2006 Incentive Compensation Plan for Nurez Khimji
This agreement outlines the 2006 incentive compensation plan for Nurez Khimji, a senior manager at VeriChip Corporation. In addition to a base salary, Khimji is eligible for up to C$200,000 in incentive compensation based on achieving specific revenue and operational targets. The plan includes quarterly and annual bonuses tied to company and division performance, with payments subject to certain conditions and formulas. The agreement specifies how bonuses are calculated, the timing of payments, and the objectives required to earn them.
Exhibit 10.27
Memorandum
| To: | Nurez Khimji | April 20, 2006 | ||
| From: | Kevin McLaughlin | |||
| Re: | Senior Management Incentive Compensation Plan | |||
In addition to your base salary of C$157,500, we are pleased to offer you the following incentive compensation for the fiscal year ended December 31, 2006.
Your target incentive compensation is C$150,000 (plus a special Implanted Revenue incentive of an additional C$50,000 as listed below) and is based upon the achievement of specific objectives. These targets and the related incentive compensation are divided into three components – quarterly, annual and Implanted Revenue. The quarterly incentive compensation (C$75,000) rewards the achievement of budgeted revenues. The annual incentive compensation (C$75,000) rewards the achievement of specific objectives; and provides an incentive for exceeding budgeted revenues. The Implanted Revenue incentive bonus o(C$50,000) rewards you for the achievement specifically of Implanted Division revenue.
Quarterly Incentive Compensation
Your quarterly incentive compensation is calculated based upon the achievement of year-to-date revenue from all of VeriChip Corporation relative to the December 9, 2005 budget. Your quarterly incentive compensation will be calculated at the end of each fiscal quarter; is earned in the quarter to which it relates; and shall be paid, subject to available cash / stock, within 45 calendar days of the end of each quarter.
The following is the formula for your quarterly incentive compensation calculation:
(Year-to-Date Revenue to the end of the Fiscal Quarter) / (Annual Revenue Budget of $34,852,000) * (Target Incentive Compensation) * (% of Target Incentive Compensation) = Actual Quarterly Incentive Compensation
Specifically for the first quarter of 2006 your actual quarterly incentive compensation is:
US$6,441,000 / US$34,852,000 * C$75,000 * 50% = C$13,861
If year-to-date revenue to the end of any fiscal quarter does not exceed 95% of the year-to-date annual revenue budget no additional incentive compensation shall be paid. Payments of quarterly incentive compensation in the 2nd, 3rd and 4th quarters will be
reduced by the actual amount paid in previous quarters. The maximum amount that you can earn during 2006 from this quarterly incentive compensation is C$75,000
Annual Incentive Compensation
Your annual incentive compensation shall be calculated at the end of each fiscal year; is earned in the year to which it relates; and shall be paid within 60 calendar days of the end of the year.
a) Achievement of Specific Objectives
This portion of the annual incentive compensation pays a specific amount for the achievement of each specific objective. Partial payments will be considered extraordinary circumstances.
| Specific Objectives of Annual Incentive | % of Target Incentive Compensation | Specific Compensation | ||||
| Achievement of budgeted Canadian revenue of US$28,360,000 | 6.66 | % | C$ | 10,000 | ||
| Achievement of legacy operations (the former companies – eXI and Instantel) budgeted EBITDA of US$4,182,000 | 10 | % | C$ | 15,000 | ||
| Completion of VeriChip Initial Public Offering with proceeds in excess of US$25M (Gross) | 10 | % | C$ | 15,000 | ||
| Quarterly Financial Statements by 15th of next month | 6.66 | % | C$ | 10,000 | ||
| Orderly transition of Accounting functions to Ottawa To be completed by December 31, 2006 | 10 | % | C$ | 15,000 | ||
| All public filings completed on time | 6.66 | % | C$ | 10,000 | ||
| Sub-Total of Annual Incentive Compensation | 50 | % | C$ | 75,000 | ||
| Implanted Revenue in excess of US$4,000,000 | C$ | 25,000 | ||||
| Implanted Revenue in excess of US$6,000,000 | C$ | 25,000 | ||||
| Total | C$ | 125,000 | ||||
b) Exceeding Budgeted Revenues
This portion of the annual incentive compensation is calculated based upon exceeding annual revenue from legacy operations (the former companies – eXI and Instantel) relative to the December 9, 2005 budget
The following is the formula for this portion of your annual incentive compensation:
[(Actual Annual Revenue) / (Annual Revenue Budget of US$28,360,000) – 1] * (Target Incentive Compensation) * (multiplier of 2) = Actual Annual Incentive Compensation
Assuming that revenues are exceeded by 10% the following would be the calculation for this portion of your Actual Annual Incentive Compensation:
[US$31,196,000 / US$28,360,000 – 1] * C$150,000 * 2 = C$30,000
If Actual Annual Revenue does not exceed the Annual Revenue Budget no incentive compensation shall be paid. There is no maximum for this portion of the annual incentive compensation.
I look forward to working with you to achieve these performance targets.
