Exhibit 10.4


 


	
  

  	
   

  	
  2841
  Dow Avenue, Tustin, California 92780 USA

  

  Phone: 714 544 6665 Fax: 714 838 4742

  

  www.cherokeepwr.com

  



 


SEVERANCE AGREEMENT


 


This Severance Agreement (the “Agreement”) is entered into by and
between Cherokee International Corporation (the “Company”), a Delaware
corporation, and Alex Patel (the “Executive”).


 


R E C I T A L S


 


WHEREAS, Executive has served and serves the Company as its Vice
President of Engineering.


 


WHEREAS, the Company believes it imperative that it should be able to
rely upon Executive to continue in his position, and that it should be able to
receive and rely upon Executive’s advice as to the best interests of the
Company and its stockholders.


 


NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements and covenants herein contained, the Company and the Executive
agree as follows:


 


1.                                       At Will Employment.  The
Executive’s employment with the Company is currently on an at-will basis,
meaning that either the Executive or the Company may terminate the employment
relationship at any time for any reason or for no reason, and without further
obligation or liability, except as set forth in this Agreement.


 


2.                                       Term of Agreement.  This
Agreement shall remain in effect for so long as the Executive is employed as
its Vice President of Engineering] of the Company (the “Term”).


 


3.                                       Severance Payment.  Subject
to the Executive’s having executed and, if applicable, not revoked, a release
of claims reasonably satisfactory to the Company (the “Release of Claims”), in
the event the Executive’s employment is terminated by the Executive for Good
Reason or by the Company other than for Cause within one (1) year
following a Change in Control, then the Executive shall be entitled to the
following (collectively, the “Severance Benefits”):  (a) a cash payment, in lieu of any other
severance payment pursuant to any other plan or agreement of the Company or any
subsidiary thereof to which the Executive is otherwise entitled, of an amount
equal to one (1) times his then annual base salary as in effect
immediately prior to the date of termination (the “Severance Payment”), and (b) continued
medical, hospitalization, life and other insurance benefits being provided to
the Executive and the Executive’s family at the date of termination, for a
period of twelve (12) months after the date of termination; provided, however,
that the Company shall have no obligation to continue to provide the Executive
with such


 


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insurance benefits for any
periods after the date the Executive obtains comparable benefits (with no
significant pre existing condition exclusions) as a result of the Executive’s
employment in a new position.  Subject to
Section 5, the Severance Payment shall be payable in a lump sum within 10
business days following the effective date of the Release of Claims.


 


The Executive shall not be
entitled to the Severance Benefits if (i) the Executive’s employment is
terminated by the Company for Cause or as a result of the Executive’s death or
Disability, (ii) the Executive terminates his employment with the Company
for any reason prior to or more than one (1) year after a Change in
Control, or other than for Good Reason within the one (1) year period
following a Change in Control, or (iii) the Company terminates the
Executive’s employment for any reason prior to or more than one (1) year
after a Change in Control.  Further, the
Executive shall not be entitled to any Severance Benefits contingent on a
Change in Control if the Executive is terminated under his then current
contract and enters into a similar contract with a successor to the Company,
provided that the Executive’s rate of base salary, target annual bonus amount,
benefits (including, without limitation severance protections) and other
material terms of employment remain substantially similar under the new
contract.


 


4.                                       Confidentiality and Related Covenants.


 


(a)                                  Confidentiality.  The
Executive shall not, at any time hereafter, disclose to any person, firm or
corporation or otherwise use any confidential or proprietary information (“Confidential
Information”) relating to the Company, its constituent partners, their
respective parents, subsidiaries, and affiliates, including Confidential
Information relating to its customers, suppliers, market arrangements or
methods of operations, employees, trade practices, trade secrets, know how, and
other matters that are not publicly known outside the Company,  except to
the extent necessary to conduct the business of the Company, or to comply with
law or the valid order of a governmental agency or court of competent
jurisdiction. Without limiting the generality of the foregoing, the parties
hereto acknowledge and agree that all information not otherwise generally known
to the public relating to each of (i) this Agreement, or (ii) the
Company, any constituent partner of the Company or any of their respective
parents, subsidiaries or affiliates, is Confidential Information and is not to
be disclosed to any persons or entities or otherwise used, except to the extent
necessary to conduct the business of the Company or to comply with law or the
valid order of a governmental agency or court of competent jurisdiction.


 


(b)                                 Rights to Innovations.  Any
invention, improvement, design, development or discovery conceived, developed,
invented or made by the Executive, alone or with others, during his employment
hereunder and applicable to the business of the Company, its parents,
subsidiaries or affiliates shall become the sole and exclusive property of the
Company. The Executive shall (i) disclose the


 


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same completely and promptly
to the Company, (ii) execute all documents requested by the Company in
order to vest in the Company the entire right, title and interest, in and to
the same, (iii) execute all documents required by the Company for the
filing, and prosecuting of such applications for patents, copyrights and/or
trademarks, which the Company, in its sole discretion, may desire to prosecute,
and (iv) provide to the Company all assistance it may reasonably require
including, without limitation, the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company’s rights
therein and thereto.


 


(c)                                  Non Solicitation. The Executive will not at any time while he
is employed by the Company or any of its subsidiaries, and for 12 months
following the termination of his employment (the “Restricted Period”), solicit,
recruit, request, cause, induce or encourage any individual who is then
employed by the Company, or was employed by the Company at any time during the
12-month period ending on the Executive’s termination date, to leave the
employment of the Company or any of its subsidiaries.


 


During the Restricted
Period, the Executive will not directly or indirectly through any other person,
influence or attempt to influence customers, vendors, suppliers, licensors,
lessors, joint venturers, associates, consultants, agents, or partners of the
Company or any affiliate of the Company (each, a “Restricted Company”) to
divert their business away from the Company or such affiliate, and the
Executive will not otherwise interfere with, disrupt or attempt to disrupt the
business relationships, contractual or otherwise, between the Company or any
affiliate of the Company.


 


However, nothing in the paragraph above shall prevent the Executive
from accepting employment with any other person or entity during the Restricted
Period, including any Restricted Company, provided that the Executive continues
to otherwise comply with the restrictions in this paragraph.


 


 (d)                              Enforcement.  The Executive acknowledges
that as a high-level executive of the Company, the Executive provides services
of a special and unique character that are of a peculiar value to the Company,
the loss of which may not be reasonably or adequately compensated for by
damages in an action at law, and any breach or threatened breach by the
Executive of any provision of this Section 4 shall cause the Company
irreparable harm which cannot be remedied solely by damages. 
Specifically, the Executive acknowledges that (a) the provisions of this Section 4
are reasonable and necessary to protect the legitimate interests of the Company
and/or any of its related entities, and (b) any violation of this Section 4
will result in irreparable injury to the Company and/or any of its related
entities, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such violation would not be reasonable or adequate
compensation to the Company and/or any of its related entities for such a
violation.  Accordingly, the Executive


 


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agrees that in the event of
a breach or threatened breach by the Executive of any of the provisions of this
Section 4, the Company shall be entitled to injunctive relief restraining
the Executive and any business, firm, partnership, individual, corporation or
entity participating in such breach or threatened breach.  Nothing herein
shall be construed as prohibiting the Company from pursuing any other remedies
available at law or in equity for such breach or threatened breach, including
the recovery of damages and the immediate termination of the Company’s duties
under this Agreement.


 


(e)                                  Modification of Restrictions.  It
is hereby further agreed that if any court of competent jurisdiction shall
determine that the restrictions imposed in this Section 4 are unreasonable
(including, but not limited to, time and scope of coverage of this Section 4),
the parties hereto hereby agree to any restrictions that such court would find
to be reasonable under the circumstances.


 


5.                                       Withholding; Section 409A.  The
Company shall make such deductions and withhold such amounts from each payment
made to the Executive hereunder as may be required from time to time by law,
governmental regulation or order.  If required by Section 409A of the
Code, all or part of any payment made to the Executive hereunder may be delayed
for a period of six months.


 


6.                                       Attorneys’ Fees and Costs.  The
Company shall pay to any law firm chosen by the Executive, all reasonable fees
and costs incurred by the Executive, in
an amount not to exceed $10,000 in the aggregate in enforcing the terms of this
Agreement.  Said fees shall be paid, as incurred, directly to the law firm
chosen by the Executive as invoiced by the law firm.


 


7.                                       No Mitigation.  The
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise.


 


8.                                       Successors.  Any successor to the Company
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
or to all or substantially all of the business and/or assets of the Company
shall assume all obligations of the Company under this Agreement and all rights
of the Company under this Agreement shall inure to such successor, in the same
manner and to the same extent that the Company would be required to perform and
be entitled to the benefits of this Agreement if no such succession had taken place.  For purposes of this Agreement, all
references to the “Company” shall include references to any “successor” to all
or substantially all of the business and/or assets of the Company.


 


9.                                       Notices.  All notices and other
communications under this Agreement shall be in writing and delivered to the
addresses set forth below and shall be effective when delivered, if hand
delivered; three (3) days after mailing by first class mail, certified or
registered with return receipt requested; and 24 hours after transmission of a
fax:


 


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  If
  to the Company:

  	
   

  	
  Cherokee
  International Corporation

  
	
   

  	
   

  	
   

  	
  2841
  Dow Avenue

  
	
   

  	
   

  	
   

  	
  Tustin,
  CA 92780

  
	
   

  	
   

  	
   

  	
  Attention:
  Chairman of the Board

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If
  to the Executive:

  	
   

  	
  Alex
  Patel

  
	
   

  	
   

  	
   

  	
  765
  S. Rockgarden Cr

  
	
   

  	
   

  	
   

  	
  Anaheim
  Hills, CA 92808

  



 


Either party may change such party’s address for notices by notice duly
given pursuant  hereto.


 


10.                                 Arbitration.  The Company and the Executive
agree that any dispute arising as to the parties’ rights and obligations
hereunder shall, at the election and upon written demand of either party, be
submitted to arbitration before a single neutral arbitrator in Orange County,
California and shall be administered by the Judicial Arbitration Mediation
Service (“JAMS”) pursuant to its Employment Arbitration Rules and
Procedures and subject to JAMS Policy on Employment Arbitration Minimum
Standards or Procedural Fairness (“Rules”), which Rules shall be modified
by the arbitrator to the extent necessary to comply with applicable law. 
The arbitrator shall not have authority to add to, modify, change or disregard
any lawful terms of this Agreement or to issue an award that is contrary to
applicable law.  The decision of the arbitrator shall be final and binding
and enforceable in any court of competent jurisdiction.  The parties
further agree, notwithstanding the foregoing, that (i) except as provided
in this Section 10, the Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement, (ii) the procedural
protections and requirements of the California Arbitration Act, Section 1280
et seq. of the California Code of
Civil Procedure, will apply to any arbitration proceedings hereunder; (iii) the
Company shall pay any costs and expenses that the Executive would not otherwise
have incurred if the dispute had been adjudicated in a court of law, rather
than through arbitration, provided, however, that if either party prevails on a
statutory claim that affords the prevailing party an award of attorney’s fees,
the arbitrator may award reasonable attorney’s fees to the prevailing party,
consistent with applicable law; and (iv) any hearing must be transcribed
by a court reporter and any decision of the arbitrator must be set forth in
writing, consistent with the applicable state or federal law and supported by
essential findings of fact and conclusion of law.  The provisions of this Section 10
shall survive the termination or revocation of this Agreement.  The
parties acknowledge and agree that any claims by the Executive for Worker’s
Compensation or unemployment compensation benefits are not covered by this
Agreement.


 


11.                                 Miscellaneous.


 


(a)                                  Modification and Waiver.  Except as otherwise specifically provided in
this Agreement, no provision of this Agreement may be modified, waived or


 


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discharged unless such
waiver, modification or discharge is agreed to in writing and signed by both
the Company and the Executive.  No waiver at any time by either party to
this Agreement of any breach by the other party hereto of, or failure to comply
with, any provision hereof shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or similar time.


 


(b)                                 Entire Agreement.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. 
This Agreement supersedes any and all prior agreements between the parties
and/or any of their affiliates with respect to the subject matter hereof.


 


(c)                                  Governing Law.  This
Agreement and the legal relations thus created between the parties hereto shall
be governed by and construed under and in accordance with the internal laws of
the State of California.


 


(d)                                 Severability.  The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.


 


12.                                 Definitions.


 


(a)                                  “Cause” shall mean (1) the willful and
continued failure by the Executive to perform his duties with the Company or
follow reasonable and lawful directives of the Board (including any material
breach of the Company’s or any subsidiary’s Code of Conduct or other corporate
policies), (2) the Executive’s conviction of, or entry of a plea of guilty
or nolo contendere to, a felony or other crime involving moral turpitude, (3) the
commission by the Executive of any act of theft, embezzlement or fraud in
connection with his employment with the Company, (4) any material breach
by the Executive of any employment or other agreement between the Executive and
the Company or any subsidiary of the Company, (5) any conflict of interest
between the Executive and the Company or any subsidiary of the Company that, in
the Board’s determination, inappropriately affects the Executive’s ability to
carry on the Executive’s normal duties as an employee of the Company or any
subsidiary of the Company or (6) the Executive’s appropriation (or
attempted appropriation) of a material business opportunity of the Company,
including attempting to secure or securing from anyone other than the Company
any personal profit without the Company’s consent in connection with any
transaction entered into on behalf of the Company.  For purposes of this definition of Cause, an
act or failure to act on the Executive’s part shall be considered “willful” if
it was done or omitted to be done by the Executive not in good faith, and shall
not include any act or failure to act resulting from any incapacity of the
Executive.


 


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(b)                                 “Change in Control” shall mean the occurrence
of any of the following events:


 


(i)                                    equity securities of the Company representing
more than fifty point one (50.1%) of the combined voting power of the
then outstanding voting securities of the Company are acquired by any person or
group of persons acting in concert (within the meaning of Section 14(d) of
the Securities Exchange Act of 1934) other than (x) the Company, a direct or
indirect subsidiary or parent of the Company, or an employee benefit plan or
trust established by the Company, or (y) Oaktree, GSC or any of their
respective affiliates;


 


(ii)                                 a merger or consolidation is consummated in
which the Company is a constituent corporation and which results in less than
fifty percent (50%) of the outstanding voting securities of the surviving or
resulting entity being owned by the then existing stockholders of the Company
(in the aggregate);


 


(iii)                              a sale is consummated by the Company of
substantially all of the Company’s assets to a person or entity which is not (x) a
direct or indirect subsidiary or parent of the Company, or an employee benefit
plan or trust established by the Company, or (y) Oaktree, GSC or any of
their respective affiliates; or


 


(iv)                             during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the Board (plus
each additional director who was approved by the vote of at least two-thirds of
the directors then still in office who were directors at the beginning of such two-year
period or whose appointment, election or nomination for election was previously
so approved or recommended) cease, for any reason, to constitute at least a
majority thereof.


 


Notwithstanding the
foregoing, a “Change in Control” shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated transactions immediately
following which the holders of the common stock of the Company immediately
prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following such
transaction or series of transactions.


 


(c)                                  “Code” shall mean the Internal Revenue Code
of 1986, as amended.


 


(d)                                 “Company” shall mean Cherokee International
Corporation or any successor thereto.


 


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(e)                                  “Disability” shall mean a physical or mental
illness which, in the judgment of the Company after consultation with the
licensed physician attending Executive, impairs Executive’s ability to
substantially perform his duties as an employee and as a result of which the
Executive shall have been unable to perform his duties for the Company on a
full-time basis for a period of 180 consecutive days.


 


(f)                                    “Good Reason” shall mean the occurrence of
one or more of the following events without Executive’s prior written consent
(except as a result of a prior termination):


 


(i)                                    any material change in the Executive’s
status, title, authorities or responsibilities (including reporting
responsibilities) which represents a demotion from Executive’s status, title, position
or responsibilities (including reporting responsibilities) immediately prior to
the Change in Control; the assignment to the Executive of any duties or work
responsibilities which are materially inconsistent with Executive’s status,
title, position or work responsibilities immediately prior to the Change in
Control, or which are materially inconsistent with the status, title, position
or work responsibilities of a similarly situated senior officer; or any removal
of the Executive from, or failure to appoint, elect, reappoint or reelect the
Executive to, any of such positions, except in the event of Executive’s death
or Disability and other than any such change primarily attributable to the fact
the Company may no longer be a public company;


 


(ii)                                 any decrease in Executive’s annual Base
Salary or target annual incentive award opportunity except for across-the-board
salary reductions similarly affecting all senior officers of the Company;


 


(iii)                              the reassignment of the Executive to a
location more than twenty-five (25) miles from Executive’s then current work
location;


 


(iv)                             the failure by the Company to continue in
effect any incentive, bonus or other compensation plan in which the Executive
participates, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to the failure to
continue such plan, or the failure by the Company to continue Executive’s
participation therein, or any action by the Company which would directly or
indirectly materially reduce his participation therein or reward opportunities
thereunder; provided, however, that the Executive continues to meet
substantially all eligibility requirements thereof;


 


(v)                                the failure by the Company to continue in
effect any employee benefit plan (including any medical, hospitalization, life
insurance,


 


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disability or other group
benefit plan in which the Executive participates), or any material fringe
benefit or perquisite enjoyed by the Executive unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to the failure to continue such plan, or the failure by the Company to
continue Executive’s participation therein, or any action by the Company which
would directly or indirectly materially reduce Executive’s participation
therein or reward opportunities thereunder, or the failure by the Company to
provide the Executive with the benefits to which the Executive is entitled as
an employee of the Company; provided, however, that the Executive continues to
meet substantially all eligibility requirements thereof;


 


(vi)                             any purported termination of Executive’s
employment for Cause which is not effective; or


 


(vii)                          the failure of the Company to obtain a
satisfactory agreement from any successor or assignee of the Company to fully
assume and agree to perform this Agreement;


 


provided, however, that Good
Reason shall be deemed not to exist until the Company has first been (1) supplied
with notice from the Executive setting forth the Executive’s assertion of Good
Reason and (2) provided with the opportunity to cure the facts giving rise
to such assertion within ten (10) days of delivery of the written notice
by the Executive to the Company.


 


Notwithstanding the
foregoing, it will not constitute “Good Reason” if the Executive becomes
employed by a parent corporation of the Company and his status, title, position
or responsibilities change as a result of his employment by the parent
corporation so long as the Executive retains the same general authority for the
operations of the Company as he had immediately prior to the Change in Control
and his status, title, position and responsibilities with the parent
corporation are consistent with other officers of the parent who have similar
operational responsibilities for other businesses of the parent or its
subsidiaries.


 


(g)                                 “GSC” shall mean, collectively, GSC Recovery
II, L.P., GSC Recovery IIA, L.P., GSC Partners CDO Funds, Limited and GSC
Partners CDO Fund II, Limited.


 


(h)                                 “Oaktree” shall mean, collectively, OCM
Principal Opportunities Fund, L.P., OCM/GFI Power Opportunities Fund, L.P. and
GFI Two LLC.


 


[Remainder of page intentionally left blank.]


 


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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement, as of the date set forth below.


 


	
  EXECUTIVE

  	
   

  	
  CHEROKEE
  INTERNATIONAL

  
	
   

  	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Alex Patel

  	
   

  	
  /s/
  Jeffrey M. Frank

  
	
  Alex
  Patel

  	
   

  	
  By:

  	
  Jeffrey
  M. Frank

  
	
  Date:

  	
  February 29,
  2008

  	
   

  	
  Its:

  	
  President
  and CEO

  
	
   

  	
   

  	
   

  	
  Date:

  	
  February 29,
  2008

  
						



 


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