Document:

Exhibit 10.1

CPI
INTERNATIONAL, INC.

STOCK OPTION AGREEMENT

(SENIOR EXECUTIVES)

THIS STOCK OPTION
AGREEMENT (the “Agreement”) is made and entered
into as of the date of grant set forth on Exhibit A hereto by and between
CPI International, Inc., a Delaware corporation (the “Company”),
and the individual (the “Optionee”) set
forth on Exhibit A.

A.                                   Pursuant to the CPI International, Inc.
2006 Equity and Performance Incentive Plan (the “Plan”),
the Committee has determined that it is to the advantage and best interest of
the Company to grant to Optionee an option (the “Option”)
to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option Shares”) set forth on Exhibit A hereto, at the
exercise price determined as provided herein, and in all respects subject to
the terms, definitions and provisions of the Plan, which is incorporated herein
by reference.

B.                                     Unless otherwise defined herein,
capitalized terms used in this Agreement shall have the meanings set forth in
the Plan.

NOW, THEREFORE, in
consideration of the mutual agreements contained herein, the Optionee and the
Company hereby agree as follows:

 

1.                                       Grant
and Terms of Stock Option.

 

1.1                                 Grant
of Option.  The Company has granted
to the Optionee the right and option to purchase, subject to the terms and
conditions set forth in the Plan and this Agreement, all or any part of the
number of Shares set forth on Exhibit A at a purchase price per Share equal to
the exercise price per Share set forth on Exhibit A.  This Option is not intended to be an
Incentive Stock Option and is instead intended to be a Nonqualified Stock
Option.

 

1.2                                 Vesting
and Exercisability.  Subject to the
provisions of the Plan and the other provisions of this Agreement, this Option
shall vest and become exercisable in accordance with the schedule set forth on
Exhibit A.  Notwithstanding the
foregoing, (a) in the event of termination of Optionee’s employment by the
Company for Cause or the termination of Optionee’s Continuous Status as an
Employee, Director or Consultant by Optionee for any reason other than death,
Disability or Good Reason (as defined in Optionee’s employment agreement), this
Option shall immediately cease vesting, and (b) in the event of
termination of Optionee’s Continuous Status as an Employee, Director or
Consultant by the Company without Cause, as a result of death or Disability, or
by the Optionee for Good Reason, this Option shall fully vest and become fully
exercisable as of the date of termination. 
In addition, if, in connection with a merger, consolidation,
reorganization, recapitalization or similar transaction in which the Company is
not the surviving entity, either (i) all obligations under this Option are not
fully assumed by the surviving or resulting entity, or (ii) the Company fails
to provide the Optionee with cash or

 

property with a
fair market value equal to the excess of the Fair Market Value of all of the
Shares subject to this Option over the aggregate exercise price of this Option,
then this Option shall fully vest and become fully exercisable immediately
prior to the effectiveness of such transaction.

1.3                                 Term
of Option.  The “Term” of this Option shall begin on the
date of grant set forth on Exhibit A and end on the expiration of the Term
specified on Exhibit A.  No portion of
this Option may be exercised after the expiration of the Term.

1.3.1                        In the event of termination of
Optionee’s Continuous Status as an Employee, Director or Consultant by death or
Disability, by the Company without Cause or by Optionee with Good Reason, this
Option shall terminate and be cancelled on the earlier of (i) the expiration of
the Term, or (ii) 12 months after termination of Optionee’s Continuous Status
as an Employee, Director or Consultant.

1.3.2                        In the event of termination of
Optionee’s Continuous Status as an Employee, Director or Consultant by Employee
without Good Reason, the portion of this Option that is not vested and
exercisable as of the date of termination shall be immediately cancelled and
terminated.  In addition, the portion of
this Option that is vested and exercisable as of the date of termination of
Optionee’s Continuous Status as an Employee, Director or Consultant shall
terminate and be cancelled on the earlier of (i) the expiration of the
Term, or (ii) the Exercise Termination Date.  The “Exercise Termination Date” shall mean
the later of (x) 90 days after termination of Optionee’s Continuous Status
as an Employee, Director or Consultant or (y) if Optionee reasonably
determines that Optionee is prohibited or restricted from selling Shares in the
public markets for any portion of the 90 day period in clause (x) (whether
as a result of the possession of information that might be considered material
nonpublic information, the absence of a registration statement available to Optionee,
or other legal or contractual restrictions on sale), 90 days after all such
restrictions cease to exist.

1.3.3                        If Optionee’s Continuous Status
as an employee is terminated for Cause, this entire Option shall be cancelled
and terminated as of the date of such termination and shall no longer be
exercisable as to any Shares, whether or not previously vested.

2.                                       Method
of Exercise.

2.1                                 Notice
of Exercise.

2.1.1                        Except as otherwise provided in
Section 2.1.2, this Option shall be exercisable by written notice in the form
attached hereto as Exhibit B which shall state the election to exercise
this Option, the number of Shares in respect of which this Option is being
exercised, and such other representations and agreements with respect to such
Shares as may be required by the Company pursuant to the provisions of this
Agreement and the Plan.  Such written
notice shall be signed by Optionee (or by Optionee’s beneficiary or other
person entitled to exercise this Option in the event

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of Optionee’s death under the Plan) and shall
be delivered in person or by overnight delivery service or certified mail to
the Secretary of the Company.

2.1.2                        If permitted by the Company at
the time of exercise, this Option may also be exercised by providing a notice
of exercise to the Third Party Administrator (as the Company’s agent) by or
through any means permitted by the Third Party Administrator from time to time,
including, without limitation, by providing notice of exercise to the Third
Party Administrator by telephone or by using the Third Party Administrator’s
Internet web site to provide notice of exercise, and in such event, the notice
of exercise may be provided, but shall not be required to be provided, in
writing.  For purposes hereof, “Third Party Administrator” means The Bank
of New York as the Company’s third party stock option administrator, or, as
applicable, any successor third party stock option administrator designated by
the Committee.

2.1.3                        Upon exercise in accordance
with Section 2.1.1 or 2.1.2, the Optionee shall pay the exercise price to the
Company in any manner permitted by Section 2.3. This Option shall not be deemed
exercised until the Company receives notice of exercise pursuant to this
Section 2.1 and the exercise price and any other applicable terms and
conditions of this Agreement are satisfied. 
This Option may not be exercised for a fraction of a Share.

2.2                                 Restrictions
on Exercise.  No Shares will be
issued pursuant to the exercise of this Option unless and until there shall
have been full compliance with all applicable requirements of the Securities
Act of 1933, as amended (whether by registration or satisfaction of exemption
conditions), all Applicable Laws, and all applicable listing requirements of
any national securities exchange or other market system on which the Common
Stock is then listed.  As a condition to
the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be necessary or appropriate,
in the judgment of the Committee, to comply with any Applicable Law.

2.3                                 Method
of Payment.  Payment of the exercise
price shall be made in full at the time of exercise (a) in cash or by
certified check or bank check or wire transfer of immediately available funds,
(b) by delivery of a properly executed exercise notice together with any
other documentation as the Committee and the Participant’s broker, if
applicable, require to effect an exercise of the Option and delivery to the
Company of the sale or other proceeds (as permitted by Applicable Law) required
to pay the exercise price or (c) with the consent of the Committee in its
discretion, by tendering previously acquired Shares (either actually or by
attestation, valued at their then Fair Market Value) that have been owned for a
period of at least six months (or such other period to avoid accounting charges
against the Company’s earnings).  In
addition, the Committee may impose such other conditions in connection with the
delivery of shares of Common Stock in satisfaction of the exercise price as it
deems appropriate in its sole discretion.

2.4                                 Tax
Withholding Obligations.  In addition
to the foregoing requirements, any exercise of this Option shall be conditioned
upon the Optionee satisfying any applicable tax withholding obligations imposed
on the Company in connection with the exercise of this Option.

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3.                                       Non-Transferability
of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution or to a beneficiary designated pursuant to the Plan, and may be
exercised during the lifetime of Optionee only by Optionee.  Subject to all of the other terms and
conditions of this Agreement, following the death of Optionee, this Option may,
to the extent it is vested and exercisable by Optionee in accordance with its
terms on the date of death, be exercised by Optionee’s beneficiary or other
person entitled to exercise this Option in the event of Optionee’s death under
the Plan.  This Option may be assigned,
in connection with the Optionee’s estate plan, in whole or in part, during the
Optionee’s lifetime to one or more Family Members of the Optionee.  Rights under the assigned portion may be
exercised by the person or persons who acquire a proprietary interest in such
Option pursuant to the assignment.  The
terms applicable to the assigned portion shall be the same as those in effect
for the Option immediately before such assignment and shall be set forth in
such documents issued to the assignee as the Committee deems appropriate.

4.                                       Restrictions;
Restrictive Legends.  Ownership and
transfer of Shares issued pursuant to the exercise of this Option will be
subject to the provisions of, including
ownership and transfer restrictions (including, without limitation, restrictions
imposed by Applicable Laws and restrictions set forth or referenced in legends
imprinted on certificates representing such Shares).

5.                                       General.

5.1                                 Governing
Law.  This Agreement shall be
governed by and construed under the laws of the state of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the
conflicts of law provisions of Delaware or any other jurisdiction.

5.2                                 Notices.  Any notice required or permitted under this
Agreement shall be given in writing by overnight courier or by postage prepaid,
United States registered or certified mail, return receipt requested, to the
address set forth below or to such other address for a party as that party may
designate by 10 days advance written notice to the other parties.  Notice shall be effective upon the earlier of
receipt or 3 days after the date on which such notice is deposited in the mails
or with the overnight courier.

	
  If to the Company:

  	
   

  	
  CPI International, Inc.

  
	
   

  	
   

  	
  811 Hansen Way

  
	
   

  	
   

  	
  Palo Alto,
  California 94303-1110

  
	
   

  	
   

  	
  Attention: Chief
  Financial Officer

  

 

If to Optionee, at the address set forth on Exhibit A.

5.3                                 Community
Property.  Without prejudice to the
actual rights of the spouses as between each other, for all purposes of this Agreement,
the Optionee shall be treated as agent and attorney-in-fact for that interest
held or claimed by his or her spouse with respect to this Option and the
parties hereto shall act in all matters as if the Optionee was the sole owner
of this Option.  This appointment is
coupled with an interest and is irrevocable.

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5.4                                 Modifications.  This Agreement may be amended, altered or
modified only by a writing signed by each of the parties hereto.

5.5                                 Application
to Other Stock.  In the event any
capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend,
stock split, reclassification or recapitalization in connection with any merger
or reorganization or otherwise, all restrictions, rights and obligations set
forth in this Agreement shall apply with respect to such other capital stock to
the same extent as they are, or would have been applicable, to the Option
Shares on or with respect to which such other capital stock was distributed.

5.6                                 Additional
Documents.  Each party agrees to
execute any and all further documents and writings, and to perform such other
actions, which may be or become reasonably necessary or expedient to be made
effective and carry out this Agreement.

5.7                                 No
Third-Party Benefits.  Except as
otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party
beneficiary.

5.8                                 Successors
and Assigns.  Except as provided
herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.

5.9                                 No
Assignment.  Except as otherwise
provided in this Agreement, the Optionee may not assign any of his, her or its
rights under this Agreement without the prior written consent of the Company,
which consent may be withheld in its sole discretion.  The Company shall be permitted to assign its
rights or obligations under this Agreement, but no such assignment shall
release the Company of any obligations pursuant to this Agreement.

5.10                           Severability.  The validity, legality or enforceability of
the remainder of this Agreement shall not be affected even if one or more of
the provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect.

5.11                           Equitable
Relief.  The Optionee acknowledges
that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach
will cause the Company great, immediate and irreparable injury and damage.  Accordingly, the Optionee agrees that the
Company shall be entitled to injunctive and other equitable relief, and that
such relief shall be in addition to, and not in lieu of, any remedies it may
have at law or under this Agreement.

5.12                           Arbitration.

5.12.1                    General.  Any controversy, dispute, or claim between
the parties to this Agreement, including any claim arising out of, in
connection with, or in relation to the formation, interpretation, performance
or breach of this Agreement shall be settled exclusively by arbitration, before
a single arbitrator, in accordance with this Section 5.12 and the then most
applicable rules of the American Arbitration Association.  Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof.  Such arbitration shall be
administered by the American Arbitration

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Association.  Arbitration shall be the exclusive remedy for
determining any such dispute, regardless of its nature.  Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court for provisional relief, including
a temporary restraining order or a preliminary injunction, on the ground that
the award to which the applicant may be entitled in arbitration may be rendered
ineffectual without provisional relief. 
Unless mutually agreed by the parties otherwise, any arbitration shall
take place in the City of Palo Alto, California.

5.12.2                    Selection of
Arbitrator.  In the event the parties
are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators (which shall be retired judges or
corporate or litigation attorneys experienced in executive compensation and
stock options) provided by the office of the American Arbitration Association
having jurisdiction over Palo Alto, California. 
If the parties are unable to agree upon an arbitrator from the list so
drawn, then the parties shall each strike names alternately from the list, with
the first to strike being determined by lot. 
After each party has used four strikes, the remaining name on the list
shall be the arbitrator.  If such person
is unable to serve for any reason, the parties shall repeat this process until
an arbitrator is selected.

5.12.3                    Applicability
of Arbitration; Remedial Authority. 
This agreement to resolve any disputes by binding arbitration shall
extend to claims against any parent, subsidiary or affiliate of each party, and,
when acting within such capacity, any officer, director, shareholder, employee
or agent of each party, or of any of the above, and shall apply as well to
claims arising out of state and federal statutes and local ordinances as well
as to claims arising under the common law. 
In the event of a dispute subject to this paragraph the parties shall be
entitled to reasonable discovery subject to the discretion of the
arbitrator.  The remedial authority of
the arbitrator (which shall include the right to grant injunctive or other
equitable relief) shall be the same as, but no greater than, would be the
remedial power of a court having jurisdiction over the parties and their
dispute.  The arbitrator shall, upon an
appropriate motion, dismiss any claim without an evidentiary hearing if the
party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation.  In the event of a conflict between the applicable
rules of the American Arbitration Association and these procedures, the
provisions of these procedures shall govern.

5.12.4                    Fees and
Costs.  Any filing or administrative
fees shall be borne initially by the party requesting arbitration.  The Company shall be responsible for the
costs and fees of the arbitration, unless the Optionee wishes to contribute (up
to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the prevailing
party in such arbitration, as determined by the arbitrator, and in any
enforcement or other court proceedings, shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing party’s costs (including but not limited to the arbitrator’s
compensation), expenses, and attorneys’ fees.

5.12.5                    Award Final
and Binding.  The arbitrator shall
render an award and written opinion, and the award shall be final and binding
upon the parties.  If any of the
provisions of this paragraph, or of this Agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent

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necessary to carry out its
provisions to the greatest extent possible and to insure that the resolution of
all conflicts between the parties, including those arising out of statutory
claims, shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration
provisions of this Agreement are not absolutely binding, then the parties
intend any arbitration decision and award to be fully admissible in evidence in
any subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.

5.13                           Headings.  The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, extend
or interpret the scope of this Agreement or of any particular section.

5.14                           Number
and Gender.  Throughout this
Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the
singular tense and number includes the plural, and the plural tense and number
includes the singular; (c) the past tense includes the present, and the present
tense includes the past; (d) references to parties, sections, paragraphs and
exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks
or months.

5.15                           Counterparts.
 This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

5.16                           Complete
Agreement.  This Agreement and the
Plan constitute the parties’ entire agreement with respect to the subject
matter hereof and supersede all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof.

5.17                           Waiver
of Jury Trial.  TO THE EXTENT EITHER PARTY INITIATES
LITIGATION INVOLVING THIS AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN
US (EVEN IF OTHER PARTIES OR OTHER CLAIMS ARE INCLUDED IN SUCH LITIGATION), ALL
THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.  THIS WAIVER WILL APPLY TO ALL CAUSES OF
ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION, INCLUDING CLAIMS RELATED
TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT, ALLEGATIONS OF STATE OR
FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR CAUSES OF
ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES,
OFFICERS, EMPLOYEES OR AGENTS.

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  CPI INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  

 

 8

EXHIBIT A

DETAILS OF STOCK OPTION GRANT

	
  Optionee Name:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Number of Shares of Common Stock:

  	
   

  	
   

  
	
  Exercise Price Per Share:

  	
   

  	
   

  
	
  Term of Option:

  	
   

  	
  10 Years after date of grant

  

 

Vesting Schedule:  Subject to the
restrictions and limitations of the Option Agreement and the Plan, this Option
shall vest and become exercisable with respect to 25% of the Shares subject to
this Option on the first anniversary of the date of grant.  On each subsequent anniversary of the date of
grant, this Option shall become vested and exercisable with respect to an
additional 25% of the Shares subject to this Option, until 100% of the Shares
subject to this Option have become vested and exercisable.

Employee Address:

 

EXHIBIT B 

NOTICE OF EXERCISE OF STOCK OPTION

 

	
  CPI International, Inc.

  
	
  811 Hansen Way

  
	
  Palo Alto, California 94303-1110

  
	
  Attn: Chief Financial Officer

  

 

Ladies and Gentlemen:

The
undersigned hereby elects to exercise the option indicated below:

	
  Option
  Grant Date:                                           

  
	
  Number of Shares Being Exercised:                                           

  
	
  Exercise Price Per Share:                                           

  
	
  Total Exercise Price: $                                           

  
	
  Method of Payment:                                            

  

 

Enclosed
herewith is payment in full of the total exercise price.

My exact name, current address and social security
number for purposes of the stock certificates to be issued and the shareholder
list of the Company are:

	
  Name:

  	
                                             

  
	
   

  	
   

  
	
  Address:                                           

  
	
   

  	
                                             

  
	
   

  	
   

  
	
  Social Security Number:

  	
                                             

  
				

 

I understand that there may be adverse tax
consequences to me as a result of the exercise of the Option and/or any sale of
the Shares, and I have consulted with my own tax advisor regarding those
consequences and I am not relying on the Company for any tax advice.

I also agree that I will not sell or dispose of my
Shares in violation of applicable securities laws, Company policy (including
applicable “black-out” periods) or any agreement
by which I am bound.

 

	
  

  	
   

  	
  Sincerely,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Optionee’s Signature)

  	
   

  
						

 

 

SPOUSAL CONSENT

By
his or her signature below, the spouse of the Optionee agrees to be bound by
all of the terms and conditions of the foregoing Option Agreement (including
those relating to the appointment of the Optionee as agent for any interest
that Spouse may have in the Option Shares).

	
   

  	
  OPTIONEE’S SPOUSE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print NameExhibit 10.2

CPI INTERNATIONAL, INC.

STOCK OPTION AGREEMENT

THIS STOCK OPTION
AGREEMENT (the “Agreement”) is made and entered
into as of the date of grant set forth on Exhibit A hereto by and between
CPI International, Inc., a Delaware corporation (the “Company”),
and the individual (the “Optionee”) set
forth on Exhibit A.

A.                                   Pursuant to the CPI International, Inc.
2006 Equity and Performance Incentive Plan (the “Plan”),
the Committee has determined that it is to the advantage and best interest of
the Company to grant to Optionee an option (the “Option”)
to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option Shares”) set forth on Exhibit A hereto, at the
exercise price determined as provided herein, and in all respects subject to
the terms, definitions and provisions of the Plan, which is incorporated herein
by reference.

B.                                     Unless otherwise defined herein,
capitalized terms used in this Agreement shall have the meanings set forth in
the Plan.

NOW, THEREFORE, in consideration
of the mutual agreements contained herein, the Optionee and the Company hereby
agree as follows:

1.                                       Grant
and Terms of Stock Option.

1.1                                 Grant
of Option.  The Company has granted
to the Optionee the right and option to purchase, subject to the terms and
conditions set forth in the Plan and this Agreement, all or any part of the
number of Shares set forth on Exhibit A at a purchase price per Share equal to
the exercise price per Share set forth on Exhibit A.  This Option is not intended to be an Incentive
Stock Option and is instead intended to be a Nonqualified Stock Option.

1.2                                 Vesting
and Exercisability.  Subject to the
provisions of the Plan and the other provisions of this Agreement, this Option
shall vest and become exercisable in accordance with the schedule set forth on
Exhibit A.  Notwithstanding the
foregoing, in the event of termination of Optionee’s Continuous Status as an
Employee, Director or Consultant for any reason, this Option shall immediately
cease vesting; provided, however, if such termination occurs as a result of
either death or Disability, the vesting of this Option shall be partially
accelerated as set forth on Exhibit A hereto.

1.3                                 Term
of Option.  The “Term” of this Option shall begin on the
date of grant set forth on Exhibit A and end on the expiration of the Term
specified on Exhibit A.  No portion of
this Option may be exercised after the expiration of the Term.

1.3.1                        In the event of termination of
Optionee’s Continuous Status as an Employee, Director or Consultant by death or
Disability, this Option shall terminate and be cancelled on the earlier of (i)
the expiration of the Term, or (ii) 12 months

 

after termination of Optionee’s Continuous
Status as an Employee, Director or Consultant.

1.3.2                        In the event of termination of
Optionee’s Continuous Status as an Employee, Director or Consultant for any
reason other than Cause, death or Disability, the portion of this Option that
is not vested and exercisable as of the date of termination shall be
immediately cancelled and terminated.  In
addition, the portion of this Option that is vested and exercisable as of the
date of termination of Optionee’s Continuous Status as an Employee, Director or
Consultant shall terminate and be cancelled on the earlier of (i) the
expiration of the Term, or (ii) 90 days after termination of Optionee’s
Continuous Status as an Employee, Director or Consultant.

1.3.3                        If Optionee’s Continuous Status
as an Employee, Director or Consultant is terminated for Cause, this entire
Option shall be cancelled and terminated as of the date of such termination and
shall no longer be exercisable as to any Shares, whether or not previously
vested.

2.                                       Method
of Exercise.

2.1                                 Delivery
of Notice of Exercise.

2.1.1                        Except as otherwise provided in
Section 2.1.2, this Option shall be exercisable by written notice in the form
attached hereto as Exhibit B which shall state the election to exercise
this Option, the number of Shares in respect of which this Option is being
exercised, and such other representations and agreements with respect to such
Shares as may be required by the Company pursuant to the provisions of this
Agreement and the Plan.  Such written
notice shall be signed by Optionee (or by Optionee’s beneficiary or other
person entitled to exercise this Option in the event of Optionee’s death under
the Plan) and shall be delivered in person or by overnight delivery service or
certified mail to the Secretary of the Company.

2.1.2                        If permitted by the Company at
the time of exercise, this Option may also be exercised by providing a notice
of exercise to the Third Party Administrator (as the Company’s agent) by or
through any means permitted by the Third Party Administrator from time to time,
including, without limitation, by providing notice of exercise to the Third
Party Administrator by telephone or by using the Third Party Administrator’s
Internet web site to provide notice of exercise, and in such event, the notice
of exercise may be provided, but shall not be required to be provided, in
writing.  For purposes hereof, “Third Party Administrator” means The Bank
of New York as the Company’s third party stock option administrator, or, as
applicable, any successor third party stock option administrator designated by
the Committee.

2.1.3                        Upon exercise in accordance
with Section 2.1.1 or 2.1.2, the Optionee shall pay the exercise price to the
Company in any manner permitted by Section 2.3. This Option shall not be deemed
exercised until the Company receives notice of exercise pursuant to this
Section 2.1 and the exercise price and any other applicable

 2
 

 

terms and conditions of this Agreement are
satisfied.  This Option may not be
exercised for a fraction of a Share.

2.2                                 Restrictions
on Exercise.  No Shares will be
issued pursuant to the exercise of this Option unless and until there shall
have been full compliance with all applicable requirements of the Securities
Act of 1933, as amended (whether by registration or satisfaction of exemption
conditions), all Applicable Laws, and all applicable listing requirements of
any national securities exchange or other market system on which the Common
Stock is then listed.  As a condition to
the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be necessary or appropriate,
in the judgment of the Committee, to comply with any Applicable Law.

2.3                                 Method
of Payment.  Payment of the exercise
price shall be made in full at the time of exercise (a) in cash or by
certified check or bank check or wire transfer of immediately available funds,
(b) by delivery of a properly executed exercise notice together with any
other documentation as the Committee and the Participant’s broker, if
applicable, require to effect an exercise of the Option and delivery to the
Company of the sale or other proceeds (as permitted by Applicable Law) required
to pay the exercise price, or (c) with the consent of the Committee in its
discretion, by tendering previously acquired Shares (either actually or by
attestation, valued at their then Fair Market Value) that have been owned for a
period of at least six months (or such other period to avoid accounting charges
against the Company’s earnings).  In
addition, the Committee may impose such other conditions in connection with the
delivery of shares of Common Stock in satisfaction of the exercise price as it
deems appropriate in its sole discretion.

2.4                                 Tax
Withholding Obligations.  In addition
to the foregoing requirements, any exercise of this Option shall be conditioned
upon the Optionee satisfying any applicable tax withholding obligations imposed
on the Company in connection with the exercise of this Option.

3.                                       Non-Transferability
of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution or to a beneficiary designated pursuant to the Plan, and may be
exercised during the lifetime of Optionee only by Optionee.  Subject to all of the other terms and
conditions of this Agreement, following the death of Optionee, this Option may,
to the extent it is vested and exercisable by Optionee in accordance with its
terms on the date of death, be exercised by Optionee’s beneficiary or other
person entitled to exercise this Option in the event of Optionee’s death under
the Plan.  This Option may be assigned, in
connection with the Optionee’s estate plan, in whole or in part, during the
Optionee’s lifetime to one or more Family Members of the Optionee.  Rights under the assigned portion may be
exercised by the person or persons who acquire a proprietary interest in such
Option pursuant to the assignment.  The
terms applicable to the assigned portion shall be the same as those in effect
for the Option immediately before such assignment and shall be set forth in
such documents issued to the assignee as the Committee deems appropriate.

4.                                       Restrictions;
Restrictive Legends.  Ownership and
transfer of Shares issued pursuant to the exercise of this Option will be
subject to the provisions of, including
ownership and 

 3
 

 

transfer restrictions (including, without
limitation, restrictions imposed by Applicable Laws and restrictions set
forth or referenced in legends imprinted on certificates representing such
Shares).

5.                                       General.

5.1                                 Governing
Law.  This Agreement shall be
governed by and construed under the laws of the state of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the
conflicts of law provisions of Delaware or any other jurisdiction.

5.2                                 Notices.  Any notice required or permitted under this
Agreement shall be given in writing by overnight courier or by postage prepaid,
United States registered or certified mail, return receipt requested, to the
address set forth below or to such other address for a party as that party may
designate by 10 days advance written notice to the other parties.  Notice shall be effective upon the earlier of
receipt or 3 days after the date on which such notice is deposited in the mails
or with the overnight courier.

If to the Company:                                             CPI International, Inc.

811 Hansen Way

Palo Alto, California 94303-1110

Attention: Chief Financial Officer

If to Optionee, at the address set forth on Exhibit A.

5.3                                 Community
Property.  Without prejudice to the
actual rights of the spouses as between each other, for all purposes of this
Agreement, the Optionee shall be treated as agent and attorney-in-fact for that
interest held or claimed by his or her spouse with respect to this Option and
the parties hereto shall act in all matters as if the Optionee was the sole
owner of this Option.  This appointment
is coupled with an interest and is irrevocable.

5.4                                 Modifications.  This Agreement may be amended, altered or
modified only by a writing signed by each of the parties hereto.

5.5                                 Application
to Other Stock.  In the event any
capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend,
stock split, reclassification or recapitalization in connection with any merger
or reorganization or otherwise, all restrictions, rights and obligations set
forth in this Agreement shall apply with respect to such other capital stock to
the same extent as they are, or would have been applicable, to the Option
Shares on or with respect to which such other capital stock was distributed.

5.6                                 Additional
Documents.  Each party agrees to
execute any and all further documents and writings, and to perform such other
actions, which may be or become reasonably necessary or expedient to be made
effective and carry out this Agreement.

5.7                                 No
Third-Party Benefits.  Except as
otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party
beneficiary.

 4
 

 

5.8                                 Successors
and Assigns.  Except as provided
herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.

5.9                                 No
Assignment.  Except as otherwise
provided in this Agreement, the Optionee may not assign any of his, her or its
rights under this Agreement without the prior written consent of the Company,
which consent may be withheld in its sole discretion.  The Company shall be permitted to assign its
rights or obligations under this Agreement, but no such assignment shall release
the Company of any obligations pursuant to this Agreement.

5.10                           Severability.  The validity, legality or enforceability of
the remainder of this Agreement shall not be affected even if one or more of
the provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect.

5.11                           Equitable
Relief.  The Optionee acknowledges
that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach
will cause the Company great, immediate and irreparable injury and damage.  Accordingly, the Optionee agrees that the
Company shall be entitled to injunctive and other equitable relief, and that
such relief shall be in addition to, and not in lieu of, any remedies it may
have at law or under this Agreement.

5.12                           Arbitration.

5.12.1                    General.  Any controversy, dispute, or claim between
the parties to this Agreement, including any claim arising out of, in
connection with, or in relation to the formation, interpretation, performance
or breach of this Agreement shall be settled exclusively by arbitration, before
a single arbitrator, in accordance with this Section 5.12 and the then most
applicable rules of the American Arbitration Association.  Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof.  Such arbitration shall be
administered by the American Arbitration Association.  Arbitration shall be the exclusive remedy for
determining any such dispute, regardless of its nature.  Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court for provisional relief, including
a temporary restraining order or a preliminary injunction, on the ground that
the award to which the applicant may be entitled in arbitration may be rendered
ineffectual without provisional relief. 
Unless mutually agreed by the parties otherwise, any arbitration shall
take place in the City of Palo Alto, California.

5.12.2                    Selection of
Arbitrator.  In the event the parties
are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators (which shall be retired judges or
corporate or litigation attorneys experienced in executive compensation and stock
options) provided by the office of the American Arbitration Association having
jurisdiction over Palo Alto, California. 
If the parties are unable to agree upon an arbitrator from the list so
drawn, then the parties shall each strike names alternately from the list, with
the first to strike being determined by lot. 
After each party has used four strikes, the remaining name on the list
shall be the arbitrator.  If such person
is unable to serve for any reason, the parties shall repeat this process until
an arbitrator is selected.

 5
 

 

5.12.3                    Applicability
of Arbitration; Remedial Authority. 
This agreement to resolve any disputes by binding arbitration shall
extend to claims against any parent, subsidiary or affiliate of each party,
and, when acting within such capacity, any officer, director, shareholder,
employee or agent of each party, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances
as well as to claims arising under the common law.  In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator.  The
remedial authority of the arbitrator (which shall include the right to grant
injunctive or other equitable relief) shall be the same as, but no greater
than, would be the remedial power of a court having jurisdiction over the
parties and their dispute.  The
arbitrator shall, upon an appropriate motion, dismiss any claim without an
evidentiary hearing if the party bringing the motion establishes that he or it
would be entitled to summary judgment if the matter had been pursued in court
litigation.  In the event of a conflict
between the applicable rules of the American Arbitration Association and these
procedures, the provisions of these procedures shall govern.

5.12.4                    Fees and
Costs.  Any filing or administrative
fees shall be borne initially by the party requesting arbitration.  The Company shall be responsible for the
costs and fees of the arbitration, unless the Optionee wishes to contribute (up
to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the prevailing
party in such arbitration, as determined by the arbitrator, and in any enforcement
or other court proceedings, shall be entitled, to the extent permitted by law,
to reimbursement from the other party for all of the prevailing party’s costs
(including but not limited to the arbitrator’s compensation), expenses, and
attorneys’ fees.

5.12.5                    Award Final
and Binding.  The arbitrator shall
render an award and written opinion, and the award shall be final and binding
upon the parties.  If any of the
provisions of this paragraph, or of this Agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all conflicts
between the parties, including those arising out of statutory claims, shall be
resolved by neutral, binding arbitration. 
If a court should find that the arbitration provisions of this Agreement
are not absolutely binding, then the parties intend any arbitration decision
and award to be fully admissible in evidence in any subsequent action, given
great weight by any finder of fact, and treated as determinative to the maximum
extent permitted by law.

5.13                           Headings.  The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, extend
or interpret the scope of this Agreement or of any particular section.

5.14                           Number
and Gender.  Throughout this
Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the
singular tense and number includes the plural, and the plural tense and number
includes the singular; (c) the past tense includes the present, and the present
tense includes the past; (d) references to parties, sections, paragraphs and
exhibits

 6
 

 

mean the
parties, sections, paragraphs and exhibits of and to this Agreement; and (e)
periods of days, weeks or months mean calendar days, weeks or months.

5.15                           Counterparts.
 This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

5.16                           Complete
Agreement.  This Agreement and the
Plan constitute the parties’ entire agreement with respect to the subject
matter hereof and supersede all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof.

5.17                           Waiver
of Jury Trial.  TO THE EXTENT EITHER
PARTY INITIATES LITIGATION INVOLVING THIS AGREEMENT OR ANY ASPECT OF THE
RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS ARE INCLUDED IN
SUCH LITIGATION), ALL THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.  THIS WAIVER WILL APPLY TO ALL CAUSES OF
ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION, INCLUDING CLAIMS RELATED
TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT, ALLEGATIONS OF STATE OR
FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR CAUSES OF
ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES,
OFFICERS, EMPLOYEES OR AGENTS.

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  CPI INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  

 

 

EXHIBIT A

DETAILS OF STOCK OPTION GRANT

	
  Optionee Name:

  	
   

  
	
  Date of Grant:

  	
   

  
	
  Number of Shares of Common Stock:

  	
   

  
	
  Exercise Price Per Share:

  	
   

  
	
  Term of Option:

  	
  10 Years after date of grant

  

 

Vesting Schedule:  Subject to the
restrictions and limitations of the Option Agreement and the Plan, this Option
shall vest and become exercisable with respect to 25% of the Shares subject to
this Option on the first anniversary of the date of grant.  On each subsequent anniversary of the date of
grant, if Optionee’s Continuous Status as an Employee, Director or Consultant
has not terminated, this Option shall become vested and exercisable with
respect to an additional 25% of the Shares subject to this Option, until 100%
of the Shares subject to this Option have become vested and exercisable.

If Optionee’s Continuous Status as an Employee, Director or Consultant
terminates as result of death or Disability and the date of termination does
not occur on an anniversary of the date of grant, then for purposes of
determining the extent to which this Option has vested, Optionee’s Continuous
Status as an Employee, Director or Consultant shall be deemed to have
terminated on the next occurring anniversary of the date of grant.  For example, if Optionee’s Continuous Status
as an Employee, Director or Consultant terminates as result of death or
Disability 25 months after the date of grant, 50% of the Shares subject to this
Option shall be deemed to be vested and exercisable as of the date of
termination (and no further vesting shall occur)

Employee Address:                                                                               

 

EXHIBIT B 

NOTICE OF EXERCISE OF STOCK OPTION

CPI International, Inc.

811 Hansen Way

Palo Alto, California 94303-1110

Attn: Chief Financial Officer

Ladies and Gentlemen:

The
undersigned hereby elects to exercise the option indicated below:

	
  Option Grant Date:                                       

  
	
  Number of Shares Being Exercised:                                       

  
	
  Exercise Price Per Share:                                       

  
	
  Total Exercise Price: $                                      

  
	
  Method of Payment:                                      

  

 

Enclosed
herewith is payment in full of the total exercise price.

My exact name, current address and social security
number for purposes of the stock certificates to be issued and the shareholder
list of the Company are:

	
   

  	
  Name:                                           

  
	
   

  	
  Address:
                                             

  
	
   

  	
   

  	
                                        

  
	
   

  	
  Social Security Number:                                      

  

 

I understand that there may be adverse tax
consequences to me as a result of the exercise of the Option and/or any sale of
the Shares, and I have consulted with my own tax advisor regarding those
consequences and I am not relying on the Company for any tax advice.

I also agree that I will not sell or dispose of my
Shares in violation of applicable securities laws, Company policy (including
applicable “black-out” periods) or any agreement
by which I am bound.

 

	
  

  	
   

  	
  Sincerely,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Optionee’s Signature)

  	
   

  
							

 

SPOUSAL
CONSENT

By
his or her signature below, the spouse of the Optionee agrees to be bound by
all of the terms and conditions of the foregoing Option Agreement (including
those relating to the appointment of the Optionee as agent for any interest
that Spouse may have in the Option Shares).

	
  

  	
  OPTIONEE’S SPOUSE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name

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