COMMUNICATIONS & POWER INDUSTRIES HOLDING CORP
EXHIBIT 10.42
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<TYPE>EX-10.42
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<FILENAME>f95383exv10w42.txt
<DESCRIPTION>EXHIBIT 10.42
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                                                                   Exhibit 10.42


                             COMPANY POLICY                   number 0001

                                                        eff. date 30 Sept. 2003
[CPI LOGO]             LEGAL AND ETHICAL CONDUCT        replaces  12 April 1999
                                                             page 1 of 10


PURPOSE

At CPI, the Chief Executive Officer and senior executives are responsible for
setting standards of business ethics and overseeing compliance with these
standards. It is the individual responsibility of each employee, consultant and
agent of CPI and its subsidiaries to comply with these standards. This Code is
not the exclusive source of guidance and information about CPI's expectations,
but it serves as the basis for other company policies and guidelines as defined
in the Company Policy Manual.

APPLICATION AND COMPLIANCE

CPI's Code of Legal and Ethical Conduct is applicable to all employees,
consultants and agents of CPI and its subsidiaries. The terms "CPI" and the
"Company" include CPI and each of its functions, Divisions, operations, and/or
subsidiaries. Managers at all levels are expected to foster the highest standard
of ethical conduct and to ensure adherence to company policies and practices and
to teach by example the exercise of sound and mature judgment in all business
relationships. They are also responsible for maintaining a workplace environment
which encourages and supports frank and open communication among employees and
with management. Questions as to the requirements of this policy or specific
applicable statutes or regulations should be raised with your team leader,
supervisor, manager, Division President or Corporate Officer. Any request by an
employee (other than a senior executive) for a waiver of any provision of this
Code must be in writing and addressed to the employee's Division President or a
Corporate Officer. Any request by a senior executive for a waiver of any
provision of this Code must be in writing and addressed to CPI's Board of
Directors.

Responsibility for compliance with this policy rests with each employee. The
unqualified recognition on the part of all employees of this responsibility is
fundamental to CPI's compliance program. Conduct not complying with both the
letter and the spirit of the requirements set forth in this Code of Legal and
Ethical Conduct and other company policies may be grounds for disciplinary
action, which in serious cases may include dismissal.

REPORTING VIOLATIONS

If an employee observes possible illegal or unethical behavior or other behavior
that is in violation of this Code, it should be reported promptly to any member
of management. If necessary, an employee will be provided with access to CPI's
outside legal counsel. It is CPI's policy that the employee will not suffer
adverse action for honestly raising an ethical or legal concern. Reporting on an
anonymous basis is available by calling the CPI Open Line at (650) 846-3200 from
an outside line.



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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          2 of 10
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GENERAL POLICY

CPI's founding tenet and continuing policy is to comply fully with all laws
governing it operations, and to honor the highest legal and ethical standards
in the conduct of its business. This Code means not only observing the law, but
also conducting CPI's business in a manner that identifies CPI as an ethical
and law-abiding enterprise, alert to all the responsibilities of good corporate
citizenship. The spirit of this Code requires CPI employees to maintain the
highest degree of integrity with shareholders, employees, customers, suppliers,
local communities, governments at all levels, and the general public. Each
section of this Code covers areas in which employees have responsibilities to
CPI:

-  Rules for Business Courtesies

-  Conflicts of Interest

-  Recording and Reporting Information

-  Marketing Guidelines

-  Insider Trading

RULES FOR BUSINESS COURTESIES

The conduct of CPI's employees and consultants in their business relationships
with others involves important responsibilities. Friendly relations with
organizations with which CPI does business are desirable. Such relationships,
however, must be guided by high standards of personal conduct and integrity.
Favoritism, preferential treatment, and unethical business practices must be
avoided. Employees and consultants must also avoid any conduct that might be
misinterpreted by others or that might provide any basis for questioning
propriety.

These rules relating to the acceptance or granting of business courtesies,
social amenities, gifts, or favors are applicable to all employees and
consultants in their relationships with employees and representatives (and
their families) of organizations with which CPI has a business relationship. An
organization with which CPI "has a business relationship" includes
organizations with which CPI competes or does business, and ones which actively
seek to do business with CPI. Expenses incurred not meeting the criteria of
this company policy are not reimbursable by the Company.

No employee may, directly or indirectly, accept from or provide to any
employee or representative of any organization with which CPI has a business
relationship any gift or favor other than an ordinary business courtesy or
social amenity. Any such courtesy or amenity must not be in violation of any
statute or regulation, must not create the appearance of impropriety or
improper influence, must only be offered or accepted in the ordinary course of
business, and must not be frequent, lavish, or extravagant. No employee may
solicit any gift or favor.
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                                                    number    0001
                                                    eff. date 30 Sept. 2003
COMPANY POLICY                                      replaces  12 April 1999
                                                    page      3 of 10
_______________________________________________________________________________


This policy is also applicable to relationships relating to U.S. Government
business. However, you must, in addition, comply with the special rules in CPI's
Government Business Policy Manual for relationships with employees and
representatives of (1) the U.S. Government, (2) U.S. Government prime
contractors and higher tier subcontractors, and (3) vendors and subcontractors
of CPI under U.S. Government contracts and subcontracts. These rules are based
upon strict statutes and regulations. Business courtesies not complying with
these rules may be viewed as unlawful by U.S. Government authorities, and may
result in penalties and/or cancellation or termination for default of any
related U.S. Government contracts.

States have similar statutes which are applicable to state and local government
agencies and departments, and their contractors. Many federal, state and local
government agencies and departments have adopted standards of conduct with
respect to business courtesies. You must comply with these statutes and
standards of conduct as well.

Reciprocity is not an exception to Company Policy on offering business
courtesies, social amenities, gifts, or favors. Merely because an employee of an
organization with which CPI does business provides a business courtesy, social
amenity, gift, or favor to you on one occasion does not permit you to provide
anything to this employee on another occasion.

Particular care must be exercised where it might appear either that CPI expects
something in return, or that an attempt is being made to secure an unfair
advantage. This includes situations where the recipient is faced with a pending
significant decision affecting the Company, or where the recipient has the
ability to directly influence a pending significant decision affecting the
Company.


CONFLICTS OF INTEREST

CPI expects its employees to devote their best efforts and attention to the
conduct of its business affairs and the performance of their jobs. Employees are
expected to use good judgment, to adhere to the highest legal and ethical
standards, and to avoid situations that present an actual or potential conflict
between the employee's personal interests and CPI's interests. A conflict of
interest exists when the employee's personal interest and CPI's interest. A
conflict of interest exists when the employee's loyalties or activities are or
could be divided between CPI's interests and those of him, her or another
business entity. Both the fact and the appearance of a conflict of interest
should be avoided.

Any employee who is involved in a transaction, activity or relationship that
constitutes or could reasonably constitute a conflict of interest must disclose
the matter to his or her manager. Certain situations, as detailed below,
require that approval of the activity be obtained upon entering employment with
CPI, or prior to engaging in the activity if the employee is already employed
with CPI.




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                                                  number        0001
                                                  eff.date      30 Sept. 2003
COMPANY POLICY                                    replaces      12 April 1999
                                                  page          4 of 10
_______________________________________________________________________________

Failure to adhere to the provisions of this policy will result in disciplinary
action up to and including termination of employment. When in doubt as to
whether a conflict of interest exists or might occur regarding a particular
transaction, activity or relationship, the employee should disclose the details
to his or her manager, Human Resources Manager, or Division President. Any CPI
manager receiving such details concerning a potential conflict of interest
shall disclose these details to the Division Human Resources manager and the
Division President or to a CPI Corporate Officer. Final approval authority in
this matter rests with the Division President or a CPI Corporate Officer, who
may elect to consult with outside counsel in complex situations.

The following provisions describe particular conflict of interest situations
for which approval by a CPI Division President or Corporate Officer is
required. This is intended to be a representative listing only and is neither
all-inclusive nor descriptive of all possible conflict of interest situations
requiring CPI's approval.

1. Other Employment or Associations

   No employee can accept other employment or consult with another business
   enterprise that competes with CPI or engages in the sale or purchase of
   products or services with CPI. Any employee who desires to engage in any
   outside employment (including self-employment) or consulting must disclose
   the facts of this work to his or her team leader, supervisor, manager, and
   Human Resources Manager for approval in advance. It is CPI's policy to
   withhold permission for consulting or other employment if:

   a.  Additional effort or a work schedule is involved with the other
       employment or consulting that would interfere with or reduce the
       productivity of the employee's work at CPI in any way.

   b.  The other employment is with a competitor or potential competitor of
       CPI, or with a person or company that could, in any way, be construed as
       being interested in obtaining or capable of using trade secrets or any
       information that is proprietary to CPI.

   c.  The other employment or consulting involves the selling or leasing of
       services or of any interest in property or assets of any kind to CPI.

   d.  The employee's association with CPI plays any part in the other activity.

   No employee may accept or retain a directorship of any commercial business
   enterprise regardless of its business relationship with CPI without the prior
   notification and approval of CPI's senior management or, where deemed
   appropriate, CPI's Board of Directors.
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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          5 of 10
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2. Financial Interests

   Potential conflicts of interest can develop if employees or members of their
   immediate families have significant financial interests in organizations with
   which CPI has a business relationship.

   Certain financial interests present such a potential for conflict of interest
   that they may not be acquired or retained by employees. Other financial
   interests may be permissible after review by the Company's management.

   To avoid actual or potential conflicts of interest, employees are required to
   report and obtain prior approval from the employee's Division President or
   Corporate Officer for the following financial interests:

   a. Ownership or acquisition of the right to acquire more than 1% of any class
      of securities of any publicly-held company with which CPI has a material
      business relationship.

   b. Any interest in an organization with which CPI has a business relationship
      whose securities or other indications of ownership including, for example,
      partnership or proprietor shares, are not publicly held, whether or not
      the organization is incorporated.

   c. Any interest in any organization, whether or not publicly held, formed or
      to be formed by employees who left CPI less than 12 months before the date
      of acquisition of the financial interest.

   d. Any interest in any transaction to which CPI is a party or which it is
      planned or proposed that CPI shall become a party.

   e. Any financial interest in a non-publicly held organization that is in
      competition with CPI.

   The required reports must be made to the employee's Division President or
   Corporate Officer, as applicable. New employees will be requested to make a
   report of any of the specified interests prior to the date of employment.
   Reportable interests that the employee plans to acquire should be reported
   far enough in advance to allow adequate time for review.

3. Personal Relationships

   Any employee who has a close relationship with someone else (a family member
   or close personal friend) who has a significant financial or employment
   relationship with a competitor, customer or supplier of CPI must disclose
   this information in writing to the employee's Human Resources manager. In
   such event, CPI may take such action as it deems
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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          6 of 10
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     appropriate to avoid an actual or potential conflict of interest
     including, without limitation, reassignment or transfer of the employee.

     No employee may be hired, promoted, transferred or maintained in a
     position where such aspect of employee's employment may be directly or
     indirectly influenced by a relative or another employee with whom such
     employee has a close personal relationship. All supervisor-subordinate
     relationships must be free of any favoritism or special treatment and must
     avoid any actual or apparent conflict of interest.

RECORDING AND REPORTING INFORMATION

Employees must record and report all information accurately and honestly. This
includes, for example, time records, marketing orders, engineering or test
results and financial reports.

One report that many employees use is the expense report. Employees are
entitled to reimbursement for reasonable expenses incurred including
expenditures for business courtesies, social amenities, gifts, and favors
meeting the Rules for Business Courtesies section of this policy. Expenditures
must be fully documented and properly accounted for on the books and records of
the Company. Expenditures not reimbursable under government contracts (such as
entertainment and alcoholic beverages) must be specifically identified. Expense
reports require specific names and positions of recipients. The use of such
terms as "guest," "customer," or "participant" is not permitted. To submit an
expense report for expenses not incurred is dishonest reporting and is
prohibited.

Under various laws, such as Securities and Exchange Commission Rules, tax laws
or the Foreign Corrupt Practices Act, CPI is required to maintain books and
records reflecting the Company's transactions. It is essential that these books
and records are accurate. Employees must ensure that they do not make false or
misleading statements in financial reports, environmental monitoring reports
and other documents submitted to or maintained for government agencies. CPI's
employees (including senior management) involved in the preparation of CPI's
public filings should ensure that these filings contain full, fair, accurate
and understandable disclosure and that they reflect on a timely basis all
material information required to be included in such filings.

An employee may not commit CPI to undertake any performance, payment or
obligation unless authorized under the appropriate delegation of authority
policies. No employee may engage in the use of sideletters or "off-the-books"
arrangements. An employee must not enter into transactions with customers,
suppliers or other business partners that facilitate improper revenue
recognition, expense treatment or accounting improprieties.

To ensure the accuracy and integrity of CPI's books and records, employees must
comply with Generally Accepted Accounting Principles (GAAP) and are required to
follow those finance policies and procedures as set forth in the CPI
Controller's Manual.

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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          7 of 10
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CPI's Division Managers, Controllers, and accounting and finance managers are
responsible for ensuring all financial reports, analyses and other information
for external disclosure is accurate, complete and reported per GAAP and company
policies and procedures.

Dishonest reporting is strictly prohibited and can lead to civil or even
criminal liability for the employee and/or CPI.

PROPRIETARY INFORMATION OF OTHERS

It is CPI's policy to respect the proprietary rights and trade secret
information of others. Employees, consultants, agents and representatives must
ensure that they do not solicit, obtain or receive any information regarding
others in illegal or improper ways. Proprietary and confidential information
belonging to third parties which has not been disclosed without restriction may
be obtained and/or used only by permission of the owner. Where an employee is
uncertain of the application of these rules, he/she should discuss the
situation with their manager, and, if appropriate, with outside legal counsel.

Fair Competition
----------------

CPI's policy is to provide the best possible products and services, and to sell
them on their merits while avoiding deprecation or criticism of competitors,
their products or services. Although truthful description of a competitor's
product or service shortcomings is normally acceptable, if such a description
is not accurate the competitor may have cause to initiate a legal claim against
CPI. An employee must not mislead others with respect to any specific
shortcoming by only providing a part of the relevant information. Stressing the
advantages of CPI products and services is preferable to criticizing
competitors, their products or their services. It is acceptable to compare
published current specifications.

Antitrust Constraints
---------------------

All employees must comply with the requirements of Company Policy 0999
"Antitrust". Since a violation of antitrust laws can result in serious legal
difficulties, CPI marketing, sales and management personnel must be familiar
with the requirements of this company policy. In general, the antitrust laws
forbid agreements or understandings of any kind, formal or informal, with
competitors or others to fix or control prices, to allocate products, markets
or territories, to boycott certain customers or suppliers, or to refrain from
or limit the manufacture, sale or production of any product.

In business dealings with outside organizations, remember that a supplier or
customer may also be a competitor. Normal sales to, purchasing from, and
subcontracts with, competitors are to be expected and are not illegal. Contacts
at association meetings, seminars, etc., are proper and need not be
avoided, provided that the subject matter discussed is appropriate. However, it
is unacceptable and unlawful to discuss or collaborate on such things
as prices, plans, production,

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                                                     number                 0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page                8 of 10
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or sales territories with competitors. Employees and others representing CPI
must be sensitive at all times to even an appearance of such activities.

INSIDER TRADING

CPI's policy prohibits directors, officers and employees from trading on, or
improperly disclosing or using "inside" information. Inside information is
information known to them through their relationship with or concerning CPI but
not known to the investing public. This policy is intended to protect the
reputation of CPI and its personnel and to help guard them from legal liability.

ANYONE IN DOUBT ABOUT THE APPLICATION OF THIS POLICY MUST SEEK GUIDANCE BEFORE
PROCEEDING.

1.   The Basic Rule: No Trading on Inside Information

     Although CPI does not currently have any publicly traded common stock, it
     does have publicly traded debt (Senior Subordinated Notes) and publicly
     traded Senior Preferred Stock. Directors, officers and employees shall not
     trade in any of these outstanding issues while in possession of material,
     non-public information relating to CPI.

     These constraints also apply (1) to family members and others living in the
     same household, and (2) to accounts that are controlled or subject to the
     influence of any CPI director, officer or employee, his or her family
     members, or others in his or her household.

     Non-public information is "material" if it could reasonably be expected to
     affect the price of a company's stocks, bonds or other securities. Some
     common examples are material changes in estimates of future company
     earnings; a proposed merger, acquisition, or joint venture; sale of
     significant assets; changes in senior management; significant new products
     or discoveries; impending liquidity problems; stock offerings or
     repurchases by the company; substantial increases or decreases in
     dividends; significant expansion or curtailment of operations; or the gain
     or loss of a substantial customer or supplier. This list is not intended to
     be exhaustive.

2.   Disclosure of Non-Public Information Is Prohibited

     CPI personnel are prohibited from disclosing to anyone inside or outside
     the Company any confidential, non-public information, including technical,
     proprietary, or business-sensitive information obtained at or through CPI,
     except on a need-to-know basis and where there is no reason to believe that
     the information will be misused or improperly disclosed.

     This prohibition applies to all confidential, non-public technical,
     proprietary or business-sensitive information, whether or not it is
     "material."
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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          9 of 10
________________________________________________________________________________

3.   Blackout Periods Regarding CPI Securities

     All Directors, Officers, Division Presidents, and other employees who have
     access to or assist in compiling company financial data, shall refrain from
     trading in CPI securities for four periods each year. Each period begins
     with the last business day of each fiscal quarter and ends two (2) business
     days after CPI makes public its quarterly operational results. In addition,
     other "blackout periods" may be imposed depending on particular
     circumstances.

     Specific exceptions may be made when the applicant does not possess
     material, non-public information, personal circumstances warrant the
     exception, and the exception would not otherwise contravene the law or the
     purpose of this policy. Any request for an exception shall be directed to
     the Chief Financial Officer.

4.   Trading After Public Announcements

     Personnel privy to material information concerning CPI which is the subject
     of a public announcement shall refrain from trading in CPI securities for a
     period of two (2) business days after the information is made public so as
     to allow time for the investing public to receive and absorb it.







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                                                     number        0001
                                                     eff. date     30 Sept. 2003
COMPANY POLICY                                       replaces      12 April 1999
                                                     page          10 of 10
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                CERTIFICATION OF COMPLIANCE WITH POLICY ON LEGAL
                              AND ETHICAL CONDUCT

It is CPI's policy that all exempt employees, plus all management, supervisors,
sales, marketing, procurement and service employees whose positions bring them
in frequent contact with customers or suppliers ("Employees Requiring
Certification"), comply with company policy and government business guidance
documents. Certain policies and practices require legal and ethical standards,
which are of overriding importance in the conduct of the company's business.

To communicate and ensure the application of these ethical and legal standards,
all Employees Requiring Certification must certify that they have read and are
familiar with these key policies. They must also certify that they understand
these policies contain mandatory legal and ethical standards and practices to
be followed in conducting the company's business.

Each Corporate Officer, Division President, Controller, Division Marketing
Manager, International and Domestic Field Sales Manager and others designated
by the Chief Executive Officer (CEO) must provide:

- Company Form 1906 annually.

- Division certification forms will be kept in a separate file in the Division's
  Human Resources Office. In the case of Corporate Officers, certification forms
  will be kept in a separate file in the Corporate Headquarters Office.

All Employees Requiring Certification must provide:

- Company Form 1909 annually. Individuals newly hired or promoted to exempt
  positions must provide this certification within ten (10) working days of
  their start date.

- These certification forms are retained in the employee's personnel file in the
  appropriate Human Resources Office.

Managers and supervisors must review Company Policies and expectations on
business conduct with newly hired or promoted Employees Requiring Certification
during the initial orientation or evaluation time period, and periodically, as
work assignments or job duties change.


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