Exhibit 10.53


 


 


April 5, 2004


 


VIA HAND DELIVERY


 


Mr. John J. Walsh


5480 East Bromley Drive


Oak Park, CA  91377


 


Dear John:


 


This letter memorializes our agreement (the “Agreement”) regarding
continuance of your paid leave of absence and subsequent termination of your
employment with Special Devices, Incorporated (“SDI”).  Please confirm your acceptance of the
Agreement by signing the duplicate copy of this letter where indicated on page
7 and returning it to me no later than May 10, 2004.


 


1.                                       Continuation of Paid Leave of Absence.  You will remain on paid leave of absence
through March 31, 2005.  During this
period, so long as you comply with your obligations hereunder, you will
continue to be paid your current base salary and will remain entitled to coverage
under all applicable benefits plans, except that you will not be eligible to
participate in the Management Incentive Plan. 
You also will be entitled to use of the company vehicle currently in
your possession, but all expenses associated with operation and maintenance of
the vehicle that are not covered by the lessor under the terms of the lease
will be for your own account, except for insurance, which will be paid by
SDI.  During this period, you will remain
available to me and the Board of Directors to provide such general advice,
cooperation, and assistance, as we may request from time to time, regarding
projects you were involved in during your employment with SDI or any other
similar matters on which we may request your assistance from time to time, provided,
however, that you will not be required to devote more than ten (10) hours per
month to such matters, and will not be required to travel outside of the State
of California.  The foregoing ten (10)
hour limitation shall not apply if your assistance is required in connection
with litigation to which SDI is a party. 
While on leave, you will not be precluded from being employed elsewhere,
so long as such employment is not in the Prohibited Lines of Business described
in paragraph 7, but you may not, without SDI’s prior approval, contact anyone
at SDI or contact SDI’s customers or vendors on any matter of SDI’s business,
or engage in any way, whether directly or indirectly or in any capacity or
relationship, in the Prohibited Lines of Business described in Section 7
of this letter.  We will provide at least
five (5) business days prior written notice of any need for your assistance
hereunder, which notice will include a reasonably complete description of the
matter with respect to which we


 





















 


require your assistance.  You
will be reimbursed for all reasonable expenses incurred in connection with the
performance of your duties hereunder, subject to and in accordance with
policies and procedures of SDI in effect from time to time relating to
reimbursement of employees.  After March 31,
2005, your employment will terminate and you will be engaged by SDI as a
consultant (see Section 7 of this letter).


 


2.                                       Resignation as an Officer.  You will submit your resignation from the
offices of Executive Vice President and Chief Operating Officer on or before
May 10, 2004.  The resignation should be
in writing in the form attached as Attachment A.  In addition, you will resign from any and all
offices or positions held by you with any of SDI’s affiliates, and promptly upon
SDI’s request will execute all documents that may be required to give effect to
such resignations and in order to effect the transfer to SDI’s designee of any
shares held by you in such affiliates. 
In order to facilitate this process, you agree to keep us advised of
your current home and business street and email addresses and telephone and
facsimile numbers, as well as your mobile telephone numbers.  Notwithstanding your resignation from these
offices, your employment will continue through March 31, 2005 as provided
above.


 


3.                                       Final Paycheck.  Subject to SDI’s established
policies, your final paycheck will include payment of your current base salary
through March 31, 2005 (the effective date of the termination of your
employment), and any accrued but unused paid-time-off, less income tax
withholding and other standard payroll deductions.


 


4.                                       COBRA and Benefit Plans; Outplacement Assistance.  If you currently
are participating in SDI’s group health plan, you will be eligible to continue
participating in that plan for a period of time after March 31, 2005, at
your own expense, in accordance with COBRA. 
You will receive additional information regarding COBRA under separate
cover from SDI’s plan administrator. 
Your eligibility to make additional contributions to SDI’s 401(k) plan
will terminate effective March 31, 2005. 
You have the options of leaving your accrued balance in SDI’s plan,
rolling your balance over into another qualified plan, or seeking a
distribution of your account subject to early withdrawal penalties required by
law.  Under SDI’s life insurance policy,
coverage will continue until March 31, 2005, at which time you may have
the option to convert your group term-life policy into a non-group whole-life
policy under the terms of the policy.  Should
you choose not to convert your life insurance policy, your life insurance
coverage will terminate 30 days after the termination of your employment.  Finally, SDI will pay for outplacement
services to be provided by Drake Beam Moran, 21820 Burbank Boulevard, Woodland
Hills, California 91367, for a period of up to six months commencing on the
date of your acceptance of this Agreement, provided that the cost to SDI of
such services shall not exceed $7,500.00. 
Notwithstanding the foregoing, if you accept fulltime employment other
than with SDI prior to March 31, 2005, the foregoing obligations of SDI in
respect of benefits coverage and outplacement assistance will terminate as of
the date on which you begin such employment.


 


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5.                                       Retirement and Stock Option Plans; Employee Loan.


 


(a)                                  Retirement
and Stock Option Plans.  Nothing in
this Agreement will affect any vested benefits that you may have in connection
with any retirement or stock option plan, including the Deferred Compensation
Plan (the “DCP”).  Without restricting
the generality of the foregoing, we agree that your DCP account shall not be
subject to forfeiture pursuant to Section 3.4 of the DCP.  If requested by you in writing on or before February 15,
2005, SDI will extend the deadline for exercising your vested options under
that certain Incentive Stock Option Agreement No. 71 dated May 1, 2002 (“ISO”)
to a date not later than May 1, 2012 (currently, the ISO provides that you must
exercise vested options within thirty (30) days following the termination of
your employment).  Neither party shall
request any other amendment to the ISO at the time of seeking or granting any
such extension. You acknowledge that, depending upon the length of the extension
you request, if any, amending the ISO to extend the deadline for exercising the
options may have tax consequences, and we recommend that you consult with your
tax advisor before deciding whether to request amendment of the ISO.  We will provide you and your tax advisor with
any information (but not advice or recommendations) that you may reasonably
require in order to reach an informed decision on this matter.


 


(b)                                 Employee
Loan.  Your W-2s for 2004 and 2005
will continue to reflect Other Compensation for the interest expense and
related tax gross up, calculated in accordance with past practice, as more
fully disclosed in Mr. Reeder’s memorandum to you dated December 19, 2003,
a copy of which is attached.  In
accordance with Mr. Reeder’s memorandum, the loan balance will be forgiven as
of the termination of your employment on of March 31, 2005 and will be
reflected as income on your W-2 for 2005.


 


6.                                       Return of Property.  The company vehicle currently in your
possession is to be returned to the Vice President, Human Resources no later
than March 31, 2005 unless otherwise agreed by you, SDI, and the lessor of
the vehicle.  Except as otherwise provided herein, you agree to return to SDI immediately
upon request any and all property of SDI, including any credit cards, keys,
cellular telephones, computers, computer disks, computer programs, files, and
any documents or information in any format prepared or received by you or SDI,
remaining in your possession or control, relating in any way to SDI’s business
operations.  SDI will not be obligated to
make any payment to you under this Agreement until you have returned all such
property to SDI to SDI’s satisfaction. 
To the best of your (and SDI’s) knowledge, all such property previously
provided to you (except the company vehicle) has been returned.  Without restricting the generality of the
foregoing, SDI acknowledges that your badge, keys, cell phone, Blackberry and
company credit cards have been returned.


 


7.                                       Engagement as a Consultant.  Effective April 1, 2005, so long as you
comply with your obligations hereunder, you will be engaged as a consultant to
SDI for a one-year


 


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period terminating on March 31, 2006.  During this period, you will remain available
to me and the Board of Directors to provide such general advice, cooperation,
and assistance, as we may request from time to time, regarding projects you
were involved in during your employment with SDI or any other similar matters
on which we may request your assistance from time to time, provided, however,
that you will not be required to devote more than ten (10) hours per month to
such matters, and will not be required to travel outside of the State of
California.  The foregoing ten (10) hour
limitation shall not apply if your assistance is required in connection with
litigation to which SDI is a party. 
While engaged by SDI as a consultant, you will not be precluded from
being employed elsewhere, so long as such employment is not in the Prohibited
Lines of Business (as defined below), but you may not, without SDI’s prior
approval, contact anyone at SDI or contact SDI’s customers or vendors on any
matter of SDI’s business.  We will
provide at least five (5) business days prior written notice of any need for
your services hereunder, which notice will include a reasonably complete
description of the matter with respect to which we require your
assistance.  You will be paid an annual
fee of $175,000 for your services as a consultant, payable in equal bi-monthly
installments on the first and third Friday of each month, commencing on the
first Friday of April, 2005.  In
addition, you will be reimbursed for all reasonable expenses incurred in
connection with the performance of your duties as a consultant hereunder, subject
to and in accordance with policies and procedures of SDI in effect from time to
time relating to reimbursement of consultants. 
You agree that you will not, during the period of your consultancy,
except with the express prior written consent of SDI, directly or indirectly,
on or before March 31, 2006, voluntarily or involuntarily, for any reason
whatsoever, directly or indirectly, individually or on behalf of persons not
parties to this Agreement, or as a partner, stockholder, director, officer,
principal, agent, consultant, joint venturer, employee or in any other capacity
or relationship, for your own account or for the benefit of any other person,
firm, corporation, partnership, association or other entity:


 


(i)                                     establish,
engage in, conduct, assist or be connected with any business that engages in or
conducts any business that competes directly with SDI in the automotive or
mining and blasting fields, including those companies listed on Attachment B
hereto (collectively, the “Prohibited Lines of Business”);


 


(ii)                                  solicit,
divert, accept any business in any of the Prohibited Lines of Business from or
otherwise take away or interfere with any former, present or future customer,
supplier or account of SDI; or


 


(iii)                               solicit, divert or
induce any present or future officers, directors or employees of SDI to leave
the employ of or otherwise terminate their relationship with SDI.


 


8.                                       Confidentiality.  You are required to keep
confidential the fact of and the terms of this Agreement, as well as any
legally protected confidential, proprietary, or trade


 


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secret information that you acquired or may acquire during your
employment with SDI or while serving as a consultant to SDI.  This is intended to cover any information of
a nature not normally disclosed by SDI to the general public, including
financial information, business plans, strategic plans, marketing strategies,
and other information about the present or proposed operations of SDI.  You shall not disclose any such information
to any person or entity outside of SDI at any time in the future, and you shall
not use any such information for the benefit of anyone other than SDI.  This provision shall not be deemed to limit your
disclosure of the terms of this Agreement to legal or financial advisors that
have a reasonable need to know of such terms in connection with providing
professional advice to you, or to make truthful disclosures required by law.


 


SDI agrees to keep the fact of and the terms of this Agreement
confidential, provided that nothing herein shall be deemed to limit SDI’s
disclosure of such information to legal or financial advisors that have a
reasonable need to know such information in connection with providing
professional advice to SDI or, subject to confidentiality agreements, in the
course of responding to due diligence requests, or to make truthful disclosures
required by law.


 


9.                                       Non-disparagement.  You agree that you will not
communicate to anyone any adverse, disparaging or derogatory statements or
information concerning SDI or any current or former director, officer or
employee of SDI.  Likewise, SDI agrees
that it will not communicate to anyone any adverse, disparaging or derogatory
statements or information concerning you. 
In response to any request for information about you from any
prospective employer, SDI will confirm that it is the company’s policy only to
provide the dates of your employment and the position that you held, which SDI
agrees to do, and SDI shall further inform the inquirer that you were engaged
as a consultant to SDI following termination of your employment.  Nothing in this Agreement shall restrict you
or SDI from making truthful disclosures as required by law.


 


10.                                 General Releases of Claims.


 


(a)                                  Your Release.  In
return for the above consideration, you agree to release SDI of and from any
and all claims arising out of or related to your employment, including the
termination of your employment, provided that nothing in this Release shall be
deemed to waive any existing rights to insurance coverage in respect of any
claims that may be made against you arising out of or related to your
employment.  By this paragraph, you are
waiving any claims that may exist against SDI, its directors, officers, board
members, employees, agents, predecessors, successors and assigns, and all other
related or affiliated persons or entities (“SDI entities”).  This is a General Release.  Thus, you agree on behalf of yourself and on
behalf of your heirs, executors, administrators and assigns, that you forever
and irrevocably release and discharge the SDI entities from any and all
grievances, suits, judgments, claims, demands, debts, actions or causes of
action, obligations, damages, and liabilities whatsoever which you


 


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now have, have had, or may have had, whether known or unknown, at law
or in equity in any way relating to any matter, act, occurrence, or transaction
on or before the date you execute this Agreement, including your employment with
SDI and the termination of your employment (“claims”).  You expressly acknowledge that this General
Release includes your release of any tort and contract claims, claims under any
local, state or federal law or regulation, and specifically including wage and
hour laws, wage collection laws or labor relations laws, and any claims of
discrimination on the basis of age, race, sex, religion, disability, national
origin, ancestry, citizenship, retaliation or any other claim of employment
discrimination, harassment or retaliation, under the California Fair Employment
and Housing Act, the California Labor Code, the Civil Rights Acts of 1964 and
1991 as amended (42 U.S.C. §§ 2000e et seq.), the Age Discrimination In
Employment Act (29 U.S.C. §§ 621 et seq.), the Americans with Disabilities
Act (42 U.S.C. §§ 12101 et seq.), the Rehabilitation Act of 1973 (29
U.S.C. §§ 701 et seq.), the Family and Medical Leave Act (29 U.S.C. §§ 2601
et seq.), the Fair Labor Standards Act (29 U.S.C. §§ 201 et seq.), and any
other claim under any common-law doctrine, statute or regulation prohibiting
employment discrimination or relating to your employment in any way whatsoever.


 


Except as provided for in the above paragraph, you acknowledge and
agree that it is your intention in executing this Agreement that it shall be
effective as a bar to each and every claim, charge, demand, suit, action, cause
of action and debt specified in this Agreement. 
In furtherance of this intention, you expressly waive any and all rights and benefits conferred by the
provisions of Section 1542 of the Civil Code of California, which provides
as follows:


 


A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with the debtor.


 


Notwithstanding Section 1542 of the Civil Code of California, you
expressly consent that this Agreement shall be given full force and effect
according to each and all of its expressed terms and provisions, including
those relating to unspecified claims, if any, and those relating to any other
claims, charges, demands, suits, actions, causes of action and debts specified
in this Agreement.  You acknowledge that
you are aware that you may subsequently discover claims or facts in addition
to, or different from, those, which you now know or believe to exist with
respect to the subject matter, covered by this Agreement and which, if known or
suspected at the time of executing this Agreement, might have materially
affected this Agreement.  Nevertheless,
you waive any right, claim or causes of action that might arise as a result of
such different or additional claims or facts, except as provided for in the
above paragraphs.  By your signature
below, you acknowledge that you understand the significance and consequences of
such a release and specific waiver of Section 1542.


 


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(b)                                 SDI’s Release.  In
return for the above consideration, SDI agrees to release you of and from any
and all claims arising out of or related to your employment, including the
termination of your employment, provided that nothing in this Release shall be
deemed to waive any existing rights to insurance coverage in respect of any
claims that may be made against SDI arising out of or related to your
employment.  By this paragraph, SDI is
waiving any claims that may exist against you, your heirs, executors,
administrators and assigns (“Walsh entities”). 
This is a General Release. 
Thus, SDI agrees on behalf of itself and on behalf of its predecessors,
successors and assigns, that it forever and irrevocably releases and discharges
the Walsh entities from any and all grievances, suits, judgments, claims,
demands, debts, actions or causes of action, obligations, damages, and
liabilities whatsoever which SDI now has, has had, or may have had, whether
known or unknown, at law or in equity in any way relating to any matter, act,
occurrence, or transaction on or before the date you execute this Agreement,
including your employment with SDI and the termination of your employment (“claims”).  SDI expressly acknowledges that this General
Release includes a release of any tort and contract claims, claims under any
local, state or federal law or regulation, and any other claim under any
common-law doctrine, statute or regulation relating to your employment in any
way whatsoever.


 


Except as provided for in the above paragraph, SDI acknowledges and
agrees that it is SDI’s intention in executing this Agreement that it shall be
effective as a bar to each and every claim, charge, demand, suit, action, cause
of action and debt specified in this Agreement. 
In furtherance of this intention, SDI expressly waives any and all rights and benefits conferred by the
provisions of Section 1542 of the Civil Code of California, which provides
as follows:


 


A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with the debtor.


 


Notwithstanding Section 1542 of the Civil Code of California, SDI
expressly consents that this Agreement shall be given full force and effect
according to each and all of its expressed terms and provisions, including
those relating to unspecified claims, if any, and those relating to any other
claims, charges, demands, suits, actions, causes of action and debts specified
in this Agreement.  SDI acknowledges that
it is aware that it may subsequently discover claims or facts in addition to,
or different from, those, which it now knows or believes to exist with respect
to the subject matter, covered by this Agreement and which, if known or
suspected at the time of executing this Agreement, might have materially
affected this Agreement.  Nevertheless,
SDI waives any right, claim or causes of action that might arise as a result of
such different or additional claims or facts, except as provided for in the
above paragraphs.  By its signature
below, SDI acknowledges that it understands the significance and consequences
of such a release and specific waiver of Section 1542.


 


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11.                                 Enforcement.  If either you or
SDI asserts any claim against the other or any of the other released entities
or individuals in violation of the foregoing General Release, the party
asserting such claim will be liable for the costs and attorneys’ fees that the
other party or released entity or individual incurs in defending against any
such claim.  However, nothing in this
paragraph will affect the ability of either party to enforce the rights
specifically provided for under this Agreement, nor will it affect any rights
with respect to any future claims arising out of events that may occur after
the execution of this Agreement.


 


12.                                 Dispute Resolution.  Any controversy or claim arising out of,
or relating to, the enforcement of this Agreement shall first be settled
through good faith negotiation between you and SDI’s President and CEO.  If you and SDI are not able to resolve the
matter, then any controversy or claim arising out of, or relating to, this
Agreement will be submitted to mediation administered by JAMS and then, if
necessary, to final and binding arbitration administered by JAMS pursuant to
its Employment Arbitration Rules and Procedures and subject to JAMS Policy on
Employment Arbitration Minimum Standards of Procedural Fairness (“JAMS Rules”)
and the California Uniform Arbitration Act and Section 1280 et seq. of the California Code of Civil
Procedure.  To the extent that the JAMS
rules and California law are in conflict, California law shall prevail.  It is agreed that the procedures set forth in
this section will be the exclusive, final, and binding means for the
resolution of any disputes relating to the enforcement of this Agreement.


 


It is further acknowledged and agreed that the obligation to arbitrate
is fully enforceable under the Federal Arbitration Act and the California
Uniform Arbitration Act, and that judgment upon the arbitration award rendered
by the arbitrator may be entered in any court having jurisdiction over such
claims.  It is further acknowledged and
agreed that this Agreement does not alter any of the substantive rights the
parties may have under law. Discovery shall be conducted in accordance with the
provisions of the California Code of Civil Procedure applicable to arbitrations
and the arbitrator shall issue a written award specifying the factual and legal
basis for the award.


 


13.                                 Reimbursement.  To
the extent that the General Release of claims in Section 10(a)  of this Agreement is determined not to be
enforceable and you initiate any claim that would have been covered by the
terms of said Section 10(a), then you agree to reimburse SDI for any
benefits you have received under this Agreement, other than benefits listed on
Attachment C hereto that are vested as of the date of your acceptance of this
Agreement.


 


14.                                 Entire Agreement.  This
Agreement represents the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements,
understandings and negotiations, both written and oral, between us with respect
to the subject matter of this Agreement and the termination of your employment


 


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with SDI, including, without limitation, that
certain memorandum dated February 6, 2004.


 


15.                                 Offer Period.  Please read this Agreement carefully.  You are advised to consult with your own
legal advisors if you so desire. 
Pursuant to the Older Worker Benefits Protection Act, you have up to
twenty-one (21) days from the date of this letter to consider this Agreement
before signing it.  In addition, once you
sign this Agreement, you will have seven days within which to revoke this
Agreement.  Any revocation must be in
writing and delivered to SDI’s President within seven days after you sign this
Agreement.  This Agreement will not
become effective until the seven-day revocation period has expired and, therefore,
you will not receive any payments under this Agreement until after the
revocation period has expired.  Of
course, if you revoke this Agreement or otherwise choose not to sign it, you
will not receive any of the special consideration provided for under this
Agreement.


 


If the foregoing terms are acceptable to you, please confirm your
agreement by signing your name below. 
Your signature will indicate that you are entering into this Agreement
freely and with a full understanding of its terms and effect.  No changes to this Agreement will be valid
unless in writing and signed by both you and SDI’s President and CEO.  Any signature on this Agreement transmitted
via facsimile shall have the full force and binding effect under the law as
would an original signature.  The
undersigned acknowledge that transmission of such signatures via facsimile
shall, however, not relieve each party from the obligation to transmit their
respective original signatures via United States first-class mail to the other
party, which the undersigned expressly agree to do.


 


The obligations of SDI under this Agreement are contingent upon your
compliance with all of its terms and conditions.  Please let me know if you have any questions.


 


Sincerely,


 


SPECIAL DEVICES, INCORPORATED


 


 


	
  By:

  	
  /s/ THOMAS W. CRESANTE

  	
   

  
	
  Thomas W. Cresante

  
	
  President and CEO

  
	
   

  
	
  Date:  May 10,
  2004

  



 


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After carefully considering my rights and reviewing this Agreement and
after consulting with the advisors of my choice, I have knowingly and
voluntarily decided to agree to the terms set forth in this letter, as
evidenced by my signature below.


 


 


	
    /s/ JOHN J.
  WALSH

  	
   

  
	
  John J. Walsh

  
	
   

  
	
  Social Security Number:

  
	
   

  
	
  Date:  May 10,
  2004

  



 


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