UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
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TASER International, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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TASER INTERNATIONAL, INC.

17800 North 85^th Street

Scottsdale, Arizona 85255

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 27, 2010

 

 

To Our Stockholders:

 

The 2010 Annual Meeting of Stockholders (the “Annual Meeting”) of TASER International, Inc. (the “Company”) will be held at 10:00 a.m. (local time) on Thursday, May 27, 2010 at the Company’s headquarters located at 17800 North 85th Street, Scottsdale, Arizona 85255 for the following purposes:

 

 

Only holders of the Company’s Common Stock at the close of business on March 30, 2010 are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. Stockholders may vote in person or by proxy. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by stockholders at the time and place of the Annual Meeting and during ordinary business hours, for a period of 10 days prior to the Annual Meeting, at the principal executive offices of the Company at the address listed above.

 

By Order of the Board of Directors,

 

 

Douglas E. Klint

Corporate Secretary

 

Scottsdale, Arizona

April 14, 2010

 

 

TASER INTERNATIONAL, INC.

17800 North 85^th Street

Scottsdale, Arizona 85255

 

 

PROXY STATEMENT FOR 2010 ANNUAL MEETING OF STOCKHOLDERS

 

 

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

Why am I receiving these proxy materials?

 

Our Board of Directors has made these materials available to you on the Internet or has delivered printed versions of these materials to you by mail in connection with the Board of Directors’ solicitation of proxies for use at our Annual Meeting of Stockholders, which will take place at 10:00 a.m. local time. on Thursday, May 27, 2010 at the Company’s principal executive office building located at 17800 North 85th Street, Scottsdale, Arizona 85255. This Proxy Statement describes matters on which you, as a stockholder, are entitled to vote. It also gives you information on these matters so that you can make an informed decision. This proxy statement is first being sent to stockholders on or about April 14, 2010.

 

What is included in these materials?

 

These materials include:

 

 

If you received printed versions of these materials by mail, these materials also include the proxy card or vote instruction form for the Annual Meeting.

 

Why did I receive a one-page Notice in the mail regarding the Internet availability of proxy materials this year instead of printed proxy materials?

 

In accordance with the rules of the Securities and Exchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to all of our stockholders, we have elected to furnish such materials to selected stockholders by providing access to these documents over the Internet. Accordingly, on April 14, 2010, we sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to selected stockholders of record and beneficial owners. These stockholders have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed set of the proxy materials by calling the toll-free number found in the Notice. The Company encourages you to take advantage of the availability of the proxy materials on the Internet in order to help reduce the environmental impact of the Annual Meeting.

 

How can I get electronic access to the proxy materials?

 

The Notice provides you with instructions regarding how to: (1) view our proxy materials for the Annual Meeting on the Internet; (2) vote your shares after you have viewed our proxy materials; (3) request a printed copy of the proxy materials; and (4) instruct us to send our future proxy materials to you

electronically by email. Copies of the proxy materials are also available for viewing at the Investor Relations page of the Company’s website at www.taser.com.

 

What items will be voted on at the Annual Meeting?

 

Stockholders will vote on the following items at the Annual Meeting:

 

 

What are the Board’s voting recommendations?

 

The Board recommends that you vote your shares:

 

“FOR” each of the nominees for election to the Board (Proposal No. 1); and

 

“FOR” the ratification of the appointment of Grant Thornton LLP as our independent registered public accountants for fiscal year 2010 (Proposal No. 2).

 

Where are the Company’s principal executive offices located and what is the Company’s main telephone number?

 

The Company’s principal executive offices are located at 17800 North 85th Street Scottsdale, Arizona 85255. The Company’s main telephone number is (800) 978-2737.

 

Who may vote at the Annual Meeting?

 

As of March 30, 2010 (the “Record Date”), there were 62,576,262 shares of the Company’s Common Stock outstanding and entitled to one vote each at the Annual Meeting. The presence in person or by proxy of persons holding a majority of these shares, or 31,288,132 shares, will constitute a quorum for the transaction of business. Each share of Common Stock entitles the holder to one vote on each matter that may properly come before the Annual Meeting. Stockholders are not entitled to cumulative voting in the election of directors. Only stockholders of record as of the close of business on the Record Date are entitled to receive notice of, to attend, and to vote at the Annual Meeting.

 

What is the difference between a stockholder of record and a beneficial owner of shares held in street name?

 

Shareholder of Record.

 

If your shares are registered directly in your name with the Company’s transfer agent, Computershare, you are considered the stockholder of record with respect to those shares, and the Notice or printed materials were sent directly to you by the Company. If you request printed copies of the proxy materials by mail, you will also receive a printed proxy card.

 

Beneficial Owner of Shares Held in Street Name.

 

If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice or the printed proxy materials were forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. If you request printed copies of the proxy materials by mail, you will also receive a printed vote instruction form.

 

If I am a stockholder of record of the Company’s shares, how do I vote?

 

There are four ways to vote:

 

In person. If you are a stockholder of record, you may vote in person at the Annual Meeting. Bring your printed proxy card if you received one by mail. Otherwise, the Company will give stockholders of record a ballot at the Annual Meeting.

 

Via the Internet. If you received a Notice, you may vote via the Internet by visiting http.//www.proxyvote.com and entering the control number found in the Notice.

 

By Telephone. If you received or requested printed copies of the proxy materials by mail, you may vote by calling the toll free number found on the proxy card.

 

By Mail. If you received or requested printed copies of the proxy materials by mail, you may vote by filling out the proxy card and returning it in the envelope provided.

 

If I am a beneficial owner of shares held in street name, how do I vote?

 

Your bank or broker will send you instructions on how to vote. There are four ways to vote:

 

In person. If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares.

 

Via the Internet. If you received a Notice, you may vote via the Internet by visiting http.//www.proxyvote.com and entering the control number found in the Notice.

 

By Telephone. If you received or requested printed copies of the proxy materials by mail, you may vote by calling the toll free number found on the vote instruction form.

 

By Mail. If you received or requested printed copies of the proxy materials by mail, you may vote by filling out the vote instruction form and returning it in the envelope provided.

 

What constitutes a quorum in order to hold and transact business at the Annual Meeting?

 

Under Delaware law and the Company’s Bylaws, the presence in person or by proxy of the holders of record of a majority of the votes entitled to be cast at a meeting constitutes a quorum. Votes “for” and “against,” “abstentions” and “broker non-votes” will all be counted as present to determine whether a quorum has been established. Once a share of the Company’s Common Stock is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournments or postponements. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

 

How are proxies voted?

 

All valid proxies received prior to the Annual Meeting will be voted. All shares represented by a proxy will be voted and, where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.

 

What happens if I do not give specific voting instructions?

 

Stockholders of Record. If you are a stockholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.

 

Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, the

organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a “non-routine” matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on such matters with respect to your shares. This is generally referred to as a “broker non-vote.”

 

Which ballot measures are considered “routine” or “non-routine”?

 

Proposal No. 2 (ratification of the appointment of the independent registered public accountants) is considered “routine.” A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected in connection with this proposal.

 

Proposal No. 1 (election of directors) is considered “non-routine.” A broker or other nominee cannot vote without specific instructions from the beneficial owner on non-routine matters, and therefore there may be broker non-votes in connection with Proposal No. 1.

 

Can I change my vote after I have voted?

 

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting by voting again via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a new proxy card or vote instruction form with a later date, or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy be revoked by delivering to the Company’s Corporate Secretary at 17800 North 85th Street, Scottsdale, Arizona 85255, a written notice of revocation prior to the Annual Meeting.

 

Is my vote confidential?

 

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except as necessary to meet applicable legal requirements; to allow for the tabulation and certification of votes; and to facilitate a successful proxy solicitation.

 

What is the voting requirement to approve each of the proposals?

 

Election of Directors. For Proposal No. 1, under the Company’s Bylaws, assuming the existence of a quorum at the Annual Meeting, each of the nominees for director who receive the affirmative vote of a plurality of all of the votes cast will be elected to the Board of Directors. This means that the director nominees with the most votes will be elected. Shares that are marked “withhold authority” will be counted toward a quorum, but will not affect the outcome of the vote on the election of such director.

 

Ratification of Independent Registered Public Accountants. For Proposal No. 2, assuming the existence of a quorum at the Annual Meeting, ratification of the appointment of the independent registered public accountants will be approved if a majority of common stock present in person or by proxy at the Annual Meeting vote in favor of ratification. Abstentions will have the same effect as a vote against the proposal.

 

Who will serve as the inspector of election?

 

Holly Gibeaut, a member of the Company’s litigation counsel will serve as the inspector of election.

 

Where can I find the voting results of the Annual Meeting?

 

The Company expects that the final voting results will be tallied by the inspector of election and, within four business days after the Annual Meeting, the Company expects to file the results on Form 8-K with the SEC.

 

Who is paying for the cost of this proxy solicitation?

 

The cost of soliciting proxies will be borne by the Company. The Company may reimburse brokerage houses, banks and other custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding proxies and proxy material to their principals. In addition to solicitation by mail, proxies may be solicited personally by the Company’s officers, employees and the Company’s proxy solicitation firm, or by telephone, facsimile or electronic transmission or express mail. This Proxy Statement is first being mailed to stockholders on or about April 14, 2010.

 

PROPOSAL ONE:

 

ELECTION OF DIRECTORS

 

The Board of Directors is elected by and accountable to the stockholders. The Board of Directors is comprised of eight directors. The directors are divided into three classes comprised as follows: two directors in Class A and three directors each in Class B, and Class C. One class is elected each year for a three-year term and until their successors are elected and qualified. The two director nominees in Class A, who would serve a regular three-year term until the annual meeting of stockholders in 2013, or until their respective successors are elected and qualified, are: John S. Caldwell and Michael Garnreiter. As discussed above, the two nominees for director receiving the highest number of votes will be elected to the Board of Directors.

 

Unless marked otherwise, proxies received will be voted FOR the election of each of the nominees named below.

 

If any nominee is unable or unwilling to serve as a director at the date of the Annual Meeting or any postponement or adjournment thereof, the proxies may be voted for a substitute nominee, designated by the Board of Directors to fill such vacancy. The Board of Directors has no reason to believe that any of the nominees will be unwilling or unable to serve if elected a director.

 

The Board of Directors recommends a vote FOR the election of John S. Caldwell and Michael Garnreiter.

 

The following table sets forth certain information about each nominee for election to the Board of Directors and each continuing director.

 

Directors

 

Nominees for Election at the Annual Meeting

 

Lt. General (USA, Retired) John S. Caldwell. General Caldwell is currently employed as a consultant affiliated with The Spectrum Group, Wesley K. Clark Associates, and ASI Consulting Group. He previously was employed as Executive Vice President, Defense Solutions, Perot Systems Government Service until June 2008. General Caldwell was Senior Vice President, Defense Information Technology Solutions, QSS Group, Inc. from July 2004 through February 2008 at which time QSS Group Inc. was merged into Perot Systems Government Services. He is also employed as an Executive Advisor for PTC Corporation. From November 2001 through January 2004, General Caldwell was a Lieutenant General in the United States Army and Military Deputy to the Assistant Secretary of the Army for Acquisition, Logistics and Technology. General Caldwell holds a B.S. degree from the U.S. Military Academy at West Point, New York and a M.S. degree in mechanical engineering from the Georgia Institute of Technology. General Caldwell is a director of Puradyn Filter Technologies and serves on several other corporate advisory boards.

 

Michael Garnreiter. Mr. Garnreiter has served as a director of the Company since June 2006 and is currently a consultant for Fenix Financial Forensics, a Phoenix Arizona based consulting organization. Mr. Garnreiter also is managing member of Rising Sun Restaurant Group, L.L.C., a private restaurant operating company and has held that position since August 2006. From April 2002 through June 2006, Mr. Garnreiter was Executive Vice President, Treasurer, and Chief Financial Officer of the Main Street Restaurant Group. Mr. Garnreiter previously served as a general partner of the international accounting firm of Arthur Andersen from 1974 through March 2002. Mr. Garnreiter holds a B.S. degree in accounting from California State University at Long Beach and is a Certified Public Accountant. Mr. Garnreiter is a director of Knight Transportation, Inc., Amtech Systems, Inc. and IA Global.

 

Incumbent Directors Whose Terms of Office Continue After the Annual Meeting

 

Patrick W. Smith. Mr. Smith has served as Chief Executive Officer and as a director of the Company since 1993. He is also co-founder of the Company. After graduating from Harvard cum laude in just three years (class of 1991), Mr. Smith entered directly into the Master of Business Administration Program at the University of Chicago, the youngest person accepted into his class that year. In two years, he completed both a master’s degree in international finance from the University of Leuven in Leuven, Belgium, and an M.B.A. with honors at the University of Chicago (normally a two-year program in itself), graduating in the top 5% of his class. After completing graduate school in the summer of 1993, he co-founded TASER International with his brother, Thomas P. Smith, on September 7, 1993.

 

Mark W. Kroll Ph.D. Dr. Kroll retired from St. Jude Medical Inc. in July 2005, where he held various executive level positions since 1995, most recently as Senior Vice President and Chief Technology Officer, Cardiac Rhythm Management Division. Dr. Kroll holds a B.S. degree in Mathematics and a M.S. degree and a Ph.D. degree in Electrical Engineering from the University of Minnesota and a M.B.A. degree from the University of St. Thomas. Dr. Kroll is a director of Haemonetics Corporation and NewCardio, Inc.

 

Judy Martz. Ms. Martz has served as a director of the Company since April 2005. From January 2001 through January 2004, Ms. Martz was Governor of the State of Montana and was Lieutenant Governor of the State of Montana from January 1996 through January 2000. From 1989 through 1995 Ms. Martz served as state representative for U.S. Senator Conrad Burns.

 

Thomas P. Smith. Mr. Smith has served as Chairman of the Board of Directors since October 2006 and was President of the Company from April 1994 through October 2006. He is a co-founder of the Company. Mr. Smith holds a B.S. degree in Ecology and Evolutionary Biology from the University of Arizona and a M.B.A. degree from Northern Arizona University. Mr. Smith was previously a director of Lightwave Logic, Inc.

 

Matthew R. McBrady Ph.D. From August 1998 through January 2000, Dr. McBrady served as an international economist with President Clinton’s Council of Economic Advisers and the United States Treasury Department. Dr. McBrady subsequently served as a professor of finance at the Wharton School of Business at the University of Pennsylvania from (from September 2002 through May 2003) and at the Darden Graduate School of Business Administration at the University of Virginia (from May 2003 through December 2006). Dr. McBrady then worked as an investment professional with the North American Private Equity group at Bain Capital, LLC (from January 2007 through January 2009) prior to joining Silver Creek Capital Management, LLC as Managing Director of Strategic Investments in January 2009. Dr. McBrady holds a B.A. degree in Economics from Harvard University, a M.S. degree in International Economics from Oxford University (UK), and a masters and Ph.D. degree in Business Economics from Harvard University.

 

Vice Admiral (Ret) Richard H. Carmona M.D., M.P.H., F.A.C.S. Dr. Carmona was sworn in as the 17th Surgeon General of the United States on August 5, 2002 and held that position through July 30, 2006. Prior to being named United States Surgeon General, Dr. Carmona was the chairman of the State of Arizona Southern Regional Emergency Medical System, a professor of surgery, public health and family and community medicine at the University of Arizona, and the Pima County Sheriff’s Department surgeon and deputy sheriff. He is currently employed as Vice Chairman of Canyon Ranch and CEO of Canyon Ranch Health in Tucson, Arizona and has held that position since October 1, 2006. Dr. Carmona attended Bronx Community College, of the City University of New York, where he earned his associate of arts degree. Dr. Carmona holds a B.S. degree and medical degree from the University of California, San Francisco. He has also earned a Masters Degree of public health from the University of Arizona. Dr. Carmona is a director of The Clorox Company.

 

Executive Officers

 

See above biographical information for Patrick W. Smith and Thomas P. Smith, who are also executive officers of the Company.

 

Daniel M. Behrendt (45). Mr. Behrendt serves as our Chief Financial Officer. Mr. Behrendt joined the Compnay in May 2004 from Imperial Home Décor, after serving in a number of financial management positions for the Imperial Home Décor Group, including Director of Financial Planning and Analysis, Vice President and Corporate Controller and finally Senior Vice President and Chief Financial Officer. From 1995 to 1998, he served as the Manager of Business Planning and Analysis for Teledyne Fluid Systems, a division of Allegheny Teledyne. From 1991 to 1995, he served as Manager, Business Planning and Analysis for PCC Airfoils, Inc. From 1988 to 1991, Mr. Behrendt was a Financial Analyst for the Power Generation Group of Babcock and Wilcox, and from 1986 to 1988, he worked as an auditor for Arthur Andersen & Co. in their Cleveland, Ohio office. Mr. Behrendt holds a B.S. degree in Accounting, cum laude, from Mount Union College and a Masters of Business Administration degree from The Weatherhead School of Management at Case Western Reserve University.

 

Steven T. Mercier (50). Mr. Mercier has served as Executive Vice President of Operations since October 2008 and previously served as Vice President, Operations, from February 2008 through September 2008. From August 2006 through February 2008, Mr. Mercier served as Executive Consultant for Mercier International Consulting. From January 1987 through August 2006 Mr. Mercier served in a number of management positions for Intel Corporation, including Senior Manager of Corporate

Acquisitions and Global Operations, Senior Manager of Assembly Test Development Quality, Senior Technical Manager and Operations Manager/Senior Engineer.

 

Jasjit Dhillon (49). Mr. Dhillon has served as Chief Strategy Officer since 2008 and General Manager, TASER Virtual Systems Division from August 2008 through March 24, 2010. From January 2006 through August 2008, Mr. Dhillon served as Senior Director, Business Development/M&A for Microsoft Live with Microsoft Corporation. From January 2003 through December 2005 Mr. Dhillon served as Founder, President and CEO of Zero Degrees, Inc., an operating company of InterActive Corp. From September 2001 through December 2002, Mr. Dhillon served as Managing Director of Pivotal Ventures, Inc. Mr. Dhillon holds a B.S. degree in Electrical Engineering from Ohio University and a M.S. degree in Systems Management from the University of Southern California.

 

Each officer serves at the discretion of our Board of Directors. No officer is subject to an agreement that requires the officer to serve the Company for a specified number of years although we have entered into employment related agreements with each of our officers. These agreements require notice of termination by the Company in certain situations that are described in further detail in this proxy statement under the heading “Executive Compensation – Employment Agreements and Other Arrangements.”

 

Board Leadership Structure

 

Thomas P. Smith, our co-founder, serves as our Chairman of the Board. Thomas Smith’s brother, Patrick W. Smith, also a co-founder of the Company, serves as our Chief Executive officer. We believe that the Smiths are highly qualified to serve in our Chairman and Chief Executive Officer roles as they founded the Company and have been actively involved in our operations and direction since our formation. In addition, the Board believes that this is the best leadership structure for our Board. Moreover, the Smiths are the Company’s largest non-institutional stockholders. John S. Caldwell serves as the Board’s lead independent director. His extensive military experience is a solid foundation for this role, where he manages executive sessions and provides guidance for the Board’s direction.

 

Family Relationships

 

Thomas P. Smith and Patrick W. Smith are brothers. No other family relationships exist among the Company’s directors and executive officers.

 

Meetings of the Board of Directors

 

During the year ended December 31, 2009, the Board of Directors held ten meetings. During 2009, each director attended at least 75% of all Board and applicable committee meetings.

 

Committees of the Board of Directors

 

The Board of Directors maintains a standing Audit Committee, Compensation Committee, Nominating Committee and Litigation Committee.

 

The following table summarizes the current membership of our standing Board committees, and identifies the chair of each committee and the number of committee meetings held in fiscal 2009:

Audit

Compensation

Nominating

Litigation

Committee

Committee

Committee

Committee

Number of Meetings

6

1

—

—

Director

Judy Martz

X

X

*

X

*

X

John S. Caldwell

X

X

X

*

Bruce R. Culver1

Michael Garnreiter

X

X

X

Matthew R. McBrady

X

*

X

X

X

	1 = Mr. Culver retired from the Board of Directors effective April 9, 2010. Judy Martz has been appointed as the new Chair of the Nominating Committee. Matthew R. McBrady has also been appointed to the Nominating Committee.

 

The function of the Audit Committee is to exercise sole authority with respect to the selection of the Company’s independent registered public accounting firm and the terms of their engagement; review the policies and procedures of the Company and management with respect to maintaining the Company’s books and records; review with the independent registered public accounting firm, upon the completion of their audit, the results of the auditing engagement and any other recommendations the independent registered public accounting firm may have with respect to the Company’s financial, accounting or auditing systems; and review with the independent registered public accounting firm, upon the completion of their quarterly review of the Company’s financial statements, the results of the quarterly review and any other recommendations the independent registered public accounting firm may have in connection with their review. The Report of the Audit Committee for the year ended December 31, 2009 is included in this Proxy Statement.

 

The Compensation Committee determines salaries, stock option and bonus awards and considers employment agreements for appointed officers of the Company, and prepares reports on these matters; considers, reviews and grants options under the Company’s compensation plans and administers such plans; and considers matters of director compensation, benefits and other forms of remuneration. The Compensation Committee Report for the year ended December 31, 2009 is included in this Proxy Statement. See “Compensation Discussion and Analysis” for more information regarding the Compensation Committee.

 

The Nominating Committee is charged with identifying qualified candidates for nomination for election to the Board of Directors and nominating such candidates for election; and reviewing and making recommendations to the Board of Directors concerning the composition and size of the Board and its committees. The Nominating Committee will consider nominees recommended by stockholders provided such recommendations are made in accordance with procedures described in this Proxy Statement under “Stockholder Proposals.” While the Nominating Committee does not have a formal diversity policy, the Committee strives to achieve a well rounded balance of varying skill sets and backgrounds in the composition of the Board. When considering a potential director candidate, the Nominating Committee looks for demonstrated character, judgment, relevant business, functional and industry experience, and a high degree of business, engineering, medical, or law enforcement acumen. The Nominating Committee’s process for identifying and evaluating nominees typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. There are no differences in the manner in which the Nominating Committee evaluates nominees for director based on whether the

nominee is recommended by a stockholder. The Company has not historically paid third parties to identify or assist in identifying or evaluating potential nominees.

 

The Litigation Committee was established in July 2006 for the purpose of reviewing, approving and ensuring that any settlement of pending litigation against the Company or its officers and directors is fair, reasonable and in the best interests of the Company’s stockholders. No member of the Litigation Committee was a named party in any pending litigation involving the Company.

 

The Audit Committee, Compensation Committee, and the Nominating Committee have each adopted charters that govern their respective authority, responsibilities and operation. The charters of the Audit Committee, Compensation Committee and the Nominating Committee are available on our Web site at www.taser.com.

 

Skills and Qualifications of the Members of the Board of Directors

 

Each Company Board member was selected in accordance with the process for the selection and nomination of directors described above. Accordingly, the Board believes that each of the Company’s Board members brings to TASER a myriad of skills, education, experiences and qualifications that can be combined to benefit the Company and its stockholders. Set forth below is a description of the key skills, experiences and/or qualifications for each member of the Board.

 

 

 

Audit Committee Financial Experts

 

The Board of Directors has determined that Messrs. McBrady and Garnreiter, independent directors of the Company, are both audit committee financial experts within the meaning of that term under applicable rules promulgated by the SEC. Information about the past business and educational experience of Messrs. McBrady and Garnreiter is included in this Proxy Statement under the heading “Proposal One: Election of Directors – Directors”. The Board has also determined that each current member of the Audit Committee is financially literate under the current listing standards of NASDAQ.

 

Director Independence

 

As of the date of this Proxy Statement, based upon the information submitted by each of its directors, the Board has made a determination that a majority of our current Board is independent as that term is defined by NASDAQ listing standards and that all of the members of our Board committees also meet any additional specific “independence” standards applicable to any committee on which such director serves, including the more stringent Audit Committee independence criteria. The following directors are currently deemed “independent” by the Board: John S. Caldwell, Michael Garnreiter, Judy Martz, Matthew R. McBrady and Richard H. Carmona.

 

Each of these directors is also a “non-employee director” (within the meaning of Rule 16b-3 under the Exchange Act) and all are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code and related Treasury Regulations.

 

Stockholder Communications with Directors

 

Stockholders may communicate with members of the Board of Directors by mail addressed to the Chairman, any other individual member of the Board, to the full Board, or to a particular committee of the Board. In each case, such correspondence should be sent to the Company’s headquarters at 17800 North 85th Street, Scottsdale, Arizona 85255. All stockholder communications will be forwarded to each individual member of the Board.

 

Director Attendance at Annual Meetings of Stockholders

 

Directors are encouraged by the Company to attend each annual meeting of stockholders if their schedules permit. Five of our directors attended the 2009 Annual Meeting of stockholders and all of the directors are expected to be in attendance at the 2010 Annual Meeting.

 

Code of Ethics

 

The Company has adopted a Code of Ethics which is applicable to all employees, directors and consultants of the Company. A copy of the Company’s Code of Ethics is published and available on the Company’s internet website at www.taser.com. The Company intends to disclose any future amendments or waivers to the Code of Ethics on the Company’s website within four business days following the date of such amendment or waiver, unless otherwise required by NASDAQ rules to disclose such event on Form 8-K.

 

Board of Directors Role in Risk Oversight

 

The Company’s risk management process is intended to ensure that risks are taken knowingly and purposefully. As such, the Company’s executive management keeps the Board of Directors apprised by presenting results of the process to identify, assess, prioritize and address strategic, financial, operating, business, compliance, safety, reputational and other risks to the Company. Executive management meets with the Board of Directors on a quarterly basis to address high priority risks, and on an as-needed basis to evaluate and monitor emerging risks.

 

COMPENSATION OF DIRECTORS

 

Members of the Board of Directors who are officers of the Company are not separately compensated for serving on the Board of Directors. Directors who are not officers of the Company are paid $7,500 per quarter and are eligible to receive grants of options to acquire common stock under the 2004 Outside Directors Stock Option Plan. The chair of the Audit Committee receives an additional $2,500 per quarter, and the chair of the Board of Directors and the chair of the Compensation Committee each receive an additional $1,250 per quarter. The Lead Independent Director receives an additional $8,000 per month. All directors are also reimbursed for reasonable expenses incurred in connection with their attendance at meetings.

 

Pursuant to the 2004 Outside Directors Stock Option Plan, new directors receive an initial grant of stock options equal to $150,000 in face value of the Company’s common stock underlying the stock options. Subsequent annual options grants are equal to $100,000 in face value of the Company’s common stock underlying the stock options. The strike price of these grants is equal to the closing price reported by NASDAQ on the day before the grant date. Annual option awards are granted on the date of the Company’s Annual Stockholders Meeting.

 

DIRECTOR COMPENSATION

 

The following table summarizes the compensation paid to non-employee directors for the fiscal year ended December 31, 2009.

 

 

 

 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The Company does not maintain a written related transaction policy. It is the Company’s policy, however, that all related party transactions will be reviewed by its Board of Directors and the Audit Committee. The Company’s policies are evidenced by the respective meeting minutes that document such reviews. Further, it is the policy of the Company’s Board of Directors that all proposed transactions by the Company with its directors, officers, five-percent stockholders and their affiliates be entered into or approved only if such transactions are on terms no less favorable to the Company than it could obtain from unaffiliated parties, are reasonably expected to benefit the Company and are approved by the Audit Committee. The Audit Committee is authorized to consult with independent legal counsel at the Company’s expense in determining whether to approve any such transaction.

 

Aircraft Charter

 

The Company reimburses Thomas P. Smith, Chairman of the Company’s Board of Directors, and Patrick W. Smith, Chief Executive Officer, for business use of their personal aircraft. For the year ended December 31, 2009, the Company incurred expenses of approximately $274,000 and $10,000, respectively, to Thomas P. Smith and Patrick W. Smith. At December 31, 2009, the Company had outstanding payables of approximately $15,000 and $0, respectively, to Thomas P. Smith and Patrick W. Smith. Management believes that the rates charged by Thomas P. Smith and Patrick W. Smith are equal to or below commercial rates the Company would pay to charter similar aircraft from independent charter companies.

 

TASER Foundation

 

In November 2004, the Company established the TASER Foundation. The TASER Foundation is an Internal Revenue Code Section 501(c)(3) non-profit corporation and has been granted tax exempt status by the IRS. The TASER Foundation’s mission is to honor the service and sacrifice of local and federal law enforcement officers in the United States and Canada lost in the line of duty by providing financial support to their families. Over half of the initial $1 million endowment was contributed directly by the Company’s employees. The Company bears all administrative costs of the TASER Foundation in order to ensure 100% of all donations are distributed to the families of fallen officers. For the years ended December 31, 2009, 2008 and 2007, the Company incurred approximately $265,000, $233,000, and $179,000, respectively, in such administrative costs. For the years ended December 31, 2009, 2008 and 2007, the Company contributed $35,000, $25,000, and $300,000, respectively, to the TASER Foundation. At December 31, 2009, the Company had approximately $1,200 in accrued salaries payable to the Foundation. At December 31, 2008, the Company had no outstanding payable amounts to the Foundation.

 

Consulting Services

 

The Company engages Mark Kroll, a member of the Board of Directors, to provide consulting services. The expenses related to these services for the years ended December 31, 2009, 2008 and 2007 were approximately $251,000, $293,000, and $227,000, respectively. At December 31, 2009 and 2008, the Company had accrued liabilities of approximately $14,000 and $23,000, respectively, related to these services.

 

Settlement agreement

 

On May 15, 2009, Bruce Culver, a member of our Board of Directors at the time, and his wife Donna Culver (the “Culvers”), and the Company, entered into a settlement and release agreement (the “Agreement”), the background and material terms of which are described below. Bruce Culver retired from the Board of Directors on April 9, 2010.

 

In July 2000, the Culvers provided a loan to the Company in exchange for a promissory note and warrants to purchase 136,364 shares of the Company’s common stock for $0.55 per share. In October 2004, the Culvers exercised the warrants, and the Company issued them a Form 1099, which included the in-the-money value of the warrants as stock compensation based upon the advice of the Company’s then-current outside tax advisors. In 2007, the Culvers informed the Company that their personal tax advisors had determined that the 2004 Form 1099 was not the proper tax treatment for the transaction, and that the value of the warrants should not have been included as compensation because the warrants were issued in connection with the loan rather than services. The Company responded by issuing an amended Form 1099 excluding the value of the warrants, and the Culvers filed an amended 2004 federal tax return seeking a refund. The Culvers are also seeking a refund with respect to their 2004 California tax return.

 

The parties entered into the Agreement to settle any disputes that the Culvers might have with the Company in connection with the original Form 1099 that was issued in October 2004 and the Culvers’ resulting tax liability. Pursuant to the Agreement, the Company agreed to pay the Culvers $350,000 upon execution in exchange for a full release, which is recorded in sales, general and administrative expense for the year ended December 31, 2009. The Agreement also contains a claw-back provision, pursuant to which the Culvers agreed to pay to the Company the amount of any refund they receive from the federal government and/or the State of California, up to the $350,000 amount of the settlement payment. The Culvers will be entitled to keep 100% of any refund(s) they receive in excess of $350,000. As of December 31, 2009 the Culvers had not received any tax refunds however, they received a refund from the Internal Revenue Service in February 2010 and they continue to seek a refund with respect to the State of California. The Company is working with the Culvers regarding the timing and the form of this payment. The Company expects to record the $350,000 under the claw-back provision once the cash has been received.

 

REPORT OF THE AUDIT COMMITTEE*

 

The Audit Committee of the Board of Directors reviews the Company’s financial reporting process on behalf of the Board. The Audit Committee has sole authority to retain, set compensation and retention terms for, terminate, oversee and evaluate the work of the Company’s independent auditors. The independent auditors report directly to the Audit Committee.

 

The Company’s management is responsible for the Company’s financial reporting process including its system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. Grant Thornton LLP, the Company’s independent registered public accounting firm, is responsible for expressing an opinion based on their audits of the consolidated financial statements. In accordance with its written charter, the Audit Committee assists the Board of Directors in its oversight of (i) the integrity of the Company’s financial statements and the Company’s financial reporting processes and systems of internal control, (ii) the qualifications, independence and performance of the Company’s independent public accounting firm and the performance of the Company’s internal audit function, (iii) the Company’s compliance with legal and regulatory requirements involving financial, accounting and internal control matters, (iv) investigations into complaints concerning financial matters and (v) risks that may have a significant impact on the Company’s financial statements.

 

Further, the Audit Committee reviews reports prepared by management on various matters including critical accounting policies and issues, material written communications between the independent auditors and management, significant changes in the Company’s selection or application of accounting principles and significant changes to internal control procedures. It is not the duty or responsibility of the Audit Committee to conduct auditing and accounting reviews or procedures.

 

In discharging its oversight responsibilities with respect to the audit process, the Audit Committee (i) obtained from the independent public accounting firm a formal written statement describing all relationships between the independent public accounting firm and the Company that might bear on the independent public accounting firm’s independence consistent with the applicable requirements of the Public Company Accounting Oversight Board, (ii) discussed with the independent auditing firm any relationships that may impact its objectivity and independence, and (iii) considered whether the non-audit services provided to the Company by Grant Thornton LLP are compatible with maintaining their independence. The Audit Committee also discussed with the independent auditing firm their identification of audit risk, audit plans and audit scope, as well as all communications required by generally accepted auditing standards, including those described in statement on Auditing Standards No. 114, as amended, “The Auditor’s Communication with those charged with Governance” and Rule 2-07 of Regulation S-X “Communications with Audit Committees.”

 

The Audit Committee reviewed and discussed with management and its independent public auditors our annual audited financial statements and quarterly financial statements, including a review of the “Managements’ Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K and 10-Q filings, as well as the Company’s earnings press releases and information related thereto.

 

During fiscal year 2009, the Audit Committee met with representatives of the independent public accounting firm, both with management present and in private sessions without management present, to discuss the results of the financial statement audit and quarterly reviews and to solicit their evaluation of the Company’s accounting principles, practices and judgments applied by management and the quality and adequacy of the Company’s internal controls.

 

In performing the above described functions, the Audit Committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company’s management and independent public accounting firm, which, in their report, express an opinion on the conformity of the Company’s annual financial statements to accounting principles generally accepted in the United States.

 

Based upon the Audit Committee’s discussion with the Company’s management and Grant Thornton LLP and the Audit Committee’s review of the representations of the Company’s management and the report of the independent public accountants to the Audit Committee, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The Audit Committee also approved the selection of Grant Thornton LLP as the Company’s independent auditor for the fiscal year 2010.

 

March 15, 2010

 

The Audit Committee:

 

Matthew R. McBrady, Chair
Michael Garnreiter
John S. Caldwell
Judy Martz

     * 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 Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by express reference therein.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

The purpose of this Compensation Discussion and Analysis is to provide material information about our compensation objectives and policies and to explain and put into context the material elements of the disclosure which follows in this Proxy Statement with respect to the compensation of our named executive officers (NEOs).

 

Introduction and Objectives

 

Processes and Procedures For Considering and Determining Executive Compensation

 

The Compensation Committee (the “Committee”) assists the Board in addressing matters relating to the fair and competitive compensation of our named executive officers and non-employee directors, together with matters relating to our other benefit plans. The Committee is composed of three independent directors, Judy Martz, Matthew R. McBrady, and John S. Caldwell.

 

The Committee met one time in 2009. All Committee members were present for these meetings.

 

Four members of management, Chairman, Thomas P. Smith, Chief Executive Officer, Patrick W. Smith, President of Hardware Group and General Counsel, Douglas E. Klint, and Chief Financial Officer, Daniel M. Behrendt, attended portions of some of the meetings. The agenda for each meeting was determined by the Committee members prior to the meeting. The Committee generally receives and reviews materials in advance of each meeting. Depending on the agenda for the particular meeting, these materials may include:

 

 

The Committee’s primarily responsibilities are to:

 

 

 

The Committee’s Charter reflects these responsibilities, and the Committee and the Board periodically review and revise the Charter. The full text of the Compensation Committee Charter is available on our website at www.taser.com.

 

Role of Management and Consultants in Determining Executive Compensation

 

Our executive management supports the Committee in its work by preliminarily outlining compensation levels for named executive officers, administering our benefit and other welfare plans and providing data to the Committee for analysis. Annually, compensation is initially determined by the CEO for each executive (excluding the CEO), consisting of base salary, annual cash incentive bonus, and long-term incentive compensation, which is then provided to the Committee for review and approval.

 

Our Committee has discretionary authority under its charter to engage the services of outside consultants and advisors, as it deems necessary or appropriate in the discharge of its duties and responsibilities. The Committee has budgetary authority to authorize and pay for the services of outside consultants and the consultants’ report directly to the Committee. In 2009, the Committee retained the services of an outside consultant to perform a review and analysis of the Company’s senior executive compensation program. Pearl Meyer & Partners (“Pearl Meyer”) performed a review of the compensation for our executive positions, including: base salaries, total cash compensation (salary plus bonuses), total direct compensation (total cash plus long-term incentives plus other annual compensation), and total remuneration (total direct compensation plus other annual compensation and change in pension and non-qualified deferred compensation earnings). The scope of Pearl Meyer’s review included reviewing a peer group of companies that it developed in its 2007 Compensation Study to compare the Company’s executive compensation to, based on the following criteria: revenue, enterprise value, and type of industry.

 

The Committee also evaluates compensation data and plan design information from national surveys and other public companies, including companies we consider to be our peers, which we discuss in more detail below.

 

Our Compensation Philosophy

 

The Committee is in place to address matters relating to the fair and competitive compensation of our named executive officers and non-employee directors, together with matters relating to our other benefit plans. The Committee is guided by three principal goals and objectives: (1) to allow us to attract and retain talent, our salaries should be in the range with the level of salaries paid to companies that are considered peers; (2) annual incentive bonuses should be directly related to our financial results produced during the year; and (3) long term compensation in the form of stock options should be linked to Company performance and enhancement of stockholder value.

 

The Committee believes that executive compensation should be aligned with the values, objectives and financial performance of the Company. The Committee wants to motivate our officers and key employees to achieve the Company’s goals of providing our stockholders with a competitive return on their

investments, which we believe results from producing high quality products. Our compensation program is designed to attract and retain highly qualified individuals who are capable of making significant contributions to our long-term success; promote a performance orientated environment that encourages Company and individual achievement; and reward named executive officers for long-term strategic management and the enhancement of stockholder value.

 

The Committee believes that compensation paid to named executive officers should be aligned with the performance of the Company on both a short-term and long-term basis, and that such compensation should assist us in attracting and retaining key executives critical to our long-term success.

 

Any decision to materially increase compensation is based upon the factors listed above, taking into account all forms of compensation, as well as based upon individual achievement of performance goals. These goals include revenue and pretax earnings targets as well as specific management tasks. Decisions regarding the CEO’s compensation are made by the Committee and reflect the same considerations used for the other named executive officers. The Committee’s decisions regarding compensation for the CEO and each named executive officer are submitted to the other independent directors for ratification. The compensation policy is consistent for each named executive officer.

 

The Committee believes that the named executive officers’ total compensation programs should strengthen the relationship between pay and performance by emphasizing variable, at-risk compensation that is dependent upon the achievement of specified corporate performance goals. The Committee also believes that a portion of pay for named executive officers should be comprised of long-term, at-risk pay to align management interests with those of stockholders. Ultimately, we balance the foregoing purposes for compensation against our need to ensure that any total compensation package we offer enhances our ability to attract, retain and develop exceptionally knowledgeable and experienced executives because our successful operation and management of the business depends upon our management team.

 

The Committee has not adopted any claw-back policies, nor does it have any security ownership guidelines and does not take into consideration amounts realized from prior compensation in determining current compensation for executive officers.

 

Our Compensation Programs

 

The total compensation program for our named executive officers consists of the following elements:

 

 

Peer Group

 

To ensure our compensation programs are at proper levels, the Committee compares our compensation elements and levels of pay to an industry peer group as well as broader market pay practices. Companies in the peer group were selected based upon the following criteria:

 

 

Pearl Meyer established a peer group that consisted of the following companies: Acme Packet, Inc., Amerigon, Inc., Blue Coat Systems, Inc., Cephaid, Inc., Concur Technologies, Inc., Falconstor Software, Inc., Globarstar, Inc., J2 Global Communications, Inc., NuVasiv, Inc., Omniture, Inc., Riverbed Technology, Inc., Sigma Designs, Inc., Smith & Wesson Holding Corporation, Smith Micro Software, Inc.,

Spectranetics Corporation, Ultimate Software Group, Inc., VASCO Data Security International, Inc., and Zoltek Companies, Inc. Pearl Meyer also compiled compensation data for them from the companies’ public SEC filings. The Committee determined that this peer group and the related data compiled by Pearl Meyer is relevant for purposes of establishing 2010 compensation. In addition, the results of this 2009 comparative analysis, which were discussed by the Committee at a meeting in December 2009, were found to be relevant and were used by the Committee in determining that there would be no change in cash compensation for our named executive officers at the Company’s traditional review date of January 1, 2010. As is the case with the rest of the salaried workforce, the named executive’s compensation adjustment was deferred by six months to July 1, 2010. At that point, the compensation committee will review and determine if any changes are warranted.

 

Benchmarking

 

Our compensation focuses heavily upon cash compensation. However, we also utilize various non-cash compensation programs, specifically stock options. To establish total compensation for our named executive officers, the Committee compares our named executive officers’ compensation against comparable companies’ pay practices and also considers recommendations from the CEO regarding those executives reporting directly to him. Our management team provides the Committee historical and prospective breakdowns of the total compensation components for each executive officer. Based upon the analysis of the pay practices of our peer group and analysis provided by the Committee’s consultant, the Committee believes that our base salary compensation and long-term incentive compensation are generally lower than the median of our established peer group. It is the Committee’s intent that our salaries, annual cash incentive bonus awards and long-term incentive award values be targeted at a level approaching the 75th percentile of competitive market pay practices. Actual payments of executive compensation in 2009, including salaries, annual cash incentive bonus awards and long-term incentive award values, fell below the 50^th percentile of peer group compensation for the Chairman, CEO, and CFO and between the 50^th and 75^th percentile for the Chief Strategy Officer and Executive Vice President, Operations.

 

The Committee is working to ensure that over time our compensation becomes more consistent with the Committee’s goal of setting compensation in relation to our established peer group. In general, the Committee believes total compensation of our named executive officers should be between the median and the 75^th percentile of our peer group. The Committee believes that targeting for this range will reflect competitive market pay practices and our current compensation philosophy, which balances our “pay for performance” strategy against our desire to offer competitive compensation with respect to our industry peer group, thus allowing us to attract and retain management talent.

 

In January 2010, the Committee determined that 2010 base salary compensation amounts for the named executive officers should remain the same as 2009 and granted stock options to named executive officers as well as other key employees. At this meeting, the Committee reviewed stock option summaries and tally sheets for each named executive officer in determining appropriate compensation levels. The Committee intends to continue to review its current compensation programs annually in conjunction with its determination of the executive compensation for 2010 and determine whether our compensation in line with our compensation philosophy. We believe that effectiveness of the compensation programs is predicated upon continual review to ensure our compensation is competitive with the market.

 

Annual Salary

 

The 2009 base salaries of our named executive officers are shown in the “Salary” column of the Summary Compensation Table in this Proxy Statement. Salaries for named executive officers are reviewed on an annual basis, as well as at the time of a promotion or other changes in responsibilities.

 

Base compensation is targeted at about the 75^th percentile of compensation paid to executives with similar levels of experience based on salary surveys of similarly sized companies in comparable industries in order to ensure that we can attract and retain appropriate levels of executive talent. Individual executives

may be paid higher or lower than this target pay positioning at the discretion of the Committee depending on facts such as tenure with the Company, results of personal, department and corporate performance, and the perceived detrimental effects to the Company that may result from such executive’s departure. The base salaries of our executive officers were established by the Committee and approved by the independent directors after considering compensation salary trends, overall level of responsibilities, total performance and compensation levels for comparable positions in the market for executive talent based on salary surveys and compensation data from peer group companies.

 

As discussed above, the Committee believes that our base salary compensation is generally lower than competitive market pay data based upon our internal analysis of comparable companies and national salary surveys. The Committee considered this information, as well as suggestions from management, in determining annual salary increases. In December, 2009 the Committee determined that 2010 base salary compensation amounts for the named executive officers would remain the same as 2009. This determination is expected to be revisited mid-way through 2010, based on an evaluation of the appropriate facts and circumstances. On January 1, 2009, Thomas P. Smith’s base salary was increased to $200,000 to reflect the additional time required for him to manage the Company’s international sales operations. On February 1, 2009, Thomas P. Smiths’ base salary was increased to $265,000 to reflect the additional responsibilities of managing worldwide sales operations in all markets. With the exception of Thomas P. Smith, base salaries and target bonus levels for the named executive officers have remained the same since January 1, 2008 or their hire date for named executives hired after January 1, 2008.

 

Annual Incentive Cash Bonuses

 

The objective of the annual incentive cash bonus plan (the “Bonus Plan”) is to provide executives with a competitive total cash compensation opportunity relative to market practices while aligning rewards with short-term financial results which the Committee believes will help achieve our goals of providing our stockholders with a competitive return on their investments over the long term.

 

The Bonus Plan was approved by the Committee in January 2006. Annual incentive awards are determined as a percentage of each named executive officer’s base salary. Annual incentive awards under the Bonus Plan are determined each year for executive officers. Targeted bonuses for the Chairman, Chief Executive Officer, Chief Financial Officer, Executive Vice President of Operations and Chief Strategy Officer, were 50%, 50%, 35%, 20% and 35%, respectively, of their base salary. The Committee establishes the performance measures and other terms and conditions of awards for executive officers and has the authority to cancel an award at its discretion. Historically, however, the Committee has not canceled a bonus for executive officers, nor has it awarded an additional discretionary bonus amount to an executive officer. The Bonus Plan is based on performance against the Board approved budget plan and uses pre-tax earnings as the metric and is thus conditioned on the pre-tax profitability of the Company.

 

On August 8, 2008 the Committee approved providing the opportunity for employees who participate in the Bonus Plan to opt out of participation in the Bonus Plan for the two year period that began on July 1, 2008 and ends on June 30, 2010 in exchange for a grant of employee stock options for Company stock. See the section below entitled “Options in Exchange for Opting out of Cash Bonus Plan”. All of our named executive officers elected to participate in this program, thus terminating their participation in the Bonus Plan in the second half of 2008, 2009 and the first half of 2010. As such, no annual incentive cash bonuses were paid to our NEOs in 2009. The Committee believes stock options further align the interests of Company employees to those of its stockholders and improves retention of employees during the three year vesting period and beyond.

 

Options in Exchange for Opting out of Cash Bonus Plan

 

In August 2008, the Compensation Committee elected to give employees of the Company the opportunity to opt out of the Cash Bonus Program for 2008 and 2009 in exchange for additional grant of stock options. The amount of options granted for each employee was based upon a mathematical formula

which was calculated by dividing the employee’s aggregate target bonus for the two year period (based on the respective employee’s current salary and target cash bonus percentage) by the Black-Scholes fair value of one stock option calculated at the date of grant. For example, an employee earning $100,000 per annum with a targeted annual bonus of 10% would receive 8,000 stock options (($100,000*2*10%)/2.5)), assuming a Black Scholes fair value of $2.50 at grant date. These stock options vest ratably on a monthly basis over a period of three years. All of our NEOs elected to participate in this program, thus terminating their participating in the Cash Bonus Plan in the second half of 2008, the full year of 2009, and the first half of 2010. These options vest over three years, even though the employees were giving up two years worth of potential cash bonuses in order to create a retention component to the award and to better align the awards with shareholder interests.

 

Long-Term Incentive Compensation

 

The Committee believes that equity-based compensation helps ensures that our executive officers have a continuing stake in our long-term success. As such, the Committee has implemented, with board and stockholder approval, the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2004 Stock Option Plan (the “2004 Plan”).

 

The 2009 Plan and the 2004 Plan provide for the opportunity to grant stock options to officers, other key employees to help align those individuals’ interests with those of stockholders, to motivate executives to make strategic long-term decisions, and to better enable us to attract and retain capable directors and executive personnel.

 

During 2009, the Company did not grant any stock options to its NEOs. In December 2008, the Compensation Committee approved stock option awards for our NEOs. In keeping with goals to align the interests of management with the Company’s stockholders, the Committee determined that a meaningful percentage of each of these option awards should be performance-based. The Compensation Committee’s intention in making these awards was to incentivize our executives over the subsequent three year vesting period. Thus, even though these awards were granted in late 2008, the Committee views them as awards to incentivize performance in 2009, 2010 and 2011. The Compensation Committee further believes that the awards provide retention benefits even beyond the performance and vesting periods as the option awards remain exercisable for up to ten years following the date of grant, to the extent vested.

 

The following table sets forth the stock option awards made to our NEOs in December 2008, including the portion of the award that is performance-based.

 

 

 

In determining the total number of options awarded to each NEO, the Compensation Committee considered, among other things the strategic objectives of the Company over the next three years.

 

In determining the portion of each NEO’s total option award that would be a performance-based award, the Compensation Committee considered, among other things each executives’ ability to influence the underlying performance criteria. A discussion of the performance-based portions of these grants is included below.

 

With respect to Patrick W. Smith, the Company’s Chief Executive Officer, the Committee considered the fact that Mr. Smith’s total compensation was below the Compensation Committee’s target range of the 50th to the 75th percentile of other CEOs in the Company’s peer group, according to the compensation study prepared by Pearl Meyer at the end of 2007. In fact, the Pearl Meyer study indicated that Mr. Smith’s total compensation was closer to the 25th percentile of other CEOs in the peer group. The Compensation Committee determined that Mr. Smith’s total compensation should be increased to the target range (i.e., between the 50th and the 75th percentiles of CEO compensation in the Company’s peer group). In discussions with the Board of Directors, Mr. Smith indicated that he preferred to receive any additional compensation that the Compensation Committee might award in the form of long-term equity awards versus cash awards. The Compensation Committee determined that increasing Mr. Smith’s total compensation through the use of such awards was the most effective way to achieve its goal of bringing Mr. Smith’s compensation in line with that of his peers while also aligning his interests with those of our stockholders. Along those lines, the Committee determined that it was appropriate to make the vesting of half of the 600,000 stock option grant subject to Mr. Smith’s achievement of certain performance goals. A discussion of the performance-based portion of this grant is included below.

 

The following table sets forth information concerning all performance-based option awards made during 2008, including the amounts identified above relating to the December 2008 option award grants. In determining the performance criteria for each NEO’s performance-based option award, the Compensation Committee considered, among other things, the strategic objectives of the Company and the executive’s ability to influence the performance criteria. The Compensation Committee believes the performance targets relating to the performance criteria described below are challenging, but achievable.

 

 

 

Employment Agreements and Other Arrangements

 

In 1998, the Company entered into employment agreements with Patrick W. Smith and Thomas P. Smith. The agreements were for an initial three-year term ending June 30, 2001, and were automatically renewed for a two-year term on such date and were automatically renewed for an additional two year term on June 30, 2003 and such agreements will be automatically renewed every two years thereafter unless the Company gives the officer who is a party to each such agreement a one-year prior notice of termination, if the termination is without cause.

 

In May 2004, the Company entered into an employment agreement with Daniel M. Behrendt pursuant to which he agreed to serve as its Chief Financial Officer.

 

In December 2007, the Company increased Messrs. Patrick and Thomas Smith’s annual base compensation to $265,000 effective January 1, 2008 and increased Mr. Behrendt’s annual base compensation to $255,000 effective January 1, 2008. Thomas P. Smith requested to change to a part time working schedule and effective June 1, 2008 his annual base compensation was adjusted to $132,500. Effective January 1, 2009 Mr. Smith agreed to resume a full-time commitment to the Company primarily in a sales related capacity. Accordingly, Mr. Smith’s base salary compensation was adjusted to $200,000 effective January 1, 2009. On February 1, 2009, Mr. Smith’s base salary compensation was restored to $265,000 when he agreed to resume his duties as the senior executive in the sales area.

 

In February 2008, Steve Mercier was hired as Vice President of Operations and entered into an employment agreement with the Company providing for an annual base salary of $200,000.

 

In August 2008, Jasjit Dhillon was hired as Chief Strategy Officer and General Manager of TASER Virtual Systems and entered into an employment agreement with the Company providing for an annual base salary of $250,000.

 

In December 2008 the Company and Messrs. Smith, Smith, Behrendt, Mercier and Dhillon each executed an addendum to their employment agreements which amended the employment agreements to bring them in compliance with regulation 409A of the Internal Revenue Code, but did not make any substantive changes to the employment agreements.

 

The Company may terminate each of these officers with or without cause. The conditions or events triggering the payment of severance benefits include the executive’s death, disability, termination without cause, or a change in control of the Company. Conditions to the payment of severance benefits include covenants relating to assignment of inventions, nondisclosure of Company confidential information, and non-competition with the Company for a period of 18 months after termination of employment without cause or change in control of the Company. Should the Company terminate Patrick Smith, Thomas Smith, Daniel Behrendt or Jasjit Dhillon without cause, or should executive’s employment with the Company end by reason of a change of control or upon the death or disability of the executive, the executive is entitled to severance compensation equal to 60 days of salary in the event of for cause termination, 12 months of salary in the event of termination without cause, 24 months of salary in the event of a change of control and 18 months of salary in the event of death or disability. Should the Company terminate Steven Mercier without cause, upon a change of control or upon his death or disability, he is entitled to severance compensation equal to six months of salary in the event of termination without cause, 199% of six (6) months base salary in the event of a change of control and 18 months of salary in the event of death or disability. Upon a change of control any non-vested stock options previously granted are subject to accelerated vesting such that each named executive officer can immediately exercise any outstanding stock options. The severance benefit amounts with respect to the above triggering events were determined based on competitive practices within peer group of companies. The Company agreed to pay these variable amounts of compensation as severance benefits or change of control benefits in order to attract and retain executive officers.

 

The table below reflects the value of severance compensation that would be provided to each of the named executive officers of the Company assuming the termination of such executive’s employment occurred on December 31, 2009.

 

 

 

Perquisites and Other Personal Benefits

 

We do not provide our named executive officers with significant perquisites or other benefits, except for Company 401(k) partial matching contributions and health care benefits that are available to all employees. The Committee periodically reviews the levels of perquisites and other benefits that could be provided to the named executive officers.

 

Compensation Deductibility

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) imposes a limit on tax deductions for annual compensation in excess of $1 million paid to the named executive officers. This provision excludes certain forms of “performance-based compensation,” including stock options, from the compensation taken into account for purposes of that limit. The Committee believes that the Bonus Plan is “performance-based” within the meaning of that restriction. Nonetheless, the Committee believes that, it is desirable for executive compensation to be fully tax deductible. However, whenever in the Committee’s judgment would be consistent with the objectives pursuant to which the particular compensation is paid, we will compensate our executive officers fairly in accordance with our compensation philosophy, regardless of the anticipated tax treatment. The Committee will from time to time continue to assess the impact of Section 162(m) of the Code on its compensation practices and will determine what further action, if any, may be appropriate in the future.

 

COMPENSATION COMMITTEE REPORT*

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the this Proxy Statement.

 

The Compensation Committee:

 

Judy Martz, Chairman

  Mathew R. McBrady

      John S. Caldwell

 

* The foregoing Compensation Committee Report will not be deemed to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and will not otherwise be deemed filed under such Acts.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

No member of the Compensation Committee is, or was during or prior to fiscal 2009, an officer or employee of the Company or any of its subsidiaries. None of the Company’s executive officers serves as a director or member of the compensation committee of another entity in a case where an executive officer of such other entity serves as a director or member of the Compensation Committee.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

In 2009, there were no new non-equity or equity awards granted to our NEOs. As previously discussed above under “options in exchange for opting out of cash bonus plan”, all of our NEOs elected to participate in this program which excluded their participation in the Cash Bonus Plan in 2009. Additionally, as our NEO’s were awarded stock options in December 2008, a portion of which were performance-based to incentivize performance beginning in 2009, no additional stock option grants were made in 2009.

 

OPTION EXERCISES AND STOCK VESTED

 

No options were exercised by our named executive officers in the year ended December 31, 2009.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

The following table includes certain information with respect to all options previously awarded to the executive officers named above as of December 31, 2009.

 

 

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

 

The following table sets forth information, as of March 30, 2010, with respect to beneficial ownership of the Company’s Common Stock by each director or nominee for director, by each named executive officer, by all directors and officers as a group, and by each person who is known to the Company to be the beneficial owner of more than five percent of the Company’s outstanding Common Stock.

 

The Company believes that, except as otherwise described below, each named beneficial owner has sole voting and investment power with respect to the shares listed.

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange

Commission. Executive officers, directors and greater than 10 percent beneficial owners are required by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a). Based solely on a review of the copies of such reports furnished to the Company and written representations from reporting persons that no other reports were required, to the Company’s knowledge, such persons complied with all of the Section 16(a) filing requirements applicable to them in 2009.

 

PROPOSAL TWO:

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee has appointed Grant Thornton LLP, independent registered public accounting firm, to audit the consolidated financial statements of the Company for the year ending December 31, 2010. Grant Thornton LLP has acted as the independent registered public accounting firm for the Company since 2005. A representative of Grant Thornton LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement and is expected to be available to respond to appropriate questions.

 

Stockholder ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. Nonetheless, the Audit Committee is submitting the selection of Grant Thornton LLP to the stockholders for ratification as a matter of good corporate practice and because the Audit Committee values the views of our stockholders on our independent auditors.

 

If the stockholders fail to ratify the election, the Audit Committee will reconsider the appointment of Grant Thornton LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the year if it determines that such an appointment would be in the Company’s best interest.

 

If the appointment is not approved by the stockholders, the adverse vote will be considered a direction to the Audit Committee to consider other auditors for next year. However, because of the difficulty in making any substitution of auditors so long after the beginning of the current year, the appointment in 2010 will stand, unless the Audit Committee finds other good reason for making a change.

 

Unless marked to the contrary, proxies received will be voted FOR ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010.

 

The Board of Directors recommends a vote FOR ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal 2010.

 

Audit and Non-Audit Fees

 

Audit and Non-Audit Fees. The following table presents fees for audit, tax and other professional services rendered by Grant Thornton LLP for the years ended December 31, 2009 and 2008.

 

 

Audit Fees: Consists of fees billed for professional services rendered for the audit of TASER International Inc.’s financial statements, fees billed related to Sarbanes Oxley 404 services and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements and fees.

 

Tax Fees: Consists of fees billed principally for services provided in connection with worldwide tax planning and compliance services, research and development tax credit studies, expatriate tax services, and assistance with tax audits and appeals.

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor. Consistent with SEC policies regarding auditor independence, the Audit Committee must pre-approve all audit and permissible non-audit services provided by our independent auditors. Our Non-Audit Services Pre-Approval Policy covers all services to be performed by our independent auditors. The policy contemplates a general pre-approval for all audit, audit-related, tax and all other services that are permissible, with a general pre-approval period of twelve months from the date of each pre-approval. Any other proposed services that are to be performed by our independent auditors, not covered by or exceeding the pre-approved levels or amounts, must be specifically approved in advance.

 

Prior to engagement, the Audit Committee pre-approves the following categories of services. These fees are budgeted, and the Audit Committee requires the independent auditors and management to report actual fees versus the budget periodically throughout the year, by category of service.

 

 

The Audit Committee has considered and concluded that the provision by Grant Thornton LLP of non-audit services is compatible with Grant Thornton maintaining its independence.

 

Audit Committee Pre-Approval Procedures for Independent Auditor-Provided Services

 

Except for the limited circumstances set forth below, the Audit Committee has the sole authority to engage the Company’s outside auditing and tax preparation firms and must pre-approve all tax consulting and auditing arrangements and all non-audit services prior to the performance of any such service. In addition, any proposed engagement of the independent registered public accounting firm for services that are not pre-approved audit-related and tax consulting services as described above must also be pre-approved on a case-by-case basis by the Audit Committee or the Chairman of the Audit Committee, or, if the Chairman is unavailable, another member of the Audit Committee. The Company’s Chief Financial Officer has the authority to engage the Company’s outside auditing and tax preparation firms for amounts less than $5,000. All of the audit – related fees, tax fees and all other fees in 2009 were approved by the Audit Committee.

 

FORWARD LOOKING STATEMENTS

 

This proxy statement contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve substantial risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include, but are not limited to, statements made in the Compensation Discussion and Analysis section of this Proxy Statement about our compensation structure and programs and our intentions with respect thereto. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect TASER’s business, particularly those mentioned under the heading “Risk Factors” in TASER’s Annual Report on Form 10-K, and in the periodic reports that TASER files with the SEC on Form 10-Q and Form 8-K.

 

STOCKHOLDER PROPOSALS

 

To be eligible for inclusion in the Company’s proxy materials for the 2011 annual meeting of stockholders, a proposal intended to be presented by a stockholder for action at that meeting must, in addition to complying with the stockholder eligibility and other requirements of the SEC’s rules governing such proposals, be received not later than December 15, 2010 by the Secretary of the Company at the Company’s principal executive offices, 17800 North 85th Street, Scottsdale, Arizona 85255.

 

Stockholders may bring business before an annual meeting only if the stockholder proceeds in compliance with the Company’s Bylaws. For business to be properly brought before the 2011 annual meeting of stockholders by a stockholder, notice of the proposed business must be given to the Secretary of the Company in writing no later than 60 days before the annual meeting of stockholders or (if later) ten days after the first public notice of the meeting is sent to stockholders.

 

The notice to the Company’s Secretary must set forth as to each matter that the stockholder proposes to bring before the meeting: (a) the nature of the proposed business with reasonable particularity, including the exact text of any proposal to be presented for adoption, and the reasons for conducting that business at the annual meeting; (b) the stockholder’s name and address as they appear on the records of the Company, business address and telephone number, residence address and telephone number, and the number of shares of Common Stock of the Company directly or beneficially owned by the stockholder; (c) any interest of the stockholder in the proposed business; (d) the name or names of each person nominated by the stockholder to be elected or re-elected as a director, if any; and (e) with respect to any such nominee, the nominee’s name, business address and telephone number, residence address and telephone number, the number of shares of Common Stock of the Company, if any, directly or beneficially owned by the nominee, all information relating to the nominee that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, under Regulation 14A of the Securities Exchange Act of 1934, as amended, or successor regulation, and a letter signed by the nominee stating the nominee’s acceptance of the nomination, the nominee’s intention to serve as a director if elected and consenting to being named as a nominee for director in any proxy statement relating to such election.

 

The presiding officer at any annual meeting shall determine whether any matter was properly brought before the meeting in accordance with the above provisions. If the presiding officer should determine that any matter has not been properly brought before the meeting, he or she will so declare at the meeting and any such matter will not be considered or acted upon.

 

Householding of Annual Meeting Materials

 

Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of the Proxy Statement and annual report may have been sent to multiple stockholders in a stockholder’s

household. The Company will promptly deliver a separate copy of either document to any stockholder who contacts the Company’s investor relations department at 17800 North 85th Street, Scottsdale, Arizona 85255, phone number (800) 978-2737, requesting such copies. If a stockholder is receiving multiple copies of the Proxy Statement and annual report at the stockholder’s household and would like to receive a single copy of the proxy statement and annual report for a stockholder’s household in the future, stockholders should contact their broker, other nominee record holder, or the Company’s investor relations department to request mailing of a single copy of the proxy statement and annual report.

 

A copy of the Company’s 2009 Annual Report on Form 10-K for the fiscal year ended December 31, 2009 is available to stockholders without charge upon request to: Investor Relations, TASER International, Inc., 17800 North 85^th Street, Scottsdale, Arizona 85255.

 

IMPORTANT NOTICE REGARDING THE AVAILABILTY OF PROXY
MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 27, 2010

 

The proxy materials for the Company’s annual meeting of stockholders, including the 2009 annual report and this proxy statement, are available over the Internet by accessing the Investor Relations page of the Company’s Internet website at www.taser.com. Other information on the Company’s website does not constitute part of the Company’s proxy materials.

 

By Order of the Board of Directors,

 

 

Douglas E. Klint

Corporate Secretary

April 14, 2010

PROXY

TASER INTERNATIONAL, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 27, 2010

Solicited on Behalf of the Board of Directors of the Company

The undersigned hereby appoints Patrick W. Smith and Douglas E. Klint as proxies, each with full power of substitution, to vote all of the shares of Common Stock that the undersigned is entitled to vote at the 2010 Annual Meeting of Stockholders of TASER International, Inc. to be held on Thursday May 27, 2010 beginning at 10:00 a.m. local time and at any adjournments or postponements thereof on the matters set forth below:

Board recommends a vote FOR:

1.

TO ELECT TWO DIRECTORS:

q

VOTE FOR all nominees listed (except as marked to the contrary below).

Instruction: To withhold authority to vote for an individual nominee, strike a line through the nominee’s name below.

Class A (three-year term) John S. Caldwell; Michael Garnreiter

q

WITHHOLD AUTHORITY to vote for all nominees listed.

2.

TO RATIFY APPOINTMENT OF GRANT THORNTON LLP as the Company’s independent registered public accounting firm for fiscal 2010.

q FOR           q AGAINST           q ABSTAIN

(please sign on reverse side)

• PLEASE VOTE, SIGN, AND RETURN THE ABOVE PROXY •

You are cordially invited to attend the 2010 Annual Meeting of Stockholders of TASER International, Inc., which will be held at 17800 North 85^th Street, Scottsdale, Arizona 85255 beginning at 10:00 a.m. local time on Thursday, May 27, 2010.

Whether or not you plan to attend this meeting, if you have note voted on the Internet or by telephone, please sign, date, and return your proxy form above as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. If you attend the meeting, you may revoke your proxy, if you wish, and vote personally. It is important that your stock be represented.

          THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED (1) “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR, AND (2) “FOR” THE RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY, MORE FULLY DESCRIBED IN THE NOTICE OF ANNUAL MEETING AND THE ACCOMPANYING PROXY STATEMENT, AND IN THE DISCRETION OF THE PROXY HOLDERS ON OTHER MATTERS THAT MAY BE PROPERLY PRESENTED AT THE MEETING. IF ANY OF THE NAMED NOMINEES SHOULD BECOME UNAVAILABLE PRIOR TO THE ANNUAL MEETING THE PROXY WILL BE VOTED FOR ANY SUBSTITUTE NOMINEE OR NOMINEES DESIGNATED BY THE BOARD OF DIRECTORS.

          Please date and sign exactly as your name or names appear below. If more than one name appears, all should sign. Persons signing as attorney, executor, administrator, trustee, guardian, corporate officer or in any other official or representative capacity, should also provide full title. If a partnership, please sign in full partnership name by authorized person

Dated:
		Signature or Signatures

PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE