EXHIBIT 10.4
FORM OF
OPTION ROLLOVER AGREEMENT
(CANADIAN EMPLOYEES)
OPTION ROLLOVER AGREEMENT dated as of January 23, 2004 (the
"Agreement") between CPI Acquisition Corp., a Delaware corporation, (the
"Acquiror"), and the manager named on Schedule A (the "Manager").
WHEREAS, the Acquiror, CPI Merger Sub Corp. (the "Merger Sub"),
Communications & Power Industries Holding Corporation (the "Company") and Green
Equity Investors II, L.P. have entered into an Agreement and Plan of Merger,
dated as of November 17, 2003 (the "Merger Agreement");
WHEREAS, pursuant to the Merger Agreement, as of the Closing which
occurs on the Closing Date (each as defined in the Merger Agreement), the Merger
Sub will merge with and into the Company, with the Company surviving, and the
Company shall be a wholly owned subsidiary of the Acquiror; and
WHEREAS, the Manager and other members of the Company management team
currently hold options to acquire shares of the Company's common stock ("Company
Options") and have agreed that, as of the Closing Date, Company Options shall be
converted into options to purchase shares of the Acquiror;
NOW THEREFORE, in consideration of the foregoing, and the covenants and
promises and representations set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged and
accepted, the parties hereto agree as follows:
1. This Agreement shall constitute a binding obligation
of the parties hereto as of the date hereof; provided that the operative
provisions of this Agreement shall only take effect upon the occurrence of the
Closing Date. In the event the Merger Agreement is terminated for any reason
without the Closing Date having occurred, this Agreement shall be terminated
without further obligation or liability of any party hereunder. Defined terms
not otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
2. Notwithstanding any provision in the Merger
Agreement, as of the date hereof, the Manager agrees not to exercise any Company
Options.
3. With respect to each grant of Company Options held by
the Manager as of the Closing Date, the Manager agrees that the number of
Company Options subject to such grant set forth on Schedule A attached hereto
(the "Continuing Options") shall be converted into options to purchase shares of
the Acquiror ("Acquiror Options"). The remaining Company Options shall be
cancelled and shall be converted into the right to receive a cash payment as set
forth in the Merger Agreement. Each Acquiror Option shall be subject to the same
terms and conditions as the corresponding Company Option (provided that the
vesting of such Acquiror Option shall accelerate to the extent that the vesting
of the corresponding Company Option accelerates pursuant to the Merger
Agreement) and, in the aggregate, shall, as of immediately
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following the Closing Date, preserve the difference between (a) the Per Share
Amount minus (b) the exercise price per share of such Company Option. The shares
of Acquiror issued upon exercise of the Acquiror Options will be subject to the
terms and conditions of the stockholders' agreement described in the Information
Memorandum previously provided to the Manager. The Manager agrees that,
notwithstanding any provision in the Merger Agreement, the Manager shall not be
entitled to receive, with respect to the Continuing Options, (x) the Per Share
Additional Amount (if any) or (y) the payment described in Section 2.3.1(e) of
the Merger Agreement and distributions from the Expense Escrow Amount and the
Working Capital Escrow Amount (collectively, the "ADDITIONAL PAYMENTS"), which
Additional Payments, if any, the Manager shall cause to be delivered to the
Acquiror or such other entity as designated by the Acquiror in its sole
discretion; provided, however, that the Manager shall be entitled to additional
options to purchase shares of Acquiror with an aggregate exercise price equal to
the excess of (i) the aggregate fair market value of the shares subject to such
options on the date of grant over (ii) the Additional Payments.
4. The Manager represents and warrants to the Acquiror
as follows:
(a) The Manager is as of the date hereof an
employee of the Company and in such capacity has acquired at least a general
understanding of the Company and its business. The Manager has been given the
opportunity to obtain any additional information or documents (and to ask
questions and receive answers about such information and documents) about the
Acquiror and its business (and the Company and its business) which he deems
necessary to evaluate the merits and risks related to his investment in the
Acquiror Options (which, for purposes of this Section 4 shall include the
underlying shares of the Acquiror).
(b) In making his decision to invest in the
Acquiror, the Manager has relied upon independent investigations made by him
and, to the extent believed by the Manager to be appropriate, his
representatives, including his own professional, financial, tax and other
advisors.
(c) The Manager is able to bear the economic
risk of a total loss of the Manager's investment in the Acquiror, and the
Manager has adequate means of providing for the Manager's current needs and
foreseeable personal contingencies and has no need for the Manager's investment
in the Acquiror Options to be liquid.
(d) The Manager understands that an investment
in the Acquiror is a speculative investment which involves a high degree of risk
of loss of his investment therein, there are substantial restrictions on the
transferability of the Acquiror Options, and, on the date hereof and for an
indefinite period following the date hereof, there will be no public market for
the Acquiror Options and, accordingly, it may not be possible for the Manager to
liquidate his investment in case of emergency, if at all.
(e) The Manager understands and has taken
cognizance of all risk factors related to the retention of the Acquiror Options,
and the Manager has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of his purchase of
the Acquiror Options as contemplated by this Agreement.
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5. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
[SIGNATURE PAGES FOLLOW THIS PAGE]
[CPI ACQUISITION CORP. SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT]
CPI ACQUISITION CORP.
By: ______________________________
Name:
Title:
[MANAGER SIGNATURE PAGE - OPTION ROLLOVER AGREEMENT]
______________________________
Name:
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Schedule A
1. Manager Name.......................................____________________
2. Rollover Amount
(a) Company Options
with exercise price of $1.10 (if any).....____________________
(b) Company Options
with exercise price of $4.00 (if any).....____________________
3. The Manager is an "accredited investor" (as defined below). Please
circle the applicable response:
YES NO
"Accredited investor" means any person who comes within any of the
following categories, or who the issuer reasonably believes comes within any of
the following categories, at the time of the sale of the securities to that
person:
a. Any bank as defined in section 3(a)(2) of the Securities Act of 1933,
as amended (the "Act"), or any savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Act whether acting
in its individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange Act of
1934; any insurance company as defined in section 2(a)(13) of the Act;
any investment company registered under the Investment Company Act of
1940 or a business development company as defined in section 2(a)(48)
of that Act; any Small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by
a state, its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
b. Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
c. Any organization described in section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000;
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d. Any director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
e. Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeds $1,000,000;
f. Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year;
g. Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii); and
h. Any entity in which all of the equity owners are accredited investors.
