Severance Agreement - TASER International Inc. and Malcolm Sherman
[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
disbursements.
- 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):
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Country 3/30 3/30 3/30 3/30 3/30 3/30
2001 2002 2003 2004 2005 2006
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India 500 600 720 864 1036 1244
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Ukraine 300 360 432 518 622 748
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Sri Lanka 100 120 144 172 208 248
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Bangladesh 200 240 288 346 414 498
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Nepal 50 60 72 86 104 124
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Jordan 200 240 288 346 414 498
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Israel 200 240 288 346 414 498
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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
countries.
- 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
Arbitration
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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
thereof.
- 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
International
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