**Exhibit10.2**

 

**SEVERANCEAGREEMENTAND**

**GENERALAND SPECIAL RELEASE**

 

This Severance Agreement and General and SpecialRelease (this “**Agreement**”),is effective as of August 26, 2002 (the “**Effective Date**”), by and between Elgar ElectronicsCorporation, a California corporation (“**Employer**”),and Kenneth R. Kilpatrick (“**Employee**”).

RECITALS

WHEREAS, Employerand Employee are party to that certain Employment Agreement, dated as ofFebruary 3, 1998, as amended by Amendment No. 1 thereto, dated as ofMarch 7, 2002 (the “**EmploymentAgreement**”);

WHEREAS, Employeehas resigned as the President and Chief Executive Officer of Employer,effective as of the Effective Date, and has been appointed Vice Chairman of theBoard of Directors of each of Employer and its parent corporation, ElgarHoldings, Inc., a Delaware corporation (“**Parent**”);and

WHEREAS, theparties desire to finally and forever amicably settle and resolve all mattersamong them and all matters arising from Employee’s employment with Employer andParent arising on or prior to Effective Date.

NOW THEREFORE, inconsideration of the premises and the mutual agreements hereinafter set forth,the parties hereto hereby agree as follows:

AGREEMENT

**1.**             **Severance Compensation**.  Notwithstanding anything contained inSection 4 of the Employment Agreement to the contrary, in connection withEmployee’s resignation as the President and Chief Executive Officer ofEmployer, effective as of the Effective Date, Employee shall be entitled to thecontinuation of payments of his annual base salary (in the amount of $225,000)in the same periodic installments provided for in Section 5.1 of theEmployment Agreement through December 31, 2003 (the period from theEffective Date through December 31, 2003 shall be known as the “**Severance Period**” for purposes of theEmployment Agreement).  In addition,during the Severance Period, Employer shall continue to pay the automobileallowance set forth in Section 5.5 of the Employment Agreement andEmployer shall continue to make all Employer contributions to medical anddental and life insurance premiums for all Employer maintained plans underwhich Employee is an insured or covered as of the commencement of the SeverancePeriod, to the extent Employee is eligible to participate in such plans.

**2.**             **Bonuses**.  On or before December 20, 2002, Employee shall be paid therefinancing bonus to which he is entitled in the amount of $78,170.  This bonus relates to the refinancing Employerand Parent concluded on June 26, 2002. In the event operating bonuses are paid with respect to the year 2002 toEmployer’s executive officers, Employee shall be entitled to a pro rata portionof the operating bonus allocable to him based upon the number of days Employeeworked in 2002.

 

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**3.**             **SoleEntitlement**.  Employeeagrees that his sole entitlement to compensation, including base salary and anybonus or other payments of any kind, monetary or nonmonetary benefits orperquisites, with respect to his employment with or his services rendered toEmployer or Parent, and all other matters among Employee, Employer and Parent,including but not limited to, any and all rights or claims arising from orrelating to the Employment Agreement, is as expressly set forth in thisAgreement, or as otherwise may be provided to Employee in his capacity as adirector of Employer or Parent, as described in Section 4 below.

**4.             Non-Executive Benefits. **In addition to the compensation provided in Sections 1and 2 above, Employee shall be provided with the benefits described herein inconsideration of Employee’s service as Vice Chairman of the Board of Directorsof each of Employer and Parent.

(a)           During Employee’s term as ViceChairman of the Board of Directors of each of Employer and Parent (the “**VC Term**”), Employee shall be provideddirectors’ and officers’ liability insurance comparable to the standarddirectors’ and officers’ liability insurance coverage afforded other members ofthe Board of Directors of each of Employer and Parent.

(b)           During the VC Term, Employee shall bepaid an annual retainer in the aggregate amount of $15,000, payable in the samemanner as paid to other members of Employer’s and Parent’s board of directors; *provided* that the annual retainer of$15,000 shall be the amount for service on the boards of directors of bothEmployer and Parent (for the sake of clarity, the total amount of such annualretainer shall be $15,000, not $30,000).

(c)           During the VC Term, Employee shall bepaid $1,500 for each meeting of the Board of Directors of Employer and Parentattended by Employee; *provided*that if meetings of the Boards of Directors of Parent and Employer are heldsimultaneously, Employee shall be paid a single attendance fee of $1,500 forattending such meetings.

(d)           During the VC Term, upon submissionof appropriate receipts and other documents, Employee shall be reimbursed forthe reasonable out-of-pocket business expenses incurred by Employee infulfilling his duties as Vice Chairman of the Board of Directors of each ofEmployer and Parent.

**5.**             **Release by Employee**.

(a)           Employee (for himself, his agents,heirs, executors and administrators) does hereby and forever release anddischarge Employer and any and all past and present parent, subsidiaries andotherwise affiliated corporations and divisions of Employer, as well as thesuccessors, stockholders, officers, directors, predecessors, assigns, agents,employees, attorneys and representatives of each of them, past or present, fromany and all causes of action or claims of whatsoever kind or character whetheror not heretofore brought before any state or federal court or before any stateor federal agency or other governmental entity, which Employee has or may haveby reason of any and all acts, omissions, events or facts occurring or existingon or prior to the Effective Date attributable to or arising from theemployment of Employee by Employer or Parent (whether pursuant to theEmployment Agreement or otherwise) or the termination thereof, whether arisingunder any federal, state or other governmental statute, regulation or ordinanceor common law or equity on any theory of pleading or proof, such as, for

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example and without limitation, Title VII of the CivilRights Act of 1964, as amended, which prohibits discrimination on the basis ofrace, religion, color, sex and national origin, the Civil Rights Act of 1866,the Age Discrimination in Employment Act, as amended, which prohibitsdiscrimination on the basis of age 40 and over, and any wrongful terminationclaims.  The foregoing will not be deemedto release any claim by Employee to enforce this Agreement or to enforceEmployee’s rights as a shareholder of Parent.

(b)           Other than for claims specified inthe last sentence of Section 5(a) above, Employee hereby waives his rightto file any charge or complaint arising out of his employment with orseparation from Employer or Parent before any federal, state or local court orany state or local administrative agency, except where such waivers areprohibited by law.  This statement ofgeneral release and waiver shall include, but not be limited to, all claims oractions arising out of, or relating in any way to, Employee’s employment andseverance of Employee’s employment with Employer and/or Parent.

(c)           Employee understands that if thisAgreement is not signed, Employee would have the right to voluntarily assistother individuals or entities in bringing claims against Employer (or any ofEmployer’s officers, directors, stockholders, affiliates and agents).  Employee further understands and agreeshereby that Employee waives such right and will not provide any such assistanceother than assistance in an investigation or proceeding conducted by the UnitedStates Equal Employment Opportunity Commission, the National Labor RelationsBoard or other government agency. Employer and Employee further agree that Employee may provideinformation pursuant to any valid subpoena or other compulsory process.  To the extent the law allows any governmentagency to file such charges on Employee’s behalf and the Employment Agreement,as amended hereby, does not prohibit Employee’s cooperation with such agency,Employee agrees the Employment Agreement, as amended hereby, will nonethelessact as a waiver of any recovery by Employee in such government-institutedaction.

(d)           If Employee violates this Agreementby suing Employer, its subsidiaries or affiliates (including its officers,directors and stockholders) or those associated with Employer, for any claimthat he has released under this Agreement, Employee agrees that Employee willpay all costs and expenses of defending against that suit incurred by Employeror its parent, affiliates (including its officers, directors and stockholders)or those associated with Employer, including reasonable attorneys’ fees.

**6.**             **Releaseby Employer**.  Employerdoes hereby and forever release and discharge Employee (and his agents, heirs,executors and administrators) from any and all causes of action or claims ofwhatsoever kind or character whether or not heretofore brought before any stateor federal court or before any state or federal agency or other governmentalentity, which Employer has or may have by reason of any and all acts,omissions, events or facts occurring or existing on or prior to the EffectiveDate attributable to or arising from the employment of Employee by Employer(whether pursuant to the Employment Agreement or otherwise) or the terminationthereof, whether arising under any federal, state or other governmentalstatute, regulation or ordinance or common law or equity on any theory ofpleading or proof.  The foregoing willnot be deemed to release any claim by Employer (1) to enforce theEmployment Agreement or this Agreement or (2) for any acts of fraud,willful misconduct or gross negligence engaged in by Employee while serving asan executive officer of the Company.

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**7.**             **Waiver ofUnknown Claims**.  There isa risk that after the execution of this Agreement either party will incur orsuffer losses, damages or injuries which are in some way caused by, arising outof, or result from the former employment relationship between Employee andEmployer but which are unknown or unanticipated at the time this Agreement issigned.  Each party assumes the risksand understands that the releases by Employee and Employer in Sections 5and 6 of this Agreement, respectively, shall apply to all unknown orunanticipated results of the transactions and occurrences, as well as thoseknown or anticipated, and upon advice of legal counsel, all parties do waiveany and all rights under California Code section 1542, which section hasbeen duly explained and reads as follows:

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

Each party understands and acknowledges the significance andconsequences of this specific waiver of section 1542.

**8.             OlderWorkers Benefit Protection Act Waiver.**

(a)           Age Discrimination Is SpecificallyIntended to Be Included As a Released Dispute.  Employee specifically intends that the disputes he is releasingherein include the Age Discrimination in Employment Act of 1967, as amended bythe Older Workers’ Benefit Protection Act of 1990 (“**ADEA**”), except for any allegation thata violation of the ADEA occurred following his execution of this Agreement.

(b)           Advice To Consult An Attorney.  Employee is hereby advised to consult withhis attorney before signing this Agreement because he is permanently giving uplegal rights.

(c)           Reasonable Time To Consider ThisAgreement.  Employee acknowledgesthat he has been given a reasonable period of time (up to 21 days, if he sochooses) to consider this Agreement prior to his signing this Agreement.  Employee understands that he has seven daysfollowing the signing of this Agreement to revoke it.

(d)           Procedure for Revoking ADEA Claim Release.  In order to effectively revoke Employee’srelease of any claim for violation of the ADEA, the parties agree that Employeemust provide notice of such revocation to Employer within seven calendar daysafter Employee executes this Agreement in accordance with the notice provisionscontained in the Employment Agreement.

**9.**             **Cessation****of Employment**.  It is expressly agreed that any and allexpress or implied employment agreements among Employee, Employer and Parentare terminated as of the Effective Date, other than those provisions of theEmployment Agreement that by their terms expressly survive cessation ofEmployee’s employment thereunder.

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**10**.          **Governing Law; Jurisdiction**.  This Agreement shall be interpreted,construed, governed and enforced in accordance with the laws of the State ofCalifornia.  Any disputes arising outof, or related to, this Agreement that are adjudicated in the courts shall beadjudicated exclusively in the state courts of California located in the countyof San Diego, California.  The partieshereby consent to exclusive personal jurisdiction in such county.

**11**.          **Counterparts**.  This Agreement may be executed in one or more counterpart copies,each of which shall be deemed to be an original and all of which taken togethershall be deemed one and the same instrument.

IN WITNESSWHEREOF, Employer has caused this Agreement to be executed on its behalf by itsduly authorized officer, and Employee has executed the same as of the day andyear first written above.

**ELGARELECTRONICS CORPORATION**

 
| By:    | /s/ Kenneth R. Kilpatrick                          |
|--------|----------------------------------------------------|
|   | Name:  Kenneth R. Kilpatrick                  |
|   | Title:  President and Chief Executive Officer |

 
| /s/ Kenneth R. Kilpatrick |
|---------------------------|
| Kenneth R. Kilpatrick     |

Acknowledged andAgreed by:

ELGAR HOLDINGS,INC.

 
| By:    | /s/ Donald Glickman         |
|--------|-----------------------------|
|   | Name:  Donald Glickman |
|   | Title:  Vice President |

 

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