TSR INC AND SUBSIDIARIES
EXHIBIT 10.4
TO REPORT ON FORM 10-K
FISCAL YEAR ENDED MAY 31, 2002
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 1, 2002 between TSR, INC., having its principal
office at 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the "Company"), and XXXXXX
X. XXXXXX, residing at XXXXX, New York ("Xxxxxx").
WHEREAS, Xxxxxx has been employed as the Company's Chief Executive Officer
since inception of the Company and has been a key factor in its growth and
development; and
WHEREAS, the Company's Board of Directors desires to encourage and
emphasize during the intermediate term, the continued building of the
fundamental businesses and acquisitions of new businesses all for the purposes
of improving operating results.
WHEREAS, The Company's Board of Directors has determined that it would be
advantageous for the Company to implement its current philosophy through the
leadership of Xxxxxx; and
WHEREAS, the Board of Directors deems it in the best interest of the
Company in furtherance of the foregoing to insure to the extent possible, the
continued employment and availability of Xxxxxx and Xxxxxx is willing to
continue his employment with the Company pursuant to the terms and conditions
herein:
NOW, THEREFORE, the parties agree as follows:
1. The Company employs Xxxxxx as President and Chief Executive Officer of
the Company to perform such duties consistent with such position and such other
related duties as may be assigned to him from time to time by the Company's
Board of Directors. Xxxxxx shall be employed at the Company's executive offices,
primarily in the metropolitan New York area.
2. During the term of this Agreement, Xxxxxx shall devote his best efforts,
knowledge, skill and all of his working time and attention to the performance of
his duties hereunder. Except in the case of earlier termination as herein
specifically provided, the term of this Agreement (the "term") shall commence as
of June 1, 2002 and terminate on May 31, 2007.
3. (a) As compensation for all services to be rendered by Xxxxxx in all
capacities hereunder, including services as an officer and director of the
Company or any of its subsidiaries, the Company will pay or cause to be paid to
Xxxxxx during the Term (i) a base salary (the "Base Salary") of $437,000 as
adjusted pursuant to Section 4(b), payable in equal monthly or more frequent
installments, as the Company shall determine:
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(b) The Base Salary shall be adjusted at the beginning of each Fiscal Year
following the Fiscal Year ending May 31, 2003, by adding thereto an amount equal
to the Incremental Percentage (as defined and determined below) multiplied by
the Base Salary, as previously adjusted, as in effect for the Fiscal Year just
ended. If the Consumer Price Index ("CPI") shall increase by 8% or more above
the CPI from the beginning of the Fiscal Year just ended until the end of such
Fiscal Year, the "Incremental Percentage" shall be 8%. If the increase in such
CPI shall be less than 8%, then the Incremental Percentage shall be equal to
such percentage increase, but in no event shall the Incremental Percentage be
less than 3%. As used herein, the CPI for any Fiscal Year end shall be equal to
the "Consumer Price Index -- All Items" for the United States as issued by the
Bureau of Labor Statistics of the Department of Labor, or any index which
replaces the CPI, if no index is published for the beginning of such Fiscal
Year, the first date preceding such date for which such index is published.
(c) In addition to the compensation set forth in (a) and (b) Xxxxxx shall
be entitled to a discretionary bonus as such may be awarded to him by the Board
of Directors. The Board of Directors shall on account of each Fiscal Year
commencing with the Fiscal Year ending May 31, 2003 consider the granting of
such bonus prior to 90 days following the expiration of such Fiscal Year. In
considering the grant of the discretionary bonus, the Board of Directors shall
consider among other things the performance of the Company during the Fiscal
Year and the extent to which Company objectives were achieved. Notwithstanding
the foregoing, should the Company earn Pre-Tax Profits during any Term Year in
excess of $1,000,000 or more, then the minimum discretionary bonus which Xxxxxx
shall be entitled to receive is an amount equal to 7.5% of such Pre-Tax Profits.
In the event such Pre-Tax Profits is less than $1,000,000, the maximum amount of
discretionary bonus which Xxxxxx shall be entitled to receive shall be limited
to $50,000. For purposes of this provision, Pre-Tax Profits shall mean the
Company's profits as reported during the fiscal successive year ending May 31,
2002, as determined in accordance with generally accepted accounting principles.
There shall be adjustments made to Pre-Tax Profits for the amount of any
extraordinary items of income or loss attributable to such Fiscal Year.
4. Xxxxxx shall be entitled to reimbursement for expenses, provided that
such expenses are reasonable and are incurred in connection with the performance
of his duties hereunder. Such expense reimbursement shall be in accordance with
and subject to the expense reimbursement policies and procedures applicable to
senior executives, as in effect from time to time during the Term of this
Agreement. In addition, Xxxxxx shall be entitled to all benefits and perquisites
generally available during the Term to the Company's senior executive officers
as well as those benefits and perquisites, which he has been receiving prior to
the date of this Agreement. Such perquisites shall include membership in a
country club and use of a Company owned or leased automobile.
5. During each full Fiscal Year of Xxxxxx' employment hereunder, he shall
be entitled to four weeks of vacation time, which to the extent not taken, shall
be non-cumulative and non-compensatory.
6. In the event of Xxxxxx' death during the Term, this Agreement shall
terminate immediately, and Xxxxxx' legal representatives shall be entitled to
receive from the Company in one lump sum an amount equal to his then Fiscal Year
rate of compensation for an additional period equal to one year. In addition,
within 120 days following completion of the Fiscal Year, Xxxxxx' legal
representatives shall also be entitled to receive a prorata portion of the
discretionary bonus for which Xxxxxx would have been entitled to at the end of
the Fiscal Year had his death not occurred during such year.
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7. If, during the Term, Xxxxxx is unable to perform his duties hereunder on
account of illness, accident or other physical or mental incapacity, and such
illness or other incapacity shall continue for a period of more than six months,
the Company shall have the right, on fifteen days' written notice (given after
such period) to Xxxxxx, to terminate this Agreement. In such event, the Company
shall be obligated to pay to Xxxxxx his Basic Compensation at the annual rate
prevailing at the time of such termination for an additional period equal to the
difference between two years from the date which such disability commenced and
the period during which Xxxxxx was absent from work as a result of such
disability through the date of termination. However, if, prior to the date
specified in such notice, Xxxxxx' illness or incapacity shall have terminated
and he shall have taken up the performance of his duties hereunder, Xxxxxx shall
be entitled to resume his employment and receive the compensation payable
hereunder as though such notice had not been given.
8. During and after the Term, Xxxxxx will not disclose to anyone (except to
the extent reasonably necessary for Xxxxxx to perform his duties hereunder) any
"confidential information" as such term is hereinafter referred to concerning
the business or affairs of the Company or of any of its affiliates or
subsidiaries. "Confidential information" shall mean all information which Xxxxxx
may have acquired in the course of or as incident to his employment or prior
dealings with the company or with any of its affiliates, including, without
limitation, customer lists, business or trade secrets of, or methods of
techniques used by, the Company or any of its affiliates or subsidiaries in
their respective businesses, or any information concerning the customers of any
of them. For purposes of this section, confidential information shall not
include information which (i) was known to the public prior to the date of
communication thereof by Xxxxxx, (ii) becomes known to the public thereafter
other than through communications by Xxxxxx, or (iii) becomes known to Xxxxxx
subsequent to the date of his termination of employment with the Company.
9. Xxxxxx acknowledges that his services and responsibilities are of unique
and particular significance to the Company and that his position with the
Company will give him a close knowledge of the Company's and its affiliates'
policies and trade secrets. Xxxxxx further acknowledges that in the event the
Company loses the services of Xxxxxx, it could be subject to the loss of
valuable business relationships which have been cultivated for the Company by
Xxxxxx. Xxxxxx acknowledges that as a result of the loss of any of the
foregoing, the Company would sustain substantial and irreparable damages.
Therefore, in consideration of the foregoing, Xxxxxx agrees that, in the event
that there is a termination of this Agreement (including as a result of Xxxxxx'
breach), except where the termination is a result of a breach of this Agreement
by the Company, he will not, during the unexpired portion of the original
contemplated Term and for a period of two years after such period with respect
to the restriction in sub-paragraph (ii) below, directly or indirectly, on
behalf of himself or others:
(i) engage in any business, engaged in by the Company during a period of 12
months prior to the termination of Xxxxxx' employment with the Company which is
competitive with any significant business engaged in by the Company, in any
jurisdiction where the Company engaged or engages in such business. For purposes
of determining whether any aspects of the Company's business is significant such
business shall be deemed to be significant if during the 12 month period prior
to the termination of Xxxxxx' employment with the Company the Company either (i)
recognized revenues equal to 2% of its aggregate revenue from such business
recognized or (ii) Pre-Tax Profits equal to 5% of the Company's Pre-Tax Profits,
during such period.
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(ii) call on for the purpose of soliciting, diverting or taking away from
the Company or its affiliates, or employ, any person who is an employee of the
Company or any of its affiliates or any person who was an employee of the
Company or its affiliates during the period of Xxxxxx' employment with the
Company, except that this restriction shall not apply to any person who has not
been employed by the Company for a period of one year prior to the date of such
solicitation.
10. Except as otherwise provided in this Agreement, the Company shall have
the right to terminate this Agreement and Xxxxxx' employment hereunder only for
a Justifiable Cause and Xxxxxx shall have the right to terminate this Agreement
and his employment hereunder only for Justifiable Cause. "Justifiable Causes" as
it relates to a termination by the Company shall be limited to (i) a material
breach by Xxxxxx of any material provision of the Agreement, but only if after
reasonable notice and only after such notice Xxxxxx fails to cure such breach
within a reasonable time or (ii) if such breach is not subject to cure, Xxxxxx
shall fail on an on-going basis to comply thereafter with the provisions of this
Agreement with respect to which he was in such breach within a reasonable time
period. In the event the Company terminates this Agreement other than for
Justifiable Cause, or Xxxxxx terminates this Agreement for Justifiable Cause,
the damages to be awarded to Xxxxxx shall be the value of all compensation and
benefits including without limiting the generality of the foregoing, bonuses,
options, incentive payments, benefits under other plans and programs or
perquisites or fringes sponsored by the Company. Nothing contained herein shall
restrict the Company from asserting such rights as it may have to assert
defenses regarding the payment or in support of mitigation of damages.
11. Xxxxxx represents and warrants to the Company that he is not under any
obligation of a contractual or other nature to any person, firm or corporation
other than the Company which would be inconsistent or in conflict with this
Agreement, or which would prevent, limit or impair in any way the performance by
him of his obligations hereunder.
12. The waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof. Any notice referred to herein shall be sufficient if furnished
in writing, and delivered in person or mailed by certified mail (return receipt
requested) to the respective parties at his or its address set forth above or
such other address as either party may from time to time designate in writing.
13. Xxxxxx' rights and interest hereunder may not be assigned, pledged or
encumbered by him except with the written consent of the Company.
14. This Agreement supersedes any and all prior written or oral agreements
between the company and Xxxxxx, and may not be amended or modified except by
writing signed by the party to be charged.
15. This Agreement is executed and delivered in the State of New York and
shall be construed and enforced in accordance with the laws and decisions of
said State applicable to contract made and performed entirely within said State.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TSR, INC.
/s/ XXXXXX X. XXXXXX By: /s/ XXXXXX X. XXXXXXX
--------------------------- --------------------------
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxx
President Director
/s/ XXXXX X. XXXX
--------------------------
Xxxxx X. Xxxx
Director
/s/ XXXX X. XXXXXXX, XX
--------------------------
Xxxx X. Xxxxxxx, Xx.
Director
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