Exhibit 10.16
TECHTEAM GLOBAL, INC.
ANNUAL INCENTIVE PLAN
Amended Effective January 1, 2008
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 (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 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 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 limited 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 with the numerator equal to 25% of Adjusted Net
Income and the denominator equal to the Bonus Pool required to pay all Employees
based on target achievement. Each level will be pro-rated accordingly based on
the statistical percentage.
Determination of Bonus Payment
The AIP bonus payable to an Employee will be calculated based on an Individual’s
Personal Business Commitments as they relate to Financials and Individual
Objectives.
The Company must achieve at least 80% of its Adjusted Net Income target for any
bonuses to be paid.
For Business Unit bonuses at levels 3 and below, the Business Unit must achieve
at least 80% of its target Adjusted Net Income and the Company must achieve a
minimum of 70% of its Adjusted Net Income target for any bonuses to be paid.
Personal Business Commitments
The Employee and his/her manager shall establish Personal Business Commitments
appropriate for the Employee’s job function in light of the Company’s business
plan. The Employee should have commitments for each category. In the category of
Financials, the employee must have a commitment to the target financials for
Adjusted Net Income and Revenue. Personal Business Commitments should be agreed
upon by January 1 [or prior to the Measurement Period]. The weighting of
“Financials” for Business Unit leaders (Senior Vice Presidents and the President
of Government Solutions) should be weighted as 80% business unit financial
achievement and 20% corporate financial achievement.
An 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 Employee has a Bonus Target Percentage based upon his/her Participation
Level. The table below sets forth the Bonus Target Percentage and the weight
each commitment has in determining the size of the Employee’s bonus.
Table 1. Bonus Targets Percentage and Weighting of Commitments

                                      Bonus Target                        
Percentage of Base                   Individual Participation Level   Salary  
Revenue   Adjusted Net Income   Objectives
Level 1
    60 %     50 %     50 %     0 %
Level 2
    45 %     37.5 %     37.5 %     25 %
Level 3
    40 %     25 %     25 %     50 %
Level 4
  25% to 30%     25 %     25 %     50 %
Level 5
  10% to 20%     25 %     25 %     50 %

A Bonus Target Percentage may be increased or decreased based upon the Company
and the Employee’s performance. The following tables set forth the factors for
levels of performance for each Personal Business Commitment upon which the Bonus
Target Percentage will be increased or decreased.
Table 2. Factor

                              Factor for           Factor for     Achieving
Adjusted   Factor for   Achieving Rating for Meeting   Net Income   Achieving
Revenue   Individual Commitment   Commitment   Commitment   Objectives
150% or more of Target achieved
    200 %     120 %     200 %
125% of Target achieved
    150 %     110 %     150 %
100% of target achieved
    100 %     100 %     100 %
75% of target achieved
    50 %     90 %     50 %

 

*   Performance that falls between the ranges specified will be interpolated and
calculated according to actual achievement.

Bonus Calculation Formula
Example for —Level 4
Employee earns $100,000
Target bonus is 25% of base salary: $25,000

                                  Category   Weighting   Eligible Amount  
Percent Achievement   Earned Amount
Financials — Revenue
    25 %   $ 6,250       100 %   $ 6,250  
Financials — Adjusted Net Income
    25 %   $ 6,250       125 %   $ 9,375  
Individual Objectives
    50 %   $ 12,500       75 %   $ 6,250  
 
  Total Eligible   $ 25,000     Total Earned   $ 21,875  

-2-

--------------------------------------------------------------------------------

 

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 the findings to the
Compensation Committee. The Vice President of Human Resources shall be
responsible for obtaining the ratings from the direct supervisor associated with
the achievement of the individual commitments.
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 Employees. As soon as practical 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
Employees. 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.
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 based on the
individual’s pro-rated active status during the Measurement Period 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

-3-

--------------------------------------------------------------------------------

 

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, excluding the
recognition of the expense and the associated tax benefit of the Bonus Pool and
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 Percentage” 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.
“Eligible Employees” are 1) key management personnel 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; however,
participation in the Executive Long-Term Incentive Plan is permitted.
“Individual Objectives” is defined as specific, quantifiable, measurable,
financial or non-financial objectives.
“Measurement Period” shall be defined as the Company’s fiscal year.
“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 total revenue for the Measurement Period as
reported in the Company’s Annual Report on Form 10-K.
“Retirement” shall be defined as termination from employment with the Company
after reaching the age of sixty-five (65).

-4-