Environmental Indemnity Agreement

EXHIBIT 10.5


ENVIRONMENTAL INDEMNITY AGREEMENT


THIS ENVIRONMENTAL INDEMNITY AGREEMENT ("Agreement") is made as of December 15, 2000, by each of the undersigned (collectively, "Obligor"), for the benefit of FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent for itself and the other Lenders (as hereinafter defined) ("Foothill"), and the Lenders (Foothill and the Lenders are collectively referred to herein as "Lender").


OBLIGOR ENTERS THIS AGREEMENT on the basis of the following facts, understandings and intentions:


A. Lender is making or continuing an extension of credit to, or other financing arrangements with COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation ("Borrower"), in the principal amount of Sixty-One Million Dollars ($61,000,000.00), pursuant to that certain Loan and Security Agreement ("Loan Agreement") of even date herewith by and among Borrower, Foothill, the other Lenders named therein and other Obligors named therein. Such extension of credit or other financing arrangements, together with any amendments, replacements, substitutions, extensions or refundings thereof, are hereinafter referred to as the "Loan".


B. In connection with the Loan, Obligor (who may or may not be Borrower) will undertake or has undertaken certain obligations to Lender other than the obligations undertaken under this Agreement. Said obligations of Obligor to Lender (excluding the obligations under this Agreement), together with any amendments, replacements, substitutions, extensions or refundings thereof, are hereinafter referred to as the "Obligation".


C. The term "Collateral" shall mean any property to which Lender or Foothill, for the benefit of Lender, has been granted a security interest by Obligor, Borrower, or any other person or entity in connection with the Loan.


D. The term "Property" shall mean that certain real property located in the County of Santa Clara, State of California, and legally described in Exhibit A attached hereto.


E. Capitalized terms which are used herein but not defined herein shall have the meanings ascribed to them in the Loan Agreement. "Lenders" means, collectively, Foothill Capital Corporation, a California corporation, and Ableco Finance LLC, a Delaware limited liability company, together with their respective successors and assigns, and shall include any other Person made a party to the Loan Agreement in accordance with the provisions of Section 14.1 thereof.


F. Lender would not make the Loan if, as a result, Lender might incur any liability arising with regard to any Hazardous Substance, as defined in Section 1, below, now or hereafter present in, on, under or around any part of the Property. Lender requires that


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Obligor execute this Agreement as a further assurance against such liability.


H. It is the intention of Lender and Obligor that, as between Lender and Obligor, Obligor shall be solely responsible for any and all liability arising with regard to any Hazardous Substance now or hereafter present in, on, under or around any portion of the Property, and Lender shall under no circumstances have any liability therefor, to the extent provided herein. Lender and Obligor intend this Agreement to be fully enforceable to the maximum extent permitted by law.


NOW THEREFORE, in consideration of, and as an inducement for, Lender making the Loan and for other good and valuable consideration, Obligor agrees as follows:


1. DEFINITION OF HAZARDOUS SUBSTANCE. For purposes of this Agreement, a "Hazardous Substance" (any two or more, "Hazardous Substances") is defined to mean any substance or material (including, without limitation, raw materials, building components, wastes, and the products and by-products of manufacturing or other activities) which is or becomes designated, classified or regulated as being "toxic", "hazardous" or similarly designated, classified or regulated under any federal, state or local law, ordinance, rule or regulation. The term "Hazardous Substance" shall include, without limitation, (i) substances defined as "hazardous substances" or "toxic substances" for purposes of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA") or the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; and (ii) petroleum, flammable explosives, urea formaldehyde insulation, asbestos and radioactive materials.


2. INDEMNITY REGARDING HAZARDOUS SUBSTANCES. Obligor agrees to indemnify, defend and hold Lender and each of its parent, subsidiary and affiliated corporations, and the respective directors, officers, shareholders, employees, agents, attorneys, representatives, successors and assigns (including, without limitation, any participants in the Loan) (each an "Indemnitee" and collectively, the "Indemnitees") harmless from and against all liabilities, claims, actions, foreseeable and unforeseeable consequential damages, reasonable and documented out-of-pocket costs and expenses (including sums paid in settlement of claims and all reasonable and documented out-of-pocket consultant, expert and legal fees and expenses) or loss directly or indirectly arising out of or resulting from any Hazardous Substance being present at any time, whether before or after the date of this Agreement, on or around any portion of the Property, or in the soil, groundwater or soil vapor on or under any portion of the Property, including those incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work, or any resulting damages or injuries to the person or property of any third parties or to any natural resources. Upon demand by Lender, Obligor shall defend any matter as to which indemnification is or will be sought hereunder, all at the cost of Obligor and by counsel and consultants to be approved by Lender in the exercise of its reasonable judgment. Notwithstanding anything to the contrary contained herein, the indemnity contained in this Section 2 shall not apply with respect to any Hazardous Substances which are first introduced to the Property by Lender, its successors or assigns or any third party owner of the Property following the acquisition of title to the Property by Foothill, Lender, their successors or assigns or


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any third party as a result of a foreclosure or deed in lieu of foreclosure of the deed of trust executed by Borrower in favor of Foothill, encumbering the Property and securing the Loan.


3. REPRESENTATION AND WARRANTY REGARDING HAZARDOUS SUBSTANCES. Obligor represents and warrants that to the best of Obligor's knowledge, no Hazardous Substance has been released onto or disposed of or otherwise is present in, on, under or around the Property, except to the extent specifically disclosed to Lender in writing by Obligor in Exhibit B attached hereto.


4. COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. Except for those Hazardous Substances used in connection with the business presently being conducted on the Property and except for the other Hazardous Substances presently on the Property and identified on Exhibit B attached hereto, Obligor shall not and shall not permit any third party to use, generate, manufacture, store, release, discharge or dispose of any Hazardous Substance in, on, under or about the Property, or transport any Hazardous Substance to or from the Property except in material compliance with all applicable laws, ordinances, rules and regulations governing Hazardous Substances. Obligor has complied and shall comply and cause all occupants of the Property to comply (including, if necessary, by resort to and diligent pursuit of all available legal, equitable and administrative remedies and proceedings) with all applicable laws, ordinances, rules and regulations governing Hazardous Substances, the orders and directives of all governmental authorities having jurisdiction over the Property. Obligor shall also cause Varian Associates, Inc., a Delaware corporation ("Varian") to comply with all of its obligations under that certain Stock Sale Agreement dated as of June 9, 1995, by and among Varian, Communications & Power Industries Holding Corporation, a Delaware corporation, and CPII Acquisition Corp., a Delaware corporation (as amended, the "Stock Sale Agreement").


5. NOTICES REGARDING HAZARDOUS SUBSTANCES. Until full performance of the Obligation and repayment of the Loan, Obligor shall promptly notify Lender if Obligor has actual knowledge (i) that there may be any Hazardous Substance on or around the Property, or in the soil, groundwater or soil vapor on or under the Property other than as described in Exhibit B and other than in material compliance with all applicable laws, ordinances, rules and regulations governing Hazardous Substances, (ii) that except as previously disclosed in writing to Lender, Obligor, Borrower or the Property is subject to any threatened or pending investigation by any governmental agency und ...