute to the Company’s long range success; (b) provide
incentives that align the interests of Employees, Consultants and
Directors with those of the stockholders of the Company; and (c)
promote the success of the Company’s business.
1.2 Eligible Award Recipients. The persons eligible
to receive Awards are the Employees, Consultants and Directors of
the Company and its Affiliates and such other individuals
designated by the Committee who are reasonably expected to become
Employees, Consultants and Directors after the receipt of
Awards.
1.3 Available Awards. Awards that may be granted
under the Plan include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards, (e) Performance Share Awards, (f) Cash Awards,
and (g) Other Equity-Based Awards.
2. Definitions.
“Affiliate” means a corporation or other entity that,
directly or through one or more intermediaries, controls, is
controlled by or is under common control with, the Company.
“Applicable Laws” means the requirements related to or
implicated by the administration of the Plan under applicable state
corporate law, United States federal and state securities laws, the
Code, any stock exchange or quotation system on which the shares of
Common Stock are listed or quoted, and the applicable laws of any
foreign country or jurisdiction where Awards are granted under the
Plan.
“Award” means any right granted under the Plan, including an
Incentive Stock Option, a Non-qualified Stock Option, a Stock
Appreciation Right, a Restricted Award, a Performance Share Award,
a Cash Award, or an Other Equity-Based Award.
“Award Agreement” means a written agreement, contract,
certificate or other instrument or document evidencing the terms
and conditions of an individual Award granted under the Plan which
may, in the discretion of the Company, be transmitted
electronically to any Participant. Each Award Agreement shall be
subject to the terms and conditions of the Plan.
“Beneficial Owner” has the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in
calculating the beneficial ownership of any particular Person, such
Person shall be deemed to have beneficial ownership of all
securities that such Person has the right to acquire by conversion
or exercise of other securities, whether such right is currently
exercisable or is exercisable only after the passage of time. The
terms “Beneficially Owns” and “Beneficially Owned” have a
corresponding meaning.
“Board” means the Board of Directors of the Company, as
constituted at any time.
“Cash Award” means an Award denominated in cash that is
granted under Section 10 of the Plan.
“Cause” means:
with respect to any Employee or Consultant, unless the applicable
Award Agreement states otherwise:
(a) if the Employee or Consultant is a party to an employment or
service agreement with the Company or its Affiliates and such
agreement provides for a definition of Cause, the definition
contained therein; or
(b) if no such agreement exists, or if such agreement does not
define Cause: (i) the commission of, or plea of guilty or no
contest to, a felony or a crime involving moral turpitude or the
commission of any other act involving willful malfeasance or
material fiduciary breach with respect to the Company or an
Affiliate; (ii) conduct that brings or is reasonably likely to
bring the Company or an Affiliate negative publicity or into public
disgrace, embarrassment, or disrepute; (iii) gross negligence or
willful misconduct with respect to the Company or an Affiliate;
(iv) material violation of state or federal securities laws; or (v)
material violation of the Company’s written policies or codes of
conduct, including written policies related to discrimination,
harassment, performance of illegal or unethical activities, and
ethical misconduct.
The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to whether a
Participant has been discharged for Cause.
“Change in Control,” unless the applicable Award Agreement
states otherwise or unless otherwise defined for purposes of an
Award in a written employment, services or other agreement between
the Participant and the Company or an Affiliate, means:
(a) One Person (or more than one Person acting as a group) acquires
ownership of stock of the Company that, together with the stock
held by such person or group, constitutes more than 50% of the
total fair market value or total voting power of the stock of the
Company; provided, that, a Change in Control shall not occur if any
Person (or more than one Person acting as a group) owns more than
50% of the total fair market value or total voting power of the
Company’s stock and acquires additional stock;
(b) One person (or more than one person acting as a group),
acquires (or has acquired during the twelve-month period ending on
the date of the most recent acquisition) assets from the Company
that have a total gross fair market value equal to or more than 50%
of the total gross fair market value of all of the assets of the
Company immediately before such acquisition(s); or
(c) any other event determined to be a Change in Control by the
Board.
“Code” means the Internal Revenue Code of 1986, as it may be
amended from time to time. Any reference to a section of the Code
shall be deemed to include a reference to any regulations
promulgated thereunder.
“Committee” means a committee of one or more members of the
Board appointed by the Board to administer the Plan in accordance
with Section 3.3 and Section 3.4.
“Common Stock” means the common stock, $0.01 par value per
share, of the Company, or such other securities of the Company as
may be designated by the Committee from time to time in
substitution thereof.
“Company” means TSR, Inc. a Delaware corporation, and any
successor thereto.
“Consultant” means any individual or entity which performs
bona fide services to the Company or an Affiliate, other than as an
Employee or Director, and who may be offered securities
registerable pursuant to a registration statement on Form S-8 under
the Securities Act.
“Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee,
Consultant or Director, is not interrupted or terminated. The
Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the
Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for
which the Participant renders such service, provided that
there is no interruption or termination of the Participant’s
Continuous Service; provided further that if any Award is
subject to Section 409A of the Code, this sentence shall only be
given effect to the extent consistent with Section 409A of the
Code. For example, a change in status from an Employee of the
Company to a Director of an Affiliate will not constitute an
interruption of Continuous Service. The Committee or its delegate,
in its sole discretion, may determine whether Continuous Service
shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any
other personal or family leave of absence. The Committee or its
delegate, in its sole discretion, may determine whether a Company
transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in a
termination of Continuous Service for purposes of affected Awards,
and such decision shall be final, conclusive and binding.
“Deferred Stock Units” or “DSUs” has the meaning set
forth in Section 8.1(b) hereof.
“Director” means a member of the Board.
“Disability” means, unless the applicable Award Agreement
states otherwise or unless otherwise defined for purposes of an
Award in a written employment, services or other agreement between
the Participant and the Company or an Affiliate, that the
Participant is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental
impairment; provided, however, for purposes of determining
the term of an Incentive Stock Option pursuant to Section 6.10
hereof, the term Disability shall have the meaning ascribed to it
under Section 22(e)(3) of the Code. The determination of whether an
individual has a Disability shall be determined under procedures
established by the Committee unless such procedures for
determination of whether an individual has a Disability are
otherwise set forth in a written employment, services or other
agreement between the Participant and the Company or an Affiliate.
Except in situations where the Committee is determining Disability
for purposes of the term of an Incentive Stock Option pursuant to
Section 6.10 hereof within the meaning of Section 22(e)(3) of the
Code, the Committee may rely on any determination that a
Participant is disabled for purposes of benefits under any
long-term disability plan maintained by the Company or any
Affiliate in which a Participant participates.
“Disqualifying Disposition” has the meaning set forth in
Section 17.12.
“Effective Date” shall mean the date approved by the
shareholders of the Company.
“Employee” means any person, including an Officer or
Director, employed by the Company or an Affiliate; provided,
that, for purposes of determining eligibility to receive
Incentive Stock Options, an Employee shall mean an employee of the
Company or a parent or subsidiary corporation within the meaning of
Section 424 of the Code. Mere service as a Director or payment of a
director’s fee by the Company or an Affiliate shall not be
sufficient to constitute “employment” by the Company or an
Affiliate.
“Exchange Act” means the Securities Exchange Act of 1934, as
amended.
“Fair Market Value” means, as of any date, the value of the
Common Stock as determined below. If the Common Stock is listed on
any established stock exchange or a national market system,
including without limitation, the New York Stock Exchange or the
Nasdaq Stock Market, the Fair Market Value shall be the closing
price of a share of Common Stock (or if no sales were reported the
closing price on the date immediately preceding such date) as
quoted on such exchange or system on the day of determination, as
reported in the Wall Street Journal. In the absence of an
established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Committee and such
determination shall be conclusive and binding on all persons.
“Fiscal Year” means the Company’s fiscal year.
“Free Standing Rights” has the meaning set forth in Section
7.
“Grant Date” means the date on which the Committee adopts a
resolution, or takes other appropriate action, expressly granting
an Award to a Participant that specifies the key terms and
conditions of the Award or, if a later date is set forth in such
resolution, then such date as is set forth in such resolution.
“Incentive Stock Option” means an Option that is designated
by the Committee as an incentive stock option within the meaning of
Section 422 of the Code and that meets the requirements set out in
the Plan.
“Non-Employee Director” means a Director who is a
“non-employee director” within the meaning of Rule 16b-3.
“Non-qualified Stock Option” means an Option that by its
terms does not qualify or is not intended to qualify as an
Incentive Stock Option.
“Officer” means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
“Option” means an Incentive Stock Option or a Non-qualified
Stock Option granted pursuant to the Plan.
“Optionholder” means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds
an outstanding Option.
“Option Exercise Price” means the price at which a share of
Common Stock may be purchased upon the exercise of an Option.
“Other Equity-Based Award” means an Award that is not an
Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, or Performance Share Award that is granted under
Section 10 and is payable by delivery of Common Stock and/or which
is measured by reference to the value of Common Stock.
“Participant” means an eligible person to whom an Award is
granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Award.
“Performance Goals” means, for a Performance Period, the one
or more goals established by the Committee for the Performance
Period based upon business criteria or other performance measures
determined by the Committee in its discretion.
“Performance Period” means the one or more periods of time,
as the Committee may select, over which the attainment of one or
more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a
Performance Share Award or a Cash Award.
“Performance Share Award” means any Award granted pursuant
to Section 9 hereof.
“Performance Share” means the grant of a right to receive a
number of actual shares of Common Stock or share units based upon
the performance of the Company during a Performance Period, as
determined by the Committee.
“Permitted Transferee” means: (a) a member of the
Optionholder’s immediate family (child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships), any person sharing the Optionholder’s
household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, a foundation
in which these persons (or the Optionholder) control the management
of assets, and any other entity in which these persons (or the
Optionholder) own more than 50% of the voting interests; (b) third
parties designated by the Committee in connection with a program
established and approved by the Committee pursuant to which
Participants may receive a cash payment or other consideration in
consideration for the transfer of a Non-qualified Stock Option; and
(c) such other transferees as may be permitted by the Committee in
its sole discretion.
“Person” means a person as defined in Section 13(d)(3) of
the Exchange Act.
“Plan” means this TSR, Inc. 2020 Equity Incentive Plan, as
amended and/or amended and restated from time to time.
“Related Rights” has the meaning set forth in Section 7.
“Restricted Award” means any Award granted pursuant to
Section 8.
“Restricted Period” has the meaning set forth in Section
8.
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to
time.
“Securities Act” means the Securities Act of 1933, as
amended.
“Stock Appreciation Right” means the right pursuant to an
Award granted under Section 7 to receive, upon exercise, an amount
payable in cash or shares equal to the number of shares subject to
the Stock Appreciation Right that is being exercised multiplied by
the excess of (a) the Fair Market Value of a share of Common Stock
on the date the Award is exercised, over (b) the exercise price
specified in the Stock Appreciation Right Award Agreement.
“Stock for Stock Exchange” has the meaning set forth in
Section 6.4.
“Substitute Award” has the meaning set forth in Section
4.8.
“Ten Percent Shareholder” means a person who owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates.
“Total Share Reserve” has the meaning set forth in Section
4.1.
3. Administration.
3.1 Authority of Committee. The Plan shall be
administered by the Committee or, in the Board’s sole discretion,
by the Board. Subject to the terms of the Plan, the Committee’s
charter and Applicable Laws, and in addition to other express
powers and authorization conferred by the Plan, the Committee shall
have the authority:
(a) to construe and interpret the Plan and apply its
provisions;
(b) to promulgate, amend, and rescind rules and regulations
relating to the administration of the Plan;
(c) to authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(d) to delegate its authority to one or more Officers of the
Company with respect to Awards that do not involve “insiders”
within the meaning of Section 16 of the Exchange Act;
(e) to determine when Awards are to be granted under the Plan and
the applicable Grant Date;
(f) from time to time to select, subject to the limitations set
forth in this Plan, those eligible Award recipients to whom Awards
shall be granted;
(g) to determine the number of shares of Common Stock to be made
subject to each Award;
(h) to determine whether each Option is to be an Incentive Stock
Option or a Non-qualified Stock Option;
(i) to prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant;
(j) to determine the target number of Performance Shares to be
granted pursuant to a Performance Share Award, the performance
measures that will be used to establish the Performance Goals, the
Performance Period(s) and the number of Performance Shares earned
by a Participant;
(k) to amend any outstanding Awards, including for the purpose of
modifying the time or manner of vesting, or the term of any
outstanding Award; provided, however, that if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates or
increases a Participant’s federal income tax liability with respect
to an Award, such amendment shall also be subject to the
Participant’s consent;
(l) to determine the duration and purpose of leaves of absences
which may be granted to a Participant without constituting
termination of their employment for purposes of the Plan, which
periods shall be no shorter than the periods generally applicable
to Employees under the Company’s employment policies;
(m) to make decisions with respect to outstanding Awards that may
become necessary upon a change in corporate control or an event
that triggers anti-dilution adjustments;
(n) to interpret, administer, reconcile any inconsistency in,
correct any defect in and/or supply any omission in the Plan and
any instrument or agreement relating to, or Award granted under,
the Plan; and
(o) to exercise discretion to make any and all other determinations
which it determines to be necessary or advisable for the
administration of the Plan.
The Committee also may modify the purchase price or the exercise
price of any outstanding Award, provided that if the
modification effects a repricing, stockholder approval shall be
required before the repricing is effective.
3.2 Committee Decisions Final. All decisions made by
the Committee pursuant to the provisions of the Plan shall be final
and binding on the Company and the Participants, unless such
decisions are determined by a court having jurisdiction to be
arbitrary and capricious.
3.3 Delegation. The Committee or, if no Committee has
been appointed, the Board may delegate administration of the Plan
to a committee or committees of one or more members of the Board,
and the term “Committee” shall apply to any person or
persons to whom such authority has been delegated. The Committee
shall have the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board or the Committee shall
thereafter be to the committee or subcommittee), subject, however,
to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. The Board
may abolish the Committee at any time and revest in the Board the
administration of the Plan. The members of the Committee shall be
appointed by and serve at the pleasure of the Board. From time to
time, the Board may increase or decrease the size of the Committee,
add additional members to, remove members (with or without cause)
from, appoint new members in substitution therefor, and fill
vacancies, however caused, in the Committee. The Committee shall
act pursuant to a vote of the majority of its members or, in the
case of a Committee comprised of only two members, the unanimous
consent of its members, whether present or not, or by the written
consent of the majority of its members and minutes shall be kept of
all of its meetings and copies thereof shall be provided to the
Board. Subject to the limitations prescribed by the Plan and the
Board, the Committee may establish and follow such rules and
regulations for the conduct of its business as it may determine to
be advisable.
3.4 Committee Composition. Except as otherwise
determined by the Board, the Committee shall consist solely of two
or more Non-Employee Directors. The Board shall have discretion to
determine whether or not it intends to comply with the exemption
requirements of Rule 16b-3. However, if the Board intends to
satisfy such exemption requirements, with respect to any insider
subject to Section 16 of the Exchange Act, the Committee shall be a
compensation committee of the Board that at all times consists
solely of two or more Non-Employee Directors. Within the scope of
such authority, the Board or the Committee may delegate to a
committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
Nothing herein shall create an inference that an Award is not
validly granted under the Plan in the event Awards are granted
under the Plan by a compensation committee of the Board that does
not at all times consist solely of two or more Non-Employee
Directors.
3.5 Indemnification. In addition to such other rights
of indemnification as they may have as Directors or members of the
Committee, and to the extent allowed by Applicable Laws, the
Committee shall be indemnified by the Company against the
reasonable expenses, including attorney’s fees, actually incurred
in connection with any action, suit or proceeding or in connection
with any appeal therein, to which the Committee may be party by
reason of any action taken or failure to act under or in connection
with the Plan or any Award granted under the Plan, and against all
amounts paid by the Committee in settlement thereof (provided,
however, that the settlement has been approved by the Company,
which approval shall not be unreasonably withheld) or paid by the
Committee in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee did
not act in good faith and in a manner which such person reasonably
believed to be in the best interests of the Company, or in the case
of a criminal proceeding, had no reason to believe that the conduct
complained of was unlawful; provided, however, that within
60 days after the institution of any such action, suit or
proceeding, such Committee shall, in writing, offer the Company the
opportunity at its own expense to handle and defend such action,
suit or proceeding.
4. Shares Subject to the
Plan.
4.1 Subject to adjustment in accordance with Section 14, no more
than 200,000 shares of Common Stock shall be available for the
grant of Awards under the Plan (the “Total Share Reserve”).
Any shares of Common Stock granted under the Plan in connection
with Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock Units, Restricted Stock Unites, Performance Share Awards or
Other Equity Compensation shall be counted against this limit as
one (1) share for every one (1) Option or Stock Appreciation Right
awarded. During the terms of the Awards, the Company shall keep
available at all times the number of shares of Common Stock
required to satisfy such Awards.
4.2 Shares of Common Stock available for distribution under the
Plan may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares reacquired by the Company in any
manner.
4.3 Subject to adjustment in accordance with Section 14, no more
than 200,000 shares of Common Stock may be issued in the aggregate
pursuant to the exercise of Incentive Stock Options (the “ISO
Limit”).
4.4 The maximum number of shares of Common Stock subject to Awards
granted during a single Fiscal Year to any Director shall not
exceed 50,000 shares of Common Stock.
4.5 No Participant shall be granted, in the aggregate during any
calendar year, Awards covering more than a total of 50,000 shares
of Common Stock.
4.6 No Participant shall be granted, in the aggregate during the
life of the Plan, Awards covering more than a total of 100,000
shares of Common Stock.
4.7 Any shares of Common Stock subject to an Award that expires or
is canceled, forfeited, or terminated without issuance of the full
number of shares of Common Stock to which the Award related will
again be available for issuance under the Plan. Any shares of
Common Stock that again become available for future grants pursuant
to this Section 4.7 shall be added back as one (1) share if such
shares were subject to Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Deferred Stock Units,
Performance Share Awards or Other Equity Based Awards and as two
(2) shares if such shares were subject to other Awards.
Notwithstanding anything to the contrary contained herein: shares
subject to an Award under the Plan shall not again be made
available for issuance or delivery under the Plan if such shares
are (a) shares tendered in payment of an Option, (b) shares
delivered or withheld by the Company to satisfy any tax withholding
obligation, or (c) shares covered by a stock-settled Stock
Appreciation Right or other Awards that were not issued upon the
settlement of the Award.
4.8 Awards may, in the sole discretion of the Committee, be granted
under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by an entity acquired by the
Company or with which the Company combines (“Substitute
Awards”). Substitute Awards shall not be counted against the
Total Share Reserve; provided, that, Substitute Awards
issued in connection with the assumption of, or in substitution
for, outstanding options intended to qualify as Incentive Stock
Options shall be counted against the ISO Limit. Subject to
applicable stock exchange requirements, available shares under a
stockholder-approved plan of an entity directly or indirectly
acquired by the Company or with which the Company combines (as
appropriately adjusted to reflect such acquisition or transaction)
may be used for Awards under the Plan and shall not count toward
the Total Share Limit.
5. Eligibility.
5.1 Eligibility for Specific Awards. Incentive Stock
Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants,
Directors and those individuals whom the Committee determines are
reasonably expected to become Employees, Consultants and Directors
following the Grant Date.
5.2 Ten Percent Shareholders. A Ten Percent
Shareholder shall not be granted an Incentive Stock Option unless
the Option Exercise Price is at least 110% of the Fair Market Value
of the Common Stock on the Grant Date and the Option is not
exercisable after the expiration of five years from the Grant
Date.
6. Option
Provisions. Each Option granted under the Plan
shall be evidenced by an Award Agreement. Each Option so granted
shall be subject to the conditions set forth in this Section 6, and
to such other conditions not inconsistent with the Plan as may be
reflected in the applicable Award Agreement. All Options shall be
separately designated Incentive Stock Options or Non-qualified
Stock Options at the time of grant, and, if certificates are
issued, a separate certificate or certificates will be issued for
shares of Common Stock purchased on exercise of each type of
Option. Notwithstanding the foregoing, the Company shall have no
liability to any Participant or any other person if an Option
designated as an Incentive Stock Option fails to qualify as such at
any time or if an Option is determined to constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the
Code and the terms of such Option do not satisfy the requirements
of Section 409A of the Code. The provisions of separate Options
need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
6.1 Term. Subject to the provisions of Section 5.2
regarding Ten Percent Shareholders, no Incentive Stock Option shall
be exercisable after the expiration of 10 years from the Grant
Date. The term of a Non-qualified Stock Option granted under the
Plan shall be determined by the Committee; provided,
however, no Non-qualified Stock Option shall be exercisable
after the expiration of 10 years from the Grant Date.
6.2 Exercise Price of an Incentive Stock Option.
Subject to the provisions of Section 5.2 regarding Ten Percent
Shareholders, the Option Exercise Price of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of the
Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
6.3 Exercise Price of a Non-qualified Stock Option.
The Option Exercise Price of each Non-qualified Stock Option shall
be not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the
foregoing, a Non-qualified Stock Option may be granted with an
Option Exercise Price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the
provisions of Section 409A of the Code.
6.4 Consideration. The Option Exercise Price of
Common Stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable statutes and regulations, either (a)
in cash or by certified or bank check at the time the Option is
exercised or (b) in the discretion of the Committee, upon such
terms as the Committee shall approve, the Option Exercise Price may
be paid: (i) by delivery to the Company of other Common Stock, duly
endorsed for transfer to the Company, with a Fair Market Value on
the date of delivery equal to the Option Exercise Price (or portion
thereof) due for the number of shares being acquired, or by means
of attestation whereby the Participant identifies for delivery
specific shares of Common Stock that have an aggregate Fair Market
Value on the date of attestation equal to the Option Exercise Price
(or portion thereof) and receives a number of shares of Common
Stock equal to the difference between the number of shares thereby
purchased and the number of identified attestation shares of Common
Stock (a “Stock for Stock Exchange”); (ii) a “cashless”
exercise program established with a broker; (iii) by reduction in
the number of shares of Common Stock otherwise deliverable upon
exercise of such Option with a Fair Market Value equal to the
aggregate Option Exercise Price at the time of exercise; (iv) by
any combination of the foregoing methods; or (v) in any other form
of legal consideration that may be acceptable to the Committee.
Unless otherwise specifically provided in the Option, the exercise
price of Common Stock acquired pursuant to an Option that is paid
by delivery (or attestation) to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid
only by shares of the Common Stock of the Company that have been
held for more than six months (or such longer or shorter period of
time required to avoid a charge to earnings for financial
accounting purposes). Notwithstanding the foregoing, during any
period for which the Common Stock is publicly traded (i.e., the
Common Stock is listed on any established stock exchange or a
national market system) an exercise by a Director or Officer that
involves or may involve a direct or indirect extension of credit or
arrangement of an extension of credit by the Company, directly or
indirectly, in violation of Section 402(a) of the Sarbanes-Oxley
Act of 2002 shall be prohibited with respect to any Award under
this Plan.
6.5 Transferability of an Incentive Stock Option. An
Incentive Stock Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.6 Transferability of a Non-qualified Stock Option.
A Non-qualified Stock Option may, in the sole discretion of the
Committee, be transferable to a Permitted Transferee, upon written
approval by the Committee to the extent provided in the Award
Agreement. If the Non-qualified Stock Option does not provide for
transferability, then the Non-qualified Stock Option shall not be
transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to
the Company, in a form satisfactory to the Company, designate a
third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.
6.7
Vesting of Options. Each Option may, but need not,
vest and therefore become exercisable in periodic installments that
may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as
the Committee may deem appropriate. The vesting provisions of
individual Options may vary. No Option may be exercised for a
fraction of a share of Common Stock.
6.8 Termination of Continuous Service. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder’s Continuous Service terminates (other
than upon the Optionholder’s death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination)
but only within such period of time ending on the earlier of (a)
the date three months following the termination of the
Optionholder’s Continuous Service or (b) the expiration of the term
of the Option as set forth in the Award Agreement; provided
that, if the termination of Continuous Service is by the
Company for Cause, all outstanding Options (whether or not vested)
shall immediately terminate and cease to be exercisable. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified in the Award Agreement, the Option shall
terminate.
6.9 Extension of Termination Date. An Optionholder’s
Award Agreement may also provide that if the exercise of the Option
following the termination of the Optionholder’s Continuous Service
for any reason would be prohibited at any time because the issuance
of shares of Common Stock would violate the registration
requirements under the Securities Act or any other state or federal
securities law or the rules of any securities exchange or
interdealer quotation system, then the Option shall terminate on
the earlier of (a) the expiration of the term of the Option in
accordance with Section 6.1 or (b) the expiration of a period after
termination of the Participant’s Continuous Service that is three
months after the end of the period during which the exercise of the
Option would be in violation of such registration or other
securities law requirements.
6.10 Disability of Optionholder. Unless otherwise
provided in an Award Agreement, in the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s
Disability, the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option
as of the date of termination), but only within such period of time
ending on the earlier of (a) the date 12 months following such
termination or (b) the expiration of the term of the Option as set
forth in the Award Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time
specified herein or in the Award Agreement, the Option shall
terminate.
6.11 Death of Optionholder. Unless otherwise provided
in an Award Agreement, in the event an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s death, then
the Option may be exercised (to the extent the Optionholder was
entitled to exercise such Option as of the date of death) by the
Optionholder’s estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person
designated to exercise the Option upon the Optionholder’s death,
but only within the period ending on the earlier of (a) the date 12
months following the date of death or (b) the expiration of the
term of such Option as set forth in the Award Agreement. If, after
the Optionholder’s death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall
terminate.
6.12 Incentive Stock Option $100,000 Limitation. To
the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any
Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds $100,000, the Options or
portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Non-qualified Stock
Options.
7.
Stock Appreciation Rights. Each Stock Appreciation
Right granted under the Plan shall be evidenced by an Award
Agreement. Each Stock Appreciation Right so granted shall be
subject to the conditions set forth in this Section 7, and to such
other conditions not inconsistent with the Plan as may be reflected
in the applicable Award Agreement. Stock Appreciation Rights may be
granted alone (“Free Standing Rights”) or in tandem with an
Option granted under the Plan (“Related Rights”).
7.1 Grant Requirements for Related Rights. Any
Related Right that relates to a Non-qualified Stock Option may be
granted at the same time the Option is granted or at any time
thereafter but before the exercise or expiration of the Option. Any
Related Right that relates to an Incentive Stock Option must be
granted at the same time the Incentive Stock Option is granted.
7.2
Term. The term of a Stock Appreciation Right granted
under the Plan shall be determined by the Committee; provided,
however, no Stock Appreciation Right shall be exercisable later
than the tenth anniversary of the Grant Date.
7.3
Vesting. Each Stock Appreciation Right may, but need
not, vest and therefore become exercisable in periodic installments
that may, but need not, be equal. The Stock Appreciation Right may
be subject to such other terms and conditions on the time or times
when it may be exercised as the Committee may deem appropriate. The
vesting provisions of individual Stock Appreciation Rights may
vary. No Stock Appreciation Right may be exercised for a fraction
of a share of Common Stock.
7.4
Exercise and Payment. Upon exercise of a Stock
Appreciation Right, the holder shall be entitled to receive from
the Company an amount equal to the number of shares of Common Stock
subject to the Stock Appreciation Right that is being exercised
multiplied by the excess of (i) the Fair Market Value of a share of
Common Stock on the date the Award is exercised, over (ii) the
exercise price specified in the Stock Appreciation Right or related
Option. Payment with respect to the exercise of a Stock
Appreciation Right shall be made on the date of exercise. Payment
shall be made in the form of shares of Common Stock (with or
without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Committee in its sole
discretion), cash or a combination thereof, as determined by the
Committee.
7.5
Exercise Price. The exercise price of a Free Standing
Right shall be determined by the Committee, but shall not be less
than 100% of the Fair Market Value of one share of Common Stock on
the Grant Date of such Stock Appreciation Right. A Related Right
granted simultaneously with or subsequent to the grant of an Option
and in conjunction therewith or in the alternative thereto shall
have the same exercise price as the related Option, shall be
transferable only upon the same terms and conditions as the related
Option, and shall be exercisable only to the same extent as the
related Option; provided, however, that a Stock Appreciation
Right, by its terms, shall be exercisable only when the Fair Market
Value per share of Common Stock subject to the Stock Appreciation
Right and related Option exceeds the exercise price per share
thereof and no Stock Appreciation Rights may be granted in tandem
with an Option unless the Committee determines that the
requirements of Section 7.1 are satisfied.
7.6
Reduction in the Underlying Option Shares. Upon any
exercise of a Related Right, the number of shares of Common Stock
for which any related Option shall be exercisable shall be reduced
by the number of shares for which the Stock Appreciation Right has
been exercised. The number of shares of Common Stock for which a
Related Right shall be exercisable shall be reduced upon any
exercise of any related Option by the number of shares of Common
Stock for which such Option has been exercised.
8.
Restricted Awards.
A Restricted Award is an Award of actual shares of Common Stock
(“Restricted Stock”) or hypothetical Common Stock units
(“Restricted Stock Units”) having a value equal to the Fair
Market Value of an identical number of shares of Common Stock,
which may, but need not, provide that such Restricted Award may not
be sold, assigned, transferred or otherwise disposed of, pledged or
hypothecated as collateral for a loan or as security for the
performance of any obligation or for any other purpose for such
period (the “Restricted Period”) as the Committee shall
determine. Each Restricted Award granted under the Plan shall be
evidenced by an Award Agreement. Each Restricted Award so granted
shall be subject to the conditions set forth in this Section 8, and
to such other conditions not inconsistent with the Plan as may be
reflected in the applicable Award Agreement.
8.1
Restricted Stock and Restricted Stock Units.
(a) Each Participant granted Restricted Stock shall execute and
deliver to the Company an Award Agreement with respect to the
Restricted Stock setting forth the restrictions and other terms and
conditions applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held by the Company
or in escrow rather than delivered to the Participant pending the
release of the applicable restrictions, the Committee may require
the Participant to additionally execute and deliver to the Company
(A) an escrow agreement satisfactory to the Committee, if
applicable and (B) the appropriate blank stock power with respect
to the Restricted Stock covered by such agreement. If a Participant
fails to execute an agreement evidencing an Award of Restricted
Stock and, if applicable, an escrow agreement and stock power, the
Award shall be null and void. Subject to the restrictions set forth
in the Award, the Participant generally shall have the rights and
privileges of a stockholder as to such Restricted Stock, including
the right to vote such Restricted Stock and the right to receive
dividends; provided that, any cash dividends and stock
dividends with respect to the Restricted Stock shall be withheld by
the Company for the Participant’s account, and interest may be
credited on the amount of the cash dividends withheld at a rate and
subject to such terms as determined by the Committee. The cash
dividends or stock dividends so withheld by the Committee and
attributable to any particular share of Restricted Stock (and
earnings thereon, if applicable) shall be distributed to the
Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such dividends.
(b) The terms and conditions of a grant of Restricted Stock Units
shall be reflected in an Award Agreement. No shares of Common Stock
shall be issued at the time a Restricted Stock Unit is granted, and
the Company will not be required to set aside funds for the payment
of any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement (“Deferred Stock Units”). At the
discretion of the Committee, each Restricted Stock Unit or Deferred
Stock Unit (representing one share of Common Stock) may be credited
with an amount equal to the cash and stock dividends paid by the
Company in respect of one share of Common Stock (“Dividend
Equivalents”). Dividend Equivalents shall be paid currently
(and in no case later than the end of the calendar year in which
the dividend is paid to the holders of the Common Stock or, if
later, the 15th day of the third month following the date the
dividend is paid to holders of the Common Stock).
8.2
Restrictions.
(a) Restricted Stock awarded to a Participant shall be subject to
the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth
in the applicable Award Agreement: (A) if an escrow arrangement is
used, the Participant shall not be entitled to delivery of the
stock certificate; (B) the shares shall be subject to the
restrictions on transferability set forth in the Award Agreement;
(C) the shares shall be subject to forfeiture to the extent
provided in the applicable Award Agreement; and (D) to the extent
such shares are forfeited, the stock certificates shall be returned
to the Company, and all rights of the Participant to such shares
and as a stockholder with respect to such shares shall terminate
without further obligation on the part of the Company.
(b) Restricted Stock Units and Deferred Stock Units awarded to any
Participant shall be subject to (A) forfeiture until the expiration
of the Restricted Period, and satisfaction of any applicable
Performance Goals during such period, to the extent provided in the
applicable Award Agreement, and to the extent such Restricted Stock
Units or Deferred Stock Units are forfeited, all rights of the
Participant to such Restricted Stock Units or Deferred Stock Units
shall terminate without further obligation on the part of the
Company and (B) such other terms and conditions as may be set forth
in the applicable Award Agreement.
(c) The Committee shall have the authority to remove any or all of
the restrictions on the Restricted Stock, Restricted Stock Units
and Deferred Stock Units whenever it may determine that, by reason
of changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
8.3
Restricted Period. With respect to Restricted Awards,
the Restricted Period shall commence on the Grant Date and end at
the time or times set forth on a schedule established by the
Committee in the applicable Award Agreement. No Restricted Award
may be granted or settled for a fraction of a share of Common
Stock. The Committee may, but shall not be required to, provide for
an acceleration of vesting in the terms of any Award Agreement upon
the occurrence of a specified event.
8.4
Delivery of Restricted Stock and Settlement of Restricted Stock
Units. Upon the expiration of the Restricted Period with
respect to any shares of Restricted Stock, the restrictions set
forth in Section 8.2 and the applicable Award Agreement shall be of
no further force or effect with respect to such shares, except as
set forth in the applicable Award Agreement. If an escrow
arrangement is used, upon such expiration, the Company shall
deliver to the Participant, or his or her beneficiary, without
charge, the stock certificate evidencing the shares of Restricted
Stock which have not then been forfeited and with respect to which
the Restricted Period has expired (to the nearest full share) and
any cash dividends or stock dividends credited to the Participant’s
account with respect to such Restricted Stock and the interest
thereon, if any. Upon the expiration of the Restricted Period with
respect to any outstanding Restricted Stock Units, or at the
expiration of the deferral period with respect to any outstanding
Deferred Stock Units, the Company shall deliver to the Participant,
or his or her beneficiary, without charge, one share of Common
Stock for each such outstanding vested Restricted Stock Unit or
Deferred Stock Unit (“Vested Unit”) and cash equal to any
Dividend Equivalents credited with respect to each such Vested Unit
in accordance with Section 8.1(b) hereof and the interest thereon
or, at the discretion of the Committee, in shares of Common Stock
having a Fair Market Value equal to such Dividend Equivalents and
the interest thereon, if any; provided, however, that, if
explicitly provided in the applicable Award Agreement, the
Committee may, in its sole discretion, elect to pay cash or part
cash and part Common Stock in lieu of delivering only shares of
Common Stock for Vested Units. If a cash payment is made in lieu of
delivering shares of Common Stock, the amount of such payment shall
be equal to the Fair Market Value of the Common Stock as of the
date on which the Restricted Period lapsed in the case of
Restricted Stock Units, or the delivery date in the case of
Deferred Stock Units, with respect to each Vested Unit.
8.5
Stock Restrictions. Each certificate representing
Restricted Stock awarded under the Plan shall bear a legend in such
form as the Company deems appropriate.
9.
Performance Share Awards.
Each Performance Share Award granted under the Plan shall be
evidenced by an Award Agreement. Each Performance Share Award so
granted shall be subject to the conditions set forth in this
Section 9, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award Agreement. The
Committee shall have the discretion to determine: (i) the number of
shares of Common Stock or stock-denominated units subject to a
Performance Share Award granted to any Participant; (ii) the
Performance Period applicable to any Award; (iii) the conditions
that must be satisfied for a Participant to earn an Award; and (iv)
the other terms, conditions and restrictions of the Award.
9.1
Earning Performance Share Awards. The number of
Performance Shares earned by a Participant will depend on the
extent to which the performance goals established by the Committee
are attained within the applicable Performance Period, as
determined by the Committee.
10. Other Equity-Based
Awards and Cash Awards. The Committee may grant
Other Equity-Based Awards, either alone or in tandem with other
Awards, in such amounts and subject to such conditions as the
Committee shall determine in its sole discretion. Each Equity-Based
Award shall be evidenced by an Award Agreement and shall be subject
to such conditions, not inconsistent with the Plan, as may be
reflected in the applicable Award Agreement. The Committee may
grant Cash Awards in such amounts and subject to such Performance
Goals, other vesting conditions, and such other terms as the
Committee determines in its discretion. Cash Awards shall be
evidenced in such form as the Committee may determine.
11.
Securities Law Compliance. Each Award Agreement shall
provide that no shares of Common Stock shall be purchased or sold
thereunder unless and until (a) any then applicable requirements of
state or federal laws and regulatory agencies have been fully
complied with to the satisfaction of the Company and its counsel
and (b) if required to do so by the Company, the Participant has
executed and delivered to the Company a letter of investment intent
in such form and containing such provisions as the Committee may
require. The Company shall use reasonable efforts to seek to obtain
from each regulatory commission or agency having jurisdiction over
the Plan such authority as may be required to grant Awards and to
issue and sell shares of Common Stock upon exercise of the Awards;
provided, however, that this undertaking shall not require
the Company to register under the Securities Act the Plan, any
Award or any Common Stock issued or issuable pursuant to any such
Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall
be relieved from any liability for failure to issue and sell Common
Stock upon exercise of such Awards unless and until such authority
is obtained.
12. Use of Proceeds from Stock. Proceeds from the
sale of Common Stock pursuant to Awards, or upon exercise thereof,
shall constitute general funds of the Company.
13. Miscellaneous.
13.1
Acceleration of Exercisability and Vesting. The
Committee shall have the power to accelerate the time at which an
Award may first be exercised or the time during which an Award or
any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
13.2 Stockholder Rights. Except as provided in the
Plan or an Award Agreement, no Participant shall be deemed to be
the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section 14 hereof.
13.3 No Employment or Other Service Rights. Nothing
in the Plan or any instrument executed or Award granted pursuant
thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the
time the Award was granted or shall affect the right of the Company
or an Affiliate to terminate (a) the employment of an Employee with
or without notice and with or without Cause or (b) the service of a
Director pursuant to the By-laws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may
be.
13.4 Transfer; Approved Leave of Absence. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee’s right to
reemployment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the
Code if the applicable Award is subject thereto.
13.5 Withholding Obligations. To the extent provided
by the terms of an Award Agreement and subject to the discretion of
the Committee, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or
acquisition of Common Stock under an Award by any of the following
means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a
combination of such means: (a) tendering a cash payment; (b)
authorizing the Company to withhold shares of Common Stock from the
shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the
Award, provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required
to be withheld by law; or (c) delivering to the Company previously
owned and unencumbered shares of Common Stock of the Company.
14. Adjustments Upon
Changes in Stock. In the event of changes in the
outstanding Common Stock or in the capital structure of the Company
by reason of any stock or extraordinary cash dividend, rights
offer, stock split, reverse stock split, an extraordinary corporate
transaction such as any recapitalization, reorganization, merger,
consolidation, combination, exchange, or other relevant change in
capitalization occurring after the Grant Date of any Award, Awards
granted under the Plan and any Award Agreements, the exercise price
of Options and Stock Appreciation Rights, the Performance Goals to
which Performance Share Awards and Cash Awards are subject, the
maximum number of shares of Common Stock subject to all Awards
stated in Section 4 will be equitably adjusted or substituted, as
to the number, price or kind of a share of Common Stock or other
consideration subject to such Awards to the extent necessary to
preserve the economic intent of such Award. In the case of
adjustments made pursuant to this Section 14, unless the Committee
specifically determines that such adjustment is in the best
interests of the Company or its Affiliates, the Committee shall, in
the case of Incentive Stock Options, ensure that any adjustments
under this Section 14 will not constitute a modification, extension
or renewal of the Incentive Stock Options within the meaning of
Section 424(h)(3) of the Code and in the case of Non-qualified
Stock Options, ensure that any adjustments under this Section 14
will not constitute a modification of such Non-qualified Stock
Options within the meaning of Section 409A of the Code. Any
adjustments made under this Section 14 shall be made in a manner
which does not adversely affect the exemption provided pursuant to
Rule 16b-3 under the Exchange Act. The Company shall give each
Participant notice of an adjustment hereunder and, upon notice,
such adjustment shall be conclusive and binding for all
purposes.
15.
Effect of Change in Control. Unless otherwise
provided in an Award Agreement, notwithstanding any provision of
the Plan to the contrary:
(a) In the event of a Change in Control, all outstanding Awards
shall become immediately exercisable, if applicable, with respect
to 100% of the shares subject to such Award, and/or, if applicable,
the Restricted Period shall expire immediately with respect to 100%
of the outstanding shares of Restricted Stock or Restricted Stock
Units.
(b) With respect to Performance Share Awards and Cash Awards, in
the event of a Change in Control, all incomplete Performance
Periods in respect of such Awards in effect on the date the Change
in Control occurs shall end on the date of such change and the
Committee shall (i) determine the extent to which Performance Goals
with respect to each such Performance Period have been met based
upon such audited or unaudited financial information then available
as it deems relevant and (ii) cause to be paid to the applicable
Participant partial or full Awards with respect to Performance
Goals for each such Performance Period based upon the Committee’s
determination of the degree of attainment of Performance Goals or,
if not determinable, assuming that the applicable “target” levels
of performance have been attained, or on such other basis
determined by the Committee.
To the extent practicable, any actions taken by the Committee under
the immediately preceding clauses (a) and (b) shall occur in a
manner and at a time which allows affected Participants the ability
to participate in the Change in Control with respect to the shares
of Common Stock subject to their Awards.
In addition, in the event of a Change in Control, the Committee may
in its discretion and upon at least 10 days’ advance notice to the
affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock
received or to be received by other stockholders of the Company in
the event. In the case of any Option or Stock Appreciation Right
with an exercise price (or SAR Exercise Price in the case of a
Stock Appreciation Right) that equals or exceeds the price paid for
a share of Common Stock in connection with the Change in Control,
the Committee may cancel the Option or Stock Appreciation Right
without the payment of consideration therefor.
The obligations of the Company under the Plan shall be binding upon
any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or
upon any successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
16. Amendment of the Plan
and Awards.
16.1 Amendment of Plan. The Board at any time, and
from time to time, may amend or terminate the Plan. However, except
as provided in Section 14 relating to adjustments upon changes in
Common Stock and Section 16.3, no amendment shall be effective
unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy any Applicable Laws.
At the time of such amendment, the Board shall determine, upon
advice from counsel, whether such amendment will be contingent on
stockholder approval.
16.2 Stockholder Approval. The Board may, in its sole
discretion, submit any other amendment to the Plan for stockholder
approval.
16.3 Contemplated Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code and/or to bring the Plan and/or Awards granted under it
into compliance therewith.
16.4 No Impairment of Rights. Rights under any Award
granted before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (a) the Company requests the consent
of the Participant and (b) the Participant consents in writing.
16.5 Amendment of Awards. The Committee at any time,
and from time to time, may amend the terms of any one or more
Awards; provided, however, that the Committee may not affect
any amendment which would otherwise constitute an impairment of the
rights under any Award unless (a) the Company requests the consent
of the Participant and (b) the Participant consents in writing.
17. General
Provisions.
17.1 Forfeiture Events. The Committee may specify in
an Award Agreement that the Participant’s rights, payments and
benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of
certain events, in addition to applicable vesting conditions of an
Award. Such events may include, without limitation, breach of
non-competition, non-solicitation, confidentiality, or other
restrictive covenants that are contained in the Award Agreement or
otherwise applicable to the Participant, a termination of the
Participant’s Continuous Service for Cause, or other conduct by the
Participant that is detrimental to the business or reputation of
the Company and/or its Affiliates.
17.2 Clawback. Notwithstanding any other provisions
in this Plan, the Company may cancel any Award, require
reimbursement of any Award by a Participant, and effect any other
right of recoupment of equity or other compensation provided under
the Plan in accordance with any Company policies that may be
adopted and/or modified from time to time (“Clawback
Policy”). In addition, a Participant may be required to repay
to the Company previously paid compensation, whether provided
pursuant to the Plan or an Award Agreement, in accordance with the
Clawback Policy. By accepting an Award, the Participant is agreeing
to be bound by the Clawback Policy, as in effect or as may be
adopted and/or modified from time to time by the Company in its
discretion (including, without limitation, to comply with
applicable law or stock exchange listing requirements).
17.3 Other Compensation Arrangements. Nothing
contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific
cases.
17.4 Sub-Plans. The Committee may from time to time
establish sub-plans under the Plan for purposes of satisfying
securities, tax or other laws of various jurisdictions in which the
Company intends to grant Awards. Any sub-plans shall contain such
limitations and other terms and conditions as the Committee
determines are necessary or desirable. All sub-plans shall be
deemed a part of the Plan, but each sub-plan shall apply only to
the Participants in the jurisdiction for which the sub-plan was
designed.
17.5 Deferral of Awards. The Committee may establish
one or more programs under the Plan to permit selected Participants
the opportunity to elect to defer receipt of consideration upon
exercise of an Award, satisfaction of performance criteria, or
other event that absent the election would entitle the Participant
to payment or receipt of shares of Common Stock or other
consideration under an Award. The Committee may establish the
election procedures, the timing of such elections, the mechanisms
for payments of, and accrual of interest or other earnings, if any,
on amounts, shares or other consideration so deferred, and such
other terms, conditions, rules and procedures that the Committee
deems advisable for the administration of any such deferral
program.
17.6 Unfunded Plan. The Plan shall be unfunded.
Neither the Company, the Board nor the Committee shall be required
to establish any special or separate fund or to segregate any
assets to assure the performance of its obligations under the
Plan.
17.7 Recapitalizations. Each Award Agreement shall
contain provisions required to reflect the provisions of Section
14.
17.8 Delivery. Upon exercise of a right granted under
this Plan, the Company shall issue Common Stock or pay any amounts
due within a reasonable period of time thereafter. Subject to any
statutory or regulatory obligations the Company may otherwise have,
for purposes of this Plan, 30 days shall be considered a reasonable
period of time.
17.9 No Fractional Shares. No fractional shares of
Common Stock shall be issued or delivered pursuant to the Plan. The
Committee shall determine whether cash, additional Awards or other
securities or property shall be issued or paid in lieu of
fractional shares of Common Stock or whether any fractional shares
should be rounded, forfeited or otherwise eliminated.
17.10 Other Provisions. The Award Agreements
authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation,
restrictions upon the exercise of Awards, as the Committee may deem
advisable.
17.11 Section 409A. The Plan is intended to comply
with Section 409A of the Code to the extent subject thereto, and,
accordingly, to the maximum extent permitted, the Plan shall be
interpreted and administered to be in compliance therewith. Any
payments described in the Plan that are due within the “short-term
deferral period” as defined in Section 409A of the Code shall not
be treated as deferred compensation unless Applicable Laws require
otherwise. Notwithstanding anything to the contrary in the Plan, to
the extent required to avoid accelerated taxation and tax penalties
under Section 409A of the Code, amounts that would otherwise be
payable and benefits that would otherwise be provided pursuant to
the Plan during the six (6) month period immediately following the
Participant’s termination of Continuous Service shall instead be
paid on the first payroll date after the six-month anniversary of
the Participant’s separation from service (or the Participant’s
death, if earlier). Notwithstanding the foregoing, neither the
Company nor the Committee shall have any obligation to take any
action to prevent the assessment of any additional tax or penalty
on any Participant under Section 409A of the Code and neither the
Company nor the Committee will have any liability to any
Participant for such tax or penalty.
17.12 Disqualifying Dispositions. Any Participant who
shall make a “disposition” (as defined in Section 424 of the Code)
of all or any portion of shares of Common Stock acquired upon
exercise of an Incentive Stock Option within two years from the
Grant Date of such Incentive Stock Option or within one year after
the issuance of the shares of Common Stock acquired upon exercise
of such Incentive Stock Option (a “Disqualifying
Disposition”) shall be required to immediately advise the
Company in writing as to the occurrence of the sale and the price
realized upon the sale of such shares of Common Stock.
17.13 Section 16. It is the intent of the Company
that the Plan satisfy, and be interpreted in a manner that
satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this Section 17.13,
such provision to the extent possible shall be interpreted and/or
deemed amended so as to avoid such conflict.
17.14
Beneficiary Designation. Each Participant under the
Plan may from time to time name any beneficiary or beneficiaries by
whom any right under the Plan is to be exercised in case of such
Participant’s death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably
prescribed by the Committee and shall be effective only when filed
by the Participant in writing with the Company during the
Participant’s lifetime.
17.15 Other Benefits. No compensation or benefit
awarded to or realized by any Participant under the Plan shall be
included for the purpose of computing such Participant’s
compensation under any compensation-based retirement, disability,
or similar plan of the Company unless required by law or otherwise
provided by such other plan.
17.16 Expenses. The costs of administering the Plan
shall be paid by the Company.
17.17 Severability. If any of the provisions of the
Plan or any Award Agreement is held to be invalid, illegal or
unenforceable, whether in whole or in part, such provision shall be
deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability and the remaining
provisions shall not be affected thereby.
17.18 Plan Headings. The headings in the Plan are for
purposes of convenience only and are not intended to define or
limit the construction of the provisions hereof.
17.19 Non-Uniform Treatment. The Committee’s
determinations under the Plan need not be uniform and may be made
by it selectively among persons who are eligible to receive, or
actually receive, Awards. Without limiting the generality of the
foregoing, the Committee shall be entitled to make non-uniform and
selective determinations, amendments and adjustments, and to enter
into non-uniform and selective Award Agreements.
18. Effective Date of
Plan. The Plan shall become effective as of the
Effective Date.
19. Termination or
Suspension of the Plan. The Plan shall terminate
automatically on the ten year anniversary of the Effective Date. No
Award shall be granted pursuant to the Plan after such date, but
Awards theretofore granted may extend beyond that date. The Board
may suspend or terminate the Plan at any earlier date pursuant to
Section 16.1 hereof. No Awards may be granted under the Plan while
the Plan is suspended or after it is terminated.
20. Choice of
Law. The law of the State of Delaware shall
govern all questions concerning the construction, validity and
interpretation of this Plan, without regard to such state’s
conflict of law rules.
As adopted by the Board of Directors of TSR, Inc. on October 12,
2020.
As approved by the stockholders of TSR, Inc. on [____].

