Exhibit 10.74
 

 
Incentive and Recognition Policy

To: Executive Management
From: Compensation Committee
Date:  March 7, 2005

Re: 2005 Incentive and Recognition Policy

The Compensation Committee recognizes the significantly improved condition of
the Company achieved by this management team over the past 12 months, both in
terms of financial health and in terms of prospects for the future. While
genuinely appreciated, there remains much more to be achieved. This policy is
designed to strongly motivate senior management to achieve goals that, in the
judgment of the Compensation Committee, are important to the long-term success
of the Company. The intent is to motivate the executive team reach for the best
performance and result for the Company and its shareholders.

The six factors that will be considered in determining management bonuses are
(in no order of importance and in no order of likelihood of success):

 
1.
Earnings per share for the year

 
2.
EBITDA for the year (i.e. earnings per share before interest, taxes,
depreciation and amortization)

 
3.
NASDAQ national market listing

 
4.
Improved value in or transaction regarding the Company’s investment in Digital
Angel

 
5.
Valuable VeriChip transaction or VeriChip license

 
6.
Revenue from VeriChip

The compensation committee recognizes that there may be situations where the
long term best interest of the company and its shareholders may be in conflict
with the short term achievement of a goal set out in this plan. In those rare
situations, it is the clear intention of this committee that the executive team
takes the initiative to come to the committee for consideration. It is clear
that the primary responsibility of all the executives of the company is to
perform their obligations and duties to the company and its shareholders without
regard to personal short term gain. Moreover, recognizing that accounting
charges occasionally do not reflect operational achievements (such as non-cash
charges), such amounts would generally be excluded from calculation (as
determined by the compensation committee at the time any bonuses would be
calculated).

 

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2                                            March 7, 2005

Summary of Calculation of Bonus
 
Each executive officer earns points for meeting or exceeding the goals as set
forth in the table below. The points assigned reflect the seniority of the
officer as well as the anticipated involvement of that officer in effecting the
goal.

Executive Management: Scott Silverman, Kevin McLaughlin Michael Krawitz, Evan
McKeown
 

 
Silverman
McLaughlin
Krawitz
McKeown

Positive EPS (for the year)
5
2
1
3
Positive EBITDA (for the year)
5
1.5
1
2
Nasdaq national market listing
5
0.5
3
1
DA transaction: EITHER a transaction that yields [omitted for confidentiality]
to Applied Digital OR maintain/improve
stock price;
5
1
4
3
(A) VeriChip transaction [omitted for confidentiality] OR (B) 50% of points for
major license [omitted for confidentiality]
5
2
4
2
VeriChip Corp. revenue (including eXI): 20% of points for each $2.5MM above
$7.5MM (i.e. bonus would start at $10MM)
5
5
1
1
 
 
 
 
 
 
30
12
14
12
Point Value
       
$50,000
                 
Notes:
       
No officer can earn more than 100% of points listed for that item
     
EPS and EBITDA are determined after giving effect to any bonuses (i.e. EPS will
only be considered
positive if, after payment of any bonuses or expected payment of bonuses, EPS is
positive).
Kevin McLaughlin's plan may be modified in whole or in part at discretion of
comp committee if
he becomes full-time CEO of VeriChip
DA Value is determined by the Compensation Committee based on the ten trading
days preceding
the date hereof and the ten trading days preceding the date the bonus is
determined, with any
adjustments the compensation committee reasonably deems appropriate.

2

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3                                             March 7, 2005

Senior Management: Lorraine Breece

 
Breece
National Market listing
3
404 - No material weakness
4
Implement 404 procedures
4
Timely SEC filings
4
Improve quality of filings
2
Acquisitions:
100% if any acquisitions (excl. eXI)
1
DA transaction:
EITHER
a transaction that yields [omitted for confidentiality] to Applied Digital
OR
maintain/improve stock price;
1
VeriChip transaction
4
 
23
   
Point Value
 
$3,000
     
NOTES:
 
Bonus may be increased or decreased by 20% for other factors, as determined by
executive management
 
Bonus may be increased or decreased by 20% for overall financial performance
 
No officer can earn more than 100% of points listed for that item
 

To the extent of any ambiguity or need for interpretation, the Compensation
Committee shall have authority, in its sole discretion, to make final
determinations. This incentive plan does not create a contract of employment or
otherwise bind the Company to employ the named officer. If the officer is
terminated for cause or resigns (without good cause) prior to the payment of any
bonus, then no portion of the bonus shall be payable without the consent of the
Compensation Committee which it may exercise in its sole discretion. If the
named executive is terminated not for cause (or terminates employment with good
reason), the Compensation Committee will make a pro rata adjustment based on the
percentage of the goal achieved before the departure.
 
 
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