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EXHIBIT 4.6    
  
 Separation Agreement




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Contents1
    
    Interpretation
    
    11.1
    
    Definitions
    
    11.2
    
    Construction
    
    31.3
    
    Headings
    
    42
    
    Termination
    
    42.1
    
    Employment & Consultancy
    
    42.2
    
    Transfer of Assets
    
    42.3
    
    Resignation of Directorship
    
    43
    
    Advisory and Consultancy Services
    
    53.1
    
    ODwyer to provide certain advisory and consultancy services
    
    53.2
    
    Payment of Reasonable Expenses
    
    54
    
    Release
    
    54.1
    
    Release
    
    54.2
    
    This document a bar
    
    55
    
    IP Rights
    
    55.1
    
    Acknowledgementexisting rights
    
    55.2
    
    Assignmentexisting rights
    
    65.3
    
    Acknowledgementfuture rights
    
    65.4
    
    Assignmentfuture rights
    
    65.5
    
    Other entities
    
    65.6
    
    Further assurance and power of attorney
    
    65.7
    
    Warranties
    
    66
    
    Confidentiality
    
    76.1
    
    Acknowledgement
    
    76.2
    
    Confidentiality
    
    77
    
    Restraint
    
    77.1
    
    Restraint
    
    77.2
    
    Construction of restraint clause
    
    87.3
    
    Exception
    
    87.4
    
    No adverse public statements
    
    88
    
    Acknowledgement
    
    89
    
    Availability of injunction proceedings
    
    810
    
    Consideration
    
    911
    
    Notices
    
    911.1
    
    General
    
    911.2
    
    How to give a communication
    
    911.3
    
    Particulars for delivery of notices
    
    911.4
    
    Communications by post
    
    911.5
    
    Communications by fax
    
    9




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11.6
    
    After hours communications
    
    1011.7
    
    Process service
    
    1012
    
    General
    
    1012.1
    
    GST
    
    1012.2
    
    Legal costs
    
    1012.3
    
    Amendment
    
    1012.4
    
    Waiver and exercise of rights
    
    1012.5
    
    Rights cumulative
    
    1112.6
    
    Consents
    
    1112.7
    
    Further steps
    
    1112.8
    
    Governing law and jurisdiction
    
    1112.9
    
    Assignment
    
    1112.10
    
    Liability
    
    1112.11
    
    Counterparts
    
    1112.12
    
    Entire understanding
    
    1112.13
    
    Relationship of parties
    
    12Schedule 1 - ASSETS
    
    13




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DatePartiesMetal Storm LtdACN 064 270 006 of Level 34, Central Plaza One, 345 Queen Street,
Brisbane Qld 4000 (Metal Storm)James Michael ODwyer ofUnit 162, Admiralty Quays, 32 Macrossan Street, Brisbane Qld
4000 (ODwyer)BackgroundA
    ODwyer has been an employee of, and is a consultant to and
director of, Metal Storm.B
    ODwyer and Metal Storm have agreed to end all of their
commercial relationships (except the shareholding allowed by
clause 6.3 and the advisory role allowed in clause 3.1) on the
Effective Date, and ODwyer has agreed to resign as a director of
Metal Storm on the Effective Date, on the terms of this document.
Agreed terms1
    Interpretation1.1
    DefinitionsIn this document:Business Daymeans a day which is not a Saturday, Sunday or bank or public holiday in
Brisbane.Confidential Informationmeans all information (whether or not in a material form) that
is not public and that relates in any way to:  (a)
    the business interests, methodology or affairs of Metal Storm or any of
its Related Bodies Corporate, or any person or entity with which it deals or is
concerned; or(b)
    the Technical Field, including (but not limited to) inventions, technical data, research and development
information, business records, information, notes, products, know how, trade secrets,
engineering or other data, designs, specifications, processes, formulae, manufacturing,
planning or marketing procedures,




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techniques or information, accounting procedures or financial information, names and
details of consumers, customers, suppliers, agents, alliance partners and joint
venturers, and employee details. Consultancy Contractmeans a contract between ODwyer (or an entity Controlled by
ODwyer) and Metal Storm (or any of its Related Bodies Corporate) under which ODwyer is
or was obliged to provide (or an entity was obliged to procure the provision by ODwyer
of) consultancy services to Metal Storm (or any of its Related Bodies Corporate), but for
the avoidance of doubt does not include the unpaid advisory and consulting services
referred to in clause 3.1. Controlhas the meaning given in the Corporations Act 2001(Cth). Effective Datemeans 8 February 2005. IP Rightsmeans any and all industrial and intellectual property rights of any kind
including but not limited to:  (a)
    patents, copyright, registered or unregistered trade marks, designs and
EL rights;(b)
    any application or right to apply for registration of any of the rights
in paragraph (a);(c)
    rights associated with confidential information and know-how; and(d)
    rights associated with business reputation and goodwill. Projectileincludes a container loaded with any substance or material that may or may not
be explosive or kinetic. Related Bodies Corporatehas the meaning given in the Corporations Act 2001(Cth). Restrained Activitymeans:  (a)
    seeking or attempting to seek the custom of any existing or potential
Metal Storm client, customer, supplier, subcontractor or collaborator for a purpose
in the Technical Field;(b)
    soliciting, interfering with or endeavouring to entice away any director,
manager, officer, employee, servant of Metal Storm or its Related Bodies Corporate;(c)
    providing or acquiring or offering to provide or acquire any product or
service in the Technical Field;(d)
    carrying on any research and development activity in the Technical Field
(other than for the benefit of Metal Storm);(e)
    carrying on any business or activity in the Technical Field which is
competitive with a business or activity which is, at the Effective Date or at any
time after the Effective Date, carried on by Metal Storm or any of its Related
Bodies Corporate; or(f)
    exercising any influence with any past or present customer of, supplier
to, subcontractor of, or collaborator of, Metal Storm or its Related Bodies




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Corporate which is in any way detrimental to the interests of Metal Storm or any
of its Related Bodies Corporate. Restraint Areameans each of the following geographic areas determined by reference to
circumstances prevailing on the Effective Date:  (a)
    the world;(b)
    the United States of America, Canada, the European Union, Australia and
the member nations of the North Atlantic Treaty Organisation;(c)
    the United States of America, Canada, the European Union and Australia;(d)
    the United States of America, Canada and Australia; and(e)
    Australia. Restraint Periodmeans, starting from the Effective Date:  (a)
    48 months;(b)
    36 months;(c)
    24 months; and(d)
    12 months. Technical Fieldmeans all or any of the following:  (a)
    sequentially loading Projectiles and propellant in a barrel;(b)
    preventing propellant burn leaking past following Projectiles which might
otherwise cause uncontrolled ignition of the following propellant;(c)
    maintaining Projectile separation between sequentially loaded Projectiles
during firing;(d)
    loading multiple Projectiles sequentially in one cartridge; and(e)
    firing sequentially loaded Projectiles by electronic or other non
mechanical means; and(f)
    any technology which is similar to or analogous to Metal Storms bullets
and barrels technology.  Voting Powerhas the meaning given to it in the Corporations Act 2001 (Cth).1.2
    ConstructionUnless expressed to the contrary, in this document:  (a)
    words in the singular include the plural and vice versa;(b)
    any gender includes the other genders;(c)
    if a word or phrase is defined its other grammatical forms have
corresponding meanings;(d)
    includes means includes without limitation;




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(e)
    no rule of construction will apply to a clause to the disadvantage of a
party merely because that party put forward the clause or would otherwise benefit
from it;(f)
    a reference to:  (i)
    a person includes a partnership, joint venture,
unincorporated association, corporation and a government or statutory body or
authority;(ii)
    a person includes the persons legal personal
representatives, successors, assigns and persons substituted by novation;(iii)
    any legislation includes subordinate legislation under it
and includes that legislation and subordinate legislation as modified or
replaced; and(iv)
    an obligation includes a warranty or representation and a
reference to a failure to comply with an obligation includes a breach of
warranty or representation; and  (g)
    if the date on or by which any act must be done under this document is
not a Business Day, the act must be done on or by the next Business Day.  1.3
    HeadingsHeadings do not affect the interpretation of this document.2
    Termination2.1
    Employment & ConsultancyOn the Effective Date, any then existing:  (a)
    contract of employment of ODwyer by Metal Storm; and(b)
    Consultancy Contract;  terminates, without any liability as between the parties to those contracts arising from
that termination, and subject in any event to the release in clause 3.2.2
    Transfer of AssetsMetal Storm shall, within 5 Business Days after the Effective Date, transfer
ownership of the assets referred to in Schedule 1 by delivery to ODwyer in full and
final satisfaction of Metal Storms obligation to pay salary or other fees to ODwyer in
respect of the period from 1 January 2005 to the Effective Date.2.3
    Resignation of DirectorshipODwyer resigns as a director of Metal Storm with effect from the Effective Date.




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3
    Advisory and Consultancy Services3.1
    ODwyer to provide certain advisory and consultancy servicesFor a period of 2 years from the Effective Date, Metal Storm may request ODwyer
to provide advisory and consultancy services to it from time to time and ODwyer shall,
to the extent that the request is reasonable and within his capability, provide those
services on an unpaid basis. The parties acknowledge that if Metal Storm wishes to
engage Mr ODwyer to provide services that will require a significant amount of ODwyers
time, the parties will discuss the commercial terms (including payments) on which they
will do so.3.2
    Payment of Reasonable ExpensesWhere ODwyer performs unpaid services at the request of Metal Storm under clause
3.1, Metal Storm will pay the reasonable expenses incurred by ODwyer with the prior
consent of Metal Storm (which shall not be unreasonably withheld) in the course of
performing those services. Metal Storm will pay such expenses within a reasonable time
after receipt of evidence reasonably satisfactory to Metal Storm of the incurring of the
expenses.4
    Release4.1
    ReleaseOn the Effective Date, ODwyer releases and discharges Metal Storm, its Related
Bodies Corporate, employees, officers, directors, servants and agents (Those Released)
from any claims which ODwyer has or which but for this document could, would or might at
any time hereafter have or have had against any of Those Released in relation to:  (a)
    his employment by Metal Storm;(b)
    his directorship of Metal Storm;(c)
    any Consultancy Contract; or(d)
    any IP Rights or Confidential Information referred to in this document.  4.2
    This document a barThis document may be pleaded by any of Those Released in bar to any action by
ODwyer for enforcement of any of the rights or claims which are in this document
released.5
    IP Rights5.1
    Acknowledgementexisting rightsODwyer acknowledges that all of the IP Rights developed by ODwyer:  (a)
    relating to the Technical Field at any time prior to the Effective Date,
(whether prior to, during or after ODwyers employment or engagement by Metal
Storm); or




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(b)
    pursuant to or in the course of ODwyers employment by, directorship of
or consultancy to Metal Storm or its Related Bodies Corporate,  are the sole and exclusive property of Metal Storm.5.2
    Assignmentexisting rightsFor the sake of clarity, to the extent he has not previously done so, ODwyer
hereby assigns to Metal Storm, without the need for further assurance, the IP Rights
referred to in clause 5.1;5.3
    Acknowledgementfuture rightsODwyer acknowledges that any and all IP Rights developed by ODwyer, in the
Technical Field, at any time after the Effective Date, will be the sole and exclusive
property of Metal Storm.5.4
    Assignmentfuture rightsODwyer hereby assigns to Metal Storm, without the need for further assurance, the
IP Rights referred to in clause 5.3.5.5
    Other entitiesODwyer shall ensure that any entity over which he has Control, and which for any
reason comes to own any right, title or interest in any of the IP Rights referred to in
clauses 5.1 or 5.3, assigns any such rights forthwith to Metal Storm.5.6
    Further assurance and power of attorneyODwyer shall sign all documents and do all acts and things which are, in Metal
Storms reasonable opinion, necessary or desirable to achieve or perfect any of the
transactions referred to in clauses 5.1 to 5.5 inclusive.ODwyer hereby appoints Metal Storm as his attorney to sign any document on his behalf,
or to do any other act or thing on his behalf, which, in Metal Storms reasonable
opinion, is necessary or desirable to achieve or perfect any of the transactions referred
to in clauses 5.1 to 5.5 inclusive.5.7
    WarrantiesODwyer warrants to Metal Storm that:  (a)
    he has not, and has not authorised or permitted any other person, to
charge, assign, licence, encumber or grant any interest in the IP Rights referred to
in this clause 5; and(b)
    any copyright works created by ODwyer in the course of providing any
services to Metal Storm are original works which are not copied wholly or
substantially from any other works.




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6
    Confidentiality6.1
    AcknowledgementODwyer acknowledges that all Confidential Information is the sole and exclusive
property of Metal Storm.6.2
    ConfidentialityODwyer shall  (a)
    within thirty Business Days after the Effective Date, deliver to Metal
Storm all Confidential Information which is in a material form and in his
possession, power or control;(b)
    within thirty Business Days after the Effective Date, certify to Metal
Storm in writing that he has complied with paragraph (a), provided that, if ODwyer
has not provided such certification within the period allowed, he shall be deemed to
have provided it on the next Business Day after that period;(c)
    keep confidential any Confidential Information;(d)
    not disclose any Confidential Information to any person at any time after
the date of this document, except:  (i)
    as required by law; or(ii)
    with the prior written consent of Metal Storm; and  (e)
    not use any Confidential Information at any time after the date of this
document for any purpose other than for the purpose of providing services to Metal
Storm.  7
    Restraint7.1
    RestraintODwyer agrees that he will not, directly or indirectly or through interposed
entities, in any capacity including on his own account or in partnership or joint venture
with any other person or as trustee or agent:  (a)
    perform, undertake, carry on, or be concerned or engaged in; or(b)
    in any way be interested in (whether as lender, investor, shareholder,
unit-holder, beneficiary or otherwise); or(c)
    provide services in relation to (whether as an authorised representative,
employee, consultant, adviser or otherwise),  a Restrained Activity during the Restraint Period in the Restraint Area, without the
prior written consent of Metal Storm (which may be granted, granted on conditions, or
withheld at Metal Storms complete discretion).




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7.2
    Construction of restraint clauseIn relation to the restraint referred to in clause 7.1,ODwyer acknowledges and
agrees that:  (a)
    that clause shall be construed and have effect as if it was a number of
separate sub-clauses which results from combining its text with each separate
period, activity and area comprising the Restraint Period, Restrained Activity and
Restraint Area respectively, to the intent that each resulting combination will be
severable from each other such resulting combination and that, if any of the
resulting combinations shall be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not prejudice or in any way affect the validity
or enforceability of any other such resulting combination. The resulting
combinations are cumulative and not alternatives;(b)
    each and every restriction in those clauses constitutes an independent
and separate restriction, severally enforceable as such; and(c)
    the restraint is fair and reasonable to protect the legitimate interests
of Metal Storm and its Related Bodies Corporate, in light of:  (i)
    the consideration to be paid by Metal Storm to ODwyer
pursuant to this agreement;(ii)
    ODwyers shareholding in Metal Storm; and(iii)
    ODwyers expressed intention not to work in the Technical
Field at any time in the future (except for the benefit of Metal Storm).  7.3
    ExceptionThis clause 7does not prohibit ODwyer (whether directly or through nominees)
from holding shares in Metal Storm.7.4
    No adverse public statementsODwyer shall not make any public statement which, in his reasonable opinion, is
adverse to the interests of Metal Storm.8
    AcknowledgementODwyer acknowledges that clauses 3, 4, 5 and 6 of this document are reasonable
for the protection of the Confidential Information, IP Rights, goodwill and trade
connection of Metal Storm.9
    Availability of injunction proceedingsODwyer acknowledges that any breach of any of clauses 3, 4, 5 or 6 of this
document may not adequately be compensated by an award of damages, and will entitle Metal
Storm, in addition to any other remedies available at law or in equity, to seek an
injunction to restrain the commission of any breach or threatened breach.




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10
    ConsiderationOn the Effective Date, Metal Storm shall pay by cheque to ODwyer the sums of:  (i)
    [$500,000] as a retirement benefit taking into account
ODwyers past services rendered to Metal Storm and its Related Bodies
Corporate; and(ii)
    AUD10.00 in consideration of the obligations and
undertakings contained in clause 5and clause 7.  11
    Notices11.1
    GeneralA notice, demand, certification, process or other communication relating to this
document must be in writing in English and may be given by an agent of the sender.11.2
    How to give a communicationIn addition to any other lawful means, a communication may be given by being:  (a)
    personally delivered;(b)
    left at the partys current address for notices;(c)
    sent to the partys current address for notices by pre-paid ordinary mail
or, if the address is outside Australia, by pre-paid airmail; or(d)
    sent by fax to the partys current fax number for notices.  11.3
    Particulars for delivery of notices  (a)
    The particulars for delivery of notices are initially as set out at page 1 of
this document.(b)
    Each party may change its particulars for delivery of notices by notice
to each other party.  11.4
    Communications by postSubject to clause 11.6, a communication is given if posted:  (a)
    within Australia to an Australian address, three Business Days after
posting; or(b)
    in any other case, ten Business Days after posting.  11.5
    Communications by faxSubject to clause 11.6, a communication is given if sent by fax, when the senders
fax machine produces a report that the fax was sent in full to the addressee. That
report is conclusive evidence that the addressee received the fax in full at the time
indicated on that report.




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11.6
    After hours communicationsIf a communication is given:  (a)
    after 5.00 pm in the place of receipt; or(b)
    on a day which is a Saturday, Sunday or bank or public holiday in the
place of receipt,  it is taken as having been given at 9.00 am on the next day which is not a Saturday,
Sunday or public holiday in that place.11.7
    Process serviceAny process or other document relating to litigation, administrative or arbitral
proceedings relating to this document may be served by any method contemplated by this
clause 11or in accordance with any applicable law.12
    General12.1
    GST  (a)
    GST Law has the meaning given to that expression in the A New Tax System
(Goods and Services Tax) Act1999 (Cth).(b)
    Expressions used in this clause which are not defined, but which have a
defined meaning in the GST Law, have the same meaning.(c)
    Unless otherwise expressly stated all consideration to be provided under
this document is inclusive of GST.(d)
    A supplier will provide a recipient with a tax invoice in respect of any
supply made by the supplier to the recipient under this document. The tax invoice
shall be provided to the recipient before the recipient provides any consideration
to the supplier under this document for the supply.(e)
    Where at any time an adjustment event arises in respect of any supply
made by the supplier under this document, the supplier shall provide the recipient
with an adjustment note in respect of the adjustment event as soon as practicable
after the occurrence of the adjustment event.  12.2
    Legal costsExcept as expressly stated otherwise in this document, each party must pay its own
legal and other costs and expenses of negotiating, preparing, executing and performing
its obligations under this document.12.3
    AmendmentThis document may only be varied or replaced by a document executed by the
parties.12.4
    Waiver and exercise of rights  (a)
    A single or partial exercise or waiver by a party of a right relating to this
document does not prevent any other exercise of that right or the exercise of any
other right.




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(b)
    A party is not liable for any loss, cost or expense of any other party
caused or contributed to by the waiver, exercise, attempted exercise, failure to
exercise or delay in the exercise of a right.  12.5
    Rights cumulativeExcept as expressly stated otherwise in this document, the rights of a party under
this document are cumulative and are in addition to any other rights of that party.12.6
    ConsentsExcept as expressly stated otherwise in this document, a party may conditionally
or unconditionally give or withhold any consent to be given under this document and is
not obliged to give its reasons for doing so.12.7
    Further stepsEach party must promptly do whatever any other party reasonably requires of it to
give effect to this document and to perform its obligations under it.12.8
    Governing law and jurisdiction  (a)
    This document is governed by and is to be construed in accordance with the
laws applicable in Queensland.(b)
    Each party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of Queensland and any courts which have jurisdiction to
hear appeals from any of those courts and waives any right to object to any
proceedings being brought in those courts.  12.9
    Assignment  (a)
    A party must not assign or deal with any right under this document without the
prior written consent of the other parties.(b)
    Any purported dealing in breach of this clause is of no effect.  12.10
    LiabilityAn obligation of two or more persons binds them separately and together.12.11
    CounterpartsThis document may consist of a number of counterparts and, if so, the counterparts
taken together constitute one document.12.12
    Entire understanding  (a)
    This document contains the entire understanding between the parties as to the
subject matter of this document.(b)
    All previous negotiations, understandings, representations, warranties,
memoranda or commitments concerning the subject matter of this document are merged
in and superseded by this document and are of no effect. No party is liable to any
other party in respect of those matters.




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(c)
    No oral explanation or information provided by any party to another:  (i)
    affects the meaning or interpretation of this document; or(ii)
    constitutes any collateral agreement, warranty or
understanding between any of the parties.  12.13
    Relationship of partiesThis document is not intended to create a partnership, joint venture or agency
relationship between the parties.




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Schedule 1 ASSETS  (1)
    Computer(2)
    HP Office Jet Printer/fax/Copier(3)
    Sony Dual Layer DvD Drive(4)
    Canon LIDE Scanner(5)
    Fellowes PS80C-2 Shredder(6)
    Brother 65 Label Maker




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Executedas an agreement. Executedby Metal Storm Ltdby its duly
    
    
    )appointed officer in the presence
    
    
    )of:
    
    
    )/s/ Andrew Mackenzie
    
    
    
    
    
    /s/ James D. MacDonaldWitness
    
    
    
    
    
    OfficerAndrew Mackenzie
    
    
    
    
    
    James D. MacDonaldName of Witness (print)
    
    
    
    
    
    Name of Officer (print)Executedby James Michael ODwyerin
    
    
    )the presence of:
    
    
    ))/s/ Andrew Mackenzie
    
    
    
    
    
    /s/ James Michael ODwyerWitness
    
    
    
    
    
    James Michael ODwyerAndrew MackenzieName of Witness (print)