Sample Business Contracts

Severance Agreement - TASER International Inc. and Malcolm Sherman

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                           [TASER INTERNATIONAL LETTERHEAD]

May 26, 2000

Malcolm Sherman
9068 E. Hillery Dr.
Scottsdale, AZ 85260

Dear Malcolm,

This letter is to confirm our previous discussions regarding your pending
retirement as a full time employee of TASER International.

-    As we discussed, we would like you to work directly with Tom Smith to train
     him to maintain the current export customer base during the time between
     now and your formal retirement on June 30, 2000.

-    The company will continue to pay your normal salary  and car allowance up
     through June 30, although your work schedule between now and that time will
     be at your discretion in order to effectively train Tom and close any
     pending deals.

-    After June 30, the company will pay your vacation time of 4 weeks in the
     month of July. These payments will be made on a biweekly basis concurrent
     with our normal payroll.

-    Your outstanding balance of non-reimbursed expenses (approximately $30,000)
     will be repaid in full on a biweekly basis starting on August 15. These
     payments will be of the same amount as your current salary plus car
     allowance, paid on a biweekly basis concurrent with our payroll

-    You will be asked to continue to serve on the board of directors and as an
     active significant shareholder. As you are aware, we do not remunerate our
     board members with cash compensation. However, the company will extend your
     current stock options (20,000 shares) for an additional 5 years after your
     formal retirement (i.e. Expiration date of 7/1/2005). All of these options
     shall be considered vested as of June 30, 2000 if they have not already
     vested prior to that time.

-    Further, the company shall work with you as an independent contractor
     (effective May 27th, 2000) in certain foreign countries. Specifically, you
     shall be considered the exclusive foreign agent for the countries of:

          -    India
          -    Nepal
          -    Sri Lanka

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        -    BANGLADESH
        -    UKRAINE
        -    JORDAN
        -    ISRAEL

        For a period of 12 months (i.e. Through June 30, 2001), these countries
        shall be reserved for you, operating as an independent contractor, to
        close an exclusive distribution deal. You will be paid a 10% commission
        for all sales in these countries for the period of time that you remain
        the exclusive agent. This 10% commission shall not include the $20,000
        deposit already received from Jordan, but shall include any additional
        sums received from the distributor in Jordan. Commissions will be paid
        to Sherman as payments are received by TASER International regardless of
        shipping dates as listed on purchase orders. Sales prices offered to
        Sherman during the course of his appointment as "exclusive agent" shall
        be equal to the best of prices offered to any other exclusive agreement
        granted by the company. In those instances which requires overages in
        billing, i.e. over the export selling price of TASER, these amount are
        to be forwarded to third parties for "commissions". TASER International,
        Inc, Agrees to forward via wire transfer or company check to such
        accounts as directed upon instructions from Sherman after these funds
        have been secured. Sherman's 10% commission is based on the net product
        prices as given to Sherman by TASER (less freight and miscellaneous
        charges). Once payment of commissions or overages has been remitted as
        instructed by Sherman, TASER shall be released of all liability
        associated with the specific transactions.

        In order to maintain your exclusive agency for these areas, the
        following performance criteria must be met (the numbers in each column
        represent the number of ADVANCED TASERs sold within the territory):

        Country        3/30           3/30           3/30           3/30           3/30           3/30
                       2001           2002           2003           2004           2005           2006
        India          500            600            720            864            1036           1244
        Ukraine        300            360            432            518             622            748
        Sri Lanka      100            120            144            172             208            248
        Bangladesh     200            240            288            346             414            498
        Nepal           50             60             72             86             104            124
        Jordan         200            240            288            346             414            498
        Israel         200            240            288            346             414            498

        The sales in each column represent sales in the 12 calendar months
        proceeding the date atop the column. Should sales not meet or exceed
        this number, the exclusivity will expire without notice and the company
        will have the option to pursue other sales opportunities in those
        markets without further compensation due.

        All inquiries from these territories will be forwarded to Sherman
        directly, and no pricing information shall be given to inquiries without
        Sherman's prior consent.

-    Under the terms of this representation, you will be responsible for all
     travel and other related expense for you to develop these markets. This
     shall include telephone

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     charges, cellular air time and all other related incidental expenses. We
     will, of course, support your efforts with reasonable collateral materials.
     Although you will remain on the payroll for the month of June as an
     employee, any sales in these territories (as listed above) beyond the
     $20,000 deposit already received from Jordan shall be treated as
     commissioned sales in your relationship as an independent contractor.

-    For purposes of supporting your role as a sales agent in the above listed
     countries, you may continue to use the title of "Director of Sales and
     Marketing." But this exception is FOR THOSE TERRITORIES ONLY. Accordingly,
     you may use your existing business cards in conjunction with these

-    Any potential business outside the scope of countries listed in this
     agreement, including any initiated by distributors in the countries listed
     within this document (specifically: India, Nepal, Sri Lanka, Bangladesh,
     Ukraine, Jordan and Israel), must be approved by TASER International in
     advance. The company may accept or reject any offers for additional
     countries at its sole discretion. The company has current prospects in
     Egypt and other countries in the Middle East and shall pursue those
     prospects directly.

-    Effective May 27th, you will be operating as an independent sales
     representative and independent contractor in relation to these foreign
     sales activities. You will also be responsible for ensuring that all
     distribution agreements in those countries comply with US export law and
     relevant laws concerning foreign commerce.

-    Although you will remain a member of our board of directors, any
     commitments on behalf of the company subsequent to the date of this letter
     must be approved, and joint signed by either Tom or Rick Smith as active
     officers in the company.

-    All foreign orders shall be prepaid prior to shipment.

-    In the event the company is going to go public through an IPO, be acquired
     by another entity, or raise a significant amount of capital to fund
     operations, the company shall have the right to buy-out the exclusivity
     provisions outlined above by a single payment equivalent to 6 months'
     historical commissions.

-    I trust that the above accurately memorializes our discussion of yesterday.
     Should a disagreement arise over any of the provisions relating to your
     retirement, or the subsequent sales representation outlined above, we shall
     first sit over a beer and work it out. If this is unsuccessful, both
     parties (TASER International and Malcolm Sherman) hereby agree that any
     disputes shall be settled in binding arbitration under the rules of the
     American Arbitration Association. Specifically, this agreement sets forth
     the entire understanding and agreement of the parties hereto with respect
     to the subject matter hereof and supersedes all other representations and
     understandings both written and oral. This agreement is drafted under the
     laws of the state of Arizona, and the venue for any legal recourse shall
     take place under laws as written in Arizona, and the venue for any legal
     recourse shall take place under these laws and be adjudicated within its
     jurisdiction. Further, the parties agree that any controversy or claim
     arising out of, or relating to, this contract, or the breach thereof, shall
     be settled by arbitration in accordance with the rules of the American

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     Association in the state of Arizona, USA under their auspices and the
     parties agree to have any dispute heard and adjudicated under these rules
     in the state of Arizona USA and both parties agree to be bound by the
     decision of the arbitrator and to pay their proportionate fees as required
     under the rules of the association and judgment upon the award rendered by
     the arbitrator(s) may be entered into any court having jurisdiction

-    This agreement may be amended or modified only in writing, signed in
     advance by the parties hereto or their designated representatives. This
     agreement shall inure to the benefit of and be binding upon the parties
     hereto, and their respective successors and assigns.

-    This memorandum outlines all terms related to your pending retirement, and
     the parties agree that any and all documents and or agreements entered into
     or/of prior date to this agreement are herein cancelled and mutually
     abrogated by the parties.

-    This memorandum outlines all terms related to your pending retirement, and
     the parties hereby mutually release each other from any and all claims
     and/or obligations related to your employment as Director of Sales and
     Marketing for TASER International other than those obligations outlined
     herein. Pre-existing financial obligations currently owed to you (such as
     your salary, vacation pay, notes payable and accrued expenses) shall
     survive this agreement in their current form.

-    TASER agrees to pay Sherman all outstanding balances owed as outlined above
     regardless and excluded from the releases in the preceding paragraph. These
     expenses will carry an effective interest rate of 10% per annum, accrued
     monthly on the unpaid balance only, until the entire principal and accrued
     interest is paid in full. Such interest shall be calculated from the
     beginning date at which the expenses were outstanding (i.e. the average
     monthly balance). However, any prior financing charges will be applied as
     credits against the interest owed.

-    Regarding office space, TASER will make temporary office space available
     through the end of July, 2000. After that time, the company will plan to
     redistribute the use of space within our offices. Further, TASER will make
     partial secretarial support available for preparation of formal letters and
     contracts in conjunction with TASER sales for those territories assigned to
     Sherman as a part of this contract only.

Malcolm, I've truly enjoyed the past 6 years together. I've grown tremendously
working with you. I wish you nothing but the best and hope you find more time
over the coming months and years to take some well-deserved personal time.

Sincerely,                                 Understood and Agreed,

/s/ Rick W. Smith        5/26/2000        /s/ Malcolm W. Sherman       5/26/2000
-----------------        ---------        ----------------------       ---------
Rick W. Smith            date             Malcolm W. Sherman           date
President, TASER

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