UNITED STATES
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SEC 1913 (02-02)
(TECHTEAM(R) LOGO)
TECHTEAM GLOBAL, INC.
27335 West 11 Mile Road
Southfield, Michigan 48034
(248) 357-2866
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME AND DATE Wednesday, June 14, 2006, at 10:00 a.m. Eastern Daylight Time.
PLACE The Townsend Hotel, 100 Townsend Street, Birmingham, MI.
ITEMS OF 1) To elect eight (8) directors to the Board of Directors of
BUSINESS TechTeam Global, Inc.;
2) To ratify the appointment of Ernst & Young LLP as
TechTeam's independent registered public accounting firm
for the year ending December 31, 2006; and
3) To consider such other business as may properly come before
the Annual Meeting.
ADJOURNMENTS Any action on the items of business described above may be
AND considered at the Annual Meeting at the time and on the date
POSTPONEMENT specified above or at any time and date to which the Annual
Meeting may be properly adjourned or postponed.
RECORD DATE You are entitled to vote only if you were a TechTeam stockholder
as of the close of business on May 15, 2006.
MEETING You are entitled to attend the Annual Meeting only if you were
OF ADMISSION a TechTeam stockholder as May 15, 2006 or hold a valid proxy
for the Annual Meeting.
VOTING YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, PLEASE VOTE AS SOON AS POSSIBLE. YOU MAY SUBMIT
YOUR PROXY OR VOTING INSTRUCTIONS BY COMPLETING THE PROXY CARD
AND RETURNING IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED OR, IN
MANY CASES, BY USING THE TELEPHONE OR THE INTERNET. FOR SPECIFIC
INSTRUCTIONS ON HOW TO VOTE YOUR SHARES, PLEASE REFER TO THE
SECTION ENTITLED QUESTIONS AND ANSWERS BEGINNING ON PAGE 3 OF
THIS PROXY AND THE INSTRUCTIONS ON THE PROXY CARD.
By order of the Board of Directors,
/s/ Michael A. Sosin
----------------------------------------
May 12, 2006 Michael A. Sosin
Vice President, Secretary
and General Counsel
THIS NOTICE OF ANNUAL MEETING, PROXY STATEMENT, THE ACCOMPANYING FORM OF
PROXY, AND TECHTEAM'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2005, ARE FIRST BEING MAILED ON OR ABOUT MAY 22, 2006 TO
STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING.
PROXY STATEMENT
TABLE OF CONTENTS
Questions and Answers ..................................................... 3
Corporate Governance....................................................... 6
Codes of Ethics......................................................... 6
Board Independence ..................................................... 6
Procedures for Contacting Directors..................................... 6
Proposal One--ELECTION OF DIRECTORS ....................................... 7
Board Matters.............................................................. 9
Committee Composition and Meeting Attendance............................ 9
Audit Committee......................................................... 9
Independence / Financial Expertise................................... 9
Compensation Committee.................................................. 10
Governance and Nominating Committee..................................... 10
Consideration of Director Nominees................................... 10
Strategy and Investment Committee....................................... 11
Executive Sessions...................................................... 11
Director Attendance at Annual Meeting................................... 11
Director Compensation................................................... 11
Proposal Two--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS ......... 12
Information about our Independent Auditors................................. 12
Fees of Ernst & Young LLP for 2005...................................... 12
Pre-approval Policies and Procedures.................................... 12
Stock Ownership by Principal Stockholders, Directors and Management........ 13
Section 16(a) Beneficial Ownership Reporting Compliance................. 14
Executive Compensation and Management Information.......................... 14
Information Regarding Executive Management.............................. 14
Summary Compensation Table.............................................. 15
Option Grants and Exercises............................................. 17
Stock Option Grants in Fiscal 2005 .................................. 17
Aggregated Option Exercises in 2005 and Year-End Value Table......... 18
Employment Contracts and Change of Control Agreements................... 18
Report of the Compensation Committee on Executive Compensation............. 19
Report of the Audit Committee.............................................. 20
Compensation Committee Interlocks and Insider Participation................ 21
Certain Relationships, Related Transactions and Litigation................. 21
Performance Graph.......................................................... 22
Stockholder Proposals for 2007 Annual Meeting.............................. 23
Other Matters.............................................................. 23
2
TECHTEAM GLOBAL, INC.
27335 W. 11 MILE ROAD,
SOUTHFIELD, MICHIGAN 48034
(248) 357-2866
PROXY STATEMENT
The Board of Directors of TechTeam Global, Inc. ("TechTeam" or the
"Company") is soliciting proxies for the 2006 Annual Meeting of Stockholders
(the "Annual Meeting"). This proxy statement contains important information for
you to consider when deciding how to vote on the matters brought before the
Annual Meeting. Please read it carefully.
The Board of Directors of TechTeam has set May 15, 2006 as the record date
for the Annual Meeting. Stockholders of record who owned TechTeam's common stock
at the close of business on that date are entitled to vote at and attend the
Annual Meeting, with each share entitled to one vote. There were approximately
10,123,000 shares of TechTeam's common stock outstanding on the record date.
QUESTIONS AND ANSWERS
Q: WHEN AND WHERE IS THE ANNUAL MEETING?
A: TechTeam's 2006 Annual Meeting of Stockholders is being held on Wednesday,
June 14, 2006, at 10:00 a.m. Eastern Daylight Time at The Townsend Hotel,
100 Townsend Street, Birmingham, Michigan. Please visit www.techteam.com
for a map providing directions to the Annual Meeting.
Q: DO I NEED A TICKET TO ATTEND THE ANNUAL MEETING?
A: No, you will not need a ticket to attend the Annual Meeting. However, we
ask that you bring evidence that you are a stockholder of record, such as
your most recent account statement prior to May 15, 2006.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A: You are receiving a proxy statement and proxy card from us because you
owned shares of common stock of TechTeam, Inc. on the record date. This
proxy statement describes proposals on which we would like you, as a
stockholder, to vote. It also provides you information regarding these
proposals so that you can make an informed decision. The proxy card is used
for voting.
Q: WHAT AM I VOTING ON?
A: You are being asked to vote on:
- The election of eight nominees to serve on our Board of Directors; and
- The ratification of the appointment of Ernst & Young LLP to serve as
TechTeam's independent registered public accounting firm for the year
ending December 31, 2006.
Q: WHAT IS THE EFFECT OF SIGNING AND RETURNING MY PROXY CARD?
A: When you sign and return the proxy card, you appoint William C. Brown and
Marc J. Lichtman as your representatives at the Annual Meeting. Mr. Brown
and Mr. Lichtman will vote your shares at the Annual Meeting as you have
instructed them on the proxy card. This way, your shares will be voted
whether or not you attend the Annual Meeting. Even if you plan to attend
the Annual Meeting, we encourage you to vote in advance of the Annual
Meeting just in case your plans change. You can vote in person at the
Annual Meeting, even if you have already sent in your proxy card.
If you sign and return but do not indicate on the proxy card how you want
your votes cast, Mr. Brown and Mr. Lichtman will vote your shares FOR the
election of all nominees for director, and FOR the ratification of Ernst &
Young LLP as TechTeam's independent accountants for the 2006 fiscal year.
3
If you sign and return the proxy card, and a matter properly comes up for a
vote at the Annual Meeting that is not described in this proxy statement,
Mr. Brown and Mr. Lichtman will vote your shares in their discretion.
Q: HOW DO I VOTE?
A: In some cases there are four ways that you may vote, as explained in the
detailed instructions on your proxy card. In summary, you may:
- Mail in your completed, signed and dated proxy card.
- If set forth on your proxy card, you may place your vote via the
Internet.
- If set forth on your proxy card, you may place your vote by telephone.
- Vote in person by attending our Annual Meeting.
We will pass out written ballots to any stockholder wanting to vote in
person at the Annual Meeting. If you hold your shares in street name, you
must request a legal proxy from your stockbroker in order to vote at the
Annual Meeting.
If you vote by Internet or telephone, you do not need to mail in your proxy
card. The Internet and telephone voting procedures have been designed to
verify stockholders' identities and allow stockholders to confirm that
their voting instructions have been properly recorded.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts at the transfer agent and/or with
stockbrokers or other nominees. Please complete and provide voting
instructions for all proxy cards and voting instruction cards that you
receive.
Q: WHAT IF I CHANGE MY MIND AFTER I HAVE VOTED?
A: You may revoke your proxy (that is, cancel it) and change your vote at any
time prior to the Annual Meeting by:
- Voting again via the Internet or by telephone (only your latest vote
will be counted);
- Completing, signing and returning another proxy card that is dated
after the date of your earlier proxy card (again, only your latest
vote will be counted);
- Sending written notice to our Corporate Secretary at our principal
executive offices in Southfield, Michigan, which notice must be
received prior to the date of the Annual Meeting, stating that you
would like to revoke your proxy; or
- Voting in person at the Annual Meeting.
If you do not properly revoke your proxy, properly executed proxies will be
voted as you specified in your earlier proxy or by the representatives as
explained in the proxy statement.
Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: They could be. If your shares are held in street name and you do not
instruct your nominee how to vote your shares, your nominee may either use
its discretion to vote your shares on "routine matters" (such as the
election of directors) or leave your shares unvoted. For "non-routine
matters," your nominee would not be able to vote on such matters.
We encourage you to provide instructions to your nominee by completing the
instruction card or proxy that it sends to you. This will ensure that the
nominee votes your shares at the Annual Meeting as you direct.
4
Q: WHAT IS A "BROKER NON-VOTE"?
A: Under the rules that govern brokers who have record ownership of shares
that they hold in "street name" for their clients who are the beneficial
owners of the shares, brokers have the discretion to vote such shares on
routine matters, but not on non-routine matters. Broker non-votes generally
occur when shares held by a broker nominee for a beneficial owner are not
voted with respect to a proposal because the nominee has not received
voting instructions from the beneficial owner and lacks discretionary
authority to vote the shares. Brokers normally have discretion to vote on
"routine matters," such as director elections, but not on non-routine
matters, such approving stock option plans.
Q: HOW ARE BROKER NON-VOTES COUNTED?
A: Broker non-votes will be counted for the purpose of determining the
presence or absence of a quorum, but will not be counted for the purpose of
determining the number of shares entitled to vote on a specific proposal. A
broker non-vote will not affect the outcome of any proposal in this proxy
statement.
Q: HOW MANY SHARES CAN BE VOTED AT THE ANNUAL MEETING?
A: As of the record date, approximately 10,123,000 shares of common stock were
outstanding. Each outstanding share of common stock entitles the record
holder to one vote on all matters covered in this proxy statement.
Q: HOW DO I VOTE IF I HOLD COMMON STOCK IN MY TECHTEAM 401(K)?
A: If you are a TechTeam employee who is a stockholder through TechTeam's
Retirement Savings Plan (the "Plan"), you will receive a form proxy with
respect to all of your shares so registered. You have the right to direct
the Trustee of the Plan how to vote the shares allocated to your account.
Q: WHAT IS A "QUORUM"?
A: A "quorum" is the number of shares of common stock that must be present, in
person or by proxy, in order for business to be transacted at the Annual
Meeting. The required quorum for the Annual Meeting is a majority of the
shares outstanding and entitled to vote at the Annual Meeting. There must
be a quorum present for the Annual Meeting to be held. All stockholders
present in person or represented by completed and signed proxy cards,
Internet votes, and telephone votes, whether representing a vote for,
against, withheld, or abstained or a broker non-vote, will be counted
toward the quorum.
Q: WHAT IS THE REQUIRED VOTE FOR A PROPOSAL TO PASS?
A: With regard to the proposal for the election of directors, the required
vote is a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the
proposal. There is no cumulative voting for the election of directors. With
regard to each other proposal, the required vote is the affirmative vote of
a majority of shares that are (i) present in person or represented by proxy
at the Annual Meeting and (ii) entitled to vote on each such proposal.
Q: HOW ARE ABSTENTIONS AND WITHHOLD VOTES COUNTED?
A: Abstentions and withhold votes are counted for the purposes of determining
both (i) the presence of a quorum and (ii) the total number of shares
entitled to vote with respect to a proposal. Withheld votes will have no
effect on the outcome of the election of directors. Abstentions will have
the same effect as a vote "AGAINST" all other proposals being presented at
this Annual Meeting.
5
Q: WHO IS SOLICITING MY VOTE?
A: This proxy solicitation is being made by the Board of Directors of TechTeam
and will be paid for by the Company. In addition to this solicitation by
mail, proxies may be solicited by our directors, officers and other
employees by telephone, Internet, or fax, in person or otherwise. Such
persons will not receive any additional compensation for assisting in the
solicitation. We will also request brokerage firms, nominees, custodians
and fiduciaries to forward proxy materials to the beneficial owners of
shares of our common stock. We will reimburse such persons and TechTeam's
transfer agent for their reasonable out-of-pocket expenses in forwarding
such material.
Q: HOW MAY I OBTAIN A COPY OF TECHTEAM'S 2005 ANNUAL REPORT ON FORM 10-K?
A: Stockholders may request another free copy by submitting a written request
to TechTeam Global, Inc., Attention: Investor Relations, 27335 W. 11 Mile
Road, Southfield, Michigan, 48034; or by calling 1-248-357-2866; or by
visiting our website at
http://ir.techteam.com/phoenix.zhtml?c=91039&p=irol-sec. We will also
provide copies of any exhibit to the 2005 Annual Report on Form 10-K, at no
expense, if specifically requested.
CORPORATE GOVERNANCE
TechTeam is committed to sound corporate governance principles, which are
essential to running TechTeam's business efficiently and to maintaining
TechTeam's integrity in the marketplace. TechTeam's Corporate Governance
Guidelines set forth the duties and responsibilities of the Board and addresses
corporate governance matters. A written charter has been developed and approved
by the Board for each of the four Board Committees. The guidelines and charters
are reviewed annually and modified as appropriate. The Corporate Governance
Guidelines, Audit Committee Charter, Compensation Committee Charter, Governance
and Nominating Committee Charter, and Strategy and Investment Committee Charter
are available at http://ir.techteam.com/phoenix.zhtml?c=91039&p=irol-govboard.
CODE OF ETHICS
The Company has adopted a code of ethics that applies to all of its
directors, officers (including its chief executive officer, chief operating
officer, chief financial officer, chief accounting officer and any other person
performing similar functions), and employees. The Code of Business Conduct is
also available on our website at
http://ir.techteam.com/phoenix.zhtml?c=91039&p=irol-govboard.
BOARD INDEPENDENCE
The Board has determined that each of the nominees standing for election,
except William C. Brown, the Company's President and Chief Executive Officer,
have no material relationship with TechTeam (either directly or as a partner,
shareholder, or officer of an organization that has a relationship with
TechTeam) and is independent within the meaning of the NASDAQ Stock Market, Inc.
("NASDAQ") director independence standards as of the date of this proxy
statement. Furthermore, the Board has determined that no member of the Audit
Committee, Compensation Committee, or Governance and Nominating Committee have a
material relationship with TechTeam (either directly or as a partner,
shareholder, or officer of an organization that has a relationship with
TechTeam) and they are "independent" within the meaning of the NASDAQ standards.
PROCEDURES FOR CONTACTING DIRECTORS
The Board has established a process for Stockholders to send communications
to the Board. Stockholders may communicate generally with the Board or with a
specific director at any time by writing to TechTeam's Secretary at 27335 W. 11
Mile Road, Southfield, Michigan, 48034. The Secretary will review all messages
received and forward any message that reasonably appears to be a communication
from a Stockholder about a matter of stockholder interest that is intended for
communication to the Board or a specific director. Communications can also be
forwarded by email to bod@techteam.com. The Secretary monitors this email
address.
6
PROPOSAL 1. ELECTION OF DIRECTORS
The Stockholders elect TechTeam's directors annually, as TechTeam does not
have staggered board terms. Each director will serve until the 2007 Annual
Meeting of Stockholders or until he or she is succeeded by another qualified
director who has been duly elected. As of the date of this proxy statement,
there are eight members of the TechTeam Board of Directors.
On February 23, 2006, the Company was notified by Costa Brava Partnership
III, L.P. ("Costa Brava") of its intent to nominate seven directors to replace
the Company's current Board of Directors. On February 27, 2006, TechTeam
announced its intention to contest the slate of nominees proposed by Costa Brava
(the contest between the two slates of nominees being referred to herein as the
"Proxy Contest"). On May 3, 2006, the Company entered into a Settlement
Agreement with Costa Brava ending the Proxy Contest (the "Settlement
Agreement"). Under the terms of the Settlement Agreement, Costa Brava agreed to
withdraw its slate of nominees, and the Company agreed to nominate the following
individuals to stand for election at the Company's Annual Meeting: William C.
Brown, the Company's President and Chief Executive Officer, Kent Heyman, John P.
Jumper, James A. Lynch, Alok Mohan, James G. Roche, Andrew R. Siegel, and
Richard R. Widgren. Messrs. Heyman, Lynch, Mohan, and Siegel were recommended by
Costa Brava. See Certain Relationships, Related Transactions and Litigation on
page 21 of this proxy statement for more information on the settlement.
If a nominee is unavailable for election, the proxy holders may vote for
another nominee proposed by the Board, or the Board may reduce the number of
directors to be elected at the Annual Meeting. Accordingly, common stockholders
will be electing eight (8) directors. Proxies may not be voted for a greater
number of persons than the number of nominees (eight) named in this proxy
statement.
The following is a description of the background of the persons nominated
for election as directors of TechTeam.
WILLIAM C. BROWN, 54, has been a director since April 2006. Mr. Brown has
been President and Chief Executive Officer of TechTeam since February 16, 2006.
Previously, Mr. Brown was a vice president in the Americas Group BTO
organization at IBM since March of 2004. During this period, Mr. Brown served in
the positions of Vice President of Sales for the Americas and Vice President of
the Americas Public Sector. From April 2001 until mid-2003, Mr. Brown was
President, Chief Executive Officer, and a member of the Board of Directors at
Aztec Software, Inc., a small publicly traded Indian company. In the late
1990's, until he left IBM to join Aztec, Mr. Brown was Vice President of the
Worldwide Application Management Services business, one of four major
outsourcing segments in IBM Global Services.
KENT HEYMAN, 50, is a nominee standing for election at this meeting. Mr.
Heyman has been the Chairman of the Board and Chief Executive Officer of
Powerhouse Technologies Group, Inc. (OTC: "PWHT"), a publicly traded provider of
mobile computing software, since September 2005 and January 2006 respectively.
Mr. Heyman was the Chief Executive Officer of ServiceWare Technologies, Inc., a
provider of customer relationship management software applications that is now
known as Knova Software, Inc. (OTC: "KNVS"), from September 2001 to February
2005, and now serves as the company's non-executive Chairman. Prior to joining
ServiceWare, Mr. Heyman was a founding officer and General Counsel to MPower
Communications, Inc., a competitive telecommunications provider.
GENERAL JOHN P. JUMPER (USAF RET.), 61, is a nominee standing for election
at this meeting. General Jumper retired from the United States Air Force
effective November 1, 2005. From September 2001 through November 1, 2005,
General Jumper was Chief of Staff of the United States Air Force, serving as the
senior uniformed Air Force officer responsible for the organization, training,
and equipping of more than 700,000 active-duty, Guard, Reserve, and civilian
forces serving in the United States and overseas. As a member of the Joint
Chiefs of Staff, General Jumper functioned as a military adviser to the
Secretary of Defense, National Security Council, and the President. Between
February 2000 and September 2001, General Jumper was the Commander of
Headquarters Air Combat Control. General Jumper serves on the Board of Directors
of Goodrich Corporation (NYSE: "GR"), and the Board of Directors of Rolls Royce
North America.
7
JAMES A. LYNCH, 55, is a nominee standing for election at this meeting.
Since 1998, Mr. Lynch has been Managing Director of Draper Atlantic, an early
stage information technology venture capital firm. Mr. Lynch is a director of
AppForge, a leader in enterprise multi-platform mobile and wireless application
development solutions; a director of Induslogic, a leader in the market for
outsourced software product engineering services; and a director of Group Logic,
a developer of network workflow software products.
ALOK MOHAN, 57, is a nominee standing for election at this meeting. Mr.
Mohan served as Chief Executive Officer of Santa Cruz Operations, Inc. ("SCO")
from July 1995 until April 1998, when he was appointed that company's Chairman
of the Board. He served as Chairman of SCO until May 2001 when a portion of
SCO's assets were sold to Caldera International, Inc. He continued as Chairman
of the Board of Directors of the remaining business, renamed Tarantella, Inc.,
until it was sold to Sun Microsystems, Inc. in 2005. From May 1994 to July 1995,
Mr. Mohan served as Senior Vice President, Operations and Chief Financial
Officer of SCO. Prior to joining SCO, Mr. Mohan was employed with NCR
Corporation ("NCR"), where he served as Vice President of Strategic Planning and
Controller and Vice President and General Manager of the Workstation Products
Division at NCR. Mr. Mohan is also the non-executive Chairman of the Board of
Directors of Rainmaker, Inc. (NASDAQ: "RMKR"), and he serves on the Board of
Directors of Stampede Technologies, Inc. and CrystalGraphics, Inc.
JAMES G. ROCHE, DBA, 66, is a nominee standing for election at this
meeting. Dr. Roche served as the 20th Secretary of the United States Air Force
from June 2001 through January 2005. For the three years prior to his Air Force
service, he was Corporate Vice President and President of the Electronic Sensors
and Systems Sector of Northrop Grumman Corporation. Secretary Roche held various
other positions with Northrop Grumman, which included Corporate Vice President
and Chief Advanced Development, Planning, and Public Affairs Officer responsible
for the company's strategy development and mergers and acquisition strategy. Dr.
Roche is a retired Captain in the United States Navy with 23 years of service.
He is currently a director of the Orbital Sciences Corporation (NYSE: "ORB").
ANDREW R. SIEGEL, 37, is a nominee standing for election at this meeting.
Since March 2005, Mr. Siegel has been a Senior Vice President at Roark, Rearden
& Hamot Capital Management LLC, an investment management firm that is the
general partner of Costa Brava Partnership III, L.P. Since October 2004, Mr.
Siegel has been the founding Managing Member of White Bay Capital Management, an
investment management firm. From July 2003 to February 2004, Mr. Siegel was a
Member of Debt Traders, Ltd., a capital management firm. He was a Financial
Adviser to Professional Television Network, a broadcasting company, from October
2002 to March 2003. In 2001 and 2002, he was an investment banker with Deutsche
Bank.
RICHARD R. WIDGREN, 62, has been a director since May 2005. Mr. Widgren is
currently Vice President -- Finance, Treasurer, and Chief Financial Officer of
Urban Science, Inc., a retail sales channel consulting company, where he began
employment in August 2001. From April 2001 through August 2001, he was Chief
Financial Officer of Presidion, Inc. Previously, Mr. Widgren served as Vice
President -- Finance and Corporate Controller of Kelly Services, Inc. Mr.
Widgren is a member of the Detroit Medical Center Board of Director, where he
serves as the chairman of the Audit Committee.
REQUIRED VOTE AND BOARD OF DIRECTORS RECOMMENDATION
If a quorum is present, the eight nominees receiving the highest number of
votes will be elected to serve as a director until the 2007 Annual Meeting of
Stockholders or until he is succeeded by another qualified director who has been
elected. Abstentions and broker no-votes will each be counted as present for the
purposes of determining the presence of a quorum, but will not have any effect
on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.
8
BOARD MATTERS
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The Board held seven meetings in 2005. The Board has four committees: (1)
Audit, (2) Compensation, (3) Governance and Nominating, and (4) Strategy and
Investment. The membership during the last fiscal year and the function of each
of the committees are set forth below. Each director attended at least 75% of
all Board and applicable Committee meetings.
GOVERNANCE AND STRATEGY AND
NAME OF DIRECTOR AUDIT COMPENSATION NOMINATING INVESTMENT
---------------- ------ ------------ -------------- ------------
Kim A. Cooper Member Chair
William F. Coyro, Jr. Member
G. Ted Derwa Chair Member
Wallace D. Riley Member Member
Gregory C. Smith Chair Member
Richard D. Somerlott * Chair
Richard R. Widgren ** Member Member
NUMBER OF MEETINGS IN 2005 9 9 4 4
* Former Committee member prior to the Company's 2005 Annual Meeting
** Elected to the Board of Directors on May 25, 2005
AUDIT COMMITTEE
The Audit Committee assists the Board in fulfilling its responsibilities
for general oversight of the integrity of TechTeam's financial statements, the
independent auditors' qualifications and independence, and risk assessment and
risk management. Among other things, the Audit Committee prepares the Report of
the Audit Committee for inclusion in the annual proxy statement; annually
reviews the Audit Committee charter and the committee's performance; appoints,
evaluates, and determines the compensation of TechTeam's independent auditors;
reviews and approves the scope of the annual audit, the audit fee, and the
financial statements; reviews TechTeam's disclosure controls and procedures,
internal controls, and corporate policies with respect to financial information;
oversees investigations into complaints concerning financial matters; and
reviews other risks that may have a significant impact on TechTeam's financial
statements. The Audit Committee works closely with management as well as
TechTeam's independent auditors. The Audit Committee has the authority to obtain
advice and assistance from, and receive appropriate funding from TechTeam for
outside legal, accounting or other advisors as the Audit Committee deems
necessary to carry out its duties. The report of the Audit Committee is included
herein on page 20.
Independence/Financial Expertise. All members of the Audit Committee are
independent directors according to standards adopted by NASDAQ, as they are
non-affiliated and receive no compensation from the Company, except in their
capacity as directors. The Board has determined Richard R. Widgren qualifies as
an "audit committee financial expert" as defined by Item 401(h) of Regulation
S-K of the Securities Exchange Act of 1934, as amended.
9
COMPENSATION COMMITTEE
The Compensation Committee discharges the Board's responsibilities relating
to compensation of TechTeam's executives and directors; produces an annual
report on executive compensation for inclusion in TechTeam's proxy statement;
conducts an evaluation of the Chief Executive Officer; provides general
oversight of TechTeam's compensation structure, including TechTeam's equity
compensation plans; and retains and approves the terms of the retention of any
compensation consultants and other compensation experts. Other specific duties
and responsibilities of the Compensation Committee include the following:
reviewing the leadership development process; determining the compensation of
executive officers; approving employment agreements for executive officers;
approving and amending TechTeam's incentive compensation and stock option
programs (subject to stockholder approval if required); recommending director
compensation to the Board; and annually evaluating its performance and its
charter.
The report of the Compensation Committee is included herein beginning on
page 19.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee identifies and nominates
individuals qualified to become Board members, consistent with criteria approved
by the Board, and identifies best practices and recommends corporate governance
principles. Other specific duties and responsibilities of the Governance and
Nominating Committee include the following: annually assessing the size and
composition of the Board; defining specific criteria for director independence;
monitoring compliance with Board and Board committee membership criteria;
annually reviewing and recommending directors for continued service;
coordinating and assisting management and the Board in recruiting new members to
the Board; and overseeing the annual evaluation of the Board.
Consideration of Director Nominees. The Governance and Nominating Committee
utilizes a variety of methods for identifying and evaluating nominees for
director. The Governance and Nominating Committee regularly assesses the
appropriate size of the Board, and whether any vacancies on the Board are
expected due to retirement or otherwise. In the event that vacancies are
anticipated or otherwise arise, the Governance and Nominating Committee
considers various potential candidates for director. Candidates may come to the
attention of the Governance and Nominating Committee through current Board
members, professional search firms, stockholders, or other persons. These
candidates are evaluated at meetings of the Governance and Nominating Committee,
and may be considered at any point during the year.
The Board believes that all of its directors should have the highest
personal integrity and have a demonstrated record of ability and judgment. There
are no firm minimum qualifications or skills that a candidate must possess.
Consistent with the Company's Corporate Governance Guidelines, the Committee
evaluates director candidates on a number of qualifications, including their
independence, judgment, leadership ability, expertise in the industry,
experience in developing and analyzing business strategies, financial literacy,
and for incumbent directors, past performance.
Any Stockholder nominations proposed for consideration by the Governance
and Nominating Committee should include the nominee's name and qualifications
for Board membership, all information relating to each person whom the
Stockholder proposes to nominate that is required to be disclosed under
applicable rules and regulations of the Securities and Exchange Commission
("SEC"), and written consent of the person proposed to be nominated to be named
in the proxy statement as a nominee and to serving as a director if elected.
Nominations should be addressed to:
Corporate Secretary
TechTeam Global, Inc.
27335 W. 11 Mile Road
Southfield, MI 48034
The Governance and Nominating Committee will evaluate a Stockholder nominee for
director in the same manner as any other proposed nominee.
10
STRATEGY AND INVESTMENT COMMITTEE
The purpose of the Strategy and Investment Committee is to work with
management to review, assess, and recommend to the Board as a whole, the
long-term business goals and strategies of the Company, and to oversee the
investment objectives and performance of the Company's investment activities.
EXECUTIVE SESSIONS
Executive sessions of non-management directors are scheduled at the end of
each regular meeting of the Board of Directors. The sessions are scheduled and
chaired by the non-employee Chairman of the Board.
DIRECTOR ATTENDANCE AT ANNUAL MEETING
The Company does not expect its directors or nominees to attend the Annual
Meeting.
DIRECTOR COMPENSATION
The following table provides information on TechTeam's compensation and
reimbursement practices from June 1, 2005 through the end of fiscal 2005 for
non-employee directors.
Monthly retainer $3,000
Additional monthly retainer for service as Chairman of the Board $6,000
Additional monthly retainer for the Chair of the Audit Committee
and the Chair of the Compensation Committee $2,000
Fee for each committee meeting attended $1,000
Additional fee for each committee meeting chaired $1,000
Stock awards 100 shares per Board
meeting attended
Annual stock option award on last business day of February 10,000
Reimbursement for expenses attendant to Board membership Yes
Prior to June 1, 2005, the monthly retainer per director was $1,500 and
fees related to committees were $600 per committee meeting and an additional
$600 per committee meeting chaired. The stock awards and stock option awards
were granted under the Company's 1996 Non-Employee Director Stock Plan, which
expired on December 31, 2005. Accordingly, effective January 1, 2006, the
Directors no longer receive common stock as payment for attendance at meetings
or an annual option grant under this plan. Stock options have an exercise price
equal to the fair market value of a share of common stock on the date of the
grant as determined by the closing price of the stock on the last business day
in February. William F. Coyro, Jr., the Company's President and Chief Executive
Officer during 2005, did not receive any compensation for his service as a
director. Mr. Brown receives no additional compensation for his service as a
director.
Pursuant to the Settlement Agreement with Costa Brava, Alok Mohan will be
the Chairman of the Board from June 14, 2006 through the first meeting of the
Board of Directors after January 1, 2007, when the directors will again elect a
chairman. Further, effective June 14, 2006, the Chairman's compensation will be
$6,250 per month.
11
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected Ernst & Young LLP ("Ernst & Young") to
serve as TechTeam's independent registered public accounting firm for the fiscal
year ending December 31, 2006. The Stockholders are asked to ratify the
selection at the Annual Meeting.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
INFORMATION ABOUT OUR INDEPENDENT AUDITORS
Ernst & Young, or its predecessors, have audited our consolidated financial
statements since TechTeam became a public company in 1987. As our independent
auditors, Ernst & Young will audit our consolidated financial statements for
fiscal 2006 and perform audit-related services in connection with various
accounting and financial reporting matters. Ernst & Young also performs certain
non-audit services for TechTeam that are permitted under the Sarbanes-Oxley Act
of 2002 and related rules of the SEC. The Audit Committee has determined that
the provision of audit-related and permitted non-audit services by Ernst & Young
is compatible with maintaining Ernst & Young's independence pursuant to the
auditor independence rules of the SEC.
FEES OF ERNST & YOUNG LLP FOR 2005
The aggregate fees for professional services by Ernst & Young in 2005 and
2004 were as follows:
TYPE OF FEES 2005 2004
------------ ------ ----
($ in
thousands)
Audit Fees .......... $1,042 $402
Audit-Related Fees .. 22 49
Tax Fees ............ 154 111
------ ----
Total ............... $1,218 $562
====== ====
In the above table, in accordance with SEC definitions and rules, "audit
fees" are fees for professional services for the audit of the Company's
consolidated financial statements included in Form 10-K and the related
assessment of the Company's internal controls over financial reporting and
disclosure and management's assessment, and review of financial statements
included in Form 10-Qs, or for services that are normally provided by the
independent auditor in connection with statutory and regulatory filings;
"audit-related fees" are fees for assurance and related services that are
reasonably related to the performance of the audit of the Company's financial
statements such as audits of employee benefit plans, accounting consultation,
and pre-acquisition financial due diligence; and "tax fees" are fees for tax
compliance and tax planning and consulting, including expatriate tax services.
PRE-APPROVAL POLICIES AND PROCEDURES
All audit and non-audit services to be performed by TechTeam's independent
auditor were approved in advance by the Audit Committee. All audit and non-audit
services provided in 2005 were pre-approved. As permitted by the SEC's rules,
the Audit Committee adopted a policy that provides for pre-approval by the Audit
Committee of specifically defined audit, non-audit and tax-related services.
Unless the specific service has been previously pre-approved with respect to
that year, the Audit Committee must approve the permitted service before the
independent auditor is engaged to perform it. The Audit Committee has delegated
to the Chairman of the Audit Committee authority to approve permitted services
provided that the Chairman reports any decisions to the Committee at its next
scheduled meeting.
REQUIRED VOTE AND BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of a majority of votes cast at the meeting, at which a
quorum is present, is required to approve this proposal. Abstentions and broker
no-votes will each be counted as present for the purposes of determining the
presence of a quorum, but will not have any effect on the outcome of the vote.
12
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS TECHTEAM'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006
STOCK OWNERSHIP BY PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT
The following table shows, as of May 11, 2006, how many shares of our
common stock are beneficially owed by (i) any person who has reported or is
known by TechTeam to be the beneficial owner of more than 5% of our common
stock, (ii) each director and nominee for director, and (iii) named executive
officers included in the Summary Compensation Table included in this proxy
statement. The information for Kern Capital Management, L.L.C., Dimensional Fund
Advisors, Inc., Janus Capital Management, L.L.C., and Diker GP, L.L.C. is based
upon their Schedule 13G filings in February 2006. The information for Ramius
Capital Group, L.L.C. is based upon its Schedule 13G filing of April 10, 2006.
The information for Costa Brava Partnership III, L.P. is based upon their
Schedule 13D/A filed on May 11, 2006. There were approximately 10,123,000 shares
of TechTeam's common stock outstanding on May 10, 2006.
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY ACQUIRABLE WITHIN OUTSTANDING
NAME OWNED (1) 60 DAYS COMMON STOCK (1)
---- ---------------- ----------------- ----------------
Ramius Capital Group, L.L.C. 992,887 -- 9.8%
666 Third Avenue, 26th Floor
New York, New York 10017
Kern Capital Management, L.L.C. 920,700 -- 9.1
114 West 47th Street, Suite 1926
New York, NY 10036
Costa Brava Partnership III L.P. 912,545 -- 9.0
68 Harvard Street, 3rd Floor,
Brookline, MA 02445.
Dimensional Fund Advisors, Inc. 732,734 -- 7.3
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Janus Capital Management, L.L.C. 644,992 -- 6.4
151 Detroit Street
Denver, CO 80206
Diker GP, L.L.C. 583,408 -- 5.8
745 Fifth Avenue, Suite 1409
New York, NY 10151
William C. Brown 25,000 50,000 **
Kim A. Cooper 20,825 90,000 1.1
William F. Coyro, Jr. 107,496 40,000 1.5
G. Ted Derwa 4,900 30,000 **
Larry W. Granger 23,050 45,000 **
Robert W. Gumber 25,569 22,000 **
James M. Hoen 14,204 37,500 **
Kent Heyman -- -- --
John P. Jumper -- -- --
James A. Lynch 5,000 -- **
13
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY ACQUIRABLE WITHIN OUTSTANDING
NAME OWNED (1) 60 DAYS COMMON STOCK (1)
---- ---------------- ----------------- ----------------
Alok Mohan -- -- --
Christoph A. Neut 9,255 39,000 **
Wallace D. Riley 102,200 50,000 1.5
James G. Roche -- -- --
Andrew R. Siegel (2) -- --
Gregory C. Smith 36,600 40,000 **
Richard G. Somerlott 43,019 100,000 1.4
Richard R. Widgren 1,350 -- **
Current directors, nominees, and
named executive officers as a
group (18 persons) 9.1%
** Less than 1%.
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or
shared investment or voting authority. For the purpose of computing the
percentage of the outstanding shares owned by a stockholder, shares subject
to acquisition by such individual within 60 days are deemed to be
outstanding securities of the class owned by that individual but are not
deemed to be outstanding for the purpose of computing the percentage owned
by any other person.
(2) Mr. Siegel is a Senior Vice President at Roark, Rearden & Hamot Capital
Management LLC, an investment management firm that is the general partner
of Costa Brava Partnership III, L.P.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of the filings with the SEC and written representations
that no other reports were required, we believe that all of our directors and
executive officers complied with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended, during fiscal 2005, except one
Form 4 was filed late by each Larry W. Granger, Robert W. Gumber, Heidi K.
Hagle, James M. Hoen, Marc J. Lichtman, David W. Morgan, Jeffery J. Ruffini, and
Michael A. Sosin on January 3, 2006, to report stock options granted on December
13, 2005.
EXECUTIVE MANAGEMENT COMPENSATION AND MANAGEMENT INFORMATION
INFORMATION REGARDING EXECUTIVE MANAGEMENT
All executive officers serve at the pleasure of the Board of Directors.
There are no family relationships among any of the directors or executive
officers of TechTeam. The following is a description of the background of
TechTeam's Executive Officers other than William C. Brown.
LARRY W. GRANGER, 60, Chief Operating Officer. Mr. Granger joined TechTeam
in December 2002 as Vice President of Professional Services. He was appointed
Chief Operating Officer in October 2003. For the prior three years, Mr. Granger
was the President and Chief Executive Officer of Perodon, L.L.C., an IT
outsourcing company. From August 1998 through December 1999, he was the Chief
Information Officer of Visteon Corporation.
14
ROBERT W. GUMBER, 57, Vice President of Operations EMEA. Mr. Gumber joined
TechTeam in September 2003. For the year and a half prior, Mr. Gumber owned and
operated RWG and Associates, L.L.C., a company providing supply chain consulting
services. From April 2001 to October 2001, he was Director, Material Planning
and Logistics for Visteon Corporation. He was Supply Director for the
Interior/Exterior Systems Division of Visteon from the middle of 1999 through
April 2001.
HEIDI K. HAGLE, 36, Vice President of Human Resources. Ms. Hagle has been
with TechTeam since 1996, when she was a Senior Human Resource Generalist. She
became Director of Human Resources in May 1999. In May 2002, Ms. Hagle was
promoted to Vice President of Human Resources.
JAMES M. HOEN, 38, Vice President of Sales and Marketing North America. Mr.
Hoen started with TechTeam in 1997. During his employment, he has been an
Account Development Manager, National Account Manager, Global Account Manager,
and Director of Global Account Management. He was appointed Vice President of
Sales in August 2001. In September 2003, he became Vice President of Sales and
Marketing North America.
DENNIS J. KELLY, 45, President of TechTeam Government Solutions, Inc.
(formerly known as Digital Support Corporation). Mr. Kelly assumed his role with
TechTeam in November 2005. From January of 2004 through November 2005, Mr. Kelly
was the Senior Vice President of Corporate Communications for Anteon
Corporation. In this role he was responsible for all external corporate
relations including investor, government, public, and media relations. From
October 2002 to December 2003, Mr. Kelly was the Senior Vice President for
Business Development at Anteon, and from September 1999 to October 2002, he was
the Group Vice President for Anteon's Information Technology Center.
MARC J. LICHTMAN, 38, Vice President of Accounting Operations and Chief
Accounting Officer. Mr. Lichtman joined TechTeam in December 2003 as Global
Corporate Controller and was promoted to Vice President and Chief Accounting
Officer in August 2004. From June 2002 through April 2003, he served as a
principal with Ernst & Young LLP in their Assurance and Advisory Business
Services Practice. From August 1989 through June 2002, Mr. Lichtman served in
various positions with Arthur Andersen LLP in their Assurance and Business
Advisory Practice, and was promoted to Partner in September 2001.
CHRISTOPH A. NEUT, 39, Vice President Sales and Marketing EMEA. Mr. Neut
has been with TechTeam's Belgian subsidiary, TechTeam Global NV/SA, since 1996,
when he was responsible for business development in Europe. In 1998, he became
General Manager for TechTeam Global NV/SA. In 2000, he became Director of Sales
Europe. In August 2001, he became Vice President Europe. He was appointed to his
current position in September 2003.
JEFFERY J. RUFFINI, 45, Vice President of Operations North America. Mr.
Ruffini has been with TechTeam since 1990. From 1997 through 1998, he was Vice
President of Corporate Services. He became Vice President of Operations in 1998.
He was appointed to his current position in September 2003.
MICHAEL A. SOSIN, 46, Vice President, General Counsel and Secretary. Mr.
Sosin joined TechTeam in July 1998 as General Counsel and Secretary. He was
appointed a Vice President in May 2003.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
awarded to, paid to or earned by TechTeam's Chief Executive Officer and each of
the other four most highly compensated executive officers of TechTeam as of
December 31, 2005, and their compensation for the 2005, 2004, and 2003 fiscal
years.
15
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
NAME AND --------------------------- STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS (3) AWARDS (4) OPTIONS # (5) (6)
------------------ ---- -------- --------- ---------- ------------- ------------
William F. Coyro, Jr. (1) 2005 $348,462 $ 73,292 $105,930 -- $26,289
President and Chief 2004 329,365 218,592 136,620 40,000 21,734
Executive Officer 2003 320,269 75,000 -- 75,000 21,608
Larry W. Granger 2005 $234,231 $ 53,145 $ 60,188 10,000 $ 6,655
Chief Operating Officer 2004 225,000 132,480 56,250 25,000 --
2003 165,577 -- -- 30,000 --
Robert W. Gumber 2005 $210,769 $ 47,586 $ 42,800 10,000 $95,031
Vice President of 2004 187,692 110,891 36,000 15,000 35,193
Operations 2003 34,615 -- -- 21,000 6,440
EMEA
James M. Hoen 2005 $206,154 $ 43,738 $ 42,800 10,000 $ 7,266
Vice President of Sales and 2004 199,615 117,760 55,200 15,000 612
Marketing North America 2003 192,500 25,000 -- 15,000 3,160
Christoph A. Neut (2) 2005 $205,356 $ 47,440 $ 43,513 10,000 $30,661
Vice President of Sales and 2004 224,220 113,033 57,780 15,000 16,136
Marketing EMEA 2003 203,120 24,600 -- 15,000 13,146
(1) Dr. Coyro ceased being President and Chief Executive Officer of the
Company on February 3, 2006. William C. Brown became President and Chief
Executive Officer on February 16, 2006.
(2) Mr. Neut's 2005 compensation is reported in U.S. dollars based upon the
prevailing exchange rate from euros to U.S. dollars on March 20, 2005 of
$1.22 per euro. His 2004 compensation is reported in U.S. dollars based
upon the prevailing exchange rate from euros to U.S. dollars on March 21,
2005 of $1.32 per euro. His 2003 compensation is reported in U.S. dollars
based upon the prevailing exchange rate from euros to U.S. dollars on March
19, 2004 of $1.23 per euro.
(3) Amounts reported in this column for 2004 and 2005 are for bonuses earned
for performance under the Company's Annual Incentive Plan during 2004 and
2005, but were not paid until 2005 and 2006, respectively.
(4) The named executive officers also earned a restricted stock award pursuant
to the Company's Long-Term Incentive Plan during 2005. The restricted stock
was awarded on March 15, 2006 based upon a stock price of $10.45. Dr. Coyro
and Messrs. Granger, Gumber, Hoen, and Neut received 10,137, 5,760, 4,096,
4,096, and 4,378 shares of restricted stock, respectively. These shares of
restricted stock vest five years after the date of grant, and dividends, if
any, will be paid on these shares. At the end of 2005, Dr. Coyro and
Messrs. Granger, Gumber, Hoen, and Neut owned restricted stock valued at
$120,972, $68,732, $43,989, $48,873, and $51,165, respectively. Dr. Coyro
was terminated as an employee of the Company on April 26, 2006, and
accordingly, under the terms of the Long-Term Incentive Plan his shares of
restricted stock have been forfeited.
(5) Consists of stock options granted under TechTeam's 2004 Incentive Stock and
Awards Plan for 2004 and 2005 and TechTeam's 1990 Nonqualified Stock Option
Plan for 2003.
(6) For the named executive officers, this column includes the following
payments by TechTeam in the years indicated:
16
================================================================================
401 (K) TERM LIFE HEALTH EXPATRIATE BELGIAN
COMPANY INSURANCE INSURANCE EXPENSES BENEFITS
NAME YEAR MATCH PAYMENT PREMIUMS (A) (B) TOTAL
---- ---- ------- --------- --------- ---------- -------- -------
William F. Coyro, Jr. 2005 $ 5,404 $2,423 $18,462 n/a n/a $26,289
2004 173 860 20,701 n/a n/a 21,734
2003 4,415 806 16,387 n/a n/a 21,608
Larry W. Granger 2005 $ 4,221 $2,434 n/a n/a n/a $ 6,655
2004 n/a n/a n/a n/a n/a n/a
2003 n/a n/a n/a n/a n/a n/a
Robert W. Gumber 2005 $ 4,216 n/a n/a $90,815 n/a $95,031
2004 462 n/a n/a 34,731 n/a 35,193
2003 -0- n/a n/a 6,440 n/a 6,440
James M. Hoen 2005 $ 4,217 $3,049 n/a n/a n/a $ 7,266
2004 462 150 n/a n/a n/a 612
2003 3,045 115 n/a n/a n/a 3,160
Christoph A. Neut 2004 $ 7,703(C) n/a $ 135 n/a $22,823 $30,661
2004 11,694(C) n/a 137 n/a 4,305 16,136
2003 9,024(C) n/a 122 n/a 4,000 13,146
(a) Mr. Gumber is a citizen of the United States working in Belgium. As part of
his employment arrangement, starting in November 2003, TechTeam pays for
his automobile, housing, certain travel expenses, and, as of October 2005,
a monthly expense stipend.
(b) Includes amounts paid for benefits particular to TechTeam's subsidiary in
Belgium, TechTeam Global NV/SA, including luncheon vouchers, representation
allowances, and payments for an automobile.
(c) Represents the amount paid by TechTeam Global, NV/SA toward a retirement
plan for Mr. Neut.
OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to grants of stock
options during the year ended December 31, 2005 to the individuals named in the
Summary Compensation Table above:
OPTION GRANTS IN 2005
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SHARES OF OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED (1) YEAR PRICE DATE 5% 10%
---- ----------- ------------ -------- ---------- ------- --------
William F. Coyro, Jr. -- -- N/A N/A $ -- $ --
Larry W. Granger 10,000 1.76% $9.83 12/13/15 $61,820 $156,665
Robert W. Gumber 10,000 1.76% $9.83 12/13/15 $61,820 $156,665
James M. Hoen 10,000 1.76% $9.83 12/13/15 $61,820 $156,665
Christoph A. Neut 10,000 1.76% $9.83 12/13/15 $61,820 $156,665
(1) All of the options reflected in the table were granted under TechTeam's
2004 Incentive Stock and Awards Plan. Option exercise prices are at market
price on the date of grant. These options vested immediately, but any stock
acquired from the exercise of the options is restricted for two years
following the date of the grant.
(2) Assumes rates of common stock price appreciation that are prescribed by the
SEC and does not reflect TechTeam's estimates or projection of future
common stock price.
17
AGGREGATE OPTION EXERCISES IN 2005 AND YEAR-END VALUE TABLE
EXERCISABLE UNEXERCISABLE
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT OPTIONS AT DECEMBER 31, 2005
ON VALUE DECEMBER 31, DECEMBER 31, ---------------------------
NAME EXERCISE REALIZED 2005 2005 EXERCISABLE UNEXERCISABLE
---- -------- -------- ------------ ------------- ----------- -------------
William F. Coyro, Jr. 40,000 $150,500 115,000 -- $224,500 $ --
Larry W. Granger 10,000 $ 79,200 60,000 10,000 $112,400 $41,800
Robert W. Gumber 7,000 $ 35,700 32,000 7,000 $ 47,960 $29,260
James M. Hoen 16,500 $136,625 35,000 9,000 $ 49,910 $45,525
Christoph A. Neut 19,000 $163,455 34,000 9,000 $ 63,325 $45,525
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
On May 25, 2005, Dr. Coyro entered into a three-year employment and
non-competition agreement (the "Agreement") with TechTeam that provided for his
employment as President and Chief Executive Officer of the Company. The
Agreement provided for a base annual salary of $360,000 per annum. The Agreement
also provided that Dr. Coyro was entitled to bonuses under the Company's Annual
Incentive Plan and Long-Term Incentive Plan. Under the Agreement, Dr. Coyro was
entitled to receive an individual medical insurance policy, as well as other
benefits made available to other employees and management of TechTeam. The
Agreement also provided certain covenants by Dr. Coyro not to compete with
TechTeam during the term of the Agreement and for two years thereafter. On
November 4, 2005, the Company announced that the Board had engaged a search firm
to find a replacement for Dr. Coyro. On February 3, 2006, Dr. Coyro ceased being
President and Chief Executive Officer. On April 26, 2006, the Board terminated
the Agreement for cause.
Christoph Neut, Vice President of Sales and Marketing for Europe, Middle
East, and Africa, is an employee of TechTeam Global NV/SA, the Company's Belgian
subsidiary. Mr. Neut has an employment contract with TechTeam Global NV/SA that
is similar in material aspects to the employment contracts for other employees
of TechTeam Global NV/SA.
On September 29, 2005, the Company entered into an employment contract with
Robert W. Gumber, Vice President of Operations Europe, Middle East, and Africa.
The contract provides that, from October 1, 2005 through December 31, 2006, Mr.
Gumber will be employed as an expatriate in Belgium in the role of Vice
President of Operations EMEA. Under the terms of the contract, Mr. Gumber will
earn a base salary of $225,000 and will participate in the Company's Annual
Incentive Plan and Long-Term Incentive Plan. As an expatriate, the Company will
also pay additional compensation $5,000 per month for his expatriate services,
as well as other benefits standard with expatriate service, including a housing
allowance that is not to exceed 4,000 euros per month. Until December 31, 2006,
Mr. Gumber can be terminated only for cause as defined in the agreement.
All executive officers of TechTeam have entered into Employment Agreements
Relating to Change of Control with TechTeam. These agreements provide these
executives, in the event of their involuntary termination after a
change-in-control, with (i) payments by TechTeam of 100% of his/her base annual
salary, (ii) accelerated vesting of all unvested options to purchase common
stock of TechTeam, (iii) employee benefits for an one-year period, and (iv) one
year of company-paid outplacement services. "Change of Control" is defined in
the agreement as (1) the sale of (a) all then outstanding shares of common stock
of TechTeam or (b) 51% of outstanding voting securities of TechTeam entitled to
vote generally in the election of the directors; or (2) the consummation of the
sale or other disposition of all or substantially all of the assets or
operations of TechTeam.
18
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board establishes the compensation plans and
specific compensation levels for all executive officers of TechTeam. Our
philosophy for the Company's total compensation and equity incentive package is
to promote the achievement of TechTeam's performance objectives, to ensure that
the executive's interests are aligned with stockholders in promoting the success
of TechTeam, and to provide compensation that attracts, retains and motivates
superior executive personnel. We believe that compensation and equity incentives
should be significantly influenced by performance. The Compensation Committee
met nine (9) times during 2005.
EXECUTIVE COMPENSATION PROGRAM. TechTeam's executive compensation program
consists of base salary, the Annual Incentive Plan, and the Long Term Incentive
Plan.
BASE SALARY. The base salaries for executives are targeted at competitive market
levels for their respective positions, levels of responsibility, their impact on
TechTeam, and their knowledge and experience. Base salaries for executives are
maintained at levels that the Compensation Committee believes, based upon its
own judgment and external data, are competitive with other companies of
comparable size and complexity.
ANNUAL INCENTIVE PLAN. The Committee believes executives should receive cash
bonus incentives based upon the attainment of high levels of corporate
performance during a fiscal year. The Executive Annual Incentive Plan ("AIP")
provides for a cash bonus to executive management (including named executive
officers and others) if certain performance metrics are reached. The metrics are
operating income (operating income, as reported in the Company's periodic
reports filed with the SEC), revenue, and individual objectives. Prior to the
start of a fiscal year, the Board of Directors sets targets for the Company's
operating income and revenue. Each officer's individual objectives are also set.
If eighty percent of the operating income target is achieved, a bonus pool of
25% of the adjusted net income of the Company (reported net income before
recognition of the expense and associated tax benefit of the bonus pool, less
net interest income or expense and the associated tax effect of net interest
income) is created. In 2005, each executive's target bonus was based on a
percentage of the executive's annual salary, which varied from 45% for the
President and Chief Executive Officer, 40% for the Chief Operating Officer, Vice
Presidents of Sales and Operations, and the Chief Financial Officer, and 25% for
other corporate officers. Each metric (operating income, revenue, and individual
objectives) is allocated a percentage of the officer's potential total bonus.
For example, executive officers' bonus is comprised of 60% from operating
income, 20% from revenue, and 20% from individual objectives. If the Company's
performance for operating income or revenue is exceeded, the respective portion
of the bonus is increased as provided in the Plan.
Executives of the Company earned an AIP bonus in 2005, which was paid in March
2006. While the Company did not fully attain its operating income target, it
exceeded its revenue target. Accordingly, executive bonuses were reduced from
their target bonuses. The Committee determined that the individual performance
of the Company's executive officers, other than CEO, warranted a bonus in excess
of the amount that would have been paid under the terms of the AIP. The bonus
amounts earned by the named executive officers are set forth in the Summary
Compensation Table.
LONG TERM INCENTIVE PLAN. In December 2003, the Board approved a Long-Term
Incentive Plan (the "LTIP"). Under the LTIP, awards of restricted stock are
based upon the attainment of the Company's operating income (operating income,
as reported in the Company's periodic reports filed with the SEC) targets for a
rolling three-year period. If the operating income goals, in aggregate, have
been met over the measured period, restricted stock will be granted to the
executive in a percentage of base salary ranging from 30% for the President and
Chief Executive Officer, 25% for the Chief Operating Officer, 20% for Vice
Presidents of Sales and Operations and the Chief Financial Officer, and 15% for
other corporate officers. If the operating income target, in aggregate, is
exceeded for the measured period, the amount of restricted stock is increased by
the percentage that aggregate operating income exceeded the aggregate target for
the measured period. The restricted stock granted under the LTIP cannot be
transferred and is subject to forfeiture unless the participant remains employed
by the Company for five (5) years after the date of issuance. The amount of
restricted stock awarded is determined by dividing the percentage of the
executive's salary by the fair market value of the Company's common stock, as
determined by the average closing price for thirty (30) trading days prior to
the grant date.
19
The Company exceeded its aggregate operating income target for 2004 and 2005.
Accordingly, executives of the Company earned, for the performance in 2005, an
award of restricted stock in 2006. A total of 42,306 shares of restricted stock
were awarded in March 2006.
Awards of performance stock may be awarded to participants for extraordinary
individual achievement during the year, regardless of the Company's achievement
of its annual goals. The performance stock granted under the LTIP cannot be
transferred and is subject to forfeiture unless the participant remains employed
by the Company for one (1) year after the date of issuance. No performance stock
was awarded in 2005.
The Committee can also award non-qualified stock options under the LTIP for
extraordinary achievements or as an employment incentive. In December 2005, the
Committee determined to award nonqualified options to employees of the Company.
Executive officers of the Company received an aggregate 90,000 stock options as
part of this grant.
CHIEF EXECUTIVE COMPENSATION. The Compensation Committee annually reviews and
approves the compensation of TechTeam's Chief Executive Officer. In May 2005,
the Company entered into a three year employment contract with Dr. Coyro, under
which Dr. Coyro's base salary from $330,000 to $360,000 based upon the Company's
performance, his skills and experience, and the competitive salaries for
comparable positions paid by companies of similar size. Based upon the Company's
performance for 2005, Dr. Coyro was paid $73,397 under the AIP, which did not
include any amount for Dr. Coyro's achievement of his individual objectives.
Based upon the terms of the LTIP, Dr. Coyro received a restricted stock award in
March 2006 of 11,137 shares.
COMPENSATION NOT QUALIFYING FOR TAX DEDUCTIBILITY. Section 162(m) of the
Internal Revenue Code provides, in general, that compensation to certain
individual executives during any year in excess of $1 million is not deductible
by a public company. The Committee believes that, given the range of salaries
and number of stock options of executive officers, the $1 million threshold will
not be reached by an executive officer of TechTeam in the near future.
Accordingly, the Committee has not considered what its policy regarding
compensation not qualifying for tax deductibility might be. The Committee will
assess this issue when it appears the threshold may be reached.
Respectfully Submitted,
G. Ted Derwa
Gregory C. Smith
Wallace D. Riley
REPORT OF THE AUDIT COMMITTEE
The Audit Committee represents and assists the Board in fulfilling its
responsibilities for general oversight of the integrity of TechTeam's financial
statements, TechTeam's compliance with legal and regulatory requirements, the
independent registered public accounting firm's qualifications and independence,
and the performance of TechTeam's internal audit function and independent
registered public accounting firm. The Audit Committee manages TechTeam's
relationship with its independent registered public accounting firm (which
reports directly to the Audit Committee). The Audit Committee has the authority
to obtain advice and assistance from outside legal, accounting, or other
advisors as the Audit Committee deems necessary to carry out its duties and
receives appropriate funding, as determined by the Audit Committee, from
TechTeam for such advice and assistance.
TechTeam's management is primarily responsible for TechTeam's internal
control and financial reporting process. TechTeam's independent registered
public accounting firm, Ernst & Young LLP, is responsible for performing an
independent audit of TechTeam's consolidated financial statements and issuing
opinions on the conformity of those audited financial statements with United
States generally accepted accounting principles, the effectiveness of TechTeam's
internal control over financial reporting, and management's assessment of the
internal control over financial reporting. The Audit Committee monitors
TechTeam's financial reporting process and reports to the Board on its findings.
20
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements with TechTeam's management.
2. The Audit Committee has discussed with the independent registered
public accounting firm the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU 380), as
modified or supplemented.
3. The Audit Committee has received the written disclosures and the
letter from the independent registered public accounting firm required
by Independence Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, "Independence Discussions with Audit
Committees") and has discussed with the independent registered public
accounting firm its independence.
4. Based on the review and discussions referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board, and
the Board has approved, that the audited financial statements be
included in TechTeam's Annual Report on Form 10-K for the fiscal year
ended December 31, 2005, for filing with the Securities and Exchange
Commission.
The foregoing report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, as amended, except to the extent the Company specifically
incorporates such report by reference therein.
Gregory C. Smith, Chair
Wallace D. Riley
Richard R. Widgren
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the past fiscal year, the Compensation Committee was comprised
solely of non-employee directors. No member of the Compensation Committee was an
officer or employee of TechTeam or any of its subsidiaries during the fiscal
year 2005. None of the executive officers of TechTeam has served on the board of
directors or on the compensation committees of any other entity of whose
officers have served either on the Board of Directors or on the Compensation
Committee of TechTeam.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND LITIGATION
From February 20, 2006 to April 23, 2006, the Company and a major customer
were engaged in a pilot program testing software that is intended to evaluate
and motivate help desk agents. The software is owned by an affiliate of Kim A.
Cooper, the Chairman of the Board of the Company. The pilot program involved
personnel of the Company but no significant out-of-pocket expense to the
Company.
As previously noted, on February 23, 2006, the Company was notified by
Costa Brava of its intent to nominate seven directors to replace the Company's
current Board of Directors. On February 27, 2006, TechTeam announced its
intention to contest the slate of nominees proposed by Costa Brava (the contest
between the two slates of nominees being the "Proxy Contest"). On or about
January 24, 2006, Costa Brava filed suit against TechTeam in the Court of
Chancery in the State of Delaware seeking access to certain of TechTeam's books
and records. On May 4, 2006, the Company entered into a Settlement Agreement
with Costa Brava ("Settlement Agreement") resolving the Proxy Contest and the
litigation, which Costa Brava agreed to dismiss with prejudice after the Annual
Meeting.
Under the terms of the Settlement Agreement, the Company agreed to nominate
four individuals from Costa Brava's slate of nominees: Kent Heyman, James A.
Lynch, Alok Mohan, and Andrew R. Siegel. Mr. Siegel is Senior Vice President at
Roark, Rearden & Hamot Capital Management LLC, an investment management firm
that is the general partner of Costa Brava Partnership III, L.P., which owns
9.0% of the
21
Company's common stock. Further, pursuant to the Settlement Agreement, the
Company agreed to reimburse Costa Brava up to $700,000 for their expenses
incurred as a result of the Proxy Contest and its request to inspect the
Company's books and records.
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on
TechTeam's common stock from January 1, 2000 through December 31, 2005 with that
of the NASDAQ Stock Market -- U.S. Index (the "NASDAQ U.S. Index") and the
NASDAQ Computer & Data Processing Services Stocks Index (the "NASDAQ Computer
Index") over the same period. The graph assumes that the value of the investment
in TechTeam's common stock, the NASDAQ U.S. Index, and the NASDAQ Computer Index
was $100 on January 1, 2000 and that all dividends were reinvested.
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Stockholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. This graph in no way reflects TechTeam's
forecast of future financial performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(PERFORMANCE GRAPH)
TOTAL RETURN INDEX
---------------------------------------------------------------
DEC 2000 DEC 2001 DEC 2002 DEC 2003 DEC 2004 DEC 2005
-------- -------- -------- -------- -------- --------
NASDAQ U.S. 100% 79% 55% 82% 89% 91%
NASDAQ COMPUTER 100% 81% 56% 73% 81% 83%
TECHTEAM GLOBAL 100% 140% 335% 315% 458% 453%
The stock price performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933, as amended, or
the Securities and Exchange Act of 1934, as amended, except to the extent
that Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under said Acts.
22
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
The deadline for submission of stockholder proposals pursuant to Rule 14a-8
under the Securities and Exchange Act of 1934, as amended ("Rule 14a-8"), for
inclusion in TechTeam's proxy statement for its 2007 Annual Meeting of
Stockholders is January 23, 2007. After April 7, 2007, notice to the Company of
a shareholder proposal submitted other than pursuant to Rule 14a-8 is considered
untimely, and the persons named in proxies solicited by the Board of Directors
of the Company for the 2007 Annual Meeting may exercise discretionary voting
power with respect to any such proposal. Proposals should be mailed to TechTeam
Global, Inc., to the attention of TechTeam's Secretary, Michael A. Sosin, 27335
W. 11 Mile Road, Southfield, Michigan, 48034.
OTHER MATTERS
Management of TechTeam knows of no other matters to be brought before the
Annual Meeting. If any other matters properly come before the Annual Meeting, it
is intended that the shares of common stock represented by proxy will be voted
with respect thereto at the discretion of the persons voting them.
By order of the Board of Directors
/s/ Michael A. Sosin
----------------------------------------
Michael A. Sosin
Vice President, General Counsel,
and Secretary
Dated: May 12, 2006
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TECHTEAM GLOBAL, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JUNE 14, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TECHTEAM GLOBAL, INC. AND WILL BE VOTED.
The undersigned hereby appoints William C. Brown and/or Marc J. Lichtman, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of TechTeam Global, Inc., a Delaware corporation
(the "Company") to be held at the Townsend Hotel, 100 Townsend Street,
Birmingham, Michigan at 10:00 a.m. E.D.T., June 14, 2006, and any adjournment(s)
or postponement(s) thereof, and to vote all shares of stock of the Company
standing in the name of the undersigned, with all the powers the undersigned
would possess if personally present at such meeting:
1. Election of directors of the Company:
Nominees: William C. Brown, Kent Heyman, John P. Jumper,
James A. Lynch, Alok Mohan, James G. Roche,
Andrew R. Siegel, and Richard R. Widgren.
/ / FOR all nominees listed above, except vote withheld from the
following nominees (if any):
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
2. Ratification of independent auditors for fiscal 2006:
/ / RATIFY the appointment of Ernst & Young, LLP as the Company's
independent registered public accounting firm.
/ / REJECT the appointment of Ernst & Young, LLP as the Company's
independent registered public accounting firm.
(Continues and to be signed on the reverse side)
3. In their discretion on such other matters as may properly come before the
meeting.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR ELECTION
OF THE DIRECTORS SET FORTH ABOVE AND TO RATIFY THE APPOINTMENT OF
ERNST & Young LLP.
This proxy card when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted for the proposal(s).
Copies of the Notice of Meeting dated May 12, 2006 and the Proxy Statement
dated May 12, 2006 have been received by the undersigned.
PLEASE DATE AND SIGN HERE
Dated: ________________________________
Name: ________________________________
PLEASE DATE, SIGN, AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE PROMPTLY.
/ / Please check here if you plan to
attend this meeting.