CPI INTERNATIONAL, INC. PERFORMANCE STOCK OPTION AGREEMENT
Exhibit
10.46
THIS
PERFORMANCE 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.
1.2.1 This
Option grant shall be broken up into two (2) tranches (each a “Tranche”) as
follows:
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1.2.1.1
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Tranche
One shall consist of options to purchase one-half of the Shares subject to
this Option.
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1.2.1.2
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Tranche
Two shall consist of options to purchase one-half of the Shares subject to
this Option.
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1.2.2 Except as
provided in Section
1.2.6 or 1.2.7 below, this
Option shall become vested and exercisable with respect to Shares subject to
this Option on the first date on which both the Time Vesting Condition
(described below) and the Performance Condition (described below) is satisfied
with respect to such Shares.
1.2.3 Time Vesting
Condition. The “Time Vesting Condition” shall
be satisfied with respect to twenty-five percent (25%) of the Shares in each
Tranche on the first anniversary of the date of grant. On each
subsequent anniversary of the date of grant, the Time Vesting Condition shall be
satisfied with respect to an additional 25% of the Shares in each Tranche, until
the Time Vesting Condition has become satisfied with respect to 100% of the
Shares in each Tranche.
1.2.4 Performance
Conditions. The “Performance Condition” shall
be deemed to be satisfied with respect to all of the Shares in a Tranche on the
first date on which the Average Stock Price (as defined below) equals or exceeds
the Price Threshold (as defined below) with respect to such
Tranche.
1.2.5 Defined
Terms.
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1.2.5.1
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“Applicable Trading
Period” means with respect to any date, the twenty consecutive
Trading Days (as defined below) immediately prior to such date, but only
if all such Trading Days occur during the Performance Period (as defined
below).
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1.2.5.2
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“Average Stock Price” as
of any date means the average, for the Applicable Trading Period
immediately preceding such date, of (i) the last reported sales price of a
Share for each Trading Day in the Applicable Trading Period, as reported
on the principal national securities exchange on which the Shares are
listed or admitted for trading or (ii) if the Shares are not listed or
admitted for trading on any national securities exchange, the average of
the highest bid and lowest asked prices for a Share in the domestic
over-the-counter market as reported by Pink OTC Markets, Inc., or any
similar organization for each Trading Day in the Applicable Trading
Period. The Average Stock Price shall be appropriately adjusted
to reflect any Share Adjustment Transaction (as defined below) which
impacts an Applicable Trading
Period.
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1.2.5.3
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“Performance Period”
shall mean the period beginning on the twentieth (20th)
day following the date of grant and ending on the tenth (10th)
anniversary of the date of grant.
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1.2.5.4
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“Price Threshold” shall
mean, (i) with respect to Tranche One, $13.50; and (ii) with respect to
Tranche Two, $16.00. Each Price Threshold shall be
appropriately adjusted to reflect any Share Adjustment Transaction during
the Performance Period.
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1.2.5.5
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“Share Adjustment
Transaction” shall mean (i) a stock dividend with respect to the
Shares, (ii) the subdivision of the Shares (by stock split,
reclassification or otherwise) into a larger number of shares, (iii) the
combination (by reverse stock split or otherwise) of the Shares into a
smaller number of shares, or (iv) a transaction which has similar
effect.
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1.2.5.6
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“Trading Day” shall mean
a day on which the principal national securities exchange on which the
Shares are listed or admitted to trading is open for trading, or if the
Shares are not listed or admitted to trading on any national securities
exchange, any day other than a Saturday, Sunday, or other day on which
commercial banking institutions in New York, New York are required or
authorized by law to remain closed.
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1.2.6 In the
event that (i) a Change of Control occurs and the Shares are converted into the
right to receive cash, other securities or other property, or (ii) a Change of
Control occurs and the Shares remain outstanding but are no longer publicly
traded (or the Company is taken private by the Cypress Group or affiliates
thereof), then the Performance Conditions shall no longer be applicable and this
Option shall be subject to the Time Vesting Condition only. In
addition, if, in connection with a merger, consolidation, reorganization,
recapitalization or similar transaction in which the Company is not the
surviving entity, (i) all obligations under this Option are not fully assumed by
the surviving or resulting entity, and (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.
1.2.7 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 and no further vesting shall occur; provided, however, if such
termination occurs as a result of either death or Disability, the Time Vesting
of this Option shall be partially accelerated as follows: upon the
date of termination as a result of either death or Disability, the 25% of each
Tranche that is next scheduled to satisfy the Time Vesting Condition will be
deemed to have satisfied the Time Vesting Condition; provided, for the avoidance
of doubt, termination due to death or Disability shall not affect whether or not
the Performance Conditions have been satisfied.
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 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 BNY Mellon Shareowner Services 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 Optionee’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 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.
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If
to the Company:
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Attention:
Chief Financial Officer
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If
to Optionee, at the address set forth on Exhibit
A.
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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.
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.
5.12.3 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 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.
By:___________________________________
Its:___________________________________
OPTIONEE
______________________________________
Name:
EXHIBIT
A
DETAILS OF PERFORMANCE STOCK
OPTION GRANT
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Optionee
Name:
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Date
of Grant:
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December
5, 2008
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Number
of Shares of Common Stock:
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Exercise
Price Per Share:
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US$10.00
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Term
of Option:
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10
Years after date of grant
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Employee
Address: ____________________________________________
____________________________________________
____________________________________________
EXHIBIT
B
NOTICE OF EXERCISE OF
PERFORMANCE STOCK OPTION
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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:_______________________________
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Address:_____________________________
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_____________________________
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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,
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Dated:_________________
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______________________________
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(Optionee’s
Signature)
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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
______________________________
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