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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-12
TechTeam Global, Inc.
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SEC 1913 (02-02)
[TECH TEAM 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, May 25, 2005, at 10:00 a.m. local time.
PLACE BPS Corporate Training & Conference Center, 31301 Evergreen
Road, Beverly Hills, Michigan.
ITEMS OF 1) To elect directors;
BUSINESS
2) To ratify the appointment of Ernst & Young LLP as
TechTeam's independent auditors for the year 2005; and
3) To consider such other business as may properly come before
the 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
POSTPONEMENT date 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 March 28, 2005.
MEETING You are entitled to attend the meeting only if you were a
ADMISSION TechTeam stockholder as of March 28, 2005 or hold a valid
proxy for the annual meeting.
VOTING YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
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
April 4, 2005 Michael A. Sosin
Vice President, General Counsel,
and Secretary
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,
2004, ARE FIRST BEING MAILED ON OR ABOUT APRIL 18, 2005 TO STOCKHOLDERS
ENTITLED TO VOTE.
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
Required Vote and Board of Directors Recommendation......................... 8
Preferred Stock Director.................................................... 8
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.................. 11
Information about our Independent Auditors.................................. 11
Fees of Ernst & Young LLP for 2004................................. 12
Pre-approval Policies and Procedures............................... 12
Required Vote and Board of Directors Recommendation......................... 12
Stock Ownership by Principal Stockholders, Directors, and Management................. 12
Section 16(a) Beneficial Ownership Reporting Compliance..................... 14
Executive Management Compensation and Management Information......................... 14
Information regarding Executive Management.................................. 14
Summary Compensation Table.................................................. 15
Option Grants and Exercises................................................. 17
Option Grants in 2004.............................................. 17
Aggregated Option Exercises in 2004 and Year-End Value Table....... 17
Employment Contracts and Change of Control Agreements....................... 18
Report of the Compensation Committee on Executive Compensation....................... 18
Report of the Audit Committee........................................................ 20
Performance Graph.................................................................... 21
Compensation Committee Interlocks and Insider Participation.......................... 22
Certain Relationships and Related Transactions....................................... 22
Stockholder Proposals for 2005 Annual Meeting........................................ 22
Other Matters........................................................................ 22
2
TECHTEAM GLOBAL, INC.
27335 W. 11 MILE ROAD,
SOUTHFIELD, MICHIGAN 48034
(248) 357-2866
PROXY STATEMENT
The Board of Directors of TechTeam, Inc. is soliciting proxies for the
2005 Annual Meeting of Stockholders. 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, Inc. set March 28, 2005 as the record
date for the Annual Meeting. Stockholders of record who owned TechTeam's common
stock and preferred 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 8,797,671 shares of TechTeam's common stock outstanding
and 689,656 shares of TechTeam's Series A Senior Convertible Preferred Stock
("Preferred Stock") outstanding on the record date.
QUESTIONS AND ANSWERS
Q: WHEN AND WHERE IS THE ANNUAL MEETING?
A: TechTeam's 2005 Annual Meeting of Stockholders is being held on Wednesday,
May 25, 2005 at 10:00 a.m. at the BPS Corporate Training & Conference
Center, 31301 Evergreen Road, Beverly Hills, Michigan. Please visit
www.techteam.com for a map to the 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 March 28, 2005.
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 or Preferred Stock of TechTeam Global, Inc.
on the record date. This proxy statement describes proposals on which we
would like you, as a stockholder, to vote. It also gives you information
on 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 seven nominees to serve on our Board of Directors;
and
- The ratification of the appointment of Ernst & Young LLP to serve as
TechTeam's independent auditors for the year 2005.
Q: WHAT IS THE EFFECT OF SIGNING AND RETURNING MY PROXY CARD?
A: When you sign and return the proxy card, you appoint William F. Coyro, Jr.
and David W. Morgan as your representatives at the Annual Meeting. Dr.
Coyro and Mr. Morgan 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.
3
If you sign and return but do not indicate on the proxy card how you want
your votes cast, Dr. Coyro and Mr. Morgan will vote your shares FOR all of
the nominees for director, and FOR the ratification of Ernst & Young LLP
as TechTeam's independent accountants for the year 2005.
If a matter properly comes up for a vote at the Annual Meeting that is not
described in this proxy statement, Dr. Coyro and Mr. Morgan 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; or
- 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 broker nominee how to vote your shares, your broker nominee
may either use its discretion to vote your shares on "routine matters"
(such as election of directors) or leave your shares unvoted. For the
"non-routine matters," your broker nominee is not able to vote on such
matters.
We encourage you to provide instructions to your broker nominee by
completing the instruction card or proxy that it sends to you. This will
ensure that the broker 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.
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, 8,797,671 shares of common stock were outstanding
and 689,656 shares of preferred stock. Each outstanding share of common
stock and preferred 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 your 401(k)
account in the TechTeam Global 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. Withhold 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.
Q: WHO IS SOLICITING MY VOTE?
A: This proxy solicitation is being made and paid for by TechTeam Global,
Inc. 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,
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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 2004 ANNUAL REPORT ON FORM 10-K?
A: Stockholders may request another free copy from TechTeam Global, Inc.,
Attention: Investor Relations, 27335 W. 11 Mile Road, Southfield, MI
48034, calling 1-248-357-2866, or visiting our website at
http://www.techteam.com/investors/2004_10k.pdf. We will also
provide any exhibit to the 2004 Annual Report on Form 10-K 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 www.techteam.com/corpgov
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 www.techteam.com/corpgov.
BOARD INDEPENDENCE
The Board has determined that each of the nominees standing for election,
except the President and Chief Executive Officer, has no material relationship
with TechTeam (either directly or as a partner, stockholder, or officer of an
organization that has a relationship with TechTeam) and is independent within
the director independence standards of the NASDAQ Stock Market, Inc. ("NASDAQ")
as of the date of this proxy. Furthermore, the Board has determined that no
member of the Audit Committee, Compensation Committee, or Governance and
Nominating Committee has a material relationship with TechTeam (either directly
or as a partner, stockholder, or officer of an organization that has a
relationship with TechTeam) and is "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 at the Annual
Meeting, as TechTeam does not have staggered board terms. Each director will
serve until the 2006 Annual Meeting of Stockholders or until he or she is
succeeded by another qualified director who has been elected. As of the date of
this proxy statement, TechTeam's Bylaws provide that, until the Board of
Directors shall otherwise determine, the number of director positions shall be
ten. Nine of the current directors were elected by the Company's common and
preferred stockholders, and one was elected by ChrysCapital II, LLC, the
stockholder of the Company's Series A Senior Convertible Preferred Stock.
After careful consideration and at the recommendation of the Company's
Governance and Nominating Committee, the Board has decided to amend the Bylaws
to reduce the number of members of the Board of Directors to eight, effective as
of the Company's 2005 Annual Meeting of Stockholders. As a result, the Board has
nominated seven (7) individuals to stand for election at the Annual Meeting. Six
(6) of these nominees, Kim A. Cooper, William F. Coyro, Jr., G. Ted Derwa,
Wallace D. Riley, Gregory C. Smith, and Richard G. Somerlott, are current
members of the Board. The final nominee, Richard R. Widgren, was selected, in
part, based upon his qualifications to serve as an audit committee financial
expert. Mr. Widgren was recommended by William F. Coyro, Jr., the Company's
President and Chief Executive Officer. 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, stockholders will be electing seven (7) directors. Proxies
may not be voted for a greater number of persons than the number of nominees
(seven) named in this Proxy Statement.
The following is a description of the background of the persons who are
being nominated for election as directors of TechTeam.
KIM A. COOPER, 46, became a director in March 1996, and Chairman of the
Board in May 2003. Mr. Cooper is President and Chief Executive Officer of
Exceed, LLC, a technology consulting and services company, which he founded in
June 2003. Between February and June 2003, he served as an IT consultant. From
October 2002 through February 2003, Mr. Cooper served as President and Chief
Executive Officer of GlobalSim, Inc., a leading driver simulation software
company, during which time GlobalSim was reorganized and sold. From April 2000
through October 2002, Mr. Cooper was the Chief Operating Officer of Sorenson
Media, Inc., a prominent streaming media company. In January 1996, Mr. Cooper
founded and became the Chairman and Chief Executive Officer of Digital Harbor
International, Inc., a Java software development company. Mr. Cooper sold
Digital Harbor in September 1999. Mr. Cooper is on the Board of Directors of
Sento, Inc. (traded under the symbol "SNTO"). Mr. Cooper is the Chair of the
Board's Strategy and Investment Committee and a member of the Governance and
Nominating Committee.
WILLIAM F. COYRO, JR., 61, is President, Chief Executive Officer, and a
director of TechTeam. Dr. Coyro is the founder of TechTeam and he was Chairman
of the Board previously from its inception through February 2000. He was also
President and Chief Executive Officer of TechTeam from its inception through
December 1997, at which point he remained TechTeam's Chief Executive Officer
through December 1998. From February 2000 through August 2001, TechTeam employed
him as a consultant to management and the Board. Dr. Coyro is a member of the
Board's Strategy and Investment Committee.
G. TED DERWA, 66, became a director in February 2003. Mr. Derwa retired
from Ford Motor Company in 1999 after 36 years of service in various management
positions. Prior to his retirement in December 1998, Mr. Derwa was the Director
of the Technical Services Office with global responsibility for Ford Motor
Company's data centers, telecommunications, office automation, engineering
workstations, systems support, helpdesk, and information technology advanced
design and research. Mr. Derwa serves as the Chairman of the Board's
Compensation Committee and as a member of the Governance and Nominating
Committee.
WALLACE D. RILEY, 77, has served as a director of TechTeam from 1987 to
1988 and from 1993 to the present. Mr. Riley is an attorney at law and, since
July 2004, has been the managing partner of the firm of Wallace D. Riley &
Associates, PLLC. For the five preceding years, he was the President and Senior
Partner of the firm of Riley, Roumell & Connolly, P.C. He is the past President
of the State Bar of Michigan as well as past
7
President of the American Bar Association. He was a member of the Board of
Governors of the American Bar Association from 1979 through 1980 and from 1982
through 1985. Mr. Riley is a member of the Board's Compensation Committee and
Audit Committee.
GREGORY C. SMITH, 60, became a director of TechTeam in March 2001. In
February 2004, Mr. Smith became President and Chief Operating Officer of New
Center Stamping, Inc., an automotive supplier. Mr. Smith had been the Chief
Executive Officer, President, and Chairman of the Board of Directors of New
Center Stamping, Inc., for the five previous years. Between 1976 and 1988, he
was the Chairman and CEO of Wolverine Technologies, Inc., a building products
company traded on the NYSE. Mr. Smith is the Chairman of the Board's Audit
Committee and a member of the Compensation Committee.
RICHARD G. SOMERLOTT, 63, has been a director from TechTeam's inception.
Dr. Somerlott has been a practicing dentist and a managing partner of
Endodontics Associates Professional Corporation during the past five years. Dr.
Somerlott is the Chairman of the Governance & Nominating Committee and a member
of the Board's Audit Committee.
RICHARD R. WIDGREN, 62, is a nominee for director standing for election at
the 2005 Annual Meeting. 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 of 2001. From
April 2001 through August 2001, he was Chief Financial Officer of Presidion,
Inc. Between July 2000 and March 2001, Mr. Widgren served as a business
consultant assisting various clients on business management and profit
improvement projects. Between January 2000 and June 2000, he was Vice President
and Chief Financial Officer of Simplified Employment Services, Inc., an employee
leasing company. Previously, Mr. Widgren serves as Vice President -- Finance and
Corporate Controller of Kelly Services, Inc. Mr. Widgren is a member of the
Detroit Medical Center Board of Directors, where he serves as the chairman of
the Audit Committee.
REQUIRED VOTE AND BOARD OF DIRECTORS RECOMMENDATION
If a quorum is present, the seven nominees receiving the highest number of
votes will be elected to serve as a director until the 2006 Annual Meeting of
Stockholders or until he or she 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 NAMED NOMINEE.
PREFERRED STOCK DIRECTOR
ChrysCapital II, L.L.C. ("ChrysCapital"), the holder of all shares of
TechTeam's Series A Senior Convertible Preferred Stock, has the right, under the
Certificate of Designations applying to the Preferred Stock, to appoint one
director to the TechTeam Board of Directors. ChrysCapital has appointed Brahmal
Vasudevan as a director of TechTeam, to serve until his successor is duly
qualified and elected by the holders of the Preferred Stock or until his earlier
removal or resignation in accordance with the terms of the Certificate of
Designations. Mr. Vasudevan does not receive compensation in his capacity as a
director of the Company.
Brahmal Vasudevan, 37, currently serves as General Partner of ChrysCapital
II, L.L.C. and Managing Director of ChrysCapital Investment Advisors [S] Pte
Ltd., which manages and advises various ChrysCapital funds including
ChrysCapital II, L.L.C. Mr. Vasudevan has held both positions since 2000.
Between 1997 and 2000, Mr. Vasudevan was Director of Marketing at ASTRO, a
leading multi-channel DBS pay-TV operator in Southeast Asia. Mr. Vasudevan holds
an MBA from the Harvard Business School and graduated with first-class honors in
Aeronautical Engineering from Imperial College, University of London. Mr.
Vasudevan is a member of the Board's Strategy and Investment Committee.
8
BOARD MATTERS
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The Board held nine meetings in 2004. 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 described below. Each director attended at least 75% of
all Board and applicable Committee meetings, except for Mr. Vasudevan who was
present for 67% of all Board meetings and applicable Committee meetings.
GOVERNANCE AND STRATEGY AND
NAME OF DIRECTOR AUDIT COMPENSATION NOMINATING INVESTMENT
--------------------------------- ----- ------------ -------------- ------------
Kim A. Cooper X X**
William F. Coyro, Jr. X
G. Ted Derwa X** X
Peter T. Kross X
Conrad L. Mallett, Jr. X
Wallace D. Riley X X
Gregory C. Smith X** X
Richard D. Somerlott X X**
Ronald T. Wong X
Brahmal Vasudevan X
NUMBER OF MEETINGS IN 2004 7 7 3 6
X = Committee member; ** = Chair.
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 as
directors. The Board has determined that both Gregory C. Smith and Richard R.
Widgren qualify as "audit committee financial experts" as defined by Item 401(h)
of Regulation S-K of the Securities Exchange Act of 1934, as amended. Mr. Smith
is the Chair of the Audit Committee.
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, including succession planning,
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 18.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee identifies 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
is 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 director's 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 and 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"), including written consent of the person proposed to be nominated to be
named in the proxy statement as a nominee and to serve 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 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 expects its directors to attend the Annual Meeting. At the
2004 Annual Meeting, all directors were present except Mr. Smith and Mr.
Vasudevan.
DIRECTOR COMPENSATION
The following table provides information on TechTeam's compensation and
reimbursement practices during fiscal 2004 for non-employee directors.
Monthly retainer $ 1,500
Monthly retainer for service as Chairman of the Board $ 5,000
Fee for each committee meeting attended $ 600
Additional fee for each committee meeting chaired $ 600
Director stock awards 100 shares per Board
meeting attended
Annual Director stock option award on last business day of February 10,000
Reimbursement for expenses attendant to Board membership Yes
From May 2004 through July 2004, the monthly retainer and fees related to
committees were reduced 10%, in order to support the Company's cost containment
efforts. Director 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, and Brahmal Vasudevan did
not receive any compensation for their Board activities.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected Ernst & Young LLP to serve as TechTeam's
independent auditors for the fiscal year ending December 31, 2005. The
Stockholders are asked to ratify the selection at the Annual Meeting.
Representatives of Ernst & Young LLP 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 LLP ("Ernst & Young"), or its predecessors, have audited our
consolidated financial statements since TechTeam became a public company in
1987. As our independent auditors,
11
Ernst & Young will audit our consolidated financial statements for fiscal 2005
and perform audit-related services in connection with various accounting and
financial reporting matters. Ernst & Young also performs for TechTeam certain
non-audit services 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 provided by Ernst & Young is
compatible with maintaining Ernst & Young's independence pursuant to the auditor
independence rule of the SEC.
FEES OF ERNST & YOUNG FOR 2004
The aggregate fees for professional services by Ernst & Young in 2004 and
2003 were as follows:
TYPE OF FEES 2004 2003
------------------------------- ----- -----
(In thousands)
Audit Fees..................... $ 402 $ 310
Audit-Related Fees............. 49 95
Tax Fees....................... 111 236
----- -----
Total.......................... $ 562 $ 641
===== =====
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 review of financial
statements included in Forms 10-Q, 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 must be approved in advance by the Audit Committee. 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 engage 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS TECHTEAM'S INDEPENDENT AUDITOR FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2005
STOCK OWNERSHIP BY PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT
This table shows, as of March 28, 2005, how many shares of our common
stock are beneficially owed by (i) any persons who have reported or are 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 Dimensional Fund Advisors, Inc., Primarius Capital, Costa Brava
Partnership III, Kennedy Capital Management, and AW Asset Management is based
upon their Schedule 13G filings in February 2005.
12
PERCENTAGE OF
NUMBER OF SHARES ACQUIRABLE WITHIN OUTSTANDING
NAME BENEFICIALLY OWNED(1) 60 DAYS COMMON STOCK(1)
------------------------------------- --------------------- ----------------- ---------------
Dimensional Fund Advisors, Inc. 764,934 8.7
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
ChrysCapital II, L.L.C. 689,656(2) 7.3
Third Floor, Les Cascades
Edith Cavell Street
Port Louis, Mauritius
Primarius Capital, LLC 582,782 6.6
One Montgomery, Suite 330
San Francisco, CA 94104
Costa Brava Partnership III L.P. 544,105 6.2
68 Harvard Street, 3rd Floor,
Brookline, MA 02445
Kennedy Capital Management 527,590 6.0
10829 Olive Boulevard
St. Louis, MO 63141
AW Asset Management, L.L.C. 518,853 5.9
535 Madison Avenue, 26th Floor,
New York, NY 10022
Kim A. Cooper 10,125 100,000 1.2
William F. Coyro, Jr. 162,898 95,000 2.9
G. Ted Derwa 4,000 30,000 **
Larry W. Granger 15,750 45,000 **
Robert W. Gumber 4,367 22,000 **
James M. Hoen 9,345 37,500 **
Peter T. Kross 88,700 10,000 1.1
Conrad L. Mallett, Jr. 2,351 30,000 **
Christoph A. Neut 5,024 39,000 **
Wallace D. Riley 81,300 90,000 1.9
Gregory C. Smith 35,900 40,000 **
Richard G. Somerlott 87,119 100,000 2.1
Richard R. Widgren 750 -0- **
Ronald T. Wong 5,765(3) 60,000 **
Current directors and named executive
officers as a group (13 persons) 12.8
** 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 such exercise are deemed to be outstanding securities of the
class owned by that stockholder but are not deemed to be outstanding for
the purpose of computing the percentage owned by any other person.
13
(2) ChrysCapital II, L.L.C. holds 689,656 shares of Series A Senior
Convertible Preferred Stock which is convertible to common stock beginning
April 8, 2004. Mr. Vasudevan is the director appointed by ChrysCapital II,
L.L.C. pursuant to the terms of the Certificate of Designations creating
the Preferred Stock.
(3) Includes 565 shares held by Mr. Wong's wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of the filings with the Securities and Exchange
Commission 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,
during fiscal 2004 except one Form 4 was filed late by each William F. Coyro,
Jr., 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 July 27,
2004, to report stock options granted on July 9, 2004; and one Form 4 was filed
late by Christoph A. Neut on July 27, 2004, to report stock options granted on
July 16, 2004.
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 not otherwise described above.
PETER S. BRIGHAM, 45, President and Chief Executive Officer of Digital
Support Corporation. Mr. Brigham joined TechTeam on December 31, 2003,
contemporaneously with the Company's acquisition of Digital Support Corporation.
Mr. Brigham has been the President and Chief Executive Officer of Digital
Support Corporation for the past five years.
LARRY W. GRANGER, 59, 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.
ROBERT W. GUMBER, 56, 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, 35, 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.
JAMES M. HOEN, 37, 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.
MARC J. LICHTMAN, 37, Vice President of Accounting Operations and Chief
Accounting Officer. Mr. Lichtman joined TechTeam in December 2003 as Global
Corporate Controller and was promoted to 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.
DAVID W. MORGAN, 46, Vice President, Chief Financial Officer, and
Treasurer. Mr. Morgan began work with TechTeam in June 2002. From July 2001
through May 2002, he was Vice President, Chief
14
Financial Officer, and Treasurer of Entivity, Inc., a software development
company. From October 1998 through December 2000, Mr. Morgan served as Vice
President, Chief Financial Officer, and Treasurer of Clover Technologies, Inc, a
systems integration subsidiary of Ameritech, Inc.
CHRISTOPH A. NEUT, 38, 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 assumed his current
responsibilities in September 2003.
JEFFERY J. RUFFINI, 44, 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 assumed his current responsibilities in September 2003.
MICHAEL A. SOSIN, 45, 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.
JEANNETTE L. WHITE, 44, President and Chief Executive Officer of Sytel,
Inc. Ms. White joined TechTeam in January 2005, contemporaneously with the
Company's acquisition of Sytel, Inc. Ms. White has been President and Chief
Executive Officer of Sytel, Inc. since 1987.
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, 2004, and their compensation for 2002, 2003, and 2004.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- -------------
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS #(2) (3)
---------------------------- ---- ---------- ----------- ------------- ------------
William F. Coyro, Jr. 2004 $ 329,365 $ 218,592 40,000 $ 21,734
President and Chief 2003 320,269 75,000 75,000 21,608
Executive Officer 2002 275,000 -- -- 17,967
Larry W. Granger 2004 $ 225,000 $ 132,480 25,000 $ --
Chief Operating Officer 2003 165,577 -- 30,000 --
2002 5,769 -- 15,000 --
Christoph A. Neut(4) 2004 $ 224,220 $ 113,033 15,000 $ 16,136
Vice President of Sales and 2003 203,120 24,600 15,000 13,146
Marketing EMEA 2002 129,309 20,945 15,000 7,314
James M. Hoen 2004 $ 199,615 $ 117,760 15,000 $ 612
Vice President of Sales and 2003 192,500 25,000 15,000 3,160
Marketing North America 2002 171,769 -- 15,000 2,405
Robert W. Gumber 2004 $ 187,692 $ 110,891 15,000 $ 35,193
Vice President of Operations 2003 34,615 -- 21,000 6,440
EMEA 2002 -- -- -- --
15
(1) Amounts reported in this column for 2004 are for bonuses earned for
performance under the Company's Executive Annual Incentive Plan during
2004, but were not paid until 2005.
(2) Comprised of stock options granted under TechTeam's 1990 Nonqualified
Stock Option Plan.
(3) For the named executive officers, this column includes the following
payments by TechTeam in the years indicated.
401(K) TERM LIFE HEALTH EXPATRIATE BELGIAN
COMPANY INSURANCE INSURANCE EXPENSES BENEFITS
NAME YEAR MATCH PAYMENT PREMIUMS (a) (b) TOTAL
--------------------- ---- --------- --------- --------- ---------- --------- --------
William F. Coyro, Jr. 2004 $ 173 $ 860 $ 20,701 n/a n/a $ 21,734
2003 4,415 806 16,387 n/a n/a 21,608
2002 3,078 n/a 14,889 n/a n/a 17,967
Larry W. Granger 2004 $ -- $ -- $ -- n/a n/a $ --
2003 -- -- -- n/a n/a --
2002 -- -- -- n/a n/a --
Christoph A. Neut 2004 $ 11,694(c) $ -- $ 137 n/a $ 4,305 $ 16,136
2003 9,024(c) -- 122 n/a 4,000 13,146
2002 4,387(c) -- 88 n/a 2,839 7,314
James M. Hoen 2004 $ 462 $ 150 $ -- n/a n/a $ 612
2003 3,045 115 -- n/a n/a 3,160
2002 2,405 n/a -- n/a n/a 2,405
Robert W. Gumber 2004 $ 462 $ -- $ -- $ 34,731 n/a $ 35,193
2003 -- -- -- 6,440 n/a 6,440
2002 -- -- -- -- n/a --
(a) Mr. Gumber is a citizen of the United States working in Belgium. As
part of the employment arrangement, starting in November 2003,
TechTeam pays for his automobile and housing expenses in Belgium.
(b) Includes amounts paid for benefits particular to TechTeam's
subsidiary in Belgium, TechTeam Global NV/SA, including luncheon
vouchers and representation allowances.
(c) Represents the amount paid by TechTeam Global, NV/SA toward a
retirement plan for Mr. Neut.
(4) Mr. Neut's 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. His 2002 compensation is reported in U.S. Dollars
based upon the prevailing exchange rate from euros to U.S. Dollars on
March 19, 2003 of $0.88 per euro.
(5) The named executive officers also earned a restricted stock award pursuant
to the Company's Long-Term Incentive Plan during 2004. The restricted
stock was awarded on March 14, 2005 based upon a stock price of $11.50.
Dr. Coyro and Messers Granger, Neut, Hoen and Gumber received 11,880,
6,750, 5,024, 4,800, and 4,320 shares of restricted stock, respectively.
These shares of restricted stock vest five years after the date of grant
and are subject to forfeiture if they are not employed by the Company at
vesting.
16
OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to grants of stock
options during the year ended December 31, 2004 to the individuals named in the
Summary Compensation Table above.
OPTION GRANTS IN 2004
-----------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SHARES OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXPIRATION PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE DATE ----------------------------------
NAME GRANTED(1) IN YEAR PRICE (MM/DD/YR) 5%(2) 10%
--------------------- ----------- ------------- -------- ---------- -------------- ----------------
William F. Coyro, Jr. 40,000 9.95% $ 9.00 7/09/2014 $ 226,402 $ 573,747
Larry W. Granger 25,000 6.22% $ 9.00 7/09/2014 $ 141,501 $ 358,592
Robert W. Gumber 15,000 3.73% $ 9.00 7/09/2014 $ 84,901 $ 215,155
James M. Hoen 15,000 3.73% $ 9.00 7/09/2014 $ 84,901 $ 215,155
Christoph A. Neut 15,000 3.73% $ 9.06 7/16/2014 $ 86,367 $ 216,590
(1) All of the options reflected in the table were granted under TechTeam's
2004 Incentive Stock Award 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.
AGGREGATE OPTION EXERCISES IN 2004 AND YEAR-END VALUE TABLE
-----------------------------------------------------------------------------------------------------------------
UNEXERCISABLE
EXERCISABLE NUMBER OF
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS NOT IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT VESTED AT DECEMBER 31, 2004
ON VALUE DECEMBER 31, DECEMBER 31, ----------------------------
NAME EXERCISE REALIZED 2004 2004 EXERCISABLE UNEXERCISABLE
--------------------- -------- ---------- ------------ ------------- ----------- -------------
William F. Coyro, Jr. 25,000 $ 108,750 115,000 -- $ 224,550 $ --
Larry W. Granger -- $ -- 45,000 25,000 $ 100,250 $ 99,550
Robert W. Gumber -- $ -- 22,000 14,000 $ 47,440 $ 58,780
James M. Hoen 10,500 $ 61,975 27,500 23,000 $ 78,755 $ 122,770
Christoph A. Neut 9,000 $ 53,630 29,000 23,000 $ 93,085 $ 122,770
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Dr. Coyro has entered into a two year employment and non-competition
agreement (the "Agreement") with TechTeam that provides for his employment as
President and Chief Executive Officer of TechTeam. The Agreement was executed on
January 9, 2003 and provides for a base annual salary of $330,000. As the
two-year term has expired, the Agreement is currently terminable without cause
by either party with 60 days prior notice. The Agreement also provides that Dr.
Coyro is entitled to a bonus at the discretion of the Compensation Committee of
the Board or under the Company's bonus plan for senior management. Under the
Agreement, Dr. Coyro is entitled to receive an individual medical insurance
policy, as well as other benefits made available to other employees and
management of TechTeam. In the event of a change of control, he would be
entitled to payment of one year's salary and other benefits as set forth below.
The Agreement also provides certain covenants by Dr. Coyro not to compete with
TechTeam during the term of the Agreement and two years thereafter.
17
Christoph Neut, Vice President of Sales and Marketing for Europe, Africa,
and the Middle East, 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.
Peter S. Brigham, President and Chief Executive Officer of Digital Support
Corporation, entered into a two-year employment agreement with Digital Support
Corporation effective from December 31, 2003 and provides a base salary of
$175,000. During the term of the agreement, Mr. Brigham may not be terminated
except for cause as defined in the agreement. After December 31, 2005, Mr.
Brigham becomes an "at will" employee and both parties have the right to
terminate the employment relationship without cause. Under the Agreement, Mr.
Brigham is entitled to receive other benefits made available to other employees
and management of Digital Support Corporation. The Agreement also provides
certain covenants by Mr. Brigham not to compete with TechTeam during the term of
the Agreement and two years thereafter.
Jeannette L. White, President and Chief Executive Officer of Sytel, Inc.,
entered into a one-year employment agreement with Sytel, Inc. effective from
January 3, 2005 through December 31, 2005, with a base salary of $225,000.
During the term of the agreement, Ms. White may not be terminated except for
cause as defined in the agreement. After December 31, 2005, Ms. White becomes an
"at will" employee and both parties have the right to terminate the employment
relationship without cause. Under the Agreement, Ms. White is entitled to
receive other benefits made available to other employees and management of
Sytel, Inc. The Agreement also provides certain covenants by Ms. White not to
compete with TechTeam for a period of four years after the execution of the
agreement.
Effective March 17, 2004, all executive officers of TechTeam, with the
exception of Mr. Brigham and Ms. White, 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. Mr. Lichtman entered into an Employment Agreement
Relating to Change of Control before he became an executive officer, which is
substantially similar to the agreements in place for executive officers, except
it provides him with 50% of his base annual salary. This agreement is still in
effect.
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 total compensation and equity incentive package is to promote the
achievement of TechTeam's performance objectives, 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 seven
(7) times during 2004.
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
18
(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 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. If the operating
income target is not met, there is no bonus. Each executive's target bonus is
based on a percentage of the executive's annual salary, which varies 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, the CEO's 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 2004, which was paid in
March 2005. The Company exceeded its operating income target by 38% and its
revenue target by 4%. Accordingly, executive bonuses exceeded their target
bonuses. 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 the aggregate operating income exceeded the aggregate target for
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 the thirty (30) day period prior to
issuance.
The Company exceeded its operating income target by 38%. Accordingly,
executives of the Company earned, for the performance in 2004, an award of
restricted stock in 2005. A total of 45,854 shares of restricted stock were
awarded in March 2005.
Awards of performance stock are 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 2004.
The Committee can also award non-qualified stock options under the LTIP
for extraordinary achievements or as an employment incentive. In July 2004, the
Committee determined an award of non-qualified options to employees of the
Company was an appropriate incentive for the Company's employees. Executive
officers of the Company received 180,000 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 2004,
the Committee determined Dr. Coyro's base salary of $330,000 remained
appropriate based upon the Company's performance, his skills and experience, and
the competitive salaries for comparable positions paid by companies of similar
size. The Committee conducted a formal annual evaluation of Dr. Coyro, as the
Chief Executive Officer, which serves as a basis for evaluating his
compensation. In the review process, the Committee determined that Dr. Coyro's
performance for 2004 had met or exceeded all of his objectives for 2004
including, but not limited to, growing the Company's operating income and
revenue, and implementing an offshore service offering. Based upon Dr. Coyro and
the Company's fine performance for 2004, the Committee determined
19
the cash bonus under the AIP of $218,592 and the restricted stock award of
11,880 shares were fair and appropriate compensation.
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 is responsible for providing independent, objective
oversight of the Company's financial reporting process on behalf of the Board of
Directors. The Audit Committee acts under a written charter adopted by the Board
of Directors in June 2000, and modified effective March 20, 2001 and March 11,
2003. In accordance with the Audit Committee Charter, the Committee has sole
authority to appoint, retain, fix the compensation of, and oversee the work of
TechTeam's independent auditors.
Management has the primary responsibility for the financial statements and
reporting process, including the system of internal controls, and for the
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States. The independent auditors are
responsible for performing an independent audit of the Company's financial
statements in accordance with auditing standards generally accepted in the
United States and expressing an opinion as to their conformity with accounting
principles generally accepted in the United States. The Committee is responsible
to monitor and oversee these processes. During fiscal 2004, the Audit Committee
held seven meetings.
In fulfilling its oversight responsibilities, the Committee has reviewed
the audited financial statements in the Annual Report on Form 10-K, and held
discussions with both management and with the independent auditors regarding the
audited financial statements. Management has represented to the Audit Committee
that TechTeam's consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United States.
The Committee has discussed with the independent auditors matters required
to be discussed by Statement on Auditing Standards No. 61, and other
professional standards, including the propriety of the independent auditors
providing non-audit related services to the Company. These discussions included
a review of the quality, not just the acceptability of accounting principles
used, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements. The Committee also reviewed with the
independent auditor, their judgments as to the quality, not just the
acceptability, of accounting principles used. The Audit Committee received
written disclosures from the independent auditors as required by Independence
Standard No. 1 (Independence Discussions with Audit Committees). The Committee
also discussed with the independent auditors the auditor's independence from
management and TechTeam. The Audit Committee also considered the compatibility
of non-audit services with the auditor's independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2004, as filed with the Securities and
Exchange Commission.
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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, except to the extent the Company specifically incorporates such
report by reference therein.
Respectfully Submitted,
Wallace D. Riley
Gregory C. Smith, Chair
Richard G. Somerlott
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on
TechTeam's common stock from December 31, 1999 through December 31, 2004 with
that of the NASDAQ Stock Market -- U.S. Index ("NASDAQ U.S. Index") and the
NASDAQ Computer & Data Processing Services Stocks Index ("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 December 31, 1999 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 1999 DEC 2000 DEC 2001 DEC 2002 DEC 2003 DEC 2004
-------- -------- -------- -------- -------- --------
NASDAQ U.S. 100% 60% 48% 33% 49% 54%
NASDAQ Computer 100% 46% 37% 25% 34% 37%
TechTeam Global 100% 46% 64% 154% 145% 211%
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.
21
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 2004. 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 AND RELATED TRANSACTIONS
Dr. William F. Coyro, Jr.'s son, William F. Coyro, III, is an employee of
the Company and serves as a Project Manager. In fiscal 2004, William F. Coyro,
III earned $66,083 in salary. He received no other compensation.
Jeannette L. White's brother, Edward Hahm is President and a majority
shareholder in Hahm Information Systems, Inc., which has entered into a
Consulting Agreement for one year with Sytel, Inc. to provide sales and
marketing services. The contract value is $120,000. Ms. White's minor son owns
25% of Hahm Information Systems, Inc.
STOCKHOLDER PROPOSALS FOR 2005 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 2005 Annual Meeting of
Stockholders is December 26, 2005. In addition, TechTeam's Bylaws specify
procedures for notifying TechTeam of nominations for director and other business
to be properly brought before any meeting of stockholders by providing notice
not less than 90 days (February 24, 2006), nor more days than 120 days, prior to
the date of the 2005 Annual Meeting. 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 matter to be brought before the
Annual Meeting, which is not referred to in the Notice of Annual Meeting. If any
other matters properly come before the Annual Meeting, it is intended that the
shares of common stock represented by the proxy will be voted with respect
thereto in accordance with the judgment 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: April 4, 2005
22
TECHTEAM GLOBAL, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 25, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TECHTEAM GLOBAL, INC. AND WILL BE VOTED.
The undersigned hereby appoints William F. Coyro, Jr. and/or David W. Morgan, 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 in the BPS Corporate Training & Conference Center,
31301 Evergreen Rd., Beverly Hills, Michigan at 10:00 a.m. E.D.T., May 25, 2005,
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: Kim A. Cooper; William F. Coyro, Jr.; G. Ted Derwa; Wallace D. Riley;
Gregory C. Smith; Richard G. Somerlott; 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 2004:
/ / RATIFY the appointment of Ernst & Young, L.L.P. as the Company's
independent auditors.
/ / REJECT the appointment of Ernst & Young, L.L.P. as the Company's
independent auditors.
(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,
L.L.P.
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 April 4, 2005 and the Proxy Statement
dated April 4, 2005 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.