Document:

Exhibit 10.32

 

SPECIAL
DEVICES, INCORPORATED

Amended
and Restated 1999 Stock Option Plan

 

1.                                       PURPOSE.                                   This
Stock Option Plan (the “Plan”) is intended as an incentive to encourage stock
ownership by officers and directors and executive and professional employees of
Special Devices, Incorporated (the “Company”) and its Parent and Subsidiary
corporations so that they may acquire or increase their equity interest in the
success of the Company and its Parents and Subsidiaries, and to encourage them
to remain in the service of the Company or of its Parents or
Subsidiaries.  Each option granted under this Plan will be designated as
either an “Incentive Stock Option” or a “Nonqualified Stock Option.” It is
intended that each option designated as an Incentive Stock Option granted under
this Plan will qualify as an incentive stock option within the meaning of
Section 422(b) of the Code.

 

2.                                       DEFINITIONS.

 

2.1                                 “Board
of Directors” means the board of directors of the Company.

 

2.2                                 “Change
in Control” shall mean the happening of any of the following:

 

2.2.1                        any
person who is not a stockholder of the Company or of any Parent on the date of
adoption of this Plan (or group of such persons acting in concert) acquires,
during any period of twelve consecutive calendar months, stock of the Company
or of a Parent representing a majority of the voting power of all stock of the
Company or any Parent having the right to vote for the election of directors;

 

2.2.2                        the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
eighty percent (80%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (ii) a merger or consolidation effected to implement a
Recapitalization of the Company;

 

2.2.3                        the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets or any transaction having a similar
effect; or

 

2.2.4                        if
the Company enters into an agreement with an unrelated party for the sale of
all or substantially all of the assets or outstanding stock of a Subsidiary (or
a transaction having a similar effect), or any other event occurs by reason of
which a Subsidiary ceases to be a Subsidiary of the Company, a Change in
Control shall be deemed to have occurred with respect to those Employees who
are then employed by such Subsidiary.

 

 

2.3                                 “Change
in Control Date” shall mean the earliest date on which one of the events
described in the definition of “Change in Control” occurs, as determined by the
Board of Directors, in its sole discretion, provided that, if
Section 2.2.4 of the definition of “Change of Control” applies, the Change
in Control Date shall be deemed to be the date of the agreement, provided that
the transaction does close.

 

2.4                                 “Change
in Control Price” shall mean the highest fair market value, or the highest
price paid or offered in any bona fide transaction related to a Change in
Control of the Company, at any time during the sixty (60) days preceding the
Change in Control Date.

 

2.5                                 “Code”
means the Internal Revenue Code of 1986, as amended.

 

2.6                                 “Company”
means Special Devices, Incorporated, a Delaware corporation.

 

2.7                                 “Employee”
means any bona fide full or part time common law employee of the Company or of
any Parent or Subsidiary of the Company.

 

2.8                                 “Incentive
Stock Option” means an Option granted pursuant to this Plan intended to qualify
and designated as an incentive stock option within the meaning of
Section 422 of the Code.

 

2.9                                 “Nonqualified
Stock Option” means any Option granted pursuant to this Plan other than an
Incentive Stock Option.

 

2.10                           “Option”
or “Stock Option” means any stock option
granted pursuant to this Plan.

 

2.11                           “Optionee”
means any individual to whom an Option is granted pursuant to this Plan.

 

2.12                           “Parent”
means, at the time of granting any Option, any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if each
of the corporations other than the Company owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.

 

2.13                           “Plan”
means the Special Devices, Incorporated 1999 Stock Option Plan.

 

2.14                           “Recapitalization”
means any reorganization, merger or other subdivision, consolidation,
recapitalization, reclassification, stock split, combination of shares,
issuance of warrants, stock dividend or similar event with respect to or
affecting the common stock of the Company, par value one cent ($.01) per share.

 

2.15                           “Stock
Option Committee” means the committee appointed to administer the Plan
pursuant to Article 7 herein, if such committee is appointed.

 

 

 

2.16                           “Subsidiary”
means, at the time of granting any Option, any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

 

2.17                           “Ten
Percent Shareholder” means any person who owns (or is considered by reason
of Section 425(d) of the Code to own) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any Parent or Subsidiary of the Company.

 

3.                                       ELIGIBILITY.                    The
persons who shall be eligible to receive Options shall be such officers,
directors and executive and professional employees of the Company or its Parent
or Subsidiary corporations as the Board of Directors shall select from time to
time.  An Optionee may hold more than one Option, but only on the terms
and subject to the restrictions hereafter set forth.

 

4.                                       STOCK.                                                 The
stock subject to the Options shall be shares of the Company’s authorized but
unissued or reacquired common stock, par value one cent ($.01) per share,
hereafter sometimes called Stock.  The aggregate number of shares which
may be issued under Options shall not exceed six hundred forty-five thousand
(645,000) shares of Stock.  The limitation established by the preceding
sentence shall be subject to adjustment as provided in Section 5.12 of the
Plan.  If any outstanding Option for any
reason expires or is terminated, the shares of Stock allocable to the
unexercised portion of such Option may again be subjected to an Option under
the Plan.

 

5.                                       TERMS
AND CONDITIONS

 

5.1                                 Option
Agreement.  Stock Options granted
pursuant to the Plan shall be authorized by the Board of Directors and shall be
evidenced by agreements in such form as the Board of Directors shall from time
to time approve, which agreements shall comply with and be subject to the terms
and conditions set forth in this Article 5.  The agreements shall not
impose upon the Company or its Parents or Subsidiaries any obligation to retain
the Optionee in their employ for any period.

 

5.2                                 Number
of Shares.  Each Option shall
state the number of shares of Stock to which it pertains.

 

5.3                                 Option
Price.  Each Option shall state
the option price, which in the case of an Incentive Stock Option shall be not
less than (i) one hundred percent (100%) of the fair market value of the shares
of Stock on the date of the granting of the Option if the Optionee is not a Ten
Percent Shareholder, or (ii) one hundred ten percent (110%) of the fair market
value of the shares of Stock on the date of the granting of the Option if the
Optionee is a Ten Percent Shareholder.  The fair market value of the
shares of Stock shall be determined pursuant to Section 7.2.

 

 

 

5.4                                 Medium
and Time of Payment.  The option
price shall be payable upon the exercise of the Option and may be paid in cash
or by good check.  At the sole option of the Company, if approved by the
Board of Directors, a portion of the purchase price may be paid by delivery of
shares of Stock previously owned by the Optionee, duly endorsed for transfer to
the Company, with a fair market value (as determined by the Board of Directors)
on the date of delivery equal to the option price, or by delivery of a recourse
promissory note bearing interest at such rate, on such other terms and in form
and with security satisfactory to the Company, or any combination of the
foregoing approved by the Board of Directors.  Exercise of an Option shall
not be effective until the Company has received written notice of exercise,
specifying the number of whole and fractional shares of Stock to be purchased,
accompanied by payment in full of the aggregate option price of the number of
shares purchased.

 

5.5                                 Term
of Options.  Each Option, by its
terms, shall not be exercisable after the expiration of ten years from the date
the Option is granted, provided, however, that any Incentive Stock Option
granted to a Ten Percent Shareholder, by its terms, shall not be exercisable
after the expiration of five years from the date the Option is granted. 
Any Option may provide that it will expire within a shorter period than the
maximum permitted hereby.

 

5.6                                 Installments.  Each Option shall be exercisable on such
dates and in such amounts (subject to the other provisions hereof) as shall be
determined by the Board of Directors.  It is not required that each Option
have the same installment provisions.  In its sole discretion, the Board
of Directors may accelerate the exercise date of part or all of any Option.

 

5.7                                 Transferability.  Each Option, by its terms, shall not be
transferable by the individual to whom granted otherwise than by will or the
laws of descent and distribution, and shall be exercisable, during the
Optionee’s lifetime, only by the Optionee.

 

5.8                                 Limits
on Exercise.  Each Option shall
be subject to the requirement that, if at any time the Board of Directors, in
its discretion, shall determine that the listing, registration, or
qualification of the shares subject to such Option upon any securities exchange
or under any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option, or the issue or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors.

 

5.9                                 Limit
on Options.  An Option shall not
be an Incentive Stock Option to the extent that the aggregate fair market value
of stock with respect to which such Option is exercisable for the first time by
any individual during any calendar year (taking into account all Incentive
Stock Options simultaneously or previously granted under all stock option plans
of the Company and its Parents and Subsidiaries) exceeds One Hundred Thousand
Dollars ($100,000).

 

5.10                           Termination
of Employment.  Each Option by
its terms shall not be exercisable after thirty (30) days after the termination
of employment of the individual to whom the Option was granted, unless such
termination was a result of the death or disability of the employee, and may
provide that it shall not be exercisable after the date of termination of 

 

 

employment of the
individual to whom the Option was granted.

 

5.11                           Expiration
of Plan.  No Option shall be
granted under this Plan more than ten years from the date on which this Plan
was adopted or approved by the stockholders of the Company, whichever is
earlier.  No Option granted under this Plan shall be valid unless the Plan
is approved by the stockholders of the Company within twelve (12) months before
or after its adoption by the Board of Directors.

 

5.12                           Recapitalization.  Upon any Recapitalization, the Board of
Directors shall make an appropriate and equitable adjustment in the number and
kind of securities with respect to which rights may be granted under this Plan
and the price at which such securities may be purchased, and an appropriate and
equitable adjustment in the number and kind of securities that may be purchased
under each outstanding Option and the price at which shares may be purchased
under each such Option.

 

The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make or authorize any adjustments, recapitalizations,
reorganizations, or other changes in the Company’s capital structure or
business, any merger or consolidation, any issuance of bonds, debentures,
preferred shares or common shares, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of the Company’s assets or
business, or any other act, whether or not similar to the events described
above.

 

5.13                           Rights
as a Stockholder.  An Optionee or
a transferee of an Option shall have no rights as a stockholder with respect to
any shares covered by the Option until the date of the issuance of a stock
certificate for such shares.  No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 5.12
hereof.

 

5.14                           Modification,
Extension and Renewal of Options. 
Subject to the terms and conditions and within the limitations of the
Plan, the Board of Directors may modify, extend or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution therefore (to the extent not theretofore exercised). 
Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted under the Plan.

 

5.15                           Investment
Purpose.  Each Option under the
Plan shall be granted on the condition that the purchases of stock thereunder
shall be for investment purposes, and not with a view to resale or distribution
unless the stock subject to such Option is registered under the Securities Act
of 1933, as amended, and any applicable state securities laws, or a resale of
such stock without such registration would otherwise be permissible.  Each
person exercising an Option must represent that such condition is fulfilled,
unless in the opinion of counsel 

 

 

for the Company such
condition is not required under the Securities Act of 1933 or any other
applicable law, regulation, or rule of any governmental agency.

 

5.16                           Withholding
Taxes.  Whenever under the Plan
shares are to be issued or cash is to be paid in satisfaction of Options, the
Company shall have the right to require the recipient to remit to the Company
an amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or payment of such cash.

 

5.17                           Termination
of Options.  Each Option, by its
terms, shall reserve to the Company the right to terminate the Option, in
connection with a Change in Control for a payment in cash equal to the
difference between the exercise price for the shares of Stock subject to the
Option and the Change in Control Price of such Stock.

 

5.18                           Other
Provisions.  The Option
agreements authorized under the Plan shall contain such other provisions,
including, without limitation, such rights of redemption, purchase and first
refusal, and such other restrictions upon the exercise of Options or the
transfer of the Stock issued upon exercise, as the Board of Directors of the
Company shall deem advisable.  Any Incentive Stock Option agreement shall
contain such limitations and restrictions upon the exercise of the Option as
shall be necessary in order that such Option will be an “Incentive Stock
Option” as defined in Section 422 of the Code.

 

6.                                       EXERCISE
OF OPTIONS

 

6.1                                 Stock
Transfer Books.  Notwithstanding
any other provision of this Plan or of any Option, no stock shall be issued by
the Company while its stock transfer books are closed.

 

6.2                                 Securities
Laws.  Notwithstanding any other
provision of this Plan or of any Option, no Option shall be exercisable, and no
stock shall be issued upon the exercise of any Option, if such exercise or such
issuance of stock would result in any violation of law or the imposition on the
Company of a requirement that it commence filing periodic reports under the Securities
Exchange Act of 1934 or any similar provision of law.

 

 

7.                                       ADMINISTRATION

 

7.1                                 Administration
by Board of Directors.  The Plan
shall be administered by the Board of Directors.  The interpretation and
construction by the Board of Directors of any provisions of the Plan or of any
Option granted under it shall be final.  The Board of Directors shall have
the authority to appoint a Stock Option Committee to assume the duties and
responsibilities of administering the Plan.  The Stock Option Committee, if
such be established by the Board of Directors, shall be composed of no less
than three (3) persons (who shall be members of the Board of Directors), each
of whom shall be a “disinterested person” as defined herein, and such Stock
Option Committee shall have the same power, authority and rights in the
administration of the Plan as the Board of Directors.  No director shall
be liable for any action or determination made in good faith with respect to
the Plan or any Option granted under it.

 

The Board of Directors
shall determine from time to time the persons who shall receive Options
hereunder; provided, however, Options may be granted hereunder only to persons
who, at the time of the grant thereof, are officers, directors or key employees
of the Company and its Parents and Subsidiaries, except as otherwise provided
in this Plan; provided, further, that any decision to award Options hereunder
to any person or the determination of the maximum number of shares of Stock (as
hereinafter defined) which may be subject to Options granted to any such
director, employee or officer shall be made by either (i) the Board of
Directors, all of the directors of which and all of the directors acting in
such matter shall be disinterested persons as defined herein, or (ii) the
Stock Option Committee appointed by the Board of Directors pursuant to this
section.  For purposes of this Plan, “disinterested person” shall mean a
director who is not, during the one year prior to service as an administrator
of the Plan, or during such service, granted or awarded equity securities
pursuant to the Plan or any other plan of the Company or any of its Parents or
Subsidiaries entitling the participants therein to acquire stock, stock options
or stock appreciation rights of the Company or any of its Parents or
Subsidiaries.

 

7.2                                 Determination
of Fair Market Value.  For the
purpose of granting Incentive Stock Options, the Board of Directors shall
determine the fair market value of the Stock of the Company as follows:

 

7.2.1  If the Company’s Stock is traded on any
recognized stock exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Stock on such stock exchange or
exchanges on the day the Option is granted or if no sale of the Company’s Stock
shall have been made on any stock exchange on that day, on the next preceding
day on which there was a sale of such stock.

 

7.2.2  During such time as the Stock is not listed
on an established exchange, but is actively traded on the over-the-counter
market, the fair market value per share shall be the mean between dealer “bid”
and “ask” prices of the Stock in the over-the-counter market on the day the
Option is granted, as reported by the National Association of Securities
Dealers, Inc.

 

7.2.3  During such time as the Company’s Stock is
neither listed on any 

 

 

recognized exchange nor
actively traded over-the-counter, the fair market value shall be determined in
good faith by the Board of Directors.  In making such determination, the
Board of Directors may (but shall not be required to) rely on the opinions of
one or more qualified, independent appraisers.

 

7.3                                 Indemnification.  In addition to such other rights of
indemnification as they may have as directors or as members of the Stock Option
Committee, the members of the Board of Directors shall be indemnified by the
Company against the reasonable expenses, including attorneys’ fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Board or Stock Option Committee member is liable for
negligence or misconduct in the performance of his duties; provided that within
sixty (60) days after institution of any such action, suit or proceeding a
Board or Stock Option Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.

 

8.                                       AMENDMENT
AND TERMINATION

 

8.1                                 Amendment.  The Board of Directors of the Company may,
insofar as permitted by law, from time to time, with respect to any shares at
the time not subject to Options, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without approval of the
stockholders, no such revision or amendment shall change the number of shares
subject to the Plan, change the designation of the class of employees eligible
to receive Options or decrease the price at which Incentive Stock Options may
be granted, materially increase the benefits accruing to participants under the
Plan, materially increase the number of securities which may be issued under
the Plan, or materially modify the requirements as to eligibility for
participation in the Plan.

 

9.                                       MISCELLANEOUS

 

9.1                                 Governing
Law.  This Plan shall be governed
by, and construed in accordance with, the laws of the State of Delaware.

 

9.2                                 Construction.  In the event any parts of this Plan are found
to be void, the remaining provisions of this Plan shall nevertheless be binding
with the same effect as though the void parts were deleted.

 

9.3                                 Application
of Funds.  The proceeds received
by the Company from the sale of Stock pursuant to Options will be used for
general corporate purposes.

 

9.4                                 No
Obligation to Exercise Option. 
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.

 

9.5                                 Approval
of Stockholders.  The Plan shall
take effect immediately upon adoption by the Board of Directors.  However, if this Plan is not approved by the
stockholders

 

 

of the Company within the
period beginning twelve (12) months before and ending twelve (12) months after
the date the Plan is adopted by the Board of Directors, no Options granted
hereunder shall constitute Incentive Stock Options.

 

 

	
   

  	
   

  	
  SPECIAL DEVICES, INCORPORATED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ THOMAS W. CRESANTE

  	
   

  
	
   

  	
   

  	
   

  	
  Thomas W. Cresante

  
	
   

  	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated: July 19,
  2001

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   /s/ LOUIS N. MINTZ

  	
   

  	
   

  	
   

  	
   

  
	
  Louis N. Mintz, Assistant Secretary

  	
   

  	
   

  	
   

  
						

 

 

SPECIAL DEVICES, INCORPORATED

Incentive
Stock Option Agreement

 

No. of Shares
subject to Option:             Option
No.:             .

 

This Agreement dated as
of
                    between
Special Devices, Incorporated, a Delaware corporation (the “Company”), and
                                  
(the Optionee”).

 

W I T N E S S E T H :

 

1.                                       GRANT
OF OPTION PRIOR GRANTS.

 

Pursuant to the
provisions of the Special Devices, Incorporated 1999 Stock Option Plan (the
“Plan”), the Company hereby grants to the Optionee, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth, the right and option to purchase from the Company all or any part of
an aggregate of
              
(       ) shares of common stock, par value
one cent ($0.01) per share, of the Company (the “Shares”), at the purchase
price of 
              
($       ) per Share, such Option to be
exercised as hereinafter provided.  This
is an Incentive Stock Option, and shall be so construed.  All terms defined in the Plan are used herein
as so defined. 

 

2.                                       TERMS AND CONDITIONS.

 

It is understood and
agreed that the Option evidenced hereby is subject to the following terms and
conditions:

 

2.1                                 Time
of Exercise of Option.

 

2.1.1                                                                        Installment Schedule.  This Option may be exercised as to

 

(a)                                  one-quarter
(1/4) of the Shares beginning one (1) year from the Commencement Date;

 

(b)                                 an
additional one-quarter (1/4) of the Shares beginning two (2) years from the
Commencement Date;

 

(c)                                  an
additional one-quarter (1/4) of the Shares beginning three (3) years from the
Commencement Date;

 

(d)                                 in
full, to the extent not theretofore exercised, beginning on the earlier of the
Change in Control Date or four (4) years from the Commencement Date.

 

For purposes of this
Option, the Commencement Date is agreed to be
                                            .

 

2.1.2                                                                        Expiration Date.  This Option shall expire absolutely ten (10)

 

 

years from the date
hereof.

 

2.1.3                                                                        Exercise
Upon Termination of Employment. 
If the Optionee shall cease to be employed by the Company or a Parent or
Subsidiary for any reason other than the Optionee’s death or disability (within
the meaning of Section 105(d)(4) of the Code), this Option, to the extent
not then exercisable in accordance with its terms, shall terminate and be
without further effect.  To the extent this Option is exercisable on the date
of termination of employment, it may be exercised at any time within thirty
(30) days after such date by the Optionee or, in case of the subsequent death
of the Optionee, then by the executors or administrators of the Optionee’s
estate or by any person or persons who shall have acquired the Option directly
from the Optionee by bequest or inheritance, and this Option, to the extent not
exercised, shall in all events terminate upon the expiration of such thirty
(30) day period or, if earlier, ten (10) years from the date hereof.

 

2.1.4                                                                        Exercise Upon Loss of Parent or Subsidiary Status.  If the Optionee ceases to be employed by the
Company or a Parent or Subsidiary by reason of the employer of the Optionee
ceasing to be a Parent or Subsidiary of the Company, then this Option, to the
extent not then exercisable in accordance with its terms, shall terminate and
be without further effect.  Within a
reasonable time after such event (not to exceed thirty (30) days), the Company
shall provide written notice to the Optionee of such event (including specific
reference to the provisions of this section). 
To the extent this Option is exercisable on the date of such event, it
may be exercised at any time within thirty (30) days after the later of the
date of such event or the date of the notice required by the preceding sentence
by the Optionee, or, in case of the subsequent death of the Optionee, then by
the executors or administrators of the Optionee’s estate or by any person or
persons who shall have acquired the Option directly from the Optionee by
bequest or inheritance, and this Option, to the extent not exercised, shall in
all events terminate upon the expiration of such thirty (30) day period, or, if
earlier, ten (10) years from the date hereof.

 

2.1.5                                                                        Exercise Upon Death or Disability.  If the Optionee shall cease to be employed by
the Company or a Parent or Subsidiary by reason of the Optionee’s death or
disability, this Option, to the extent not then exercisable in accordance with
its terms, shall terminate and be without further effect.  To the extent
this Option is exercisable on the date of death or disability, it may be
exercised at any time within twelve (12) months after the date of death or
disability by the Optionee in case of disability, or in case of the death of
the Optionee, then by the executors or administrators of the Optionee’s estate
or by any person or persons who shall have acquired the Option directly from
the Optionee by bequest or inheritance, and this Option, to the extent not
exercised, shall in all events terminate upon the expiration of such twelve
(12) month period or, if earlier, ten (10) years from the date hereof.

 

2.1.6                                                                        Acceleration of Exercise Date.  In its sole discretion, the Board of
Directors may accelerate the date or dates on which this Option may be
exercised in whole or in part.

 

2.2                                 Method
of Exercise. This Option may be exercised as follows:

 

2.2.1                                                                        Notice of Exercise.  The Optionee shall deliver written notice to
the Company specifying the number of Shares as to which the Option is being
exercised.

 

 

2.2.2                                                                        Payment of Purchase Price.  At the time of any exercise the purchase
price of the shares as to which this Option is being exercised shall be paid to
the Company in cash or good check, or if approved by the Board of Directors, by
the delivery of Shares previously owned by the Employee, duly endorsed for
transfer to the Company, with a fair market value (as determined by the Board
of Directors) on the date of delivery equal to the aggregate purchase price of
the Shares with respect to which the Option is being exercised, or by the
delivery of a recourse promissory note bearing interest at such rate, or on
such other terms and in form and with security satisfactory to the Company, or
any combination of the foregoing approved by the Board of Directors, in its
sole discretion.  Notation of any partial
exercise shall be made by the Company on Schedule I hereto.

 

2.2.3                                                                        Restrictions on Transfer/Right of Repurchase;
Investment Representation. 
Prior to the issuance of any shares upon the exercise of all or any part
of this Option, the Company may require the person exercising the Option to (i)
execute, become a party to, and subject such shares to restrictions in
accordance with the terms of a Stockholders Agreement dated as of December 15,
1998 among the Company and all or substantially all the persons who are
stockholders owning shares of Common Stock of the Company as of the date of
this Option, as such agreement may be amended and/or restated and in effect at
the time of each exercise of this Option, and/or (ii) execute, become a party
to, and subject such shares to restrictions in accordance with a stock purchase
agreement in a form acceptable to the Company, which stock purchase agreement
may grant to the Company the right to repurchase all or any of the shares
issued upon exercise of the option, at the purchase price per share provided
for herein, in the event that the Optionee ceases to be employed by the Company
or a Parent or Subsidiary by reason of the voluntary resignation by the
Optionee from his or her employment.  If
the Company so requires, the certificate or certificates evidencing the shares
issued upon the exercise of all or any part of this Option shall be legended in
accordance with said agreement(s).

 

2.3                                 Nontransferability.  This Option shall not be transferable except
by will or by the laws of descent and distribution.  During the lifetime of the Optionee, this
Option shall be exercisable only by the Optionee.

 

2.4                                 Adjustments.  In the event of any change in the Stock of
the Company by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of shares, or any
similar change affecting the Stock, then in any such event the number and kind
of shares subject to this Option and their purchase price per share may be
adjusted pursuant to Section 5.12 of the Plan, in such manner as the Board
of Directors may in its sole discretion deem equitable.  Any adjustment so
made shall be final and binding upon the Optionee.

 

2.5                                 No Rights as Stockholder.  The Optionee shall have no rights as a
stockholder with respect to any shares of Stock subject to this Option prior to
the date of issuance to the Optionee of a certificate or certificates for such
shares.

 

2.6                                 Compliance with Law and Regulations.  This Option and the obligation of the Company
to sell and deliver shares hereunder shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any government
or regulatory 

 

 

agency as may be
required.  The Company shall not be required to issue or deliver any
certificates for shares of Stock if the Company determines that such issue or
delivery would (a) require any registration or qualification of such
shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to
be applicable; (b) require the commencement of the filing by the Company of
periodic reports pursuant to the Securities Exchange Act of 1934, or (c)
violate any law or governmental regulation. 
If at any time the Board of Directors in its discretion determines that
the listing, registration of qualification of the shares subject to this Option
upon any securities exchange or under any law or regulation, or the consent or
approval of any government regulatory body is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares hereunder,
this Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors.

 

2.7                                 Withholding
Taxes.  Whenever under this
Option shares are to be issued or cash is to be paid, the Company shall have
the right to require the recipient to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares or payment of such
cash.

 

2.8                                 Modification, Extension and Renewal.  Subject to the terms and conditions and
within the limitations of the Plan, the Board of Directors may modify, extend
or renew this Option, or accept the surrender hereof (to the extent not
theretofore exercised) and authorize the granting of a new Option or Options in
substitution therefor (to the extent not theretofore exercised). 
Notwithstanding the foregoing, no modification of this Option shall, without
the consent of the Optionee, alter or impair any rights or obligations under
any Option theretofore granted under the Plan.

 

2.9                                 Termination.  The Company hereby reserves the right to
terminate this Option in connection with any Change in Control for a payment in
cash equal to the difference between the Exercise Price for the shares of Stock
subject to the Option and the Change in Control Price of such Stock.

 

2.10                           Parachute
Payments.                             In
the event that the aggregate present value of the payments to the Employee
under this Agreement, and any other plan, program, or arrangement maintained by
the Company or a Subsidiary, constitutes an “excess parachute payment” (within
the meaning of Section 280G(b)(1) of the Code) and the excise tax on such
payment would cause the net parachute payments (after taking into account
federal, state and local income and excise taxes) to which the Employee
otherwise would be entitled to be less than what the Employee would have netted
(after taking into account federal, state and local income taxes) had the
present value of the Employee’s total parachute payments equaled One Dollar
($1.00) less than three (3) times the Employee’s “base amount” (within the
meaning of Code Section 280(G)(b)(3)(A)), the Employee’s total “parachute
payments” (within the meaning of Code Section 280G(b)(2)(A)) shall be
reduced (by the minimum possible amount) so that their aggregate present value
equals One Dollar ($1.00) less than three (3) times such base amount.  For purposes of this calculation, it shall be
assumed that the Employee’s tax rate will be the maximum marginal federal,
state and local income tax rate on earned income, with such maximum federal
rate to be computed with regard to Code Section 1(g), if applicable.  In the event that the Employee and the
Company are unable to agree as to 

 

 

the amount of the
reduction described above, if any, the Employee shall select a law firm or
accounting firm from among those regularly consulted (during the twelve (12)
month period immediately prior to the change in control that resulted in the
characterization of the payments as parachute payments) by the Company
regarding federal income tax or employee benefit matters, and such law firm or
accounting firm shall determine the amount of such reduction and such
determination shall be final and binding upon the Employee and the Company.

 

3.                                       REPRESENTATIONS AND OBLIGATIONS OF OPTIONEE.

 

In consideration of the
grant of this Option, the Optionee hereby represents and agrees as follows:

 

3.1                                 Optionee Bound by Plan. Optionee
hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all
the terms and provisions thereof.  Any term used herein with the first
letter of such term capitalized shall have the same meaning as in the Plan.

 

3.2                                 Investment Representation.  Optionee hereby represents that any shares
purchased pursuant to this Option will be acquired for the Optionee’s own
account for investment and not with a view to, or for the offer or sale in
connection with, the distribution of any such shares.

 

3.3                                 Best Efforts.  Optionee agrees to use his or her best
efforts for the benefit of the Company during his or her employment or other
relationship with the Company.

 

3.4                                 Restrictions.  The Optionee agrees that any shares of Stock
acquired pursuant to exercise of this Option shall be subject to rights of
repurchase and other restrictions as contemplated by Section 2.2.3 of this
Agreement.

 

3.5                                 No Rights to Continued Employment.  The Optionee acknowledges that neither any of
the terms and provisions of the Plan or this Agreement nor the grant of this
option to the Optionee shall be construed to give to the Optionee any rights to
continued employment with the Company or a Parent or Subsidiary thereof, or to
give to the Optionee any rights whatsoever in connection with such employment,
except as expressly provided in the Plan or this Agreement.  Except as may otherwise be provided in a
written agreement between the Optionee and the Company or a Parent or
Subsidiary, the Optionee is an employee at will, and each party to the
employment relation has a right to terminate such employment at any time and
for any reason, or for no reason at all.

 

4.                                       NOTICES.

 

Notices delivered
pursuant to this Agreement shall be in writing, and shall be deemed to have
been duly given when a) delivered by hand; (b) sent by facsimile (with
receipt confirmed), provided that a copy is promptly thereafter mailed by
first-class prepaid certified mail, return receipt requested; (c) received
by the addressee, if sent with delivery receipt requested by Express Mail,
Federal Express, other express delivery service or first-class prepaid
certified mail, in each case to the appropriate addresses and facsimile numbers
set forth below, or to such other address(es) or facsimile number(s) as a party
may designate as to itself by notice to the other party.

 

 

(a)                                  If
to the Company:

 

Special Devices,
Incorporated

14370 White Sage Road

Moorpark, CA   93021

Facsimile:               (805)
553-1208

Attention:                                         Thomas
W. Cresante,

President and Chief
Executive Officer

 

with a copy sent by any
of the foregoing methods simultaneously to:

 

Louis N. Mintz

c/o J.F. Lehman &
Company

2001 Jefferson Davis
Highway, Suite 607

Arlington, VA   22202

Facsimile:                                            (703)
418-6099

 

(b)                                 If
to the Optionee:

 

To
the latest home address as shown on the Company’s personnel records subject to
the right of either party to designate at any time hereafter in writing some
other address.

 

5.                                       COUNTERPARTS.

 

This Agreement has been
executed in two counterparts each of which shall constitute one and the same
instrument.

 

IN
WITNESS WHEREOF, Special Devices, Incorporated has caused
this Agreement to be executed by its President or a Vice President and Optionee
has executed this Agreement, both as of the day and year first above written.

 

	
   

  	
  SPECIAL DEVICES, INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Thomas W. Cresante,

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

CONSENT
OF SPOUSE

 

The
undersigned spouse of
                               has
read and hereby approves the terms and conditions of this Incentive Stock
Option Agreement
No.                (the
“Option Agreement”) by and between Special Devices, Incorporated (the
“Company”) and the said                             ,
dated as
of                          .  In consideration of the Company’s granting
his/her spouse the right to purchase Shares as set forth in the Option
Agreement, the undersigned hereby agrees to be irrevocably bound by the terms
and conditions of the Option Agreement and further agrees that any community
property interest shall be similarly bound. 
The undersigned hereby appoints the undersigned’s spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Option Agreement and agrees to be bound by the provisions
of the Option Agreement insofar as the undersigned may have any rights
thereunder or in any shares issued pursuant thereto under the community
property laws of the State of California or similar laws relating to marital
property in effect in the state of our residence as of the date of the signing
of the Option Agreement.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
				

 

OR

 

CERTIFICATE OF OPTIONEE

 

I hereby certify that I have
no spouse.  In the event of any marriage,
I undertake to deliver to the Company a Consent of Spouse in the form set forth
above within not less than five (5) business days following such marriage.

 

	
   

  	
   

  	
   

  

 

 

Schedule I

to

SPECIAL DEVICES,
INCORPORATED

Incentive Stock
Option Agreement No.:         .

dated                  (the
“Agreement”) by and between

Special Devices, Incorporated (the “Company”)

and

                  (the
“Optionee”)

 

WHEREAS, the Optionee has
this day delivered to the Company written notice of partial exercise of the
Option granted by the Agreement; and

 

WHEREAS, in accordance
with Section 2.2.1 of the Agreement, said written notice specified that
the number of Shares as to which the Option is being exercised is
                           
Shares; and

 

WHEREAS,
Section 2.2.1 of the Agreement requires that notation of any partial
exercise of the Option be made on this Schedule I to the Agreement;

 

NOW, THEREFORE, it is
hereby acknowledged and agreed that the Option granted by the Agreement has
this day been exercised as to
                        
Shares.

 

IN WITNESS WHEREOF,
Special Devices, Incorporated has caused this Schedule to be executed by
its President or a Vice President and Optionee has executed this Schedule, both
as of the            day
of
                             ,
             .

 

	
   

  	
  SPECIAL DEVICES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEEExhibit 10.33

 

SPECIAL DEVICES, INCORPORATED

 

DEFERRED BONUS/COMPENSATION PLAN

 

(Effective, November 3, 2003)

 

 

 

SPECIAL DEVICES, INCORPORATED

 

DEFERRED BONUS/COMPENSATION PLAN

 

(Effective, November 3, 2003)

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
  ARTICLE II

  	
  PARTICIPATION

  	
   

  
	
  2.1

  	
  Effective Date of
  Participation

  	
   

  
	
  2.2

  	
  Cessation of Participation

  	
   

  
	
  ARTICLE III

  	
  ACCRUAL OF CREDITS

  	
   

  
	
  3.1

  	
  Incentive Elective
  Bonus Credits

  	
   

  
	
  3.2

  	
  Incentive
  Non-Elective Bonus Credit

  	
   

  
	
  3.3

  	
  Cessation
  of Credits

  	
   

  
	
  3.4

  	
  Maintenance
  of Accounts.

  	
   

  
	
  3.5

  	
  Valuation
  of Accounts

  	
   

  
	
  3.6

  	
  Investment
  Obligation of the Company

  	
   

  
	
  ARTICLE IV

  	
  PLAN BENEFITS

  	
   

  
	
  4.1

  	
  Change in Control
  Distributions.

  	
   

  
	
  4.2

  	
  Claims Procedure for
  Benefits.

  	
   

  
	
  4.3

  	
  Payments to Minors, Etc

  	
   

  
	
  4.4

  	
  Satisfaction of Liability

  	
   

  
	
  4.5

  	
  Nonassignability

  	
   

  
	
  4.6

  	
  Tax Withholding

  	
   

  
	
  4.7

  	
  Benefit Offset

  	
   

  
	
  ARTICLE V

  	
  BENEFICIARY
  DESIGNATION

  	
   

  
	
  5.1

  	
  Beneficiary Designation

  	
   

  
	
  ARTICLE VI

  	
  OPERATION AND
  ADMINISTRATION OF THE PLAN

  	
   

  
	
  6.1

  	
  Authority and
  Responsibility

  	
   

  
	
  6.2

  	
  Records
  and Reports.

  	
   

  
	
  6.3

  	
  Required
  Information

  	
   

  
	
  6.4

  	
  Payment of Expenses of Plan

  	
   

  

 

 

	
  ARTICLE VII

  	
  AMENDMENT AND TERMINATION

  	
   

  
	
  7.1

  	
  Amendment

  	
   

  
	
  7.2

  	
  Termination

  	
   

  
	
  ARTICLE VIII

  	
  GENERAL
  PROVISIONS

  	
   

  
	
  8.1

  	
  Limitation
  of Rights

  	
   

  
	
  8.2

  	
  No Right to Shareholder
  Rights

  	
   

  
	
  8.3

  	
  Construction
  of Plan

  	
   

  
	
  8.4

  	
  Severability

  	
   

  
	
  8.5

  	
  Heirs, Assigns and
  Personal Representatives

  	
   

  
	
  8.6

  	
  Lost Payees

  	
   

  
	
  8.7

  	
  Reliance on Data and
  Consents

  	
   

  
	
  8.8

  	
  Titles
  and Headings

  	
   

  
	
  8.9

  	
  Gender and Number

  	
   

  
	
  8.10

  	
  Notices

  	
   

  
	
  8.11

  	
  Waiver of Notice

  	
   

  
	
  8.12

  	
  Effect on Other
  Employee Benefit Plans

  	
   

  

 

 

SPECIAL DEVICES, INCORPORATED

 

DEFERRED BONUS/COMPENSATION PLAN

 

(Effective, November 3, 2003)

 

WITNESSETH:

 

WHEREAS, Special Devices, Incorporated (“Company”) has determined that
with respect to a fiscal year of the Company, that it may adopt an incentive
bonus plan, through which the Company may reward the performance of its
eligible employees upon the attainment by the Company of certain articulated
goals by crediting a portion of a bonus to a non-elective subaccount
established for an eligible employee under, and subject to the terms of, a
deferred bonus plan, and paying the balance to the eligible employee in cash;

 

WHEREAS, the Company has adopted concurrently herewith such an
incentive bonus plan with respect to its 2003 fiscal year named the Special
Devices, Incorporated Fiscal Year 2003 Incentive Compensation Plan (“Incentive
Plan”);

 

WHEREAS, the Company desires to establish a deferred bonus plan to set
forth the terms and conditions that will apply to a non-elective subaccount and
to permit an eligible employee to defer a portion of a cash bonus awarded for
services rendered after the date of his/her deferral election to an elective
subaccount established under this Plan;

 

WHEREAS, the Company intends that the deferred bonus plan be a
non-qualified unfunded deferred compensation for federal tax and other
applicable tax law purposes and a bonus program as described in Department of
Labor Regulation 29 C.F.R. Section 2510.3-2(c) that is not a plan subject
to the Employee Retirement Income Security Act of 1974, as amended;

 

WHEREAS, the bonus credited to a non-elective subaccount and any bonus
deferred to an elective subaccount by an eligible employee will be deemed to
have been invested in the common stock of the Company, and the value of an
eligible employee’s account will be determined by reference to the value of the
common stock of the Company; and

 

WHEREAS, through the Incentive Plan (and subsequently adopted similar
plans that make reference to this Plan) and this Plan, the Company desires to
establish a program that will motivate eligible employees, insure continuity of
management, provide a competitive compensation package, and align the interests
of an eligible employee more directly with the interests of the shareholders of
the Company to improve the business performance of the Company.

 

NOW, THEREFORE, effective as of November 3, 2003, the Company
hereby adopts this Special Devices, Incorporated Deferred Bonus/Compensation
Plan.

 

 

ARTICLE I

 

DEFINITIONS

 

For purposes of this Plan, the following words and phrases shall have
the following meanings unless a different meaning is plainly required by the
context.

 

1.1                                 “Account” shall mean the account
established on the books of the Company for a Participant to reflect the number
of deemed shares of Common Stock that have been deemed to have been purchased
with his/her Incentive Non-Elective Bonus Credits and Incentive Elective Bonus
Credits which shall be allocated, respectfully, to the following
subaccounts:  (a) Non-Elective Subaccount
and (b) Elective Subaccount.  Notwithstanding
that a Participant’s interest in this Plan is described by reference to deemed
shares of Common Stock, the obligation of the Company under this Plan is
expressly limited to the payment of the applicable value of such deemed shares
at such time as set forth in this Plan.

 

1.2                                 “Appropriate Form” shall mean
the form provided or the method prescribed by the Plan Administrator for the
particular purpose.

 

1.3                                 “Beneficiary” shall mean the
individual or entity designated by a Participant in writing to be the recipient
of the benefits payable under this Plan in the event of the death of the
Participant.  As to a Participant who
dies and who has not designated a Beneficiary (or who is not survived by any
such designated Beneficiary), Beneficiary shall mean the following classes of
takers, each class to take to the exclusion of all subsequent classes, with all
members of that class to share equally: 
(a) the Participant’s surviving spouse; (b) the Participant’s lineal
descendants (including adopted persons, but not including step-children that
have not been adopted) per stirpes; (c) the Participant’s surviving parents;
and (d) the Participant’s estate.

 

1.4                                 “Board” shall mean the board of
directors of the Company.

 

1.5                                 “Change in Control” shall mean
the happening of any of the following:

 

(a)                                  any person who is not a
stockholder of the Company or of any Parent on the date of adoption of this
Plan (or group of such persons acting in concert) acquires, during any period
of twelve consecutive calendar months, stock of the Company or of a Parent
representing a majority of the voting power of all stock of the Company or any
Parent having the right to vote for the election of directors;

 

(b)                                 the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty (80%) of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a Recapitalization of the Company;  or

 

(c)                                  the stockholders of the Company
approve a plan of complete liquidation 

 

2

 

of the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company’s assets or any transaction having a
similar effect.

 

As used herein, “Parent” means, any
corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.  As used herein, “Recapitalization” means any
reorganization, merger or other subdivision, consolidation, recapitalization,
reclassification, stock split, combination of shares, issuance of warrants,
stock dividend or similar event with respect to or affecting the common stock
of the Company.

 

1.6                                 “Change in Control Date” shall
mean the earliest date on which the acquisition described in Section 1.5,
clause (a) occurs, the merger or consolidation described in Section 1.5,
clause (b) occurs, or the date on which the transaction is consummated as
contemplated by the approval of the plan of complete liquidation or sales
agreement described in Section 1.5, clause (c), occurs, as determined by
the Board, in its sole discretion.

 

1.7                                 “Code” shall mean the Internal
Revenue Code of 1986, as the same may be amended from time to time.

 

1.8                                 “Common Stock” shall mean the
common stock of Special Devices, Incorporated, par value one cent ($.01) per
share.

 

1.9                                 “Company” shall mean Special
Devices, Incorporated, a Delaware corporation.

 

1.10                           “Effective Date” shall mean November 3,
2003.

 

1.11                           “Eligible Employee” shall mean
an Employee who has a Level II through VI classification under the Special
Devices, Incorporated Fiscal Year 2003 Incentive Plan or so designated under
any other Incentive Plan.

 

1.12                           “Employee” shall mean an
individual who is employed by the Company.

 

1.13                           “Fair Market Value” shall mean
the fair market value of a share of Common Stock determined by the Board as
follows:

 

(a)                                  If the Common Stock is traded on
any recognized stock exchange or exchanges, such fair market value as of the
date of reference shall be deemed to be the highest closing price of the Common
Stock on such stock exchange or exchanges on such date, or if no sale of the
Common Stock shall have been made on any stock exchange on that day, on the
next preceding day on which there was a sale of such stock;

 

(b)                                 During such time as the Common
Stock is not listed on an established exchange, but is actively traded on the
over-the-counter market, the fair market value per share shall be the mean
between dealer “bid” and “ask” prices of the Common Stock in the
over-the-counter market on the date of reference as reported by the National
Association of Securities Dealers, Inc; and

 

3

 

(c)                                  During such time as the Common
Stock is neither listed on any recognized exchange nor actively traded
over-the-counter, the fair market value per share as of the date of reference
shall be determined in good faith by the Board. 
In making such determination, the Board may (but shall not be required
to) rely on valuations performed by the controlling shareholder in connection
with the shareholder’s annual financial statement reporting requirements.

 

1.14                           “Good Cause” shall be deemed to
exist, as determined by the Company in its sole discretion, if, and only if:
(a) the Participant engages in an act or omission constituting dishonesty,
intentional breach of fiduciary obligation or intentional wrongdoing or
malfeasance; (b) the Participant is convicted of a criminal violation involving
fraud or dishonesty; or (c) the Participant materially breaches any agreement,
applicable contract of employment with, or applicable policy of the Company
(other than by engaging in acts or omissions enumerated in clause (a) or (b)
above), or materially fails to satisfy the conditions and requirements of
his/her employment with the Company and such breach or failure by its nature is
incapable of being cured, or such breach or failure remains uncured for more
than thirty (30) days following receipt by the Participant of written notice
from the Company specifying the nature of the breach or failure and demanding
the cure thereof.  For purposes of this
clause (c), inattention by the Participant to his/her duties shall be deemed a
breach or failure capable of cure.

 

1.15                           “Incentive Elective Bonus” shall
mean that portion of the bonus declared by the Company from time to time
pursuant to the terms of the Incentive Plan that is payable to a Participant in
cash.

 

1.16                           “Incentive Elective Bonus Credit”
shall mean a credit of a dollar amount representing the amount of the Incentive
Elective Bonus of reference that a Participant has elected to defer under this
Plan.

 

1.17                           “Incentive Non-Elective Bonus”
shall mean that portion of the bonus declared by the Company from time to time
pursuant to the terms of the Incentive Plan that is intended to be credited as
an Incentive Non-Elective Bonus Credit.

 

1.18                           “Incentive Non-Elective Bonus
Credit” shall mean a credit of a dollar amount representing the amount of the
Incentive Non-Elective Bonus of reference that has been awarded to a
Participant.

 

1.19                           “Incentive Plan” shall mean the
Special Devices, Incorporated Fiscal Year 2003 Incentive Compensation Plan and
any similar plan that the Company adopts that is intended to be an incentive
bonus plan that coordinates with this Plan.

 

1.20                           “Participant” shall mean any
individual who is an Eligible Employee and a participant in the Incentive
Plan.   Notwithstanding that an
individual ceases to be an Eligible Class Employee, he/she shall continue to be
a Participant in this Plan until he/she ceases to have a vested balance in
his/her Account.

 

1.21                           “Plan” shall mean the Special
Devices, Incorporated Deferred Bonus/Compensation Plan, as set forth herein,
and as may be amended from time to time.

 

4

 

1.22                           “Plan Administrator” shall mean
the Compensation Committee of the Board, or if designated by the Compensation
Committee, the Company or any one or more officers of the Company.

 

1.23                           “Plan Year” shall mean the
fiscal year of the Company for federal income tax purposes.

 

1.24                           “Valuation Date” shall mean each
December 31 next following the Effective Date.

 

ARTICLE II

 

PARTICIPATION

 

2.1                                 Effective
Date of Participation.  An Eligible Employee shall become a
participant in this Plan on the later of the Effective Date or the effective
date of his/her participation in the Incentive Plan.

 

2.2                                 Cessation
of Participation.  An individual shall cease to be a Participant
for all purposes under this Plan on the date on which he/she ceases to have a
vested balance in his/her Account.

 

ARTICLE III

 

ACCRUAL OF CREDITS

 

3.1                                 Incentive
Elective Bonus Credits.  An individual who becomes a Participant in
this Plan during a Plan Year may elect to defer all or any portion (in
increments of 1%) of the Incentive Elective Bonus, which is otherwise payable
to the Participant for services to be performed subsequent to the election, by
completing a deferral agreement and filing it with the Plan Administrator
within thirty (30) days following his/her entry date into this Plan.  The election shall reduce such Incentive
Elective Bonus by the amount designated. 
Each election under this Section 3.1 shall be made on an
Appropriate Form prescribed by the Plan Administrator.  The deferral percentage shall apply to each
Incentive Elective Bonus during the initial Plan Year of participation, and
each subsequent Plan Year, until the revocation by the Participant or
suspension by the Company of the deferral agreement.  With respect to each such deferred Incentive
Elective Bonus that is deferred by a Participant, an Incentive Non-Elective
Bonus Credit shall be credited to the Participant’s Elective Subaccount
effective as of the December 31 next following the last day of the Plan
Year for which the Incentive Elective Bonus is otherwise payable.  A Participant may revoke his/her deferral
agreement as of the first day of any Plan Year which follows such revocation by
giving written notice to the Plan Administrator before that day (or any such
earlier date as the Plan Administrator may prescribe).  The Company may suspend the deferral
agreement of a Participant as of the first day of any Plan Year by giving
written notice to the Participant before that day.  Subject to the written consent of the Company,
a Participant may reinstate a revoked deferral agreement or execute a new
deferral

 

5

 

agreement but such deferral agreement shall
become effective no earlier than the first day of the Plan Year following the
execution of such deferral agreement. 
The Company may reinstate a deferral agreement that is suspended, but
such reinstated deferral agreement shall become effective no earlier than the
first day of the Plan Year following the reinstatement of such deferral
agreement. The Plan Administrator shall suspend a deferral agreement for the
remainder of a Plan Year if a Participant receives a distribution on account of
an unforeseeable hardship under this Plan during such Plan Year.  Further, the Plan Administrator may suspend a
deferral agreement to the extent required under a Code Section 401(k) plan
in which the Participant is a participant.

 

3.2                                 Incentive
Non-Elective Bonus Credit.  In the event that the Company elects to award
an Incentive Non-Elective Bonus with respect to a Participant during a Plan
Year, the Plan Administrator shall credit the Non-Elective Subaccount of that
Participant with an Incentive Non-Elective Bonus Credit effective as of the December 31
next following the last day of the Plan Year for which that Incentive
Non-Elective Bonus is awarded.

 

3.3                                 Cessation
of Credits.  Notwithstanding anything contained in this
Plan to the contrary, no Incentive Elective Bonus Credit or Incentive
Non-Elective Bonus Credit shall be made under this Plan on or after the date
this Plan is terminated or on or after a Change in Control Date.

 

3.4                                 Maintenance
of Accounts.

 

(a)                                  The Plan Administrator shall
establish and maintain an Account (and Subaccounts) with respect to each
Participant.  The dollar amount of an
Incentive Elective Bonus Credit shall be deemed to have been applied to
purchase shares (including fractional shares) of Common Stock based on the Fair
Market Value of a share of Common Stock on the December 31 as of which it
is credited.  The dollar amount of an
Incentive Non-Elective Bonus Credit shall be deemed to have been applied to
purchase shares (including fractional shares) of Common Stock based on the Fair
Market Value of a share of Common Stock on the December 31 as of which it
is credited.  The Plan Administrator
shall record in each Account the number of shares of Common Stock deemed
purchased for that Account.  In the event
any stock dividend, stock split, combination of shares or any other change in
the number of shares of Common Stock, the Plan Administrator shall make
adjustments, determined by the Plan Administrator in its sole discretion to be
appropriate, as to the number of deemed shares of Common Stock allocated to an
Account.  The number of deemed shares of
Common Stock allocated to an Account shall be adjusted to reflect payments and
forfeitures as provided under this Plan. 
Except as provided in subparagraph (b) below, a Participant shall have a
nonforfeitable (fully vested) interest in his/her Account which shall not be
affected by reason of the termination of employment of the Participant.

 

(b)                                 Notwithstanding anything
contained in this Plan to the contrary, including but not limited to a
determination that a Participant is entitled to benefits under this Plan, the
Account (including the deemed shares of Common Stock allocated thereto) of a
Participant shall be forfeited in the event that the employment of the
Participant with the Company or any of its subsidiaries or affiliates is (i) terminated
by the Company or any

 

6

 

of its subsidiaries or affiliates by reason of Good Cause; (ii)
terminated for reasons other than Good Cause, but it is later determined by the
Company that the employment of the Participant could have been terminated by
reason of Good Cause, or (iii) terminated by the Participant and the Company
determines that the employment of the Participant could have been terminated by
his/her employer by reason of Good Cause.

 

3.5                                 Valuation
of Accounts.  Each share of deemed Common Stock allocated
to an Account shall be valued at the time and in the manner as follows: (a) as
of each Valuation Date, by reference to the Fair Market Value of a share of
Common Stock as of such date and (b) as of the Change in Control Date, by reference
to the Fair Market Value of a share of Common Stock as of such date, less an
amount equal to (i) the transaction costs related to the Change in Control
divided by (ii) the total number of deemed shares of Common Stock allocated to
Accounts under this Plan plus the total number of shares of Common Stock and
Common Stock equivalents outstanding as of the Change in Control Date.

 

3.6                                 Investment Obligation of the Company.  A benefit is payable by the Company in cash
from its general assets when it becomes due without regard to any actual
investments the Company may make to meet its obligations under this Plan.  The Company shall not be obligated to
purchase or maintain any asset, and any reference to investments is solely for
the purpose of determining the obligations of the Company. Neither this Plan
nor any action taken pursuant to the terms of this Plan shall be considered to
create a fiduciary relationship between the Company and any Participant in this
Plan or any other persons, or to establish a trust in which the assets are
beyond the claims of any unsecured creditor of the Company.  A benefit hereunder shall be paid from assets
of the Company which shall continue, for all purposes, to be a part of the
general, unrestricted assets of the Company. 
The obligation of the Company hereunder shall be an unfunded and
unsecured promise to pay money in the future. No person shall have nor acquire
any legal or equitable right, interest or claim in, or to, any property or
assets of the Company. The right of a Participant, or in the event of the death
of a Participant, the Beneficiary of the Participant, shall be no greater than
any unsecured creditor of the Company. 
It is intended that this Plan be unfunded for tax purposes.

 

ARTICLE IV

 

PLAN BENEFITS

 

4.1                                 Change
in Control Distributions.

 

(a)                                  Determination of Benefit.  Except as otherwise provided in this Plan, as
of the Change in Control Date, a Participant shall be entitled to one-hundred
(100%) percent of the dollar value of the deemed shares of Common Stock allocated
to his/her Account as determined under Section 3.5, clause (b) of this
Plan.

 

(b)                                 Benefit Commencement Date.  The Company shall pay the amount determined
under Section 4.1(a) in a single sum in cash on or before the expiration
of ninety (90) days following the Change in Control Date.  Notwithstanding the foregoing to the
contrary, if a Participant dies prior to the date on which the distribution of
such

 

7

 

amount is completed, the Beneficiary of the Participant shall be
entitled to receive such amounts at the time and in the form of distribution as
applicable to the Participant had he/she survived.

 

4.2                                 Claims
Procedure for Benefits.

 

(a)                                  Initial Request for
Information/Claim.  Any request for specific information or a
claim with respect to a benefit under this Plan must be made to the Plan
Administrator in writing by a Participant, or in the event of the death of a
Participant, the Beneficiary of the Participant.  The Plan Administrator shall not recognize an
oral communication as a formal request or claim for benefits under this
Plan.  Written notice of the disposition
of a claim shall be furnished to the claimant within ninety (90) days after the
application for benefits is filed with the Plan Administrator, unless special
circumstances require an extension of time for processing the claim.  If such an extension of time for processing
is required, the Plan Administrator shall furnish the claimant written notice
of the extension prior to the termination of the initial ninety (90) day
period.  In no event shall such an
extension exceed a period of ninety (90) days from the end of the initial
period.  The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by which the Plan Administrator expects to render its decision.

 

(b)                                 Appeals of Denied Claims for
Benefits.  In the event that any claim for a benefit is
denied in whole or in part, or any benefit is forfeited under the provisions of
this Plan, the claimant whose claim has been so denied or benefit forfeited,
shall be notified of such denial or forfeiture in writing by the Plan
Administrator.  The notice advising of
the denial or forfeiture shall specify the reason or reasons for denial or
forfeiture, make specific reference to pertinent provisions of the Plan, shall
describe any additional material or information necessary for the claimant to
perfect the claim (explaining why such material or information is needed), and
shall advise the Participant or Beneficiary, as applicable, of the procedure
for the appeal of such denial or forfeiture. 
All appeals shall be made through the following procedure:

 

(i)                                     The
claimant whose claim has been denied or benefits forfeited shall file with the
Plan Administrator a notice of desire to appeal the denial or forfeiture. Such
notice shall be filed within sixty (60) days of notification by the Plan
Administrator of the claim denial or forfeiture, shall be made in writing, and
shall set forth all of the facts upon which the appeal is based.  An appeal that is not timely filed shall be
barred.

 

(ii)                                  The
Plan Administrator, within thirty (30) days of receipt of the notice of appeal
of the claimant, shall establish a hearing date on which the claimant (or his
attorney or other authorized representative) may make an oral presentation to
the Plan Administrator in support of the appeal of the claimant.  The claimant (or representative) shall have
the right to submit written or oral evidence and argument in support of his/her
claim at such hearing.  The claimant
shall be given not less than ten (10) days’ notice of the date set for the
hearing.  At the hearing (or prior
thereto upon five (5) business days’ written notice to the Plan

 

8

 

Administrator), the claimant
(or representative) shall have an opportunity to review all documents, records,
and other information which are pertinent to the claim at issue and to receive
copies thereof without charge.

 

(iii)                               The
Plan Administrator shall consider the merits of the written and oral
presentations of the claimant, the merits of any facts or evidence in support
of the denial of benefits, and such other facts and circumstances as the Plan
Administrator shall deem relevant.  If
the claimant elects not to make an oral presentation, such election shall not
be deemed adverse to his/her interest, and the Plan Administrator shall proceed
as set forth below as though an oral presentation of the contents of the
claimant’s written presentation had been made.

 

(iv)                              The
Plan Administrator shall render a determination within sixth (60) days of the
receipt of the appeal (unless there has been an extension of no more than sixty
(60) days due to special circumstances, provided that the delay and the special
circumstances occasioning it are communicated to the claimant in writing within
the first sixty (60) day period).  That
determination shall be accompanied by a written statement presented in a manner
calculated to be understood by the claimant and shall include specific reasons
for the determination and specific references to the pertinent provisions of
the Plan on which the determination is based. 
The determination so rendered shall be binding upon all parties.  The Plan Administrator shall provide such access
to, and copies of, documents, records, and other information relevant to the
claimant’s claim for benefits.

 

(c)                                  If, after exhausting the appeals
process set forth in Paragraph (b) above, the claimant elects to further appeal
the decision of the Plan Administrator, the claimant shall submit his/her
appeal to arbitration (hereinafter “Claim”). 
Except as provided herein, the Claim shall be submitted to arbitration
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association (“AAA”) then in effect.  By participation in this Plan, each claimant
acknowledges and agrees that his/her right to seek relief and remedies in a
federal or state court, including, but not limited to a jury trial, shall be
waived.  The time limitation for
submitting a Claim to arbitration shall be thirty (30) days from the date of
the receipt of the final determination of the Plan Administrator.

 

The
arbitration shall be conducted by a single arbitrator chosen by mutual agreement
of the claimant and the Plan Administrator, or absent such an agreement, a
single arbitrator shall be selected by AAA in accordance with its National
Rules for the Resolution of Employment Disputes then in effect.  The arbitrator shall conduct such arbitration
in accordance with the procedural and substantive law as would be applicable if
such Claim had been brought in a federal district court or state court and
heard by a judge sitting without a jury, including, but not limited to, the law
applicable to discovery, standards of review, relief, and remedies.  The arbitrator’s fees shall be paid by the
unsuccessful party.  The claimant shall
be responsible for all filings fees and costs, but in no event in an amount
greater than the filing fee that would have been applicable if the appeal had
been filed in court.  The claimant and
the Company shall be responsible

 

9

 

separately for the costs and expenses of their own attorney’s fees and
related costs.  The arbitration shall be
conducted in a mutually convenient location, and absent agreement, in or within
fifty (50) miles of Wilmington, Delaware. 
The decision of the arbitrator shall be in writing, final and binding
upon the parties, and judgment upon such decision may be entered in any court
of competent jurisdiction in the state of Delaware. 

 

4.3                                 Payments
to Minors,
Etc.  If a Participant or Beneficiary entitled to
receive any benefits hereunder is, in the judgment of the Plan Administrator,
legally, physically, or mentally incapable of personally receiving and
receipting any distribution, or in the case of a Beneficiary, a minor, the Plan
Administrator may make distributions to a legally appointed guardian or to such
other person or institution as, in the judgment of the Plan Administrator, is
then maintaining or has custody of the payee. Any payments made in accordance
with the foregoing provisions shall be a full and complete discharge of any
liability for such payments.

 

4.4                                 Satisfaction
of Liability.  After all benefits have been distributed in
full to a Participant or in the event of the death of the Participant, to the
Beneficiary of the Participant, all liability to such Participant or to the
Beneficiary shall terminate. The Plan Administrator may require such
Participant or Beneficiary, as a condition to receiving such final payment
under this Plan, to execute a receipt and release therefore in such form as
shall be determined by the Plan Administrator. 
If a receipt and release is required but the Participant or Beneficiary
does not provide such receipt and release in a timely manner to permit a
distribution in accordance with the general timing of distributions under this
Plan, the payment of any affected distribution may be delayed until the Plan
Administrator receives a proper receipt and release.

 

4.5                                 Nonassignability.  No payment,
benefit, or right of any Participant or Beneficiary shall be subject to any
claim of any creditor of such person and, in particular, to the fullest extent
permitted by law, all such payments, benefits and rights shall be free from
attachment, garnishment, trustee’s process, or any other legal or equitable
process available to any creditor of such Participant or Beneficiary.  No Participant or Beneficiary shall have the
right to alienate, anticipate, commute, pledge, encumber or assign any of the
benefits or payments that he/she may expect to receive, contingently or
otherwise, under this Plan, except the right to designate a Beneficiary or
Beneficiaries as appropriate.

 

4.6                                 Tax
Withholding.  The Company may make such provisions and take
such actions as it may deem necessary or appropriate for the withholding of any
taxes which a payee is required by any law or regulation of any governmental
authority, whether federal, state, or local, to withhold in connection with any
benefits under this Plan, including, but not limited to, the withholding of
appropriate sums from any amount otherwise payable to the Participant or in the
event of the death of the Participant, to the Beneficiary of the
Participant.  Each payor shall be
responsible for the payment of all individual tax liabilities with respect to
any such benefits.

 

4.7                                 Benefit
Offset.  The Company may, in its sole discretion, upon
notice to the Participant, or in the event of the death of a Participant, the
Beneficiary of the Participant, reduce any benefit by any outstanding debt owed
by the Participant to the Company or any of its subsidiaries or affiliates,
including, but not limited to, any loan to the Participant, advanced vacation
pay, salary or expenses.

 

10

 

ARTICLE V

 

BENEFICIARY DESIGNATION

 

5.1                                 Beneficiary
Designation.  Upon becoming eligible for participation in
this Plan, a Participant may designate one or more primary and one or more
contingent Beneficiaries to receive any benefit becoming payable under this
Plan upon the death of the Participant. 
All beneficiary designations shall be in writing in form satisfactory to
the Plan Administrator.  A Participant
shall be entitled to change a designation of a Beneficiary at any time and from
time to time.  A change in a designation
of a Beneficiary shall become effective only upon receipt of the designation by
the Plan Administrator, but upon such receipt, the change shall relate back to
and take effect as of the date the Participant executed the designation (which
shall be presumed to be the date appearing on such designation, or if there be
none, then the date of the death of the Participant) whether or not the
Participant is living at the time of such receipt.  The Plan Administrator and the Company in its
capacity as the sponsor of this Plan shall not be liable by reason of any
payment of a benefit before receipt of any acceptable form designating or
changing the designation of a Beneficiary. 
Any change of beneficiary designation filed in proper form with the Plan
Administrator shall revoke all prior beneficiary designations.  The Plan Administrator shall, in its sole
discretion, determine the acceptability of a beneficiary designation or change
in a beneficiary designation.

 

ARTICLE VI

 

OPERATION AND
ADMINISTRATION OF THE PLAN

 

6.1                                 Authority
and Responsibility.  The Plan Administrator shall have the sole
and exclusive discretionary authority to determine eligibility for benefits
under this Plan, to interpret and construe the terms of this Plan, and to
determine all questions arising in connection with the administration,
interpretation, and application of this Plan. 
The Plan Administrator shall remedy any ambiguity, inconsistency or
omission in its sole and complete discretion. The Plan Administrator’s
interpretation, construction or determination, as the case may be, shall be
conclusive and binding on all parties. 
Such authority shall include, but shall not be limited to, the
following:

 

(a)                                  appointment of qualified
accountants, actuaries, consultants, administrators, counsel, appraisers, or
other persons it deems necessary or advisable, who shall serve the Plan
Administrator as advisors only and shall not exercise any discretionary
authority, responsibility or control with respect to the management or
administration of this Plan;

 

(b)                                 adoption of forms and
regulations for the efficient administration of this Plan which are consistent
with this Plan;

 

(c)                                  remedy of any inequity resulting
from incorrect information received or communicated, or of administrative
error;

 

11

 

(d)                                 settlement or compromise of any
claims or debts arising from the operation of this Plan and the commencement of
any legal action or administrative proceeding; and

 

(e)                                  enrollment of a Participant in
this Plan, distribution and receipt of Plan administration forms and compliance
with all applicable governmental reporting and disclosure requirements.

 

6.2                                 Records
and Reports.

 

(a)                                  The Plan Administrator shall
keep a record of its proceedings and acts and shall keep books of account,
records and other data necessary for the proper administration of this Plan.

 

(b)                                 At least annually, the Plan
Administrator shall provide each Participant and Beneficiary, if applicable,
with a detailed statement of his/her Account, including all transactions
affecting the Account during the prior twelve-month period, and reflecting the
most recent valuation of such accounts. 
The Plan Administrator shall furnish each Participant and Beneficiary,
if applicable, with such information as may be required by him/her for tax or
other purposes in connection with this Plan.

 

6.3                                 Required
Information.  A Participant or Beneficiary who is entitled
to a benefit under this Plan shall furnish such forms, information and data as
requested by the Plan Administrator which is necessary or desirable for the
proper administration of this Plan.  A
failure on the part of any Participant or Beneficiary to comply with such
request within a reasonable period of time shall be sufficient grounds for
delay in the payment of benefits until the form, information or data requested
is received.  The records and/or
determination of the Company as to a period or periods of employment,
termination of employment and the reason therefore, leaves of absences,
reemployment, and post-employment activity shall be conclusive on all persons.

 

6.4                                 Payment
of Expenses of Plan.  The Company shall pay all of the
administrative expenses of this Plan, including but not limited to, all fees
and retainers of accountants, counsels, actuaries, consultants, administrators
or other specialists.

 

6.5                                 Delegation of Authority and
Responsibility of Plan Administrator.  If serving as the
Plan Administrator, the Compensation Committee of the Board may delegate any
authority or responsibility granted to the Plan Administrator hereunder to the
Company or to any one or more of the officers of the Company to act on its
behalf.

 

ARTICLE VII

 

AMENDMENT AND TERMINATION

 

7.1                                 Amendment.  The Board may amend or otherwise modify this
Plan at any time, in its sole discretion, in whole or in part, either
retroactively or prospectively, provided that no

 

12

 

amendment or modification shall, with respect
to credits awarded previously, negatively effect such credits. 

 

7.2                                 Termination.  The Board may terminate this Plan, in its
sole discretion, at any time without regard to the tax effect on any
Participant or Beneficiary.  Written
notification of such action shall be given to each Participant and Beneficiary
of a deceased Participant.  Thereafter,
no further allocations or credits shall be made under this Plan.  No later than six (6) months following the
termination of this Plan, the Company shall pay to each Participant, and if
applicable, the Beneficiary of a deceased Participant, in a single sum payment
or in eighteen (18) or less monthly installments, as determined by the Company
in its sole discretion, an amount equal to the unpaid vested balance of the
Participant or deceased Participant, as applicable, based on the value of
his/her Account as of the date established by the Company for the
distribution.  In the event such amounts
are paid in installments, the final installment shall also include a credit
equal to simple interest at the rate of three (3%) percent compounded annually
on the unpaid balance from time to time, which shall begin to accrue after the
first installment is paid.

 

ARTICLE VIII

 

GENERAL PROVISIONS

 

8.1                                 Limitation
of Rights.  The establishment of this Plan, any
modification thereof, the creation of an account, or the payment of any benefit
shall not be construed as giving any Participant, Beneficiary, or any other
person whomsoever, any legal or equitable right against the Company, or the
Plan Administrator, unless such right shall be specifically provided for in
this Plan, or conferred by affirmative action of the Plan Administrator in
accordance with the terms and provisions of this Plan, or as giving any
Participant the right to be retained in the employment of the Company or any of
its subsidiaries or affiliates.  Each
Employee shall remain subject to discharge to the same extent as if this Plan
had never been adopted.

 

8.2                                 No
Right to Shareholder Rights.  Participation in the Incentive Plan or this
Plan shall not give any Participant or other employee any rights whatsoever as
a shareholder of the Company (including, but not limited to, voting rights,
dividend or other distribution rights with respect to the Common Stock), and
all such rights are hereby denied.

 

8.3                                 Construction
of Plan.  This Plan shall be construed according to the
laws of the State of Delaware, and all provisions hereof shall be administered
according to, and its validity shall be determined under, the laws of Delaware
without giving effect to principles of conflicts of laws, except where
preempted by Federal law.

 

8.4                                 Severability.  Should any
provision of this Plan or any procedures adopted thereunder be deemed or held
to be unlawful or invalid for any reason, such fact shall not adversely affect
the other provisions or procedures, unless such invalidity shall render
impossible or impractical the functioning of this Plan and, in such case, the
Company or the Plan Administrator, as applicable, shall immediately adopt a new
provision or procedure to take the place of the one held illegal or invalid.

 

13

 

8.5                                 Heirs, Assigns and Personal Representatives.  This Plan shall be binding upon (a) the
heirs, executors, administrators, and successors of each Participant and
Beneficiary, present and future, and all persons for whose benefit there exists
any approved domestic relations order with respect to any Participant and (b)
the Company and any successor to the Company as a result of a statutory merger
or any other form of reorganization of the business of the Company.

 

8.6                                 Lost
Payees.  A benefit shall be deemed forfeited if the
Plan Administrator is unable to locate a Participant or Beneficiary to whom
payment is due, provided, however, that such benefit shall be reinstated,
without interest, if a claim is made by the Participant or Beneficiary for the
forfeited benefit within ninety (90) days of the date that the last payment to
such Participant or Beneficiary would have been made.

 

8.7                                 Reliance
on Data and Consents.  The Company, the Plan Administrator and all
other persons or entities associated with the administration of this Plan may
reasonably rely on the truth, accuracy and completeness of all data provided by
a Participant and Beneficiary of a deceased Participant.  Furthermore, the Company, the Plan
Administrator and all other persons or entities associated with the
administration of this Plan may reasonably rely on all consents, elections and
designations filed with this Plan by any Participant, Beneficiary of any
deceased Participant, or the representatives of such persons, without duty to
inquire into the genuineness of any such consent, election or designation.  None of the aforementioned persons or
entities associated with the operation of this Plan shall have any duty to
inquire into any such data, and all may rely on such data being current to the
date of reference, it being the duty of each Participant and Beneficiary to
advise the appropriate parties of any change in such data.

 

8.8                                 Titles
and Headings.  The titles and headings of the Articles and
Sections in this instrument are for convenience of reference only and, in the
event of any conflict, the text rather than such titles or headings shall
control.

 

8.9                                 Gender
and Number.  Except if otherwise clearly indicated by
context, the masculine and the neuter shall include the feminine and the
neuter, the singular shall include the plural, and vice-versa.

 

8.10                           Notices.  Any notice or document relating to this Plan
required to be given to or filed with the Plan Administrator or the Company
shall be considered as given or filed if delivered or mailed by registered or
certified mail, postage prepaid, to the Company.

 

8.11                           Waiver
of Notice.  Any notice required under this Plan may be
waived by the person entitled to notice.

 

8.12                           Effect on Other Employee Benefit Plans.  Any benefit paid or payable under this Plan
shall not be included in the compensation of a Participant for purposes of
computing benefits under any employee benefit plan maintained or contributed to
by the Company, except as may otherwise be required under the terms of such
employee benefit plan.

 

14

 

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers this 1st day of October, 2003.

 

 

	
  ATTEST:

  	
  SPECIAL
  DEVICES, INCORPORATED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/
  JAMES E. REEDER

  	
   

  	
  By:

  	
    /s/
  THOMAS W. CRESANTE

  	
   

  
	
   

  	
  Assistant
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
    President
  & CEO

  	
   

  
						

 

15

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