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EXHIBIT 4.5 Metal Storm Limited
ACN 064 270 006
Level 34 Central Plaza One
345 Queen Street
Brisbane Qld 4000
GPO Box 1097
Brisbane Qld 4001 Australia
Tel: 61 7 3221 9733
Fax: 61 7 3221 9788
Web Sit: www.metalstorm.com
Email Address: msau@metalstorm.com
    
    (METAL STORM LOGO)
 31 January 2005 Mr David A Smith
9619 Potters Hill Circle
LORTON VA 22079 Dear David I am delighted that you have decided to accept the position of CEO with Metal Storm. I am writing to outline the terms of the companys employment offer for the position of Chief
Executive Officer for Metal Storm Limited, which is located in Brisbane, Australia11
but has its main US location in DC. Your office will be in the DC premises (see below). In
this capacity you will be reporting directly to the Metal Storm Limited Board of Directors. If you accept this position you will be nominated for membership on the Board of Directors of Metal
Storm Limited and Metal Storm, Inc. (hereinafter collectively referred to as Metal Storm). Your
election to the board of Metal Storm will be decided upon by a vote of its shareholders at the
Companys General Meeting which is scheduled to occur on or about May 20, 2005 in Brisbane. Your
assigned office location will be in the Metal Storm facilities located in Suite 810, 4350 N.
Fairfax Drive, Arlington, VA. Your monthly base salary will be $20,000, which is equivalent to a rate of $240,000 per year. We
would like you to start work on Monday, February 7, 2005. As the senior member of the Metal Storm
management team, you will be eligible to participate in our annual incentive compensation plan
which has both short term and long term components. Your target shortterm performance bonus goal
for the Metal Storm fiscal year which ends on December 31, 2005, will be 75% of your base salary.
Short-term bonuses are payable in cash and/or fully vested stock. You will also be eligible for a
long-term performance bonus in the form of stock granted on option, the details of which will be
explained in a separate letter. In general, the option would be a right to acquire 1,000,000 shares
of Metal Storm Limited common stock based upon grants of 125,000 shares per quarter over a two year
period.Your bonus will be based on both corporate performance and achievement of your objectives
(as determined by the Metal Storm Limited Board), and may be pro-rated based on the number of
months you are employed during the Metal Storm Limited fiscal year. If your employment is terminated during your first 90 days of employment you will not be eligible
to receive any severance payments whatsoever. Thereafter, if you employment by Metal Storm is
terminated for reasons other than cause,2 Metal Storm will provide you with
separation benefits equal to six months   1
    
    Your duties will also include acting as the
CEO of Metal Storm, Inc., which is a wholly owned subsidiary of Metal Storm
Limited doing business in the United States.2
    
    Cause shall be defined as (i) a willful
failure to substantially perform your duties, (ii) gross misconduct or, (iii)
conviction
of a felony. U.S. Office
4350 N Fairfax Drive, Suite 810, Arlington VA 22203     Tel: 703 248 8218  Fax: 703 248 8262




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Metal Storm Limited
ACN 064 270 006
Level 34 Central Plaza One
345 Queen Street
Brisbane Qld 4000
GPO Box 1097
Brisbane Qld 4001 Australia
Tel: 61 7 3221 9733
Fax: 61 7 3221 9788
Web Sit: www.metalstorm.com
Email Address: msau@metalstorm.com
    
    (METAL STORM LOGO)
 of your base salary paid as a lump sum. The severance benefits described in this letter will be
Metal Storms sole and exclusive obligation to you in the event you are terminated for reasons
other than cause in which case you will not be entitled to any severance benefits whatsoever. In
return for these separation benefits, you will release and discharge any claims whatsoever that you
might have against Metal Storm and its officers, directors, employees and agents. As an employee of Metal Storm, you will be eligible to receive fringe benefits, which I will
discuss with you. The following documents which must be accepted/completed by you as a condition
of your employment will be sent to you under separate covers:  Ø
    Employee Agreement Regarding Intellectual Property and ConfidentialityØ
    Employment ApplicationØ
    Employment Eligibility Verification (I-9) (w/required documents)Ø
    Fair Credit Reporting Act Disclosure If these terms are acceptable to you please indicate your willingness to acceptance of this offer
by return email. David, I would like to provide additional verbal information before you begin. Could you be available for
a telephone call at 7.30pm on your Monday evening? Could you provide a call number and another
time if that is more convenient? Yours sincerely -s- Terry ODwyer Metal Storm Limited
Terry ODwyer
Chairman