**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”) regardingcontinuance of your paid leave of absence and subsequent termination of youremployment with Special Devices, Incorporated (“SDI”).  Please confirm your acceptance of theAgreement by signing the duplicate copy of this letter where indicated on page7 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 absencethrough March 31, 2005.  During thisperiod, so long as you comply with your obligations hereunder, you willcontinue to be paid your current base salary and will remain entitled to coverageunder all applicable benefits plans, except that you will not be eligible toparticipate in the Management Incentive Plan. You also will be entitled to use of the company vehicle currently inyour possession, but all expenses associated with operation and maintenance ofthe vehicle that are not covered by the lessor under the terms of the leasewill be for your own account, except for insurance, which will be paid bySDI.  During this period, you will remainavailable to me and the Board of Directors to provide such general advice,cooperation, and assistance, as we may request from time to time, regardingprojects you were involved in during your employment with SDI or any othersimilar 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 permonth to such matters, and will not be required to travel outside of the Stateof California.  The foregoing ten (10)hour limitation shall not apply if your assistance is required in connectionwith 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 describedin paragraph 7, but you may not, without SDI’s prior approval, contact anyoneat 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 orrelationship, in the Prohibited Lines of Business described in Section 7of this letter.  We will provide at leastfive (5) business days prior written notice of any need for your assistancehereunder, which notice will include a reasonably complete description of thematter with respect to which we

 

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require your assistance.  Youwill be reimbursed for all reasonable expenses incurred in connection with theperformance of your duties hereunder, subject to and in accordance withpolicies and procedures of SDI in effect from time to time relating toreimbursement of employees.  After March 31,2005, your employment will terminate and you will be engaged by SDI as aconsultant (see Section 7 of this letter).

 

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

 

3.                                       **Final Paycheck.* ***Subject to SDI’s establishedpolicies, your final paycheck will include payment of your current base salarythrough March 31, 2005 (the effective date of the termination of youremployment), and any accrued but unused paid-time-off, less income taxwithholding and other standard payroll deductions.

 

4.                                       **COBRA and Benefit Plans; Outplacement Assistance.* ***If you currentlyare participating in SDI’s group health plan, you will be eligible to continueparticipating in that plan for a period of time after March 31, 2005, atyour own expense, in accordance with COBRA. You will receive additional information regarding COBRA under separatecover from SDI’s plan administrator. Your eligibility to make additional contributions to SDI’s 401(k) planwill 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 adistribution of your account subject to early withdrawal penalties required bylaw.  Under SDI’s life insurance policy,coverage will continue until March 31, 2005, at which time you may havethe option to convert your group term-life policy into a non-group whole-lifepolicy under the terms of the policy.  Shouldyou choose not to convert your life insurance policy, your life insurancecoverage will terminate 30 days after the termination of your employment.  Finally, SDI will pay for outplacementservices to be provided by Drake Beam Moran, 21820 Burbank Boulevard, WoodlandHills, California 91367, for a period of up to six months commencing on thedate of your acceptance of this Agreement, provided that the cost to SDI ofsuch services shall not exceed $7,500.00. Notwithstanding the foregoing, if you accept fulltime employment otherthan with SDI prior to March 31, 2005, the foregoing obligations of SDI inrespect of benefits coverage and outplacement assistance will terminate as ofthe date on which you begin such employment.

 

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5.                                       **Retirement and Stock Option Plans; Employee Loan.**

 

(a)                                  Retirementand Stock Option Plans.  Nothing inthis Agreement will affect any vested benefits that you may have in connectionwith any retirement or stock option plan, including the Deferred CompensationPlan (the “DCP”).  Without restrictingthe generality of the foregoing, we agree that your DCP account shall not besubject 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 underthat 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 mustexercise vested options within thirty (30) days following the termination ofyour employment).  Neither party shallrequest any other amendment to the ISO at the time of seeking or granting anysuch extension. You acknowledge that, depending upon the length of the extensionyou request, if any, amending the ISO to extend the deadline for exercising theoptions may have tax consequences, and we recommend that you consult with yourtax advisor before deciding whether to request amendment of the ISO.  We will provide you and your tax advisor withany information (but not advice or recommendations) that you may reasonablyrequire in order to reach an informed decision on this matter.

 

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

 

6.                                       **Return of Property.* ***The company vehicle currently in yourpossession is to be returned to the Vice President, Human Resources no laterthan March 31, 2005 unless otherwise agreed by you, SDI, and the lessor ofthe vehicle.** **Except as otherwise provided herein, you agree to return to SDI immediatelyupon request any and all property of SDI, including any credit cards, keys,cellular telephones, computers, computer disks, computer programs, files, andany 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 businessoperations.  SDI will not be obligated tomake any payment to you under this Agreement until you have returned all suchproperty to SDI to SDI’s satisfaction. To the best of your (and SDI’s) knowledge, all such property previouslyprovided to you (except the company vehicle) has been returned.  Without restricting the generality of theforegoing, SDI acknowledges that your badge, keys, cell phone, Blackberry andcompany credit cards have been returned.

 

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

 

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period terminating on March 31, 2006.  During this period, you will remain availableto me and the Board of Directors to provide such general advice, cooperation,and assistance, as we may request from time to time, regarding projects youwere involved in during your employment with SDI or any other similar matterson 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 tosuch matters, and will not be required to travel outside of the State ofCalifornia.  The foregoing ten (10) hourlimitation shall not apply if your assistance is required in connection withlitigation to which SDI is a party. While engaged by SDI as a consultant, you will not be precluded frombeing employed elsewhere, so long as such employment is not in the ProhibitedLines of Business (as defined below), but you may not, without SDI’s priorapproval, contact anyone at SDI or contact SDI’s customers or vendors on anymatter of SDI’s business.  We willprovide at least five (5) business days prior written notice of any need foryour services hereunder, which notice will include a reasonably completedescription of the matter with respect to which we require yourassistance.  You will be paid an annualfee of $175,000 for your services as a consultant, payable in equal bi-monthlyinstallments on the first and third Friday of each month, commencing on thefirst Friday of April, 2005.  Inaddition, you will be reimbursed for all reasonable expenses incurred inconnection with the performance of your duties as a consultant hereunder, subjectto and in accordance with policies and procedures of SDI in effect from time totime 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 reasonwhatsoever, directly or indirectly, individually or on behalf of persons notparties to this Agreement, or as a partner, stockholder, director, officer,principal, agent, consultant, joint venturer, employee or in any other capacityor 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 orconducts any business that competes directly with SDI in the automotive ormining and blasting fields, including those companies listed on Attachment Bhereto (collectively, the “Prohibited Lines of Business”);

 

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

 

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

 

8.                                       **Confidentiality.* ***You are required to keepconfidential the fact of and the terms of this Agreement, as well as anylegally protected confidential, proprietary, or trade

 

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

 

SDI agrees to keep the fact of and the terms of this Agreementconfidential, provided that nothing herein shall be deemed to limit SDI’sdisclosure of such information to legal or financial advisors that have areasonable need to know such information in connection with providingprofessional advice to SDI or, subject to confidentiality agreements, in thecourse of responding to due diligence requests, or to make truthful disclosuresrequired by law.

 

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

 

10.                                 **General Releases of Claims.**

 

(a)                                  Your Release.  Inreturn for the above consideration, you agree to release SDI of and from anyand all claims arising out of or related to your employment, including thetermination of your employment, provided that nothing in this Release shall bedeemed to waive any existing rights to insurance coverage in respect of anyclaims that may be made against you arising out of or related to youremployment.  By this paragraph, you arewaiving any claims that may exist against SDI, its directors, officers, boardmembers, employees, agents, predecessors, successors and assigns, and all otherrelated or affiliated persons or entities (“SDI entities”).  This is a General Release.  Thus, you agree on behalf of yourself and onbehalf of your heirs, executors, administrators and assigns, that you foreverand irrevocably release and discharge the SDI entities from any and allgrievances, suits, judgments, claims, demands, debts, actions or causes ofaction, obligations, damages, and liabilities whatsoever which you

 

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now have, have had, or may have had, whether known or unknown, at lawor in equity in any way relating to any matter, act, occurrence, or transactionon or before the date you execute this Agreement, including your employment withSDI and the termination of your employment (“claims”).  You expressly acknowledge that this GeneralRelease includes your release of any tort and contract claims, claims under anylocal, state or federal law or regulation, and specifically including wage andhour laws, wage collection laws or labor relations laws, and any claims ofdiscrimination on the basis of age, race, sex, religion, disability, nationalorigin, ancestry, citizenship, retaliation or any other claim of employmentdiscrimination, harassment or retaliation, under the California Fair Employmentand Housing Act, the California Labor Code, the Civil Rights Acts of 1964 and1991 as amended (42 U.S.C. §§ 2000e et seq.), the Age Discrimination InEmployment Act (29 U.S.C. §§ 621 et seq.), the Americans with DisabilitiesAct (42 U.S.C. §§ 12101 et seq.), the Rehabilitation Act of 1973 (29U.S.C. §§ 701 et seq.), the Family and Medical Leave Act (29 U.S.C. §§ 2601et seq.), the Fair Labor Standards Act (29 U.S.C. §§ 201 et seq.), and anyother claim under any common-law doctrine, statute or regulation prohibitingemployment discrimination or relating to your employment in any way whatsoever.

 

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

 

**A general release does not extend toclaims which the creditor does not know or suspect to exist in his favor at thetime of executing the release, which if known by him must have materiallyaffected his settlement with the debtor.**

 

Notwithstanding Section 1542 of the Civil Code of California, youexpressly consent that this Agreement shall be given full force and effectaccording to each and all of its expressed terms and provisions, includingthose relating to unspecified claims, if any, and those relating to any otherclaims, charges, demands, suits, actions, causes of action and debts specifiedin this Agreement.  You acknowledge thatyou are aware that you may subsequently discover claims or facts in additionto, or different from, those, which you now know or believe to exist withrespect to the subject matter, covered by this Agreement and which, if known orsuspected at the time of executing this Agreement, might have materiallyaffected this Agreement.  Nevertheless,you waive any right, claim or causes of action that might arise as a result ofsuch different or additional claims or facts, except as provided for in theabove paragraphs.  By your signaturebelow, you acknowledge that you understand the significance and consequences ofsuch a release and specific waiver of Section 1542.

 

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(b)                                 SDI’s Release.  Inreturn for the above consideration, SDI agrees to release you of and from anyand all claims arising out of or related to your employment, including thetermination of your employment, provided that nothing in this Release shall bedeemed to waive any existing rights to insurance coverage in respect of anyclaims that may be made against SDI arising out of or related to youremployment.  By this paragraph, SDI iswaiving 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 dischargesthe Walsh entities from any and all grievances, suits, judgments, claims,demands, debts, actions or causes of action, obligations, damages, andliabilities whatsoever which SDI now has, has had, or may have had, whetherknown 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 GeneralRelease includes a release of any tort and contract claims, claims under anylocal, state or federal law or regulation, and any other claim under anycommon-law doctrine, statute or regulation relating to your employment in anyway whatsoever.

 

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

 

**A general release does not extend toclaims which the creditor does not know or suspect to exist in his favor at thetime of executing the release, which if known by him must have materiallyaffected his settlement with the debtor.**

 

Notwithstanding Section 1542 of the Civil Code of California, SDIexpressly consents that this Agreement shall be given full force and effectaccording to each and all of its expressed terms and provisions, includingthose relating to unspecified claims, if any, and those relating to any otherclaims, charges, demands, suits, actions, causes of action and debts specifiedin this Agreement.  SDI acknowledges thatit 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 respectto the subject matter, covered by this Agreement and which, if known orsuspected at the time of executing this Agreement, might have materiallyaffected this Agreement.  Nevertheless,SDI waives any right, claim or causes of action that might arise as a result ofsuch different or additional claims or facts, except as provided for in theabove paragraphs.  By its signaturebelow, SDI acknowledges that it understands the significance and consequencesof such a release and specific waiver of Section 1542.

 

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11.                                 **Enforcement.* ***If either you orSDI asserts any claim against the other or any of the other released entitiesor individuals in violation of the foregoing General Release, the partyasserting such claim will be liable for the costs and attorneys’ fees that theother party or released entity or individual incurs in defending against anysuch claim.  However, nothing in thisparagraph will affect the ability of either party to enforce the rightsspecifically provided for under this Agreement, nor will it affect any rightswith respect to any future claims arising out of events that may occur afterthe 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 settledthrough good faith negotiation between you and SDI’s President and CEO.  If you and SDI are not able to resolve thematter, then any controversy or claim arising out of, or relating to, thisAgreement will be submitted to mediation administered by JAMS and then, ifnecessary, to final and binding arbitration administered by JAMS pursuant toits Employment Arbitration Rules and Procedures and subject to JAMS Policy onEmployment Arbitration Minimum Standards of Procedural Fairness (“JAMS Rules”)and the California Uniform Arbitration Act and Section 1280 *et seq.* of the California Code of CivilProcedure.  To the extent that the JAMSrules and California law are in conflict, California law shall prevail.  It is agreed that the procedures set forth inthis section will be the exclusive, final, and binding means for theresolution of any disputes relating to the enforcement of this Agreement.

 

It is further acknowledged and agreed that the obligation to arbitrateis fully enforceable under the Federal Arbitration Act and the CaliforniaUniform Arbitration Act, and that judgment upon the arbitration award renderedby the arbitrator may be entered in any court having jurisdiction over suchclaims.  It is further acknowledged andagreed that this Agreement does not alter any of the substantive rights theparties may have under law. Discovery shall be conducted in accordance with theprovisions of the California Code of Civil Procedure applicable to arbitrationsand the arbitrator shall issue a written award specifying the factual and legalbasis for the award.

 

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

 

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

 

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

 

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

 

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

 

The obligations of SDI under this Agreement are contingent upon yourcompliance 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 andafter consulting with the advisors of my choice, I have knowingly andvoluntarily decided to agree to the terms set forth in this letter, asevidenced by my signature below.

 

 
|   /s/ JOHN J.  WALSH |   |
|---------------------------|--------|
| John J. Walsh             |
|                      |
| Social Security Number:   |
|                      |
| Date:  May 10,  2004 |

 

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