EXHIBIT 10.17
(TECHTEAM(R) LOGO)
TECHTEAM GLOBAL, INC. EXECUTIVE
ANNUAL INCENTIVE PLAN
Amended Effective January 1, 2006
PURPOSE
The Annual Incentive Plan (AIP) has been established to provide opportunities
for Eligible Employees to receive incentive compensation as a reward for high
levels of corporate performance as well as individual performance that exceeds
the ordinary standards compensated through base salary. The AIP is designed to
provide competitive rewards to recognize Eligible Employees who achieve or
exceed performance objectives.
ELIGIBLE EMPLOYEES
Participation in the AIP is limited to Eligible Employees. The Company's CEO
shall designate the Eligible Employee's participation level prior to the
commencement of the Measurement Period. The Compensation Committee shall approve
the CEO's designation of Eligible Employees and their Participation Level for
the Measurement Period prior to the commencement of the Measurement Period. The
Compensation Committee can deem an employee hired during the Measurement Period
an Eligible Employee for the length of time the person is employed with the
Company.
BONUS POOL
The AIP is funded by the Bonus Pool. The Bonus Pool is up to 25% of the Adjusted
Net Income of the Company for the Measurement Period. If the Bonus Pool required
should exceed more than 25% of Adjusted Net Income, a statistical percentage
will be calculated. Each level will be pro-rated accordingly.
DETERMINATION OF BONUS PAYMENT
The AIP bonus payable to an Eligible Employee will be calculated based on the
Company's achievement of its Target Operating Income, Target Revenue and the
Eligible Employee's achievement of his/her Individual Target Objectives.
Corporate Objectives
The Target Operating Income and Target Revenue will be established by the Board
of Directors prior to the Measurement Period.
Individual Objectives
The Eligible Employee and his/her manager shall establish individual objectives
appropriate for the Eligible Employee's job function in light of the Company's
business plan. A minimum of three (3) individual objectives should be
established. Objectives should be agreed upon by January 1 [or prior to the
Measurement Period].
An Eligible Employee's individual performance will be evaluated by the
individual's direct supervisor, subject to approval by the Chief Executive
Officer.
-1-
BONUS TARGETS
Each Eligible Employee has a Bonus Target Percentage based upon his/her
Participation Level. The table below sets forth the Target Bonus Percentage and
the weight each objective has in determining the size of the Eligible Employee's
bonus.
TABLE 1. BONUS TARGETS PERCENTAGE AND WEIGHTING OF OBJECTIVES
Bonus Target Revenue Individual
Percentage of Operating Income Objective Objectives
Participation Level Base Salary Objective Weight Weight Weight
- ------------------- ------------- ---------------- --------- ----------
Level 1 50% 60% 20% 20%
Level 2 45% 60% 20% 20%
Level 3 40% 60% 20% 20%
Level 4 30% 60% 20% 20%
Level 5 15% 60% 20% 20%
A Bonus Target Percentage may be increased or decreased based upon the Company's
or the Eligible Employee's performance. The following tables set forth the
factors for levels of performance for each objective upon which the Bonus Target
Percentage will be increased or decreased.
TABLE 2. TARGET OPERATING INCOME FACTOR
RATING FOR MEETING TARGET OPERATING INCOME BONUS LEVEL FOR TARGET OPERATING INCOME
- ------------------------------------------ ---------------------------------------
150% or more of Target achieved 200%
125% of Target achieved 150%
100% of target achieved 100%
75% of target achieved 50%
- - Performance that falls between the ranges specified will be interpolated
and calculated according to actual achievement.
TABLE 3. TARGET REVENUE FACTOR
RATING FOR TARGET REVENUE BONUS LEVEL FOR TARGET REVENUE
- ------------------------- ------------------------------
150% or more of Target Revenue achieved 200%
125% of Target Revenue achieved 150%
100% of Target Revenue achieved 100%
75% of Target Revenue achieved 50%
- - Performance that falls between the ranges specified will be interpolated
and calculated according to actual achievement.
- - IF THE COMPANY DOES NOT REACH AT LEAST 75% OF THE TARGET OPERATING INCOME,
NO BONUS WILL BE PAID FOR MEETING ANY LEVEL OF TARGET REVENUE.
TABLE 4. INDIVIDUAL OBJECTIVES FACTOR
RATING FOR MEETING INDIVIDUAL KEY
TARGET OBJECTIVES BONUS LEVEL FOR INDIVIDUAL TARGETS
- --------------------------------- ----------------------------------
Exceeds All Key Target Objectives 125%
Meets All Key Target Objectives 100%
Meets Majority of Key Target Objectives 75%
Unacceptable Performance on Objectives 0%
- - IF THE COMPANY DOES NOT REACH AT LEAST 75% OF THE TARGET OPERATING INCOME,
NO BONUS WILL BE PAID FOR MEETING ANY LEVEL OF INDIVIDUAL OBJECTIVES.
-2-
BONUS CALCULATION FORMULA
The actual bonus to be paid an Eligible Employee shall be determined based upon
the following formula: Bonus = (Base Salary * Bonus Target Percentage* Operating
Income Weighting * Target Operating Income Factor) + (Base Salary * Bonus Target
Percentage* Revenue Weighting * Target Revenue Factor) + (Base Salary * Target
Bonus * Individual Objectives Weighting * Individual Objectives Factor)
EXAMPLE FOR -LEVEL 4
Employee earns $100,000
Target bonus is 30% of base salary: $30,000
Weighting for Target Operating Income is $15,000 (60%)
Weighting for Target Corporate Revenue is $5,000 (20%)
Weighting for meeting Individual Objectives is $5,000 (20%)
If the Company meets 100% of the Target Operating Income and 125% of the Target
Revenue and the Eligible Employee meets all key Individual Objectives, the bonus
would be calculated as follows in this example:
($100,000 * 0.30 * 0.60 * 1.00) + ($100,000 * 0.30 * 0.20 * 1.5) + ($100,000 *
0.30 * 0.20 * 1.0) = $18,000 + $9,000 + $6,000 = $33,000
PAYMENT TERMS
Bonus payments will be made no later than March 15, subject to change due to IRS
regulations. Bonuses will be paid in cash subject to all required tax
withholdings as required by the IRS or other local regulations.
PROCESS FOR DETERMINATION OF BONUS
The Company's Chief Financial Officer ("CFO") shall be responsible for
determining whether the financial objectives have been met for the purpose of
the calculation of the bonus. The CFO shall report to the Compensation Committee
on the findings. The Vice President of Human Resources shall be responsible for
obtaining the ratings from the direct supervisor associated with the achievement
of the individual objectives.
The Chief Executive Officer, in conjunction with the Chief Financial Officer and
Vice President of Human Resources, shall prepare for the Compensation Committee
a recommendation for the bonuses for all Company officers. As soon as
practicable after the close of the Measurement Period, the Compensation
Committee shall meet to review and certify in writing, whether, and to what
extent, the objectives for the Measurement Period have been achieved. If
achieved, the Compensation Committee shall certify in writing the amount of the
bonus earned by the executive. Prior to the Compensation Committee's
certification, publication of bonus amounts is not permitted.
The Compensation Committee reserves the right to make bonus payments, outside of
the guidelines of this plan, if, during any Measurement Period, there exist
extraordinary circumstances beyond management control that have a negative
effect on the Company's operating income and revenue growth. The CEO can request
the Compensation Committee authorize bonus payments in such a circumstance by
providing the rationale for said bonuses and the amount of the bonuses to the
Compensation Committee. The Compensation Committee may approve, approve with
modification, or reject the proposal.
REVIEW OF LIABILITIES
The Chief Financial Officer and Vice President of Human Resources shall meet
quarterly to review the status of the plan and record any required liabilities
and reserves associated with the plan.
-3-
ADMINISTRATION AND MAINTENANCE OF THE PLAN
The Vice President of Human Resources shall be responsible for the
administration and maintenance of the plan.
TERMINATION OF EMPLOYMENT
No bonus will be paid to any individual who is not an employee of the Company on
the day of payment. In the event of death during the Measurement Period, the
bonus shall be paid to the individual's beneficiary and shall be pro-rated based
on the individual's active status and paid at the time of all other bonus
payments. In the event of total disability or retirement during the Measurement
Period, the bonus shall be based on the individual's pro-rated active status
during the Measurement Period.
ENTITLEMENT AND FUNDING
No individual has an earned or vested entitlement to any bonus. No bonus is
earned until approved by the Committee and paid. Nothing in this Plan will
require the Company to purchase assets or place assets in trust or other entity
to which contributions are made or otherwise segregate assets for the purpose of
satisfying obligations under the Plan. Individuals will have no rights under the
Plan other than as unsecured general creditors.
RIGHT OF EMPLOYMENT
Nothing in this Plan will be construed as creating any contract of employment,
conferring upon any individual any right to continue in the employ or service of
the Company, limit in any way the right of the Company to change the
individual's compensation or other benefits, or to terminate employment or other
service of such person with or without cause.
RIGHT TO AMEND OR TERMINATE
The Company reserves the right to amend or terminate the Plan at any time and in
any respect.
DEFINITIONS
"Adjusted Net Income" is the net income of the Company for the Measurement
Period as reported in the Company's Annual Report on Form 10-K, before the
recognition of the expense and the associated tax benefit of the Bonus Pool, and
excluding net interest income or expense and the associated tax liability or
benefit resulting from that net interest income or expense.
"Base Salary" is the salary of the Eligible Employee paid during the Measurement
Period. Should the base salary change mid-year, the bonus shall be pro-rated
accordingly.
"Bonus Pool" shall be defined as the available funding mechanism for the Plan.
"Bonus Target" shall be defined as a percentage of the Eligible Employee's
salary and is the baseline by which the bonus will be calculated.
"Company" shall be defined TechTeam Global, Inc., a Delaware corporation, and
any successor thereto.
-4-
"Eligible Employees" are 1) key senior management personnel (Director-level or
above) that have the potential to significantly and positively influence the
performance of the Company or business unit for which they are responsible, and
2) are designated to be eligible for participation in the AIP by the CEO prior
to the start of the Measurement Period. An employee who is eligible to
participate in any other incentive plan, commission or bonus plan is not
eligible for the AIP.
"Individual Objectives" is defined as specific, quantifiable, measurable,
financial or non-financial objectives.
"Measurement Period" shall be defined as the Company's fiscal year.
"Operating Income" means Operating Income as reported in the Company's Annual
Report on Form 10-K.
"Participation Level" is defined as the level of participation designated by the
CEO for the Eligible Employee which, in conjunction with Table 1, determines the
Eligible Employee's Bonus Target.
"Revenue" means the Company's base and organic revenue.
"Retirement" shall be defined as termination from employment with the Company
after reaching the age of sixty-five (65).
"Target Operating Income" means the Operating Income projection for the
Measurement Period agreed to by the Company's Board of Directors.
-5-