THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

CPI International, Inc. (CPII)

5/1/2006 424B4 Information

MANAGEMENT STOCKHOLDERS AGREEMENT

We, Cypress, our outside directors and certain of our executive officers (together with certain of our outside directors, ‘‘management stockholders’’) entered into a management stockholders agreement dated as of January 23, 2004. This agreement contained restrictions on transfer, rights to repurchase shares of common stock held by such management stockholders upon their termination of employment, tag-along rights on certain transfers of common stock by Cypress, drag-along rights in favor of Cypress, rights of first refusal on transfers of common stock by management stockholders, call rights, voting agreements and non-competition and non-solicitation covenants. This agreement also contained "piggyback" registration rights in favor of the management stockholders and imposed certain "lockup" restrictions on such stockholders.

In connection with this offering, on April 27, 2006, we amended and restated the management stockholders agreement. All provisions of the original management stockholders' agreement were terminated other than the registration rights and "lock-up" provisions.

The amended and restated management stockholders agreement grants the management stockholders and certain of their permitted transferees customary ‘‘piggyback’’ registration rights. If at any time during the two-year period after this offering we propose to register any common stock under the Securities Act (pursuant to a demand or otherwise) other than on a registration statement on Form S-4 or S-8, or in connection with an exchange offer, then the management stockholders may elect to include in, or ‘‘piggyback’’ on, the registration all or a portion of the shares of our common stock held by them. The managing underwriter, if any, of the offering pursuant to the registration will have the right to limit the number of shares to be included by the management stockholders. In addition, the management stockholders may not (1) sell shares in a public offering if the managing underwriters determine in their reasonable judgment that such participation would have an adverse effect on such offering, or (2) exercise piggyback rights to the extent that the exercise would result in a sale by a management stockholder, on a cumulative basis, of a greater percentage of such management stockholder's common stock than the percentage sold by Cypress. In addition, we would bear all registration expenses incurred in connection with these registrations, and the selling stockholders would pay all underwriting fees, discounts, and commissions applicable to the sale of their securities. In addition, the amended and restated agreement provides that no further employees will become eligible for registration rights thereunder. The amended and restated management stockholders agreement imposes ‘‘lock-up’’ restrictions on the management stockholders, generally preventing them from selling our common stock during certain periods following registered offerings of our common stock that take place during the two-year period after this offering.

REGISTRATION RIGHTS AGREEMENT

We entered into a registration rights agreement with Cypress on January 23, 2004. In connection with this offering, on April 27, 2006, we amended and restated this registration rights agreement. Under the amended and restated registration rights agreement Cypress and its affiliates and certain persons who acquire our common stock from them (the ‘‘Cypress Holders’’) have the right, subject to certain limitations, at any time on or after the date that is 180 days after this offering, to demand that we file a registration statement under the Securities Act covering all or a portion of such Cypress Holder's shares of our common stock. The Cypress Holders may not make more than six demands.

In addition, the amended and restated registration rights agreement grants the Cypress Holders customary ‘‘piggyback’’ registration rights. If at any time after this offering we propose to register any common stock under the Securities Act (pursuant to a demand or otherwise) other than on a registration statement on Form S-4 or S-8, or in connection with an exchange offer, each of the Cypress Holders may elect to include in, or ‘‘piggyback’’ on, the registration all or a portion of the shares of our common stock held by such Cypress Holders. However, the managing underwriter, if any, of the offering pursuant to the registration has the right to limit the number of shares to be included by these holders. In connection with an offering of common stock, we will agree to indemnify the selling Cypress Holders and their controlling persons against certain liabilities, including liabilities under the Securities Act. In addition, we will bear all registration expenses incurred in connection with these registrations. The selling stockholders will pay all underwriting fees, discounts, and commissions applicable to the sale of their securities. For the first two demand registrations that are underwritten offerings, we will agree to use our commercially reasonable efforts to make senior management available for road show presentations.

FEE AGREEMENTS

In connection with our January 2004 merger, we paid $0.3 million to Chris Toffales, one of our directors. The financial advisory fees paid to Chris Toffales were for services performed prior to his appointment to our board of directors.

In connection with the merger, we entered into a transaction fee agreement with Cypress Advisors, which is an affiliate of Cypress Associates II, LLC, the general partner of Cypress Merchant Banking Partners II L.P., which is our majority stockholder, relating to certain structuring and advisory services that Cypress Advisors provided to us for aggregate transaction and advisory fees of $2.5 million, which was paid when the merger was consummated. We agreed to indemnify Cypress Advisors and its affiliates, directors, officers and representatives for losses relating to the services contemplated by the transaction fee agreement and the engagement of Cypress Advisors pursuant to, and the performance by it of the services contemplated by, the transaction fee agreement. Two of our directors, Jeffrey Hughes and Michael Finley, are officers of Cypress Advisors.

Our predecessor and Leonard Green & Partners, L.P., which is an affiliate of the general partner of Green Equity Investors II, L.P., the predecessor's former majority stockholder, were parties to a management services agreement pursuant to which our predecessor was required to pay to Leonard Green & Partners, L.P. an annual amount equal to approximately $0.4 million, plus out-of-pocket expenses. Certain individuals who were stockholders of the general partner of Leonard Green & Partners, L.P. were members of our predecessor's and Communications & Power Industries' board of directors. The management services agreement provided for management, consulting and financial planning services, including assistance in strategic planning, providing market and financial analyses, negotiating and structuring financing and exploring expansion opportunities. During fiscal year 2003 and for the 16-week period ended January 22, 2004, our predecessor paid Leonard Green & Partners, L.P. an amount of $0.4 million and $0.1 million, respectively, of annual fees. In addition, in connection with and upon consummation of the merger, pursuant to the management services agreement, our predecessor paid Leonard Green & Partners, L.P. a transaction fee of $1.2 million. The management services agreement was terminated when the merger was consummated.

OTHER AGREEMENTS AND ARRANGEMENTS

In March 2004, Mr. Targoff and Mr. Toffales, both of which were at such time and currently are our directors, purchased 65,020 and 9,753 shares of our common stock, respectively, at a price of $7.69 per share, which was the same purchase price paid by Cypress for shares of our common stock in connection with their investment in January 2004.

In connection with our predecessor's 1995 management equity plan, certain executive officers of our predecessor elected to pay a portion of the purchase price for the shares of the predecessor's common stock purchased by them pursuant to such plan by delivery of a secured promissory note to the predecessor. The aggregate principal amount of these promissory notes was $0.9 million as of October 3, 2003. In connection with our January 2004 merger, these promissory notes and accrued interest were paid in full and cancelled.