Document:

Exhibit
10.6

 

April 14,
2008

 

 

Linster
W. Fox

841
Promontory Drive West

Newport
Beach, CA  92660

 

                                                Re:          Transaction Bonus
Agreement

 

Dear
Mr. Fox:

 

Cherokee International Corporation (the “Company”)
has decided to grant selected employees of the Company an opportunity to
receive a cash bonus (“Transaction Bonus”) on the terms and conditions set
forth in this letter agreement (this “letter agreement”) in the event there is
a Company Sale (as defined below).  The
purpose of this letter agreement is to notify you that you have been selected
to become eligible for a Transaction Bonus and to set forth the terms and
conditions of your opportunity.

 

Bonus Opportunity.  If a Company Sale occurs and
the conditions set forth below under “Conditions of Bonus Opportunity” are
satisfied, you will be entitled to receive a Transaction Bonus based on the Net
Proceeds (as defined below) received by common stockholders in the Company
Sale.  In the event of a Company Sale in
which the Net Proceeds are less than $   
per share, you will not be entitled to a Transaction Bonus under this
letter agreement.  If the Net Proceeds
are $    per share, you will be entitled
to a Transaction Bonus of $300,000.  If
the Net Proceeds are more than $    per
share but less than $    per share, your
Transaction Bonus shall be scaled linearly between $300,000 and $1.5 million
(for example, if the Net Proceeds are $   
per share, you will be entitled to a $900,000 Transaction Bonus, and if
the Net Proceeds are $    per share, you
will be entitled to a $1.098 million Transaction Bonus).  If the Net Proceeds are $    per share, you will be entitled to a $1.5
million Transaction Bonus.  If the Net
Proceeds are more than $    per share but
less than $    per share, your
Transaction Bonus shall be scaled linearly between $1.5 million and $3 million
(for example, if the Net Proceeds are $   
per share, you will be entitled to a $1.65 million Transaction Bonus,
and if the Net Proceeds are $    per
share, you will be entitled to a $2.1 million Transaction Bonus).  If the Net Proceeds are $10.00 per share or
more, you will be entitled to a $3 million Transaction Bonus.  Your maximum Transaction Bonus will be $3
million.

 

For
purposes of this letter agreement, the term “Company Sale” means (1) a
sale or other disposition of all or substantially all of the assets of the
Company and its subsidiaries on a consolidated basis, or (2) a sale or
other transfer (including by way of merger) by the Company of more than 50% of
the issued and outstanding voting equity securities of the Company (other than
a transfer to the Company or any of its respective affiliates or to GSC or
Oaktree);

 

 

provided,
however, that in no event will any transaction that occurs before the date of
this letter agreement be considered a Company Sale for purposes of this letter
agreement.  For this purpose, a series of
related transactions will be deemed a single sale.

 

For purposes of this letter
agreement, the term “Net Proceeds” means the value of proceeds actually
distributed per share to the common stockholders in a Company Sale, as and when
distributed, after deducting all fees and related expenses (including the cost
of bonuses under this letter agreement and similar Company Sale bonus letter
agreements).  For example, in the event
that proceeds from a Company Sale are subject to escrow, hold-back, earn-out or
similar delayed payment provisions (“Contingent Consideration”), you will
initially be entitled to a bonus based on Net Proceeds excluding the Contingent
Consideration.  If any Contingent
Consideration is subsequently distributed to common stockholders, you will then
receive an additional bonus based on the incremental Net Proceeds from the
Contingent Consideration.  This
additional bonus shall be calculated as the difference between your Transaction
Bonus based on all aggregate Net Proceeds as of that date and all Transaction
Bonuses previously paid to you.

 

Conditions of Bonus Opportunity.  If a
Company Sale occurs, you will be entitled to receive a cash bonus if:

 

1.             You execute and deliver to the
Company, on or promptly after the date of the Company Sale and in a form
acceptable to the Company, a general release of claims related to the Company’s
obligations under this letter agreement, and you do not revoke such release
within any revocation period provided under applicable law; and

 

2.             You are either (i) employed
with the Company or one of its subsidiaries at the time of the Company Sale, (ii) you
are terminated by the Company other than for Cause within six (6) months
prior to a Company Sale, or (iii) you terminate your employment with the
Company for Good Reason within six (6) months prior to a Company Sale.

 

If
you terminate your employment with the Company voluntarily or you are
terminated by the Company for Cause prior to a Company Sale, you shall not be
entitled to any bonus payable under this letter agreement.

 

Payment.  All payment of Transaction Bonuses shall be
on substantially the same schedule as the distribution of the underlying Net
Proceeds to common stockholders.  Your
bonus will be subject to and reduced by all required tax withholding.

 

Definition of Cause.  For purposes of this
letter agreement, “Cause” is defined as the occurrence of any of the
following:  (i) your willful and
continued failure to perform your 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); (ii) your
conviction of, or entry of a plea of guilty or nolo contendere to, a felony or
other crime involving moral turpitude; (iii) the commission by you of any act of theft, embezzlement or
fraud in connection with your employment with the Company;

 

2

 

(iv) any
material breach by you of any employment or other agreement between you and the
Company or any subsidiary of the Company; (v) any conflict of interest
between you and the Company or any subsidiary of the Company that, in the
Board’s determination, inappropriately affects your ability to carry on your
normal duties as an employee of the Company or any subsidiary of the Company;
or (vi) your 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 your part shall be considered “willful”
if it was done or omitted to be done by you not in good faith, and shall not
include any act or failure to act by you resulting from any incapacity.  Cause shall be deemed not to exist until you have
first been (1) supplied with notice from the Company setting forth the
Board’s finding of Cause, (2) provided with the opportunity to appear
before the Board to dispute the Board’s findings of Cause or present evidence
that the facts giving rise to the finding of Cause have been cured and (3) following
a final finding of Cause by the Board, provided with the opportunity to cure
the facts giving rise to such finding within ten (10) days of delivery of
the written notice of the Board’s final findings to you by the Company.

 

Definition of Good Reason.  For purposes of this letter
agreement, “Good Reason” is defined as the occurrence of one or more of the
following events without your prior written consent (except as a result of a
prior termination):  (i) any
material change in your status, title, authorities or responsibilities
(including reporting responsibilities) which represents a demotion from your
status, title, position or responsibilities (including reporting
responsibilities) immediately prior to the Company Sale; the assignment to you
of any duties or work responsibilities which are materially inconsistent with
your status, title, position or work responsibilities immediately prior to the
Company Sale, or which are materially inconsistent with the status, title,
position or work responsibilities of a similarly situated senior officer; or
any removal of you from, or failure to appoint, elect, reappoint or reelect you
to, any of such positions, except in the event of your 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 your 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 you to a location more than twenty-five (25) miles from your
then current work location; (iv) the failure by the Company to continue in
effect any incentive, bonus or other compensation plan in which you
participate, 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 your participation therein, or
any action by the Company which would directly or indirectly materially reduce
your participation therein or reward opportunities thereunder; provided,
however, that you continue 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,
disability or other group benefit plan in which you participate), or any
material fringe benefit or perquisite enjoyed by you 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 your participation therein, or any action by the Company
which would directly or indirectly materially reduce your participation therein
or reward opportunities thereunder, or the failure by the Company to provide
you with the benefits to which you are entitled as an employee of the Company;
provided, however, that you continue to meet substantially all eligibility requirements
thereof;

 

3

 

(vi) any
purported termination of your 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 letter
agreement; provided, however, that Good Reason shall be deemed not to exist
until the Company has first been (1) supplied with notice from you setting
forth your assertion of Good Reason and (2) provided with the opportunity
to cure the facts giving rise to such assertion within thirty (30) days of
delivery of the written notice by you to the Company.

 

Notwithstanding the foregoing, it will not constitute “Good Reason” if
you become employed by a parent corporation of the Company and your status,
title, position or responsibilities change as a result of your employment by
the parent corporation so long as you retain the same general authority for the
operations of the Company as you had immediately prior to the Company Sale and
your 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.

 

Non-Solicitation. 
You will not at any time while
you are employed by the Company or any of its subsidiaries, and for 12 months
following the termination of your 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 your termination date, to leave the employment of
the Company or any of its subsidiaries.

 

During the Restricted Period, you 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 you 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 you from
accepting employment with any other person or entity during the Restricted
Period, including any Restricted Company, provided that you continue to
otherwise comply with the restrictions in this paragraph.

 

No Right to Continued Employment. 
Subject to any written employment agreement you may have with the
Company (or any of its affiliates) and subject to applicable law, nothing
contained in this letter agreement constitutes an employment or service commitment
by the Company (or any of its affiliates), affects your status as an employee
at will who is subject to termination without cause at any time, or interferes
in any way with the Company’s right (or the right of its affiliates) to change
your compensation or other terms of employment at any time.

 

4

 

Attorneys’ Fees and Costs.  The Company shall pay to any law firm chosen
by you, all reasonable fees and costs incurred by you, in an amount not to
exceed $30,000 in the aggregate in enforcing the terms of this letter agreement
or in the resolution of any dispute with respect to the benefits payable under
this letter agreement.  Said fees shall
be paid, as incurred, directly to the law firm chosen by you as invoiced by the
law firm.

 

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

 

Governing Law.  This letter agreement shall be governed by
the laws of the State of California.

 

Entire Agreement.  This
letter agreement contains all of the terms and conditions of your bonus
opportunity and supersedes all prior understandings and agreements, written or
oral, between you and the Company or any of its respective affiliates with
respect thereto.  This letter agreement
may be amended only by a written agreement, signed by an authorized officer,
that expressly refers to this letter agreement. 
For purposes of clarity, this letter agreement does not supersede your
severance agreement with the Company.

 

[Remainder of page intentionally left blank]

 

5

 

If this letter agreement accurately sets forth our
understanding with respect to the foregoing matters, please indicate your
acceptance by signing this agreement below and returning it to me.  A duplicate copy of this letter agreement is
included for your records.

 

	
   

  	
  Sincerely,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  JEFFREY M. FRANK

  
	
   

  	
  Jeffrey
  M. Frank, President and CEO

  
	
   

  	
  Cherokee
  International Corporation

  
				

 

 

	
  Acknowledged
  and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  LINSTER W. FOX

  	
   

  
	
  Linster
  W. Fox

  	
   

  

 

6Exhibit 10.7

 

April 14,
2008

 

Mukesh Patel

15 Rocky Mountain

Coto De Caza, CA  92679

 

Re:                             Transaction Bonus Agreement

 

Dear
Mr. Patel:

 

Cherokee International Corporation (the “Company”)
has decided to grant selected employees of the Company an opportunity to
receive a cash bonus (“Transaction Bonus”) on the terms and conditions set
forth in this letter agreement (this “letter agreement”) in the event there is
a Company Sale (as defined below).  The
purpose of this letter agreement is to notify you that you have been selected
to become eligible for a Transaction Bonus and to set forth the terms and
conditions of your opportunity.

 

Bonus Opportunity.  If a Company Sale occurs and
the conditions set forth below under “Conditions of Bonus Opportunity” are
satisfied, you will be entitled to receive a Transaction Bonus based on the Net
Proceeds (as defined below) received by common stockholders in the Company
Sale.  In the event of a Company Sale in
which the Net Proceeds are less than $   
per share, you will not be entitled to a Transaction Bonus under this
letter agreement.  If the Net Proceeds
are $    per share, you will be entitled to a Transaction
Bonus of $45,000.  If the Net Proceeds
are more than $    per share but less
than $    per share, your Transaction Bonus shall be scaled
linearly between $45,000 and $225,000 (for example, if the Net Proceeds are $    per
share, you will be entitled to a $135,000 Transaction Bonus, and if the Net
Proceeds are $    per share, you will be entitled to a
$164,700 Transaction Bonus).  If the Net
Proceeds are $    per share, you will be entitled to a
$225,000 Transaction Bonus.  If the Net
Proceeds are more than $    per share but less than $    per
share, your Transaction Bonus shall be scaled linearly between $225,000 and
$450,000 (for example, if the Net Proceeds are $    per
share, you will be entitled to a $247,500 Transaction Bonus, and if the Net
Proceeds are $    per share, you will be entitled to a
$315,000 Transaction Bonus).  If the Net
Proceeds are $10.00 per share or more, you will be entitled to a $450,000
Transaction Bonus.  Your maximum
Transaction Bonus will be $450,000.

 

For
purposes of this letter agreement, the term “Company Sale” means (1) a
sale or other disposition of all or substantially all of the assets of the
Company and its subsidiaries on a consolidated basis, or (2) a sale or
other transfer (including by way of merger) by the Company of more than 50% of
the issued and outstanding voting equity securities of the Company (other than
a transfer to the Company or any of its respective affiliates or to GSC or
Oaktree); provided, however, that in no event will any transaction that occurs
before the date of this letter agreement be considered a Company Sale for purposes
of this letter agreement.  For this
purpose, a series of related transactions will be deemed a single sale.

 

 

For purposes of this letter
agreement, the term “Net Proceeds” means the value of proceeds actually
distributed per share to the common stockholders in a Company Sale, as and when
distributed, after deducting all fees and related expenses (including the cost
of bonuses under this letter agreement and similar Company Sale bonus letter
agreements).  For example, in the event
that proceeds from a Company Sale are subject to escrow, hold-back, earn-out or
similar delayed payment provisions (“Contingent Consideration”), you will
initially be entitled to a bonus based on Net Proceeds excluding the Contingent
Consideration.  If any Contingent Consideration
is subsequently distributed to common stockholders, you will then receive an
additional bonus based on the incremental Net Proceeds from the Contingent
Consideration.  This additional bonus
shall be calculated as the difference between your Transaction Bonus based on
all aggregate Net Proceeds as of that date and all Transaction Bonuses
previously paid to you.

 

Conditions of Bonus Opportunity.  If a
Company Sale occurs, you will be entitled to receive a cash bonus if:

 

1.             You execute and deliver to the
Company, on or promptly after the date of the Company Sale and in a form
acceptable to the Company, a general release of claims related to the Company’s
obligations under this letter agreement, and you do not revoke such release
within any revocation period provided under applicable law; and

 

2.             You are either (i) employed
with the Company or one of its subsidiaries at the time of the Company Sale, (ii) you
are terminated by the Company other than for Cause within six (6) months
prior to a Company Sale, or (iii) you terminate your employment with the
Company for Good Reason within six (6) months prior to a Company Sale.

 

If
you terminate your employment with the Company voluntarily or you are
terminated by the Company for Cause prior to a Company Sale, you shall not be
entitled to any bonus payable under this letter agreement.

 

Payment.  All payment of Transaction Bonuses shall be
on substantially the same schedule as the distribution of the underlying Net
Proceeds to common stockholders.  Your
bonus will be subject to and reduced by all required tax withholding.

 

Definition of Cause.  For purposes of this letter agreement,
“Cause” is defined as the occurrence of any of the following:  (i) your willful and continued failure
to perform your 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); (ii) your
conviction of, or entry of a plea of guilty or nolo contendere to, a felony or
other crime involving moral turpitude; (iii) the commission by you of any
act of theft, embezzlement or fraud in connection with your employment with the
Company; (iv) any material breach by you of any employment or other
agreement between you and the Company or any subsidiary of the Company; (v) any
conflict of interest between you and the Company or any subsidiary of the
Company that, in the Board’s determination, inappropriately affects your
ability to carry on your normal duties as an employee of the Company or any
subsidiary of the Company;

 

2

 

or
(vi) your 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 your part shall be considered “willful”
if it was done or omitted to be done by you not in good faith, and shall not
include any act or failure to act by you resulting from any incapacity.

 

Definition of Good Reason.  For purposes of this letter
agreement, “Good Reason” is defined as the occurrence of one or more of the following
events without your prior written consent (except as a result of a prior
termination):  (i) any material
change in your status, title, authorities or responsibilities (including
reporting responsibilities) which represents a demotion from your status,
title, position or responsibilities (including reporting responsibilities)
immediately prior to the Company Sale; the assignment to you of any duties or
work responsibilities which are materially inconsistent with your status,
title, position or work responsibilities immediately prior to the Company Sale,
or which are materially inconsistent with the status, title, position or work
responsibilities of a similarly situated senior officer; or any removal of you
from, or failure to appoint, elect, reappoint or reelect you to, any of such
positions, except in the event of your 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 your 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 you to a location more than twenty-five (25) miles from your
then current work location; (iv) the failure by the Company to continue in
effect any incentive, bonus or other compensation plan in which you
participate, 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 your participation therein, or
any action by the Company which would directly or indirectly materially reduce
your participation therein or reward opportunities thereunder; provided, however,
that you continue 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, disability or other
group benefit plan in which you participate), or any material fringe benefit or
perquisite enjoyed by you 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 your
participation therein, or any action by the Company which would directly or
indirectly materially reduce your participation therein or reward opportunities
thereunder, or the failure by the Company to provide you with the benefits to
which you are entitled as an employee of the Company; provided, however, that
you continue to meet substantially all eligibility requirements thereof; (vi) any
purported termination of your 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 letter
agreement; provided, however, that Good Reason shall be deemed not to exist
until the Company has first been (1) supplied with notice from you setting
forth your assertion of Good Reason and (2) provided with the opportunity
to cure the facts giving rise to such assertion within thirty (30) days of
delivery of the written notice by you to the Company.

 

3

 

Notwithstanding the foregoing, it will not constitute “Good Reason” if
you become employed by a parent corporation of the Company and your status,
title, position or responsibilities change as a result of your employment by
the parent corporation so long as you retain the same general authority for the
operations of the Company as you had immediately prior to the Company Sale and
your 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.

 

Non-Solicitation.  You will not at any time while you are
employed by the Company or any of its subsidiaries, and for 12 months following
the termination of your 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 your termination date, to leave the employment of the Company or any
of its subsidiaries.

 

During the Restricted Period, you 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 you 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 you from
accepting employment with any other person or entity during the Restricted
Period, including any Restricted Company, provided that you continue to
otherwise comply with the restrictions in this paragraph.

 

No Right to Continued Employment.  Subject to any written employment agreement
you may have with the Company (or any of its affiliates) and subject to
applicable law, nothing contained in this letter agreement constitutes an
employment or service commitment by the Company (or any of its affiliates),
affects your status as an employee at will who is subject to termination
without cause at any time, or interferes in any way with the Company’s right
(or the right of its affiliates) to change your compensation or other terms of
employment at any time.

 

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

 

Governing Law.  This letter agreement shall be governed by the
laws of the State of California.

 

Entire Agreement.  This
letter agreement contains all of the terms and conditions of your bonus
opportunity and supersedes all prior understandings and agreements, written or
oral, between you and the Company or any of its respective affiliates with
respect thereto.  This letter agreement
may be amended only by a written agreement, signed by an authorized officer,
that expressly refers to this letter agreement. 
For purposes of clarity, this letter agreement does not supersede your
severance agreement with the Company.

 

4

 

[Remainder of page intentionally left blank]

 

5

 

If this letter agreement accurately sets forth our
understanding with respect to the foregoing matters, please indicate your
acceptance by signing this agreement below and returning it to me.  A duplicate copy of this letter agreement is
included for your records.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
             /s/
  JEFFREY M. FRANK

  
	
   

  	
  Jeffrey
  M. Frank, President and CEO

  
	
   

  	
  Cherokee
  International Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged
  and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  MUKESH PATEL

  	
   

  	
   

  
	
  Mukesh
  Patel

  	
   

  
			

 

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]