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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
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TSR, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: ________
2) Aggregate number of securities to which transaction applies: ___________
3) 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): _____________
4) Proposed maximum aggregate value of transaction: _______________________
5) Total fee paid: ________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid: ________________________________________________
2) Form, Schedule or Registration No.: ____________________________________
3) Filing Party: __________________________________________________________
4) Date Filed: ___________________________________________________________
_
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TSR, Inc.
400 OSER AVENUE
HAUPPAUGE, NY 11788
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on December 5, 2007
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of TSR, Inc. (the
"Company"), a Delaware corporation, will be held at the Sheraton Long Island
Hotel, 110 Vanderbilt Motor Parkway, Smithtown, New York 11788, on December 5,
2007 at 9:00 a.m. local time, to consider and act upon the following matters.
1. To elect two (2) Class III Directors.
2. To ratify the appointment by the Board of Directors of J.H. Cohn, LLP
as the independent registered public accountants of the Company to
audit and report on its consolidated financial statements for the
fiscal year ending May 31, 2008.
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Stockholders of record at the close of business on October 31, 2007 will be
entitled to vote at the meeting or any adjournments thereof. A list of
stockholders entitled to vote at the Meeting will be open for examination by any
stockholder of the Company, for any purpose germane to the meeting, during
ordinary business hours at the offices of the Company for the ten-day period
prior to the Meeting.
By Order of the Board of Directors,
John G. Sharkey, Secretary
Hauppauge, New York
November 1, 2007
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE
SO THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE PROXY IS MAILED
WITHIN THE UNITED STATES.
TSR, Inc.
400 Oser Avenue
Hauppauge, NY 11788
ANNUAL MEETING OF STOCKHOLDERS
to be held on December 5, 2007
PROXY STATEMENT
---------------
The accompanying form of proxy is solicited on behalf of the Board of Directors
of the Company for use at the Annual Meeting of the Stockholders of the Company
to be held at the Sheraton Long Island Hotel, 110 Vanderbilt Motor Parkway,
Smithtown, New York 11788, on December 5, 2007 at 9:00 a.m. or at any
adjournment thereof. The solicitation of proxies will be made by mail and the
cost will be borne by the Company.
Proxies in the accompanying form which are properly executed and duly returned
to the Company and not revoked will be voted as specified and, if no direction
is made, will be voted for each of the proposals set forth in the accompanying
Notice of Meeting. Each proxy granted is revocable and may be revoked at any
time prior to its exercise by advising the Company in writing of its revocation.
In addition, a Stockholder who attends the Meeting in person may, if he wishes,
vote by ballot at the Meeting, thereby canceling any proxy previously given.
This Proxy Statement, the enclosed form of proxy and the Company's Annual Report
for the fiscal year ended May 31, 2007 were first mailed on or about November 1,
2007 to holders of record as of October 31, 2007.
A majority of the issued and outstanding shares of Common Stock entitled to vote
constitutes a quorum at the Meeting. Shares of Common Stock represented in
person or by proxy at the Meeting (including shares that abstain or do not vote
with respect to one or more of the matters presented at the Meeting) will be
tabulated by the inspectors of election appointed for the Meeting whose
tabulation will determine whether or not a quorum is present. 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 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. Accordingly, a "broker
non-vote" on a matter will have no effect on the voting.
Candidates for election as members of the Board of Directors who receive the
highest number of votes, up to the number of directors to be chosen, shall stand
elected, and an absolute majority of the votes cast is not a prerequisite to the
election of any candidate to the Board of Directors. Accordingly abstentions
have no effect on the outcome of the election.
1
The outstanding voting stock of the Company as of September 20, 2007 consisted
of 4,568,012 shares of Common Stock, par value one ($.01) cent per share (the
"Common Stock"), with each share entitled to one vote. Only Stockholders of
record at the close of business on October 31, 2007 are entitled to vote at the
Meeting.
As of September 20, 2007 the following persons were known to Management to be
beneficial owners of more than five percent of the Company's Common Stock:
Amount and Nature
Name and Address of Beneficial Ownership
of Beneficial Owner at September 20, 2007 (1) Percent of Class
------------------- ------------------------- ----------------
Joseph F. Hughes (2)
400 Oser Avenue
Hauppauge, New York 11788 1,839,267 (3) 40.3%
Daniel Zeff (4)
50 California Street, Suite 1500
San Francisco, CA 94111 456,023 10.0%
(1) Unless otherwise stated herein, each beneficial owner has sole voting power
and sole investment power.
(2) The beneficial owner is an officer and director of the Company.
(3) Mr. Hughes' ownership includes 270,928 shares of common stock held of
record by his wife, as to which Mr. Hughes disclaims beneficial ownership.
(4) Information furnished in reliance on the Schedule 13D filed September 17,
2007.
All executive officers and directors of the Company as a group (7 persons)
beneficially owned shares of the Company's common stock as of September 20, 2007
as follows:
Amount of Shares
Beneficially Owned Percent of Class
------------------ ----------------
1,854,187 40.6%
2
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Meeting, two (2) Class III Directors are to be elected for a three year
term expiring at the Company's 2010 Annual Meeting or until their successors
have been elected and qualified.
If the nominees listed below are unavailable for election at the date of the
Annual Meeting, the shares represented by the proxy will be voted for such
nominee or nominees as the person or persons designated to vote shall, in their
judgment, designate. Management at this time has no reason to believe that the
nominees will not be available or will not serve if elected.
Set forth in the following table is certain information with respect to the
nominees, as of September 20, 2007.
Names of Directors Nominee Nominee
and Nominees for Class for Term
for Election Age of Director Expiring
------------ --- ----------- --------
Robert A. Esernio 78 Class III 2010
John H. Hochuli, Jr 77 Class III 2010
Directors and Executive Officers of the Company.
-----------------------------------------------
The following table sets forth certain information concerning the executive
officers and directors of the Company, including equity securities beneficially
owned, as of September 20, 2007. The statements as to securities beneficially
owned are based upon information furnished by the officers and directors of the
Company:
Common Stock
Year First of the Company Percentage
Officer Owned Beneficially Of
Name Age Position or Director Directly or Indirectly Class
---- --- -------- ----------- ---------------------- -----
Joseph F. Hughes 76 Chairman of the Board, Chief 1969 1,839,267 (1) 40.3%
Executive Officer, President,
Treasurer and Director
John G. Sharkey 48 Vice President, Finance, Controller 1990 13,500 0.3%
and Secretary
James J. Hill (2,3,4,5) 74 Director 1989 -- --
John H. Hochuli, Jr. (2,3,4) 77 Director 1993 -- --
Robert A. Esernio (2,3,4,6) 78 Director 2001 -- --
Christopher Hughes 46 Sr. VP , Pres., TSR Consulting 2000 1,420 --
Services, Inc. and Director
Raymond A. Roel.(2,3,4) 52 Director 2005 -- --
(1) See footnotes to table of stock ownership of certain stockholders.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
(4) Member of the Nominating Committee of the Board of Directors.
(5) Mr. Hill is Chairman of the Compensation Committee.
(6) Mr. Esernio is Chairman of the Audit and Nominating Committees.
3
Directors and Executive Officers of the Company (Continued)
-----------------------------------------------------------
The Company maintains the following committees of the Board of Directors:
the Compensation Committee, the Nominating Committee and the Audit Committee.
The Board of Directors has determined that each member of each committee
meets the applicable laws and regulations, including those of The NASDAQ Stock
Market, regarding "independence". The Board of Directors also has determined
that Robert A. Esernio, an independent director who serves as the Chair of the
Board's Audit Committee, is an "audit committee financial expert" as such term
is defined in applicable regulations of the Securities and Exchange Commission.
During the fiscal year ended May 31, 2007, the Board of Directors held six
meetings, the Audit Committee held six meetings, the Compensation Committee held
three meetings and the Nominating Committee did not meet. During such 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 he was a member.
The Audit Committee
The Audit Committee's current members are Robert A. Esernio (Chairman),
James J. Hill, John H. Hochuli Jr. and Raymond A. Roel. 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 our independent auditors. The
Audit Committee operates under a written charter approved by the Board on
September 16, 2004, a copy of which was attached as an appendix to the Company's
proxy statement for its 2004 annual meeting.
The Compensation Committee
The Compensation Committee's current members are Robert A. Esernio, James
J. Hill (Chairman), John H. Hochuli, Jr. and Raymond A. Roel. The Compensation
Committee reviews the total compensation package for all executive officers,
including the Chief Executive Officer; considers modification of existing
compensation and benefit programs and employment agreements with officers and
the adoption of new plans and employment agreements with officers; and
administers the plans.
The Nominating Committee
The Nominating Committee's current members are Robert A. Esernio
(Chairman), James J. Hill, John H. Hochuli, Jr. and Raymond A. Roel. A copy of
the Nominating Committee Charter was attached to the Company's Proxy Statement
for its 2004 Annual Meeting. The Nominating Committee determines the criteria
for nominating new directors, recommends to the Board of Directors candidates
for nomination to the Board of Directors and oversees the evaluation of the
Board of Directors. The Nominating Committee's process to identify and evaluate
candidates for nomination to the Board of Directors includes consideration of
candidates for nomination to the Board of Directors recommended by stockholders.
Such stockholder recommendations must be delivered to our Corporate Secretary,
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 Nominating
Committee-recommended nominee as described below. To date, we have not received
any recommendations from stockholders requesting that the Nominating Committee
consider a candidate for inclusion among the Nominating Committee's slate of
nominees in our proxy statement.
4
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. The procedures described in this paragraph are meant to establish
additional requirements and are not meant to replace or limit stockholders'
general nomination rights in any way.
In evaluating director nominees, the Nominating Committee currently
considers the following factors:
o the Company's needs with respect to the particular talents and
experience of our directors;
o 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 of Directors;
o familiarity with the Company's business and businesses similar or
analogous to ours;
o experience with accounting rules and practices and corporate
governance principles; and
o such other factors as the Nominating Committee deems are in our best
interests and the best interests of our stockholders.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors 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 of Directors 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 of Directors
suggestions as to individuals who meet the criteria.
Executive Sessions of Independent Directors
Directors who are independent under the NASDAQ stock market listing
standards and applicable laws and regulations meet in executive session without
management present at least two times each fiscal year.
Code of Ethics
The Company has adopted a code of ethics that applies to all of the
employees, including the chief executive officer and chief financial and
accounting officers. The code of ethics is posted on the Home Page of its
website at http://www.tsrconsulting.com. The Company intends to post on its
website all disclosures that are required by law or NASDAQ stock market listing
standards concerning any amendments to, or waivers from, our code of ethics.
Stockholders may request a free copy of the code of ethics by writing to
Corporate Secretary, TSR, Inc., 400 Oser Avenue, Hauppauge, NY 11778. 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 within five 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 Stock
Market.
Stockholder Nominations.
Under the Company's By-laws 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 75
days nor more than 120 days prior to the anniversary date of the prior year's
annual meeting.
However, if the annual meeting is scheduled to be held on a date more than
30 days before the anniversary date or more than 60 days after the anniversary
date, a stockholder's notice must be given not later than the later of (i) the
75th day prior to the scheduled date of the annual meeting or (ii) the 15th day
following the day on which public announcement of the date of the annual meeting
is first made by the Company.
5
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 of
Directors, 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, Hauppauge, NY 11788.
Attendance at Annual Meeting
There is no Company policy requiring directors to attend annual meetings of
stockholders, but directors are encouraged to attend. All of the directors
attended the 2006 annual meeting.
Directors and Executive Officers
Mr. Joseph F. Hughes, from 1953 until forming the Company in 1969, was employed
by International Business Machines Corporation ("IBM") in various systems
engineering, marketing and administrative positions. Immediately prior to his
employment with the Company, Mr. Hughes was responsible for managing the market
and technical sales group serving colleges and universities with IBM in Long
Island and Westchester County.
Mr. John G. Sharkey has a Masters Degree in Finance. He 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.
Mr. John H. Hochuli, Jr. has been a Director of the Company since April 1993. In
1994 he retired from Diamond Manufacturing Corp., a maker of aluminum windows
and doors, which he founded in 1955 and served as President.
Mr. James J. Hill has been a Director of the Company since December 1989. In
1998, he retired from MRA Publications, Inc., a medical publishing business for
which he had been Executive Vice President of Sales and Marketing since 1979.
Mr. Hill received a Bachelor of Science Degree in Business Administration from
the University of Arizona in 1958 and a Bachelor of Foreign Trade Degree from
the American Institute of Foreign Trade in Arizona in 1959.
Mr. Robert A. Esernio has been a Director of the Company since April 2001. From
1969 through 1990 Mr. Esernio was a partner in the international accounting and
consulting firm of Grant Thornton LLP. Mr. Esernio is a certified public
accountant and was also a professor of Accounting at St John's and Long Island
Universities from 1958 through 1985 when he retired with Emeritus status. Mr.
Esernio received a Bachelor of Business Administration Degree; Magna cum Laude
from St. John's University in 1956 and a Master of Business Administration
Degree from New York University in 1963.
Mr. Christopher Hughes has been a Director of the Company from April 2000 until
September 2004 and again from January 2005 until the present. He has been
employed by the Company since 1985 and was a Vice President-Sales for the
Company's computer programming services subsidiary from 1991 through 2006. In
2007 he was appointed Senior Vice President of the Company and President of the
subsidiary. He is the son of Mr. Joseph F. Hughes, Chairman of the Board. Mr.
Christopher Hughes is a 1984 graduate of St. Bonaventure University.
Mr. Raymond A. Roel has been a Director of the Company since January 2005. Since
1996, Mr. Roel has been employed by McCann Worldgroup, a unit of Interpublic
Group of Companies, Inc. His most recent position is Associate Director of
Worldwide Communications. Mr. Roel is a 1977 graduate of Brown University.
The Company's executive officers are elected by, and serve at the discretion of,
the Board of Directors.
6
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Objectives and Strategy
The Company's executive officer compensation program is designed to
attract and retain the caliber of officers needed to ensure the Company's
continued growth and profitability and to reward them for their performance, the
Company's performance and for creating long term value for shareholders. The
primary objectives of the program are to:
o align rewards with performance that creates shareholder value;
o support the Company's strong team orientation;
o encourage high potential team players to build a career at the
Company; and
o provide rewards that are cost-efficient, competitive with other
organizations and fair to employees and shareholders.
The Company's executive compensation programs, as detailed in the
executives' employment agreements, are approved and administered by the
Compensation Committee of the Board of Directors. Working with management, the
Compensation Committee has developed a compensation and benefits strategy that
rewards performance and reinforces a culture that the Compensation Committee
believes will drive long-term success.
The compensation program rewards team accomplishments while promoting
individual accountability. Compensation depends in significant measure on
Company results, but individual accomplishments and responsibilities are also
very important factors in determining each executive's compensation. The program
seeks to provide compensation that is commensurate with performance.
Role of the Compensation Committee
General
The Compensation Committee provides overall guidance for our executive
compensation policies and determines the amounts and elements of compensation
for our executive officers.
The Compensation Committee currently consists of four members of our Board
of Directors, Robert A. Esernio, James J Hill (Chair), John H. Hochuli, Jr, and
Raymond A. Roel. Each member of the Compensation Committee is independent, as
independence is defined for purposes of Compensation Committee membership by the
listing standards of Nasdaq.
Joseph Hughes, Chairman of the Board and Chief Executive Officer, makes
recommendations to the Compensation Committee with respect to the establishment
of salaries and granting of bonuses to other executives of the Company.
Use of Outside Advisors
In making its determinations with respect to executive compensation, the
Compensation Committee has not historically engaged the services of a
compensation consultant. The Compensation Committee has the authority to retain,
terminate and set the terms of the Company's relationship with any outside
advisors who assist the Committee in carrying out its responsibilities.
7
Compensation Structure
Pay Elements -- Overview
The Company utilizes three main components of compensation:
o Base Salary -- fixed pay that takes into account an individual's role
and responsibilities, experience, expertise and individual
performance.
o Annual Incentive -- variable pay that is designed to reward attainment
of annual business and individual performance goals.
o Benefits and Perquisites -- these include club dues, automobile
allowances and medical insurance benefits.
Pay Elements -- Details
1. Base Salary
The Compensation Committee reviews officer salaries and makes adjustments
as warranted based on individual responsibilities and performance, Company
performance in light of market conditions and competitive practice.
2. Annual Incentive Compensation
Annual incentive compensation for the executive officers is paid under an
incentive arrangement as detailed in the officer's employment agreement. The
incentive arrangements are designed to grant bonus awards to such individuals as
an incentive to contribute to our profitability. The Compensation Committee
administers the incentive arrangements which, in some cases, include
establishment of targets in area of responsibility and payment of bonus based on
the extent to which the targets have been met or exceeded, or which, in some
cases, are based on meeting overall profits targets.
The Company also previously provided incentive compensation through the
grant of stock options, but its stock option plan has expired, and in view of
the recent market prices of the Company's common stock, the Compensation
Committee does not consider stock-based incentive plans to provide an effective
incentive.
3. Other Benefits and Perquisites
The Company's executive compensation program also includes other benefits
and perquisites. These benefits include those available to all full-time
employees, such as medical benefits, dental benefits, life insurance and
disability insurance. Perquisites also include, in some instances, automobile
allowances, club memberships and an executive medical plan. The Company annually
reviews these other benefits and perquisites and makes adjustments as warranted
based on competitive practices, the Company's performance and the individual's
responsibilities and performance.
Pay Mix
We utilize the elements of compensation described above because we believe
that it provides a well-proportioned mix of retention value and at-risk
compensation which produces short-term and long-term performance incentives and
rewards. By following this approach, we provide the executive a measure of
security in the minimum level of compensation that the individual is eligible to
receive, while motivating the executive to focus on the business metrics that
will produce a high level of performance for the Company.
Pay Levels
Pay levels for executives are determined based on a number of factors,
including the individual's roles and responsibilities within the Company, the
individual's experience and expertise, pay levels in the marketplace for similar
positions and performance of the individual and the Company as a whole. The
Compensation Committee is responsible for approving pay levels for the executive
officers. In determining the pay levels, the Compensation Committee considers
all forms of compensation and benefits.
8
As noted above, notwithstanding the Company's overall pay positioning
objectives, pay opportunities for specific individuals vary based on a number of
factors such as scope of duties, tenure, institutional knowledge and/or
difficulty in recruiting a new executive. Actual total compensation in a given
year will vary above or below the target compensation levels based primarily on
the attainment of operating goals and the creation of shareholder value.
Post-Termination Compensation and Benefits
Change in control or severance arrangements are negotiated in the
employment agreements of the executive officers. They range from none up to two
years of salary, bonus and benefits.
Employment agreements
We have entered into employment agreements with two of the Named Executives
and the employment agreement with Joseph F. Hughes recently terminated and the
Compensation Committee will consider whether to authorize a new employment
agreement with Mr. Hughes.
In June 2002, an employment agreement was entered into with Joseph F.
Hughes, which terminated May 31, 2007. This agreement provided for an initial
base salary of $437,000 with annual adjustments based upon increases in the
Consumer Price Index, such increases to be no less than 3% and no more than 8%
per year. Additionally, the agreement provided for an annual discretionary bonus
for each fiscal year, up to a maximum of $50,000 if pre-tax profits were less
than $1,000,000 and a minimum of 7.5% of pre-tax profits if such profits
exceeded $1,000,000. In fiscal 2007, Mr. Hughes received the minimum bonus of
7.5% of pre-tax profits or $189,000 as incentive compensation. The Compensation
Committee authorized Mr. Hughes to continue to be compensated on the basis of
this employment agreement, pending its consideration of a new employment
agreement or arrangement.
In June 2005, an employment agreement was entered into with John G.
Sharkey, which terminates May 31, 2010. This agreement provides for an initial
annual base salary of $150,000, subject to increase in the discretion of the
President of the Company and an annual discretionary bonus, which bonus was
$50,000 for the fiscal year ended May 31, 2007. The agreement also contains a
change in control agreement pursuant to which Mr. Sharkey may receive a payment
equal to two times his prior year's total compensation.
In March 2007, an employment agreement was entered into with Christopher
Hughes, which terminates February 28, 2012. This agreement provides for an
annual base salary of $ 200,000 and an annual discretionary bonus as approved by
the Compensation Committee of the Board of Directors. The agreement also
contains a change in control agreement pursuant to which Mr. Hughes may receive
a payment equal to two times his prior year's total compensation.
Compensation Committee Discretion
The Compensation Committee retains the discretion to decrease all forms of
incentive payouts based on significant individual or Company performance
shortfalls. Likewise, the Compensation Committee retains the discretion to
increase payouts and/or consider special awards for significant achievements or
special circumstances.
Conclusion
The Compensation Committee believes that each of the compensation packages
of the executive officers is within the competitive range of practices.
Adjustment or Recovery of Awards
Under Section 304 of Sarbanes-Oxley, if the Company is required to restate
its financial results due to material non-compliance with any financial
reporting requirements as a result of misconduct, the Chief Executive Officer
and Chief Financial Officer must reimburse the Company for (1) any bonus or
other incentive-based or equity-based compensation received during the 12 months
following the first public issuance of the non-complying document, and (2) any
profits realized from the sale of securities of the Company during those 12
months.
9
Impact of Tax and Accounting
As a general matter, the Compensation Committee always takes into the
account the various tax and accounting implications of compensation vehicles
employed by the Company.
When determining amounts of Stock Incentive Plan grants to executives and
employees, the Compensation Committee considered the accounting cost associated
with the grants. Under Statement of Financial Accounting Standard 123 (revised
2004), grants of stock options, restricted stock, restricted stock units and
other share-based payments result in an accounting charge for the Company. The
accounting charge is equal to the fair value of the instruments being issued.
For restricted stock and restricted stock units, the cost is equal to the fair
value of the stock on the date of grant times the number of shares or units
granted. This expense is amortized over the requisite service period, or vesting
period of the instruments. The Company's lone share based plan expired in April
2007. There were no grants or exercises from this plan in fiscal 2007.
Section 162(m) of the Internal Revenue Code generally prohibits any
publicly held corporation from taking a federal income tax deduction for
compensation paid in excess of $1 million in any taxable year to the chief
executive officer and the next four highest compensated officers. Exceptions are
made for qualified performance-based compensation, among other things. It is the
Compensation Committee's policy to maximize the effectiveness of our executive
compensation plans in this regard.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis with management and based on the review and discussions,
the Compensation Committee recommended to our Board of Directors that the
Compensation Discussion and Analysis be included in this proxy statement and
incorporated by reference into our annual report on Form 10-K.
Compensation Committee
Robert A. Esernio
James J. Hill (Chair)
John H. Hochuli Jr.
Raymond A. Roel
10
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Name and Principal Fiscal Stock Option Plan Compensation All Other
Position Year Salary Bonus Awards Awards Compensation Earnings Compensation Total
Joseph F. Hughes............ 2007 $498,000 $189,000 -- -- -- -- $54,000(1) $741,000
President and
Chief Executive Officer
John G. Sharkey............. 2007 156,000 50,000 -- -- -- -- 7,000(2) 213,000
Vice President, Finance
Christopher Hughes.......... 2007 $156,000 $119,000 -- -- -- -- $11,000(3) $286,000
Sr. Vice President
(1) Other Compensation for Mr. J. Hughes consists of $18,000 club dues, $26,000
in benefits from an executive medical plan and $10,000 from personal use of
a company owned vehicle.
(2) Other Compensation for Mr. Sharkey consists of $7,000 from personal use of
a company leased vehicle.
(3) Other Compensation for Mr. C. Hughes consists of $8,000 in benefits from an
executive medical plan and $3,000 from personal use of a company leased
vehicle.
GRANTS OF PLAN-BASED AWARDS: There were no grants of plan-based awards in fiscal
2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END: There were no outstanding equity
awards at the end of fiscal 2007.
OPTIONS EXERCISED AND VESTED: There were no options exercised or vested during
fiscal 2007.
PENSION BENEFITS: The Company does not maintain a defined benefit pension plan.
The Company maintains a 401(K) defined contribution plan: however, no amounts
have been contributed by the Company for the Named Executives.
NONQUALIFIED DEFERRED COMPENSATION: The Company does not maintain any
nonqualified deferred compensation plans.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL: Under employment
agreements entered into between the Company and one of the Named Executive
Officers, Christopher Hughes, if the Named Executive Officer's employment is
terminated by the Company for any reason other than for cause, the Employee
would be entitled to receive a severance payment equal two years base salary,
payable in equal semi-monthly installments and would continue to be provided all
employee benefits for 18 months at the Company's expense. The employment
agreements for two of the Named Executives, also contain change in control
agreements pursuant to which, in the case of Mr. Sharkey, if he terminates his
employment or his employment is terminated following a change of control and, in
the case of Christopher Hughes, if his employment is terminated without cause
following a change of control, the Named Executives would receive a payment
equal to two times his prior year's total compensation (base salary and bonus)
in a lump sum payment and would continue to be provided all benefits for 18
months after termination in the case of Mr. Hughes and 24 months in the case of
Mr. Sharkey. Christopher Hughes' salary and bonus for the fiscal year ended May
31, 2007 was $156,000 and $119,000, respectively, and the annual costs of his
benefits for such fiscal year was $11,000. Mr. Sharkey's salary and bonus for
the fiscal year ended May 31, 2007 was $156,000 and $50,000, respectively, and
the annual cost of his benefits for such fiscal year was $7,000.
11
DIRECTOR COMPENSATION
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Or Paid Stock Option Plan Compensation All Other
Name In Cash Awards Awards Compensation Earnings Compensation Total
Robert A. Esernio............ $10,000 -- -- -- -- -- $10,000
James J. Hill................ 10,000 -- -- -- -- -- 10,000
John H. Hochuli, Jr.......... 10,000 -- -- -- -- -- 10,000
Raymond A. Roel.............. $10,000 -- -- -- -- -- $10,000
For their service, members of the Board of Directors who are not salaried
employees of the Company received an annual retainer of $10,000, payable
quarterly during fiscal 2007.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was not a participant in, since the beginning of the Company's last
fiscal year, any transaction, and there are no currently proposed transactions,
in which the Company is to be a participant, and in which the amount involved
exceeds $120,000, and in which any related person had or will have a direct or
indirect material interest.
On an ongoing basis, the Audit Committee is required by its charter to review
all "related party transactions" (those transactions that are required to be
disclosed in this proxy statement by SEC Regulation S-K, Item 404 and under
Nasdaq's rules), if any, for potential conflicts of interest and all such
transactions must be approved by the Audit Committee
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited
consolidated financial statements of the Company for the 2007 Fiscal Year with
the Company's management. The Audit Committee has separately discussed with BDO
Seidman, LLP, the Company's independent registered public accounting firm for
the 2007 Fiscal Year, the matters required to be discussed by Statement of
Auditing Standards No. 61 ("Communication with Audit Committees"), as amended,
which includes, among other things, matters related to the conduct of the audit
of the Company's consolidated financial statements.
The Audit Committee has also received the written disclosures and the
letter from BDO Seidman, LLP required by Independence Standards Board Standard
No. 1 ("Independence Discussions with Audit Committees"), as amended, and the
Audit Committee has discussed with BDO Seidman, 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 of Directors that the Company's
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the 2007 Fiscal Year for filing with the Securities and
Exchange Commission.
Members of the Audit Committee
Robert A. Esernio, James J. Hill John H. Hochuli, Jr. Raymond A. Roel
Chairman
12
Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who 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 Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
Stockholders are required by regulation of the Commission 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, during the fiscal year
ended May 31, 2007, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were satisfied.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
-----------------------------------------------------------
J.H. Cohn, LLP, certified public accountants, have been appointed by the
Company's Board of Directors as independent registered public accountants for
the Company to audit and report on its consolidated financial statements for the
fiscal year ending May 31, 2008. BDO Seidman, LLP audited and reported on the
Company's consolidated financial statements for the year ended May 31, 2007 and
it is expected that a representative of BDO Seidman, LLP will be present at the
Meeting with an opportunity to make a statement if he or she desires to do so
and will be available to respond to questions. The appointment of the
independent accountants 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
Meeting, in person or by proxy. Submission of the appointment of the accountants
to the Stockholders for ratification will not limit the authority of the Board
of Directors to appoint another accounting firm to serve as independent
accountants if the present accountants resign or their engagement is otherwise
terminated. If the Stockholders do not ratify the appointment of J.H. Cohn, LLP
at the Meeting, the selection of J.H. Cohn, LLP may be reconsidered by the Board
of Directors. The Audit Committee is responsible for approving engagement of the
auditors to render audit or non-audit services prior to the engagement of the
auditors to render such services.
Change in Company's Certifying Accountant
-----------------------------------------
On September 19, 2007, the Registrant dismissed BDO Seidman, LLP as its
independent registered public accountants. The reports of BDO Seidman, LLP on
the Registrant's financial statements for the fiscal years ended May 31, 2006
and 2007 did not contain an adverse opinion, or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. The Registrant's audit committee of the Board of Directors approved
the decision to change accountants. During the Registrant's two most recent
fiscal years and subsequent interim periods, there were no disagreements with
BDO Seidman, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of BDO Seidman, LLP would have caused it to
make reference to such disagreement in its reports. During the years ended May
31, 2006 and 2007 and through September 19, 2007, there have occurred none of
the "reportable events" listed in Item 304(a)(1)(v) of Regulation S-K.
The Registrant engaged J.H. Cohn LLP to act as its independent registered
public accountants, effective September 20, 2007. During the two most recent
fiscal years and subsequent interim periods, the Registrant has not consulted
J.H. Cohn LLP on items which (i) involved the application of accounting
principles to a specified transaction, either completed or proposed, or involved
the type of audit opinion that might be rendered on the Registrant's financial
statements or (ii) or (ii) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions) or a reportable event (as described in Item 304(a)(1)(v) of
Regulation S-K).
13
AUDIT FEES
----------
The aggregate fees billed by BDO Seidman, LLP for professional services
related to the audit of the Company's consolidated financial statements for the
fiscal years ended May 31, 2007, 2006, and 2005 were $50,634, $51,817, and
$41,981, respectively. The fees associated with the reviews of the consolidated
condensed financial statements included in the Company's Quarterly reports on
Form 10-Q for the fiscal years ended May 31, 2007, 2006, and 2005 were $18,327,
$15,229, and $15,255, respectively.
AUDIT RELATED FEES
------------------
There were no fees billed by BDO Seidman, LLP for audit related services
for the fiscal years ended May 31, 2007, 2006 or 2005.
TAX SERVICES
------------
There were no fees billed by BDO Seidman, LLP for tax services during the
fiscal years ended May 31, 2007, 2006 or 2005.
ALL OTHER SERVICES
------------------
There were no fees billed by BDO Seidman, LLP related to any other
non-audit services for the fiscal years ended May 31, 2007, 2006 or 2005.
14
STOCKHOLDER'S PROPOSALS
-----------------------
Any proposal by a Stockholder of the Company intended to be presented at
the 2008 Annual Meeting of Stockholders must be received by the Company at its
principal executive office not later than June 27, 2008 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any such
proposal must also comply with the other requirements of the proxy solicitation
rules of the Securities and Exchange Commission.
FORM 10-K ANNUAL REPORT
-----------------------
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, 2007, 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 31,
2007, 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, Hauppauge, NY 11788.
OTHER BUSINESS SOLICITATION AND EXPENSES OF SOLICITATION
--------------------------------------------------------
The Board of Directors does not know of any other matters to be brought
before the Meeting, except those set forth in the notice thereof. If other
business is properly presented for consideration at the 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 of
Stockholders 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.
Your cooperation in giving this matter your immediate attention and in
returning your proxies will be appreciated.
By Order of the Directors,
John G. Sharkey, Secretary
November 1, 2007
15
PROXY CARD
Front
TSR, Inc.
400 OSER AVENUE
HAUPPAUGE, NEW YORK 11788
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 5, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOSEPH F. HUGHES and CHRISTOPHER HUGHES or
either of them, each with full power of substitution, proxies of the undersigned
to vote all shares of common stock of TSR, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on the 5th of December, 2007 at 9:00 a.m., at the Sheraton
Long Island Hotel, 110 Vanderbilt Motor Parkway, Smithtown, New York, and all
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat. Said proxies are
instructed to vote as follows:
1. FOR __ WITHHOLDING VOTE __ The election of Robert A. Esernio and John H.
Hochuli, Jr. for Class III Director.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME.
2. FOR __ AGAINST __ ABSTAIN __ The ratification of the appointment by the
Board of Directors of the Company of J.H. Cohn, LLP as the independent
registered public accountants of the Company to audit and report on its
financial statements for the year ending May 31, 2008.
3. In accordance with their best judgment with respect to any other business
that may properly come before the Meeting.
(Continued and to be signed on the reverse side.)
1
Proxy Card
Back
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED, IT WILL BE VOTED FOR THE ABOVE PROPOSALS.
Receipt is acknowledged of the Notice and Proxy Statements relating to this
meeting.
Dated: _____________________________________ , 2007
___________________________________________________
Signature
___________________________________________________
Signature
Please sign as name(s) appear(s) hereon. Proxies should be dated when signed.
When signing as attorney, executor, administrator, trustee or guardian, the full
title of such should be given. Only authorized officers should sign for a
corporation. If shares are registered in more than one name, each joint owner
should sign.
2