exv10w16



 





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-